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TMI Blog2023 (3) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... ties. In the instant case, it can be noticed that the view expressed by Ld PCIT is contrary to the Circular issued by CBDT. On the contrary, the deduction allowed by the AO is in accordance with the view expressed in the Circular issued by the CBDT. The view expressed by Ld PCIT with regard to the computation of deduction u/s 80IA cannot be sustained. Accordingly, we quash the impugned revision order passed by Ld PCIT on this issue. Exemption allowed to the assessee u/s 10(38) of the Act in respect of gains arising on sale of JM Arbitrage Advantage Annual Bonus Plan - We notice that the AO has issued notice u/s 142(1) of the Act, wherein he has called for details of exempt income and also the details of expenses incurred in relation to the above said exempt income. If so claimed, the justification for claiming it was also called for. AO has asked for justification for various exemptions and deduction claimed in the return of income including the profit on sale of investments, being securities chargeable to STT. In reply to thereto, the assessee has furnished the break-up details of exempt income, which included exemption of long term capital gain claimed u/s 10(38) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision proceedings in the revision order passed by Ld PCIT. 2. The facts relating to the case are stated in brief. The return of income filed by the assessee for Assessment Year 2017-18 was completed by the AO u/s 143(3) of the Act on 09-12-2019. On examination of assessment record, the Ld PCIT took the view that the AO has not properly examined the following issues:- (a) AO has allowed deduction u/s 80IA of the Act without setting off brought forward unabsorbed depreciation of wind mill as required u/s 80IA(5) of the Act. (b) AO has allowed brought forward losses without proper details of unabsorbed loss brought forward from AY 15-16 to AY 16-17. (c) AO has allowed set off of unabsorbed depreciation of Rs.71,31,099/- pertaining to M-77 unit, which was not eligible for set off, since this unit commenced operation from current year, i.e., AY 2017-18 only. (d) The AO has allowed benefit of exemption u/s sec. 10(38) on the gains arising on sale of a security named JM Arbitrage Annual Bonus Option . The AO has not examined how the sale of security was exempted. (e) The AO has not examined the applicability of sec. 14A of the Act on exempt income. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to allow the deduction u/s 80IA without adjusting brought forward loss/depreciation pertaining to the prior to the initial year is one of the possible views and hence the Ld PCIT was not justified in initiating revision proceedings. 5. The Ld D.R, on the contrary, supported the order passed by Ld PCIT. We have heard rival contentions and perused the record. The scope of revision proceedings initiated under section 263 of the Act was examined by Hon'ble Bombay High Court, in the case of Grasim Industries Ltd. V CIT (321 ITR 92) by taking into account the law laid down by the Hon'ble Supreme Court. The relevant observations are extracted below : Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings 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 interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The key words that are used by section 263 are that the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because he has got a different opinion in the matter. The consideration of the Commissioner as to whether an order is erroneous in so far it is prejudicial to the interests of Revenue must be based on materials on record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to start fishing and roving enquiries in matters or orders which are already concluded. 6. In the instant case, we notice that the method of claiming deduction u/s 80IA without adjusting losses of the years prior to the initial year would get support from the decision rendered by Ahmedabad bench of ITAT in the case of DCIT vs. Chhotabhai Jethabhai Patel Co. (supra), wherein it was held as under:- 8. We have carefully considered the rival submissions. The short issue that arises for consideration in the present case is whether the assessee is entitled in law for claim of deduction of income arising from eligible business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred above that the losses arising in 'eligible business', if any, subsequent to earmarking of 'initial assessment year' shall however continue to be governed by embargo placed in Section 80IA(5) of the Act, i.e., the losses incurred in the years prior to the initial year need not be adjusted while computing the deduction u/s 80IA in the initial year. Hence the view expressed by Ld PCIT goes against the Circular of CBDT referred above. There should not be any doubt that the circulars issued by CBDT are binding on the tax authorities. In the instant case, it can be noticed that the view expressed by Ld PCIT is contrary to the Circular issued by CBDT. On the contrary, the deduction allowed by the AO is in accordance with the view expressed in the Circular issued by the CBDT. 7. Accordingly, we are of the opinion that the view expressed by Ld PCIT with regard to the computation of deduction u/s 80IA cannot be sustained. Accordingly, we quash the impugned revision order passed by Ld PCIT on this issue. 8. The next issue referred to by Ld PCIT relates to the exemption allowed to the assessee u/s 10(38) of the Act in respect of gains arising on sale of JM Arbitrage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to exempt income:- Separate records are not maintained through which we can identify the items related to expenditure. Hence, the AO has asked explanations on the above said observation. The assessee replied that it has not earned any expenditure relating to exempt income. 11. With regard to the interest expenses, the Ld A.R submitted that the own funds available with the assessee is far more than the value of investments and hence no portion of interest expenses is liable to be disallowed. A perusal of the Balance sheet would show that the assessee is having capital balance of Rs.229.34 crores, as against the investments of around Rs.130 crores. Hence no part of interest expenses is liable to be disallowed in terms of the decision rendered by Hon ble Bombay High Court in the case of HDFC Bank Ltd (366 ITR 505)(Bom). 12. The foregoing discussions would show that the AO has made enquiries during the course of assessment proceedings with regard to the disallowance to be made u/s 14A of the Act. Further, since the assessee is having enough own funds, no disallowance out of interest expenses is also called for. On these reasoning, the order passed by Ld PCIT on thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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