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TMI Blog2017 (2) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... l arise, if any, with reference to original assessment proceedings only. The subsequent re-assessment proceedings will not obviate the bar of limitation prescribed under section 263(2) of the Act on an unconnected issue. Thus so far as alleged wrong set off of unabsorbed depreciation against the business income of the current year is concerned, the issue is clearly time barred due to lapse of statutory time limit with reference to the original assessment order Hence, we are of the firm of opinion that the jurisdiction of CIT to invoke the revisional power in respect of claim of set off is time barred and cannot be sustained.- Decided in favour of assessee Wrongly acceptance of eligibility of incremental subsidy for the determination of deduction under section 10B - Held that:- AO has denied the incremental subsidy under section 10B of the Act in the re-assessment proceedings which was reversed in section 154 of the Act. Both these orders have been subjected to revision under section 263 of the Act. When the issue of eligibility of incremental subsidy for the purpose of deduction under section 10B is seen in the light of the CBDT Circular No.39/2016, wherein it has been noted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.263 of the Act beyond the period of limitation. 6. The learned CIT erred in fact and in law in setting aside the order passed u/s.154 dated 28.02.2012 despite the fact that the AO had correctly applied the law while passing the said order and there was no error in the same. 7. The learned CIT erred in fact and in law holding that incremental subsidy is not eligible for reduction u/s.10B of the Act. 8. The learned CIT erred in fact and in law in not allowing the set off of brought forward depreciation amounting to ₹ 87,46,089/- on the ground that the set off of brought forward depreciation was allowed in AY 2003-04. 3. The Grounds of appeal raised by the Assessee in ITA No.1315/Ahd/2013 for AY 2005-06 read as under:- All the grounds of appeal in this appeal are mutually exclusive and without prejudice to each other. 1. The learned Commissioner of Income Tax-III, Baroda ( the CIT ) erred in fact and in law in passing the order u/s.263 of the Income Tax Act, 1961 ( the Act ) beyond the period of limitation. 2. The learned CIT erred in fact and in law in computing the period of limitation from the passing of order u/s.147 of the Act instea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d subsequent order under section 154 dated 28/02/2012 to be erroneous in so far as prejudicial to the interests of the Revenue and accordingly issued show-cause notice under section 263 of the Act dated 17/10/2013 to the assessee in this regard. The CIT alleged error on two counts namely (i) set off of unabsorbed depreciation of ₹ 87,46,089/- pertaining to AY 2002-03 was wrongly allowed in the impugned assessment year 2004-05 and therefore directed the AO to withdraw the excess allowance of set off towards impugned unabsorbed depreciation (ii) the CIT also found fault with the AO in granting rectification under section 154 of the Act towards incremental subsidy claim purportedly on the premise that this subsidy was not integral to foreign remittance and therefore not amenable to deduction under section 10B of the Act. He accordingly, cancelled the order of the AO passed under section 154 of the Act and with a direction to pass fresh order keeping in view the directions given in the order under section 263 of the Act. The order under section 147 was also directed to be modified for withdrawal of set off towards unabsorbed depreciation. 7. Aggrieved by the order with the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of reopening of the assessment under section 147. Therefore the time limit ought to have been computed from the date of passing regular assessment order earlier under section 143(3). The regular assessment order was passed on 29/12/2006, wherein both the issues; namely, brought forward depreciation of ₹ 87,46,089/- as well as incremental subsidy were embedded and were part of assessment process. The Ld.AR in elaboration submitted that the impugned brought forward depreciation of ₹ 86,46,089/- was duly claimed in the original assessment and accepted by the AO. To justify the assertion, he referred to the computation of income placed in the paper-book and the original assessment order and submitted that the brought forward depreciation claimed as set off against the current year business income was duly accepted by the AO in the original assessment in as much as the total income declared at ₹ 19,04,380/- was taken as a starting point for various adjustments while proposing the original assessment order. Similarly, while framing the reassessment order pursuant to section 147, the identical figure of total income was taken as a base for re-computing the assessed inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39/2016, wherein it has been noted that subsidy is part and parcel of profit and gains of business for the purpose of deduction. The Ld.AR also canvassed that the aforesaid issue on merit has to be decided in favour of the assessee on merits in view of the decision of the Karnataka High Court in the case of CIT vs. Yokogawa India Ltd. Reported in 341 ITR 385 (Kar.). The Ld.AR in conclusion that the order passed under section 147 and section 154 cannot be revised under section 263 of the Act both owing to bar of limitation as well as in the absence of any demonstrable error in the orders which are subject matter of revision. 12. The Ld.DR Ms.Vibha Bhalla for the Revenue relied on the order of the Commissioner and in furtherance submitted that the set off of depreciation was granted in the reassessment order as well which was admittedly allowed in the earlier assessment years. This was resulted in set off of the same amount from business income twice in two different assessment years. Thus, there was an apparent error in the re-assessment order which has been rightly revised under section 263 of the Act. The Ld.DR further submitted that incremental subsidy was specifically reduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unabsorbed depreciation while computing the business income. We find that the set off was duly claimed in the original assessment order was admitted in full. Similar set off was granted in repetition while making the revised computation under section 147 of the Act. The reasons recorded also do not cast any aspersions on the correctness of the allowability of set off of unabsorbed depreciation claimed. There is no discussion on the point in the reassessment order either. Besides, as noted, the set off of unabsorbed depreciation has been duly accepted in the original proceedings. Thus, the set off of unabsorbed depreciation claimed rightly or wrongly was not subject matter of reassessment at all. Hence, it is manifest that cause of action under section 263 of the Act will arise, if any, with reference to original assessment proceedings only. The subsequent re-assessment proceedings will not obviate the bar of limitation prescribed under section 263(2) of the Act on an unconnected issue. The law in this regard is very clear. The issue as to when the period of limitation would commence for an order under section 263 was considered by the Hon ble Apex Court in the case of CIT vs. Alage ..... X X X X Extracts X X X X X X X X Extracts X X X X
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