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Income Tax Appellate Tribunal, MUMBAI A BENCH, MUMBAI
Per Pramod Kumar VP
By way of this appeal, the assessee-appellant has challenged correctness of the order dated 20th March 2020, passed by the learned CIT(Exemption) passed under section 263 r.w.s. 143(3) of the Income Tax Act 1961, for the assessment year 2015-16.
Grievances raised by the appellant are as follows:-
That on the facts and in the circumstances of the case, the Learned Commissioner of Income Tax (Exemptions), Mumbai (here-in-after referred to as Ld. CIT) was not justified and grossly erred in passing the impugned order u/s263 of the Act in great haste without affording the appellant sufficient opportunity of hearing while the nation was in complete lock down due to the pandemic, which is in gross violation of the principle of natural justice. 2. That on the facts and in the circumstances" of the case, the impugned order passed u/s 263 of the Act is grossly arbitrary and bad in law in relation to the issue raised and adjudicated therein and needs to be summarily deleted.
ITA No. 1613/Mum/2020 Assessment year: 2015-16
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That on the facts and in the circumstances of the case, the Ld. CIT was not justifiedgin initiating proceedings u/s 263 of the Act as the order passed by the Assessing Officer (here-in-after referred to as A.O.) was neither erroneous nor prejudicial to the interests of the revenue. 4. That on the facts and in the circumstances of the case and without prejudice to Ground no. 1 to 3 taken here-in-above, the Ld. CIT was not justified and grossly erred in denying exemption us 10(47) to the appellant being an infrastructure debt fund, a RBI registered IDF-NBFC and which has duly fulfilled all conditions laid down by the RBI and which are specified under Rule 2F of Income Tax Rules, 1962 for the purpose of claiming the exemption u/s 10(47). 5. That the appellant craves leave, to add, amend, modify, rescind, supplement, or alter any of the grounds stated here-in- above, either before or at the time of hearing of this appeal.
To adjudicate on this appeal, only a few material facts need to be taken note of. The assessee before us in a non banking financial institution, and is said to be engaged in the business of refinancing eligible and operational public private partnership project. It‟s assessment under section 143(3) was finalized on 24.11.2017, and in the assessment so finalized, the assessee was allowed exemption u/s. 10(47) to the tune of Rs. 31,95,83,162/-. Subsequently, however, this assessment was subjected to revision under section 263 on the short ground that as the assessee was notified by Central Board of Direct Taxes as an „infrastructure debt fund‟, which is sine qua non for exemption u/s. 10(47), the assessee was wrongly allowed exemption u/s. 10(47). While doing so, the learned CIT (Exemptions), inter alia, observed as follows:-
In the submission, the assessee has stated that the provisions of section 263 are not attracted in this case, submitting that the order passed by the assessing officer is neither erroneous, nor prejudicial to the interests of revenue. Further, it has been submitted that during assessment, the assessee has submitted that it does not have a notification by CBDT u/s 10(47) of the act, however since it fulfils all the conditions that are laid down by the Reserve Bank of India and which are specified under Rule 2F of the Income Tax Rules, for IDF-NBFCs for claiming exemption u/s 10(47), therefore the Assessing officer has rightly allowed the claim of the assessee. It has also been submitted that once the assessing officer has taken a particular view, merely because the Commissioner has a different view, proceedings u/s 263 can not be initiated. Further it has been submitted that the assessee has been granted Certificate of Registration as IF NBC and on an yearly basis, the RBI conducts an audit of the assessee, and the assessee has also obtained an auditor's report that conditions prescribed under Rule 2F. Further, the assessee has submitted that it has obtained a certificate of no TDS deduction u/s 197. 5. To substantiate its claim, the assessee has quoted the case of Texmaco Rail and Engineering Ltd v/s PCIT (2017) ITAT Kolkata. In this case, the Hon'ble tribunal has adjudicated that the Assessee had claimed weighted deduction u/s 35(2AB) on the basis of certificate of recognition granted from SIR, but had not submitted Form 3CK (Which is an agreement between the assessee conducting in house research and SIR). In the above case, the proceedings under section 263 were quashed
ITA No. 1613/Mum/2020 Assessment year: 2015-16
Page 3 of 5 stating- "It is undisputed that Department of Scientific and Industrial Research (SIR) granted recognition to the Assessee for the period from April 1st, 2010 to 31st March, 2019. It has been held in the decision referred to by the learned counsel for the Assessee in the proceedings before the CIT us. 263 of the Act and before the Tribunal that deduction Sec.35(2AB) read with rule 6 does not prescribe any time limit within which application for approval in form No.3CM has to be made. Once approval is granted by SIR the same would apply till it is revoked. 6. It is seen that in the above case law quoted by the assessee, the facts are distinguishable. In the quoted case, the company had approval from SIR but had not made a technical compliance of filing a form 3CK. For claiming deduction under section 35(2AB), no prior permission from the income tax department is required, while in the instant case, the assessee has not taken approval from CBDT for claiming exemption u.s 10(47). It is also important to realise the difference between claim of exemption and deduction. In case of a deduction, if the assessee fulfils the conditions prescribed, it can claim the deduction, but an exemption needs prior approval because then the income of the exempt entity becomes non-taxable. In this case, the exemption needs approval from the Central Government through a notification in the Official Gazette of India. Therefore, that is not just a procedural formality but a precondition for claiming the exemption under section 10(47) which clearly states the two conditions which have to be fulfilled, the first being that the fund is set up in accordance with the guidelines as may be prescribed, and it is to be notified by the Government in the Official Gazette. The other case laws relied upon by the assessee namely ACIT V/s Meco Instruments (P) Ltd. (2010) Taxmann.com 24 (Mumbai) etc also deal with claim of deduction under section 35(2AB), which are squarely not applicable in the case of the assessee. 7. It is also important to realise here that by having a certificate of registration from the RBI, as IDFC-NBFC does not in itself make the assessee eligible for claim under section 10(47). The assessee has to make an application, in the prescribed format, and then it is for the Central Government to verify whether all conditions as mentioned in Rule 2F are met. Only then, by a Gazette notification, the Infrastructure Debt Fund is notified. Therefore, the claim of the assessee that it is registered as and IDF-NBFC and is being audited by RBI on an yearly basis is not relevant in this case, because that is only one of the conditions prescribed under Rule 2F. Also, a certificate from the auditor, stating that the conditions under Form 2F are satisfied, is not sufficient to allow the assessee to claim exemption u/s 10(47). It is seen that at the time of filing of return of income, the assessee in this case had not even applied to CBDT for Notification u/s 10(47). Therefore, the assessee has claimed an exemption for which it has not yet applied for. That is not how a claim of exemption can be made. 8. The other argument raised by the assessee is that since the assessing officer has examined the issue during assessment, and formed an opinion, it can not be changed at a later stage because the revisionary authority has a different opinion. In the instant case, it is a clear matter of fact that the assessee, at the time of filing of return, has made a claim of exemption for which it had not even applied for taking approval. The primary action of the assessee of making that claim in the return itself is incorrect. Therefore, in the present case, the order passed by the Assessing officer is erroneous in so far as it is prejudicial to the
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Page 4 of 5 interest of revenue, and provisions of section 263, therefore become applicable. 9. In view of the facts and circumstances narrated supra, I hold that the assessee is not entitled for grant of exemption under section 10(47) of the Income Tax Act. The assessing officer is directed to give effect to this order by withdrawing the exemption us 10(47) allowed in the assessment order u/s.143(3) of I.T. Act dated 24/11/2017 and recomputing the tax liability. 4. The assessee is aggrieved and is in appeal before us.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position
We find that section 10(47) categorically provides for exemption of “any income of as infrastructure fund, set up in accordance with the guidelines as may be prescribed, which is notified by the Central Government in the official Gazette for the purpose of this clause” (emphasis, by underlining, supplied by us). Clearly, therefore, notification by the Central Government, for the purpose of Section 10(47), is a necessary precondition for grant of exemption under section 10(47). Admittedly that condition was not satisfied on the facts of this case, and, for this short reason, the Assessing Officer‟s action for granting exemption under section 10(47) was erroneous an indeed prejudicial to the interest of the revenue. Learned counsel‟s plea that as this decision to grant exemption was taken after examining the matter in detail and upon being satisfied that prescribed guidelines have been satisfied, this view should be taken as a possible view of the matter, and for this reason revision under section 263 does not come into play, this plea is, in our humble understanding, not sustainable in law. As for the view taken by the Assessing Officer being a possible view of the matter, one must bear in mind the fact that, as held by Hon‟ble Supreme Court, in the case of Malabar Industrial Co Ltd Vs CIT [(2000) 243 ITR 83 (SC)] a possible view being taken by the Assessing Officer, to oust the revision jurisdiction under section 263, is subject to the rider “unless view taken by the Income Tax Officer is unsustainable in law”. The view taken by the Assessing Officer is clearly unsustainable in law. The assessee thus does not derive any advantage from „one of the possible views‟ theory, so strenuously argued before us. Similarly, the decisions cited with reference to the satisfaction of necessary conditions being enough to grant the exemption do not impress us as the requirement of section 10(47) with respect to Central Government notification are not dealt with any of those judicial precedents. In any event, we are in considered agreement with will reasoned stand of the learned CIT(E) on these points in the impugned order. In view of these discussions, and bearing in mind entirety of the case, we approve the stand of the learned CIT(E) and decline to interfere in the matter. In the result, the appeal is dismissed. Pronounced in the open court today on the 20th 7. day of May, 2022
Sd/- Sd/- Rahul Chaudhary Pramod Kumar (Judicial Member) (Vice President) Mumbai, dated the 20th day of May, 2022
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Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File
By order etc True Copy
Assistant Registrar/ Sr PS Income Tax Appellate Tribunal Mumbai benches, Mumbai