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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Per Shri A.T.Varkey, JM These appeals filed by the assessee are against the revision order of Ld. Pr. CIT-2, Kolkata passed u/s. 263 of the Income-tax act, 1961 (hereinafter referred to as the “Act”) dated 30.03.2017 for AYs 2011-12 and 2012-13. Since facts are common and grounds are identical, we dispose of both these appeals by this consolidated order for the sake of convenience.
At the outset itself it was brought to our notice by the Ld. AR that in the show cause notice issued by the Ld. Pr. CIT dated 30.12.2016 wherein the Ld. Pr. CIT found fault with the order passed by the AO u/s. 154 of the Act on 25.02.2015. However, later, the Ld. Pr. CIT found fault with the assessment order in respect to assessee’s claim for deduction u/s. 80IE of the Act, computation of tax liability u/s. 115JB and payment of tax u/s. 115O of the Act and, thereafter, after giving an opportunity to the assessee on 10.01.2017, the Ld. Pr. CIT passed 263 order (similar) for both the years, which reads as under: “Therefore, I hold that the order u/s. 143(3) dated 24.12.2013 passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue within the meaning of section 263 of the Income Tax Act, 1961. Therefore, the order is set aside with direction that the AO should pass fresh assessment order after conducting independent, detailed and complete enquiry with regard to assessee’s claim for (i) deduction u/s. 80IE, (ii) computation of tax liability u/s. 115JB and (iii) payment of tax u/s. 115O, after allowing due opportunity to the assessee of being heard in the matter. ”
3. It has been brought to our notice that in this case after the AO had passed the original scrutiny order u/s. 143(3) of the Act dated 24.12.2013, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to pass appellate orders in respect of all the issues raised by the Ld. Pr. CIT in his 263 order by an order dated 20.07.2016. Therefore, according to Ld. AR, the AO’s order (which the Ld. Pr. CIT has found fault with) has merged with the order of the Ld. CIT (A)’s appellate order dated 20.07.2016 and, therefore, show cause notice dated 30.12.2016 of Ld. CIT proposing to interfere by exercising his revisional jurisdiction cannot be made in the light of clause (c) of explanation (1) to sec. 263 of the Act which reads as under:
Revision of orders prejudicial to revenue.- ....... (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the 2 Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he, may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation.1 — For the removal of doubts, it is hereby declared that, for the purpose of this sub-section,- (a) ..... (b) ..... (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988], the powers of the[Principal Commissioner or] Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.”
We note that the issues that have been remitted by the Ld. CIT to AO for fresh adjudication are – (i) is with regard to deduction u/s. 80IE, (ii) computation of tax liability u/s. 115JB and (iii) payment of tax u/s. 115O which has been decided by the Ld. CIT(A) vide order dated 20.07.2016 for AY 2011-12 as under:
In respect of grounds raised by the assessee before the Ld. CIT (A) in respect to deduction u/s. 80IE is as under:
“6. For that learned AO was wrong in holding that the AY 2011-12 is 4th year for deduction u/s. 80 IE and not 3rd year as claimed by assessee.
While computing total income learned AO has wrongly allowed deduction u/s. 80IE amounting to Rs.103,59,415/- instead of equal to GTI Rs.1,17,99,350/- computed by him. Ignoring the fact that maximum amount eligible for deduction worked out by the Ao is Rs.1,87,60,838/- which is to be restricted to the amount of GTI. On correct deduction u/s. 80IE the total income and tax payable will be nil.”
The Ld. CIT (A) decided the grounds as under:
“1. In the matter of Ground No. 6, relating to the claim that the Ld. AO was incorrect in holding that the AY 2011-12 is 4th year for deduction u/s. 80IE and not 3rd year as claimed by assessee, it has to be said that in AY 2010-11, decided in Appeal No. 393/LD. CIT(A)- 10/CIT-4/2014-15/Kol dated 20th July, 2016, it has been held that the AY 2009-10 would be the first year for deduction for Sec. 80IE. Consequently, the subject AY 2011-12 would be the 3rd year for similar claim, and accordingly, ground no. 6 is held in favour of the assessee- appellant.”
“(i). On the issue of Ground No. 8, the appellant company has stated that while computing total income learned AO has wrongly allowed deduction u/s. 80IE amounting to Rs.1,03,59,415/- instead of equal to GTI Rs.1,17,99,350/- computed by him ignoring the ract that maximum amount eligible for deduction worked out by the AO is Rs.1,87,60,838/- which is to be restricted to the amount of GTI. On correct deduction u/s. 80IE the total income and tax payable will be nil.”
In respect of ground raised by the assessee before the Ld. CIT (A) in respect of sec. 115JB which is as under:
“9. For that learned AO was wrong in holding that section 115JB is applicable for the year under consideration ignoring that as per return there was no tax payable on ‘total income’ and as per concurrent orders of CIT (A), ITAT and Calcutta High Court in case of Vishnu Sugar Mills Ltd. and some other judgments which have attained finality, in such circumstances S. 115JB is not applicable.
8. The Ld. CIT (A) decided this issue as under “(ii) 1. I have considered the action of the Ld. AO and the various submissions made by the Ld. AR in the matter of applicability of Sec. 115JB in the case of the appellant-assessee.
2. It is to be aid that the matter has been decided in favour of the assessee-appellant for the preceding AYs. 2008-09, 2009-10 and 2010-11. Elaborate discussion has been made while adjudicating Ground No. 8 of the grounds in that year of appeal. The said order was adjudicated in Appeal No. 396/ CIT(A)-10/Cir-4/14-15/Kol dated 20th July, 2016.
In consonance with those decisions, it is held that Sec. 115JB would not be applicable for the case of the appellant-assessee for the subject AY 2011-12 also, and therefore the grounds are adjudicated in favour of the assessee-company.
In respect of Sec. 115O, the assessee raised the following ground before the Ld. CIT(A):
“10. For that learned AO has raised demand of additional tax u/s. 115O and interest thereon, without passing any order about the same, without giving any reason and without asking any explanation and ignoring binding judgment of honourable Calcutta High Court in case of Jayshree Tea & Inds. Ltd. (Departments SLP has also been dismissed by the Supreme Court) to the effect that in case of tea company, additional tax is to be levied at applicable rate only on 40% of dividend distributed.”
The Ld. CIT(A) decided the issue as under:
(iii) 1. I have examined the matter of the imposition of additional tax by the Ld. AO u/s. 115O of the Income Tax Act, 1961. It has been brought to notice by the Ld. AR for the appellant that the matter is covered in its favour by the judgment of the jurisdictional High Court of Calcutta in the case of Jayashree Tea & Industries Ltd. (2006) 285 ITR 506 (Cal).
2. the said judgment was also upheld by the Hon’ble Apex Court in Civil Appeal 2008 CC 9853/2008 dated in terms of the amounts applicable for the tea company, as under:
“Now comes the question of Tea Company. The activities of the tea company differ from other commercial sectors. Although all those tea companies are corporate entitles their activities have a distinctive feature. It has a lot of agricultural activities starting from plantation to packing green tea leaves. The constitution makers provided that agriculture income would come within the domain of the state. Hence, the Income-tax Act being the central law was not competent to make the agriculture income within its fold as it was beyond the legislative competence of the parliament. Hence, if that additional tax was found to have been put on any agricultural income it was liable to be struck down (para 24).
A tea company was liable to pay tax at the prescribed rate on or 40 per cent on total net income. If there is any additional tax they would pay in the same manner in the same proportion. In such circumstances provisions of sec. 115O could not be regarded as irrational or unconstitutional. (para 26).
If a tea company had a net income of Rs. 100, Rs. 40 would be liable to income-tax at the prescribed rate and the assessee would be assessed accordingly. By virtue of sec. 115O if the company declares Rs. 50 for distribution amongst the shareholders it would have a proportionate liability. It is true that in the case the company decides to distribute a part of the income it would be impossible to find out whether that part of the income included in the whole of the agricultural income or a part of it. This exercise now is not at all relevant in view of the provisions of rule 8 of the Income Tax Rules. In such event the company would be charged on Rs. 40 for income tax and on Rs. 50 for additional income tax on proportionate basis (para 28).
Rs.50 as a whole could not be taxed at the prescribed rate of additional tax. Such additional tax would be levied on Rs. 20 being 40 percent of Rs. 50. Hence, the company would have to pay income tax at the prescribed rate on Rs.40 as well as additional income tax at the prescribed rate on Rs. 20.
In view of the above findings, the Ld. AO is directed to impose tax only on 40% of dividend, in accordance with the judgments of the Supreme Court of India approving judgment of Calcutta High Court.”
Therefore, we find that the aforesaid issues which has been set aside by the Ld. Pr. CIT for fresh adjudication of AO vide impugned order dated 30.03.2017 has already merged with the order of the Ld. CIT(A) so, the Ld. Pr. CIT lacks jurisdiction to interfere with the order on the issues that has already merged with the order of the Ld. CIT(A) dated 20.07.2016.
Coming to AY 2012-13. We note that all the three identical issues discussed above which has been remitted by the Ld. Pr. CIT has been taken cognizance by the Ld. CIT(A) in the regular appeal preferred by the assessee well before the Ld. CIT issued the SCN conveying his desire to invoke revisional jurisdiction u/s. 263 of the Act, therefore, as per the clause (c) to Explanation (1) of sec. 263 (supra) of the Act, the subject matters of all the three issues was already under appeal before the Ld. CIT(A) and, therefore, the Ld. CIT does not enjoy revisional jurisdiction u/s. 263 to interfere on these issues which is under appeal before the Ld. CIT (A). Therefore, we find merit in the appeal of the assessee and we quash both the impugned orders of the ld. Pr. CIT. Thus, both the appeals of the assessee are allowed.
In the result, both the appeals of assessee are allowed.
Order is pronounced in the open court on 11.05.2018