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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: Shri Rajpal Yadav, Vice-(KZ) & Shri Girish Agrawal
Per Girish Agrawal, Accountant Member:
This appeal by the assessee is directed against the order of ld. Principal Commissioner of Income Tax-1, Kolkata for Assessment Year 2015-16 passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act” dated 19th June, 2020. The grounds of appeal relating to India Power Corporation Limited AY 2015-16 jurisdiction assumed by the ld. Pr. CIT in invoking the revisionary proceedings under section 263 and passing the order thereon are reproduced hereunder:- (1) That on the facts and in the circumstances of the case, the ld. Principal Commissioner of Income Tax-1 (hereinafter referred to as Ld. Pr. CIT) was not justified in initiating proceedings u/s 263 of the Act as the Assessing Officer (hereinafter referred to as A.O.) had duly considered all the materials during the course of the assessment proceedings. (2) That on the facts and in the circumstances of the case, the impugned order passed u/s 263 is grossly arbitrary and bad in law in relation to the issues raised and adjudicated therein and needs to be summarily deleted since the order passed by A.O. was neither erroneous nor prejudicial to the interest of the revenue. (3) That on the facts and in the circumstances of the case, the ld. Pr. CIT was not justified in initiating proceedings u/s 263 of the Act alleging lack of enquiry/inadequate verification without appreciating the fact that the AO has made sufficient enquiry during the course of assessment proceedings. (4) That on the facts and in the circumstances of the case, the impugned order passed u/s 263 is gr4ossly arbitrary and bad in law in relation to the issues raised and adjudicated therein and needs to be summarily deleted. (5) That on the facts and in the circumstances of the case and without prejudice to Ground No. 1 to 4 taken hereinabove, the ld. Pr. CIT was not justified and grossly erred in invoking provisions of sec. 80IA(12) without considering the fact that eligible undertaking had commissioned after the date of amalgamation.
2. At the outset, we note that there is a delay of 126 days in filing the present appeal which was filed on 22.12.2020. Assessee has placed on record a petition for condonation of delay. From the perusal of the said condonation petition, we note that the order passed by Ld. Pr. CIT is dated 19.06.2020 which was passed ex parte qua the India Power Corporation Limited AY 2015-16 assessee. From the perusal of Form No. 36 it has been ascertained that the date of order is 19.06.2020 and date of service or communication of the order is 19.06.2020. Considering the date of receipt of certified true copy on 19.06.2020 the appeal ought to have been filed on or before 18.08.2020. The period of this delay of 126 days falls within the lock-down owing to Covid-19 Pandemic for which the Hon’ble Supreme Court has directed that the period from 15.03.2020 to 28.02.2022 is to be excluded for the purpose of computing the limitation period during the COVID-19 pandemic. Further, a period of 90 days is allowed after 28.02.2022 vide same order. Considering the facts and the explanation of the assessee placed on record, we condone the delay in filing the appeal and admit it for adjudication.
Brief facts as called out from records are that the assessee is engaged in the business of Generation, Transmission and Distribution of Power. It filed return of income on 28.11.2015 reporting total income of Rs.22,86,07,834/- under the normal provisions of the Act and book profit of Rs.33,06,40,725/- under section 115JB of the Act. Pursuant to the Scheme of Amalgamation sanctioned by the Hon’ble High Court of Calcutta vide its order dated 17.04.2013, the erstwhile Indian Power Corporation Limited has been amalgamated with the assessee-company with the appointed date of 01.10.2011 for making the approved scheme effective.
3.1 The case of the assessee was selected for scrutiny assessment under CASS. Statutory notices were issued, which were complied with by the assessee. The assessee had India Power Corporation Limited AY 2015-16 claimed deduction under section 80IA amounting to Rs.7.24 crores in respect of two numbers of Windmill Undertakings situated at Rajasthan. In the assessment proceedings vide notice under section 142(1), ld. Assessing Officer asked for the details of deductions claimed by the assessee under Chapter-VIA to which the assessee made its submissions vide letter dated 11.08.2017. The claim made by the assessee was allowed in the assessment proceedings for which Tax Audit Report and Form No. 10CCB were placed on record.
3.2 Subsequently, ld. Pr. CIT called for and examined the records of the assessee wherefrom he observed that pursuant to the scheme of arrangement of amalgamation with Dishergarh Power Supply Co. Limited (DPSC Ltd.) of PSU incorporated in 1919, India Power Corporation Limited (IPCL) was amalgamated with the Company w.e.f. 01.10.2011. Ld. Pr. CIT noted that owing to this amalgamation, the deduction claimed by the assessee under section 80IA should not be allowed in terms of section 80IA(12A) of the Act as the company is formed by the consequence of amalgamation.
3.3 Based on formation of this opinion, ld. Pr. CIT issued a show-cause notice under section 263(1) of the Act dated 03.01.2020 giving an opportunity to the assessee to make its representation on the issue raised therein. The relevant extract from the show cause notice on the issue raised by the ld. Pr. CIT is reproduced as under:- “In the instant case it was seen from assessment record that pursuance to the scheme of arrangement and amalgamation with Dishergarh Power Supply Co. Ltd (DPSC Ltd.), a PSU incorporated in 1919, India Power Corporation Ltd.(IPCL) was amalgamated with the company
India Power Corporation Limited AY 2015-16 w.e.f 01.10.2011. Therefore, no deduction u/s 80IA should be allowed as per sub section 12A of the section 80IA for the relevant assessment year as the assessee company is formed by the consequence of demerger/amalgamation. However, A.O allowed deduction of Rs.7,24,30,006/- for A.Y. 2015-16 in respect of Rajasthan windmill unit-I and unit -II. Since the merger happened after the cut-off date of 01.04.2007, the deduction in respect of Rajasthan windmill unit-I and unit-II was required to be disallowed and as such, irregular allowance of deduction has resulted in under assessment of income of Rs.7,24,30,006/- involving under charge of tax of Rs. 3,27,43,214/-.
AO has passed the impugned assessment order without any application of mind not conducting any enquiries or verifications which should have been made in this case”.
In response to the said show-cause notice, assessee filed a detailed submission vide its letter dated 09.01.2020, which is placed on record at page nos. 9 to 15 in the paper book. Disregarding the submissions made by the assessee, ld. Pr. CIT observed that ld. AO has wrongly allowed the deduction of Rs.7,24,30,006/- under section 80IA of the Act, since, according to section 80IA(12A), the benefit of deduction is not allowed to an enterprise or undertaking, which was transferred in a scheme of amalgamation/ demerger on or after 01.04.2007. The relevant extract of the observation made by the ld. Pr. CIT in this respect is reproduced as under:- “6. On perusal of the assessment, record and the assessment order, it is observed that the A.O. has wrongly allowed deduction of Rs.7,24,30,006/- u/s 80IA of the I.T. Act. As per section 80IA(12A), the Benefit of deduction is not allowed to an enterprise or undertaking which was transferred in a scheme of amalgamation/demerger on or after 01.04,2007, Further, the sub section 12 of section 801A provides, that where any undertaking of an Indian company which is entitled to the deduction under the said section is transferred before the expiry of the period specified therein, to another Indian company in scheme of amalgamation/ demerger the provisions of said section 801A shall apply to the amalgamated or the resulting company. As they would 5
India Power Corporation Limited AY 2015-16 have applied to the amalgamating or demerged company, if the amalgamation/demerger have not taken place. The main intention in providing benefit to someone who had not taken these risks and had only acquired the eligible undertaking much latter when the risk had reduced. CBDT circular No, 03/2008 dated 12.03.2008 wherein it has been specifically mentioned that the benefit of deduction u/s 80IA will not be available to the amalgamated or demerged undertaking or enterprise which is transferred in the scheme of amalgamation/demerger after 31.03.2007”-
Ld. Pr. CIT further noted that pursuant to the Scheme of Amalgamation sanctioned by the Hon’ble High Court of Calcutta vide its order dated 17.04.2013, the erstwhile Indian Power Corporation Limited has been amalgamated with the assessee-company. He noted that the main intention under section 80IA had been to provide incentive to those, who had taken initial investment and entrepreneur risk. Since in the present case, the initial risk has been taken by the erstwhile Company, which has been amalgamated with the assessee-company, therefore, there is no justification for passing on the benefit to someone, who had not taken these risks and had only acquired the eligible undertaking much later when the risks had reduced. He thus concluded that ld. AO has erroneously allowed the deduction under section 80IA in the assessee’s case in respect of Rajasthan Windmill Unit Nos. I & II. Based on the above observation and having arrived at the consideration, ld. Pr. CIT set aside the assessment order and directed ld. AO to frame the assessment afresh after considering the observations made by him.
Before us, Shri Soumen Adak, FCA represented the assessee and Shri Sudipta Guha, CIT(DR) represented the Department. 6
India Power Corporation Limited AY 2015-16
Ld. Counsel of the assessee challenged the assumption of jurisdiction by the ld. Pr. CIT by invoking the revisionary proceedings under section 263 of the Act and passing the impugned order thereon. Ld. Counsel strongly submitted that the assumption of jurisdiction by the ld. Pr. CIT is based on grossly incorrect set of facts, which are verifiable from the records. He submitted that the material which the ld. Pr. CIT can rely upon includes not only the record as its stand at the time when the order in question was passed by the ld. Assessing Officer and also the record as its stand at the time of examination by the ld. Pr. CIT. In this context, ld. counsel of the assessee apprised the bench about the correct set of facts by stating that the assessee had claimed deduction under section 80IA in respect of Windmill Undertakings situated at Rajasthan, details of which are tabulated as under:- Location Capacity Date of Year of Initial Commissioning commencement of assessment operation year of claim Rajasthan 52MW 31.03.2012 AY 2012-13 AY 2015-16 Rajasthan 8 MW 05.01.2013 AY 2014-15 Ay 2015-16 7.1 Ld. Counsel submitted that India Power Corporation Limited (Amalgamating Company) amalgamated with the DPSC Limited (Amalgamated Company) with the appointed date 01.10.2011 under a Scheme of Amalgamation approved by the Hon’ble High Court of Calcutta vide order dated 17.04.2013. He pointed out that the Scheme of Amalgamation became operative from 01.10.2011 and referred to Para 4.6 of the approved scheme which provided that with effect from the appointed date and upto the effective date the amalgamating
India Power Corporation Limited AY 2015-16 company undertakes to carry on and shall be deemed to have been carried on, all its business activities and stand possessed of its properties and assets, for and on account of interest for the amalgamated company.
7.2 In respect of the details of assets transferred under the Scheme of Amalgamation, ld. Counsel referred to Schedule ‘B’ forming part of Scheme of Amalgamation placed at pages 76 to 78 of the paper book. By referring to the said Schedule ‘B’, ld. Counsel contended that there has been no transfer of Rajasthan Windmills under the Scheme of Amalgamation and thus the allegation raised by the ld. Pr. CIT by issuing the show-cause notice under section 263(1) suffers from factual error.
7.3 To corroborate the submissions made by him, ld. Counsel referred to the Certificate of Commissioning of Windmills situated at Rajasthan, placed in the paper book at pages no. 56 to 58, to demonstrate that the said Windmill commenced its operation on 31.03.2012 (Rajasthan Windmill Unit No. I) and on 05.01.2013 (Rajasthan Windmill Unit No. II), which is after the appointed date of 01.10.2011 when the scheme of amalgamation became effective. Accordingly ld. Counsel submitted that since the Windmill Undertakings in Rajasthan are not transferred from the erstwhile IPCL into the assessee under the approved Scheme of Amalgamation, provisions of section 80IA(12A) are not attracted. Accordingly the claim of deduction made by the assessee is rightly allowed by the ld. Assessing Officer in the assessment completed under section 143(3) of the Act.
India Power Corporation Limited AY 2015-16 7.4 Ld. Counsel further submitted that in the instant case, both the undertakings in Rajasthan started claiming deduction under section 80IA from A.Y. 2015-16, which is much after the effective date of amalgamation, i.e. 01.10.2011. In this respect, attention of the Bench was drawn to Form 10CCB placed on record in the paper book to demonstrate that the two Windmill Undertakings at Rajasthan commissioned on 31.03.2012 and 05.01.2013 respectively and claimed the deduction for the first time in A.Y. 2015-16.
7.5 To further corroborate the submissions made, ld. counsel referred to the Notes on Financial Statements, which were reinstated to give effect to the Approved Scheme of Amalgamation sanctioned by the Hon’ble High Court of Calcutta vide its order dated 17.04.2013, wherein at Note No. 2.2.2, all the details relating to amalgamation were disclosed.
Per contra, ld. CIT(DR) relied on the impugned order of the ld. Pr. CIT and submitted that the ld. Assessing Officer has failed to conduct proper enquiry on the issue raised by the ld. Pr. CIT, who has rightly invoked the action under section 263 of the Act. The ld. CIT(D.R.) strongly contended that the Scheme of Amalgamation was approved by the Hon’ble High Court of Calcutta vide order dated 17.04.2013 and the date of Commissioning of the two Units of Windmill at Rajasthan are prior to the date of this order of sanction by the Hon’ble High Court of Calcutta. Based on this fact, ld. CIT(DR) submitted that the ld. Pr. CIT has rightly observed
India Power Corporation Limited AY 2015-16 that the deduction claimed by the assessee under section 80IA is to be disallowed in terms of section 80IA(12A), which the ld. Assessing Officer failed to do so. He further submitted that ld. Pr. CIT has merely remitted this issue to the file of the ld. Assessing Officer for fresh enquiry and no prejudice is caused to the assessee if this is being examined afresh.
Before we advert on the issue in hand, attention is drawn to the relevant provisions of section 80IA(12A) of the Act, which is reproduced as under:-
“(12) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger— (a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place. (12A) Nothing contained in sub-section (12) shall apply to any enterprise or undertaking which is transferred in a scheme of amalgamation or demerger on or after the 1st day of April, 2007”. [emphasis supplied by us by underline] 9.1 From the perusal of the section above, “before expiry of the period” specified therein, means that the eligible units should start claiming deduction under section 80IA and, in between if units are transferred to other Company under the Scheme of Amalgamation/demerger, then in such a case,
India Power Corporation Limited AY 2015-16 transferee company shall not be entitled to claim the deduction for un-expired period.
Admittedly, it is a fact that the Scheme of Amalgamation under which the assessee is covered was approved by the Hon’ble High Court of Calcutta vide order dated 17.04.2013. Under the said order, the Scheme of Amalgamation was sanctioned and was given an approval from the appointed date of 01.10.2011. The fact of appointed date of 01.10.2011 is noted by the ld. Pr. CIT in the show-cause notice itself. Before us, the bone of contention in the present case between the ld. counsel of the assessee and the ld. CIT(DR) relates to the effective date, which ought to be taken into consideration in respect of transfer of Rajasthan Windmill Unit Nos. I and II to the assessee.
10.1 Before us, ld. counsel has submitted that the transfer has to be looked at with reference to the appointed date of 01.10.2011, which is the date when the Scheme of Amalgamation was made effective as approved by the Hon’ble High Court of Calcutta. When we look at the submissions made by the ld. CIT(DR), the line of argument is based on considering the date of 17.04.2013, which is the date of order passed by the Hon’ble High Court of Calcutta for approving the Scheme of Amalgamation. Thus if the appointed date of 01.10.2011 is taken into consideration as contended by the ld. Counsel of the assessee, the Commissioning of the two eligible Power Undertakings situated at Rajasthan were commissioned after the appointed date, i.e. 31.03.2012 and 05.01.2013. However, if the date of India Power Corporation Limited AY 2015-16 passing of order by the Hon’ble High Court of Calcutta for the transfer of Scheme of Amalgamation is taken into consideration, i.e. 17.04.2013 as contended by the ld. CIT(DR), then the Commissioning Date of the two eligible Power Undertakings at Rajasthan falls prior to this date.
10.2 On perusal of the provisions of section 80IA(12A), we note that the ‘transfer’ of an Undertaking has been referred to therein. Admittedly, it is a fact that the Scheme of Amalgamation provides for schedule of assets, which have been transferred from the amalgamating company to the amalgamated company as detailed in scheduled ‘B’ forming part of the Approved Scheme of Amalgamation placed at pages 75 and 76 of the paper book. We note that schedule ‘B’ categorically states about “schedule of assets (excluding Investment Division) of India Power Corporation Limited (the transferor-amalgamating company) to be transferred and vested in DPSC Limited (the transferee –amalgamated company) as on October 01, 2011 (the appointed date-II)”.
10.3 The relevant extracts from the order of Hon’ble High Court of Calcutta sanctioning the Scheme of Amalgamation in respect of the appointed date as applicable for the transfer of assets and liabilities from the amalgamating company to the amalgamated company is reproduced hereunder:- “This Hon’ble Court doth hereby sanction the proposed Scheme of Amalgamation set forth in Annexure ‘A’ of the petition herein subject to amendment of clause 1.3.2 of part 1 as “1.3.2 “Appointed Date I” with reference to Part III of the Scheme means First day of October in the year two thousand eleven, being the date with effect from which the scheme shall, upon sanction of the same by the court, be deemed to be effective in respect of 12
India Power Corporation Limited AY 2015-16 Part III of this Scheme” instead of existing clause 1.3.2 and alteration of Schedule 2 of the said scheme reflecting the assets and liabilities of the Investment Division of the said Amalgamating Company as on First day of October in the year two thousand eleven and specified in the Schedule ‘A’ hereto subject to the Accounting following the Scheme strictly in accordance with AS-14 and doth hereby declare the same to be binding with effect from First day of October, in the year two thousand eleven hereinafter referred to as the said ‘Appointed Date’) on the said Amalgamating Company and the said Amalgamated Company and their respective shareholders and creditors and all concerned”.
10.4 Thus, we note that the appointed date is to be reckoned for the purpose of taking into consideration the transfer of assets and liabilities for the purpose of claim of deduction under section 80IA of the Act. From the Certificate of Commissioning of the two eligible Power Undertakings situated at Rajasthan placed on record, admittedly, it is a fact that the two Units were commissioned on 31.03.2012 and 05.01.2013 respectively. Since their commissioning date falls after the appointed date of 01.10.2011, there cannot be any occasion of transfer of these two eligible Power Undertakings under the Scheme of Amalgamation. Further, we also note that these two eligible Power Undertakings situated at Rajasthan do not form part of the schedule of assets referred in scheduled ‘B’ to the Approved Scheme of the Amalgamation. It is also a fact noted from Form 10CCB placed on record that the claim of deduction under section 80IA has been made for the first time in A.Y. 2015-16 in respect of these two eligible Power Undertakings situated at Rajasthan.
India Power Corporation Limited AY 2015-16 11. Considering these facts on record corroborated by the documentary evidences, we are inclined to find favour with the submissions made by the ld. counsel of the assessee to take into consideration the appointed date of 01.10.2011 for the purpose of transfer of assets and liabilities under the Approved Scheme of Amalgamation and, therefore, we are of the considered view that the said Windmill Undertakings situated at Rajasthan were not transferred from the erstwhile IPCL into the assessee under the Scheme of Amalgamation. Accordingly we hold that the provisions of section 80IA(12A) are not attracted in the present set of facts and circumstances. Having so held, the very foundation on which the present proceedings were initiated under section 263 by the ld. Pr. CIT falls apart.
11.1 We find that in the present facts and circumstances, the legal maxim ‘sublato fundamento cadit opus’ is applicable, meaning thereby – ‘a foundation being removed, the superstructure falls’. Once the basis of a proceeding is gone, the action taken thereon would fall to the ground. Thus, in the absence of such foundation, exercise of a suomotu power is impermissible. It should not be presumed that initiation of power under suomotu revision is merely an administrative act. It is an act of a quasi-judicial authority and based on formation of an opinion with regard to existence of adequate material to satisfy that the decision taken by the Assessing Officer is erroneous as well as prejudicial to the interests of the revenue.
11.2 We find that it is an issue, purely on facts which is verifiable from the records of the assessee relating to the approved scheme of amalgamation which contained specifics about the effective date of India Power Corporation Limited AY 2015-16 scheme becoming applicable and the assets and liabilities which existed under the said approved scheme for transfer from the amalgamating company to the amalgamated company. Furthermore, examination and verification of certificate of commissioning of the two windmills undertakings also revealed the correct state of their coming into operations for the purpose of getting eligibility for claim u/s 80IA of the Act. Ld. PCIT and the ld. CIT, DR could not bring any material on record to controvert this verifiable factual position. For the above finding of ours, we find force from the decision of Hon’ble Bombay High Court in the case Gabriel India Ltd. [1993] 203 ITR 108 (Bom) wherein it is observed as under (page 113) –
" . . . From a rending of sub-section (1) of section 263, it is clear that the power of suomotu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is 'erroneous in so far as it is prejudicial to the interests of the Revenue'. It is not an arbitrary or unchartered power, it can be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the 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.” [Emphasis supplied by us by underline] 11.3 On the issues raised by the Ld. PCIT in the revisionary proceedings, no action u/s 263 of the Act is justifiable which in our considered view cannot be sustained under the facts and circumstances of the present case and judicial precedents dealt herein
India Power Corporation Limited AY 2015-16 above. We, therefore, quash the impugned order u/s 263 of the Act and allow the grounds raised by the assessee.
12. In the result, the appeal of assessee is allowed.
Order pronounced in the open Court on August 01, 2022.