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TMI Blog2016 (11) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... OSEPH, SC, FOR INCOME TAX FOR THE RESPONDENT : ADV. SRI.SUKUMAR NAINAN OOMMEN, ADV. SRI.SHERRY SAMUEL OOMMEN JUDGMENT Antony Dominic, J. 1. This appeal is filed by the Revenue calling in question the order passed by the Income Tax Appellate Tribunal, Cochin Bench in ITA.696/08. 2. The respondent assessee owns three 100% export oriented units, viz., PVC Unit, Traditional Mats Unit and Pathirapally Unit. All the three units, being 100% export oriented units, were eligible for the benefit provided under section 10B of the Income Tax Act, 1961. 3. In the assessment year 2003-04, the PVC unit and Traditional Mats unit returned profit while the Pathirapally Unit returned loss. While completing the assessment, the assessing officer permitted the assessee to set off the loss incurred at the Pathirapally Unit against the profit of the PVC Unit and the Traditional Mats Unit. On the basis that the said order was erroneous and prejudicial to the interests of the Revenue, the Commissioner of Income Tax assumed jurisdiction under section 263 of the Income Tax Act and passed Annexure B order, holding that the assessee was not entitled to set off loss of one 100% export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 263 of the Act. Section 263 of the Act empowers the Commissioner to call for and examine the record of any proceeding under the Act, and if he considers that any order passed therein by the assessing officer is erroneous in so far as it is prejudicial to the interest of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. This power includes the power to order enhancing or modifying the assessment or cancelling the assessment and directing fresh assessment. 9. The celebrated decision explaining the scope of section 263 of the Act is that of the Apex Court in Malabar Industrial Co. Ltd. v. Commissioner of Income-tax [243 ITR 83]. In that judgment, the meaning of the term 'prejudicial to the interest of the Revenue' and the cases where this power was invoked have been explained as follows: 7 . There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der S.263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from. 11. Having regard to these principles, if, as found by the Tribunal, the assessing officer has adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, such a case cannot be treated as an erroneous order prejudicial to the interest of the Revenue unless the view taken by the ITO is unsustainable in law. In so far as this case is concerned, reading of the order passed by the Tribunal shows that it has concluded that the view taken by the assessing officer is one of the possible views. The Tribunal arrived at this conclusion relying on the judgment of the Bombay High Court in Hindustan Unilever Limited v. Deputy Commissioner of Income Tax and Union of India [325 ITR 102] where, on identical facts, the court has held thus: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nits had returned a profit during the course of the assessment year, while the Crab Stick unit had returned a loss. The assessee was entitled to a deduction in respect of the profits of the three eligible units while the loss sustained by the fourth unit could be set off against the normal business income. In these circumstances, the basis on which the assessment is sought to be reopened is contrary to the plain language of Section 10B. 12. This judgment was followed by the Bombay High Court in The Commissioner of Income Tax v. Galaxy Surfactants Ltd. [343 ITR 108] and it was held thus: 5. At the outset, while dealing with the submission which has been urged on behalf of the Revenue, it must be noted that Section 10B when it was originally introduced by the Finance Act, 1988, with effect from 1 April 1989, provided for an exemption of the profits and gains derived by the assessee from a hundred percent export oriented undertaking. The earlier provision specifically stipulated that profits and gains derived by an assessee from a hundred percent export oriented undertaking to which the section applies shall not be included in the total income of the assessee. Section 10A as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainly in error in proceeding on the basis that because the income is exempted, the loss was not allowable. All the four units of the assessee were eligible under Section 10B. Three units had returned a profit during the course of the assessment year, while the Crab Stick unit had returned a loss. The assessee was entitled to a deduction in respect of the profits of the three eligible units while the loss sustained by the fourth unit could be set off against the normal business income. In these circumstances, the basis on which the assessment is sought to be reopened is contrary to the plain language of Section 10B. This decision of the Division Bench has been followed by another Division Bench of this Court in the case of Commissioner of Income Ax II vs. Patni Computers Systems Ltd. Income Tax Appeal 2177/10 decided on 1 July 2011. 13. Reading of the judgments of the Bombay High Court certainly will lead to the conclusion that the view taken by the assessing officer allowing set off is one of the possible views. In such a case, having regard to the principles laid down by the Apex Court in its judgment in Malabar Industrial Co. Ltd. (supra), the Commissioner could not have a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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