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TMI Blog2016 (11) TMI 1057X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, in such a circumstance, the learned CIT cannot be allowed to wrongly assume jurisdiction u/s 263 of the Act under the “Guise” of AO’s failure to conduct any further enquiry. The learned CIT has passed his order on this issue on the ground that no enquiry at all was conducted by the AO. After perusal of the record, we noticed that the stand taken by CIT is incorrect. The records of assessment establishes that an enquiry was conducted by the AO and the assessee had also participated and filed reply before the AO on this issue. We are of the considered view that in the present case on the issue of computation of capital gains and depreciation, the AO has conducted enquiries and the assessee had also submitted the detailed explanations and evidently the claim was allowed by the AO on being satisfied with the explanations of the assessee. Therefore, the learned CIT in the present case has wrongly assumed jurisdiction u/s 263 of the Act on all the issues raised by the assessee - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2007-08 on 30-10-2007 declaring total income of ₹ 14,09,29,031/- after claiming deduction u/s 10A of ₹ 4,09,14,952/-. The return was processed u/s 143(1) of the Act on 29-08-2008 and subsequently the case was selected for scrutiny. Notices were issued notices u/s 143(2) and 142(1) of the Act seeking replies and after receipt of replies from the assessee the draft of the proposed order of assessment was prepared u/s 144C(1) of the Act at an assessed income of ₹ 15,55,83,590 wherein disallowance of ₹ 1,43,30,864/- u/s 92CA(3) and deduction u/s 10A of the Act of ₹ 4,05,91,252/- was proposed on 26-12-2010 under normal provisions of the Act. The aforesaid draft proposed order of assessment proposing total variation of ₹ 1,46,54,564/- to be made in the income returned by the assessee was held to be prejudicial to the interest of the assessee and hence, the AO sent the copy of the same to the assessee requiring it u/s 144C(2) of the Act within thirty days of receipt of the same for (a) acceptance of the proposed variation or (b) to file objection if any to such variation before the Dispute Resolution Panel or before the Assessing Officer. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of a slump sale, decrease by the actual cost of the asset falling within that block as reduceda) by the amount of depreciation actually allowed to him under this Act or under the corresponding provisions of the India Income-tax Act 1922 in respect of any previous year relevant to the assessment commencing before the 1st day of April1988 and b) by the amount of depreciation that would have been allowable to the assessee for any assessment year commencing on or after the 1st day of April 1988 as if the block asset was the only asset in the relevant block of assets. So, however, that the amount of such decrease not exceed the written down value: The above mode of computation has been reiterated in the case of DCIT v. Warner Lambert (India)(P) Ltd. reported in 56 DTR 121 by the ITAT, Mumbai. Accordingly, the net worth of the undertaking should have been computated as under: Sale consideration 14,15,00,000 Less: 1.Fixed Assets(wdv) 6,26,71,984 Less: Depreciation allowable 1,99,68,604 4,29,03,380 2 Net current assets 6,08,09,939 Net worth as on 14.02.2007 10,37,13,319 Less: Expenses on transfer 7,61,381 Capital Gain (Short term) 3,70,25,300 However, as stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, the assessee filed detailed submissions on 9th December 2010 explaining the interpretation taken and computation of Capital Gains for the relevant year. After proper enquiry and due consideration of the prevailing legislation, the Assessing Officer was convinced with the stand taken by the assessee. (II) With regard to the computation of capital gains the assessee contended as under: (a) As per the provisions of section 50B of the Act, any profit or gain arising from slump sale effected during the previous year shall be chargeable to tax as capital gain in the year in which transfer takes place. In computing capital gains net worth of the undertaking sold shall be deemed to be the cost of acquisition and cost of improvement. (b) Explanation 1 to section 50B provides that "net worth" shall be the "aggregate value of total assets" of the undertaking, as reduced by the value of liabilities of such undertaking. (c) Further, explanation 2 to section 50B provides that, in the case of depreciable assets, the aggregate value of total assets shall be the written down value of the block of assets determined in accordance with the provisions contained in sub-item (C) of item (i) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant assesmsen5t year and since the WDV of the assets sold on slump sale is already reduced from the opening WDV of the relevant block, the question of computing deprecation on the assets sold on slump sale does not arise. (h) It is submitted that it is a well settled judicial position that law applicable and to be applied shall be the law as on the 1st day of April of the relevant assessment year. This is a universally accepted proposition, which was upheld by the Supreme Court in the case of Reliance Jute and Industries Limited vs .CIT [(1979) 120 ITR 921]. Thus, applying the ratio of the above decision, the rate of depreciation is to be applied on the WDV of the block of assets existing as on the 1st day of the relevant assessment year i.e., as on 1 April 2007 in the present case, however, since the assets have been transferred by way of slump sale on 14.02.2007 and are not owned by the assessee on 1 April 2007, no depreciation can be granted to it. (i) Another absurdity that will arise if depreciation is allowed to the assessee for the year in which assets are sold under slump sale, is that both the assessee as well as the purchaser will be allowed depreciation on the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned DR representing the Revenue has supported the order of the learned CIT passed u/s 263 of the Act, with regard. 7. We have heard rival submissions and perused the materials placed on record before us. After considering the order passed by the learned CIT as well as hearing the parties at length we are of the considered view that since the assessee itself has submitted all the details as required by the AO with regard to the issue in question, therefore, any order u/s 263 of the Act in this regard is unwarranted. 8. Further, the learned AR relied upon the judgment of the Hon'ble Jurisdictional High Court in the case of CIT Vs Gabriel India Ltd. reported in [1993] 203 ITR 108 (Bom.) / [1993] 71 Taxman 585 (Bombay) wherein it has been held as under:- "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1973-74 - Assessee claimed a sum of ₹ 99,326 described 'as plant relay out expenses' as revenue expenditure and ITO, after making enquiries in regard to nature of said expenditure and considering explanation furnished by assessee in that regard, allowed assessee's claim. Subsequently, Commissioner, exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l cost of the assessee, which will give the operating margin of ₹ 3,38,28,638/-. The assessee has shown the operating margin of ₹ 1,94,97,774/-. Thus, the difference of ₹ 1,43,30,864/- would be adjusted to the international transaction relating tot his activity to arrive at an Arms Length Price of the transaction. Thus, the AO would require to make an adjustment of ₹ 1,43,30,864/- in the said activity of the assessee and the total income of the assessee would accordingly increase. Thus, upward adjustment is required to be made in the income of the assessee on account following: (i) Software Development ₹ 1,43,30,864/- 4.2 In terms of section 92CA(4) of the I.T. Act,1961, the Assessing Officer is mandated to compute the total income of the assessee under sub section 4 of section 92CA in conformity with the arms length price as so determined by the Transfer Pricing Officer vide order u/s 92CA(3) dated 15.10.2010. in view of the above, the addition of ₹ 1,43,30,864/- is made to the total income of the assessee as per provisions of section 92CA(4) in conformity with the arms length price determined by the Transfer Pricing Officer I(6), Mumbai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome is computed after taking net profit of whole unit, no separate working of non 10a unit is made." 10. After considering the details filed by the assessee in its paper book and upon hearing the arguments of both the sides, we are of the considered view that in the present case the assessee had submitted a detailed explanation along with relevant details assessment order was passed by the AO, prima facie on being satisfied with the explanation of the assessee. In the present case the learned CIT has passed the order u/s 263 by concluding that the order passed by the AO is erroneous to the interests of the Revenue without providing a fulcrum for such a claim or justify such a claim has been made. We have noticed from the facts of the present case that simply because the AO in his order did not make an elaborate discussion or did not call for any further details, that by itself cannot be a ground to hold the order passed by the AO to be 'Erroneous" for lack of enquiry. From a careful perusal of the record, we have also noticed that enquiries were conducted by the AO and, therefore, in such a circumstance, the learned CIT cannot be allowed to wrongly assume jurisdiction u/s 263 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Assessing Officer only on the ground that the CIT did not agree with the view taken by the Assessing Officer and took a view different than that taken by the Assessing Officer. In our view it cannot be said that the Assessing Officer has not applied his mind while granting deduction to the assessee under Section BOHHC as regards net profit earned by the assessee pertaining to their export business. In our view, the' Tribunal is correct in its view that the view taken by the Assessing Officer was a possible view and that the condition precedent for invoking jurisdiction under Section 263 by the CIT did not exist. 7. In view of the above, we hold that ITAT was justified in upsetting the order passed by CIT(A) under Section 263 of the Income Tax Act, 1961. We, therefore, answer the question of law raised in this appeal in favour of the assessee and against the revenue. The above appeal, therefore, stands dismissed. However, there will be no order as to costs. " A similar stand was again taken in the following cases: • Grasim Industries Limited vs. Commissioner of Income Tax (2010) 321 ITR 92 (80m), • Commissioner of Income Tax vs. Development C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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