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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: SHRI. CHANDRA POOJARI & SMT. BEENA PILLAI
ORDER
PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed by assessee against order dated 10/10/2019 passed by Ld.PCIT, Thiruvananthapuram u/s. 263 of the Act on following grounds of appeal: “1. The order of the Principal Commissioner of Income Tax is against law and facts.
2. The Principal Commissioner of Income Tax has erred in concluding that the AO had completed the assessment without verification and application of mind. During the original assessment proceedings the AO had sought all information on the deduction claimed under Chapter VIA. He had issued a notice u/s 142(1) dated 23.05.2017, in which inter alia he had called for reconciliation of the large deduction claimed u/s 80(IA) with the books of account Page 2 of and the details of the claim. The appellant filed a letter in which a detailed reply was filed regarding the windmill undertakings operated by the appellant and the details of the claim pointing out that the claim is also supported by certificates from chartered accountant as required by section 80(IA). The deduction under section 80(IA) was thus granted after due application of mind by the AO after considering the detailed workings filed backed the certificates from the chartered accountant.
3. The learned Commissioner should have appreciated that the claim under section 80(IA) is correctly worked out and allowed and the facts of the Kerala High court decision are not applicable to the appellant's case as in that case the claim for u/s 80(IA) was first deducted from the profits of the eligible undertaking and the balance was taken to be the gross total income. In the appellant's case, the loss from one of the windmill undertaking was set off against the aggregate of the profits of the cashew business and the other two windmill undertakings and the gross total income was first arrived at and thereafter the total eligible claim of Rs. 84,88,882/- was deducted from the gross total income of Rs. 3,11,70,709/- to arrive at a taxable income of Rs.2,26,56,827/-. Thus the deduction u/s 80(IA) has been claimed only as per the decision of the Kerala High court.
4. The order of assessment was completed by the AO after due consideration of the factual and legal aspects. The AO has taken one of the possible views on the issue and hence the order of the AO is not erroneous or prejudicial to the revenue. The learned Commissioner is not justified in revising the assessment merely because another view is possible in the matter. PRAYER For these grounds and such other grounds as may urged at the time of hearing it is prayed that the order of revision may be set aside.”
2. Brief facts of the case are as under: 2.1 The Assessee e-filed the Return of Income for the Assessment Year 2015-16 on 29.09.2015 declaring a total income of Rs. 2,26,56,830/- . This case was selected for limited scrutiny under CASS to verify the "Customs duty payment mismatch, sales turnover mismatch, deduction u/s Chapter VI-A and Duty Drawback received / receivable". After verifying the details Page 3 of Authorised Representative of the assessee, the 'assessment u/s 143(3) of the Income Tax Act, 1961 was completed by the Assistant Commissioner of Income Tax, Circle- 1, Kollam on 29.06.2017 by accepting the income returned by the assessee. On subsequent verification of the records, the Ld.PCIT observed as under: 2.2 Deduction u/s 80 IA amounting to Rs.84,88,882/- was allowed in the assesment despite the fact that the assessee was having a gross loss of Rs.2,67,18,670/- during the previous year 2014-15 (relevant to the Assessment Year 2015-16) in the business of power generation. This irregular allowance of deduction u/s 80 IA has resulted in short levy of income tax. 2.3 The Ld.PCIT accordingly issued notice to the assessee u/s. 263 of the Act on 05/03/2019 as under:
2.4 In response, the assessee filed its submission on 18/03/2019 wherein the assessee submitted that: “for the purpose of section 80-IA, each unit has to be taken as a separate undertaking and the profit of one undertaking has to be computed as if it is the only undertaking owned by the assessee, without setting off the loss of any other undertaking that may be owned by the assessee. The sequence of computation and claiming of deduction u/s 80IA of the Income Tax Act has been laid down by the Kerala High Court in C1T Vs Accel Tra lsmatic Systems Ltd (230 CTR 206)(Ker)." The assessee also highlighted the said decision as " The assessee cannot claim deduction under section 8C-IA in excess of gross total income computed, no matter eligible amounts may be higher than such income. However, we disapprove the pattern of computation made by the assessee by deducting the profits of the Page 6 of eligible industrial unit the claim amount and then returning the balance to constitute gross total in the computation of total income. Infact, the procedure to the followed for the purpose of granting deduction under section 80-IA is to first compute the profits and gains of the eligible unit and then to determine the eligible deduction there from in terms of section 80-IA(5) of the Act. Thereafter, in the computation of total income under the provisions of the Act, the eligible deduction has to be reduced and if the total income computed is less than the eligible amount, deduction has to be limited to such amount" 2.5 The Ld.PCIT after considering the reply filed, observed and held as under: “I have gone through the decision of the Hon'ble Kerala High Court in CIT Vs Accel Transmatic Systems Ltd (230 CTR 206)(Ker)." In that particular case, the Hon'ble High Court has considered the deduction u/s 80IA claimed by the assessee who was having two units, one earning profit and one running at loss. In the case of M/s Anu Cashews also, there are multiple units where some are earning profit and some are in loss. Hence the procedure laid down by the Hon'ble High Court in CIT Vs Accel Transmatic systems Ltd. can be applied in the case of M/s Anu Cashews also. The Hon'ble High Court has clearly specified the procedure which is to be followed for the purpose of granting deduction u/s 80IA. Therefore, I direct the assessing Officer to compute the eligible deduction u/s 80IA by following the procedure laid down by the Hon'ble High Court. Based on the reason given above, I find that the assessment was completed by the Assessing Officer without due verification and application of mind in the manner it ought to be, resulting in an order erroneous and prejudicial to interests of revenue. The following judicial decisions need to be considered in this context. I. Assessment made on 1. wrong assumption of facts or 2. on incorrect application of law or 3. without due application of mind or 4. without following the principles of natural justice would be 'erroneous' [CIT Vs. Jawahar Bhatacharjee (2012) 341 ITR 434 (Gau.)(FB)] II. The Honorable High Court of Delhi in Toyoto Motor Corporation 306 ITR 49 had given a finding that "The order Page 7 of Assessing Officer should be a self-contained order giving the relevant facts and reasons for coming to the conclusion based on those facts and law." Absence of examination of records by the Assessing Officer in conjunction with the issue discussed above renders the impugned order erroneous and prejudicial to revenue. The revision proceedings initiated u/s 263 is hereby disposed off by setting aside the Assessment Order u/s 143(3) dated 29.06.2017 and the Assessing Officer is directed to thoroughly verify the issues involved and to re-examine the above aspects after giving appropriate opportunity of being heard to the assessee. The same is to be done after examining all relevant facts as per provisions of the Income Tax Act, 1961 and within the time limit as prescribed in the Income Tax Act 1961.” Against the order passed u/s. 263, the assessee is in appeal before this Tribunal.
The Ld.AR submitted that the original assessment was under limited scrutiny and the notice issued u/s. 142(1) specifically considered the deduction claimed under Chapter VIA of the Act. He placed reliance on page 47 of the paper book wherein the said notice dated 18/05/2017 is placed.
The Ld.AR submitted that assessee had filed its reply in respect of the issue that was to be verified in a limited scrutiny assessment proceedings on 02/06/2017.
The Ld.AR submitted that assessee had provided detailed explanation in respect of the deduction claimed under Chapter VIA being deduction claimed u/s. 80(IA) of the Act. All details in respect of the windmill located at Tamil Nadu and Karnataka and that two of the units were running in profit and the third unit was running at a loss. The Ld.AR placed reliance on following decisions wherein it is held that when there is a verification carried on by the assessing officer during the original assessment proceedings, it cannot be held that there is a non application of mind by the Ld.AO. CIT vs. Gabriel India Ltd. reported in 203 ITR 108 (Bombay) CIT vs. J.L. Morrison (India) Ltd. reported in 366 ITR 593 (Calcutta High Court) NTPC Ltd. vs. CIT-V 45 reported in 392 ITR 426 (Del HC) CIT vs. Kelvinator of India Ltd. reported in 256 ITR 1 (Del HC) 6. Assessee has also placed reliance on the decision of Hon’ble Kerala High Court in case of CIT vs. Accel Transmatic Systems Ltd. reported in [2010] 230 CTR 206 (Kerala) wherein the Hon’ble Court has held that the assessee cannot claim deduction u/s. 80IA in excess of the gross total income computed no matter the eligible amounts may be higher than such income. Hon’ble High Court in case of CIT vs. Accel Transmatic Systems Ltd. (supra) has held that: The procedure to be followed for the purpose of granting deduction under section 80-IA is to first compute the profits and gains of the eligible unit and then to determine the eligible deduction therefrom in terms of section 80-IA(5). There-after, in the computation of total income under the provisions of the Act, the eligible deduction has to be reduced and if the total income computed is less than the Page 10 of eligible amount, deduction has to be limited to such amount.
He thus submitted that the view taken by the Ld.AO is also the view of the jurisdictional High Court that has been elaborately discussed in case of CIT vs. Accel Transmatic Systems Ltd. (supra). On the contrary, the Ld.DR relied on the orders passed by authorities below. We have perused the submissions advanced by both sides in the light of records placed before us.
An identical issue regarding the method of computation of deduction u/s. 80IA has been considered by Hon’ble Supreme Court in case of CIT vs. Reliance Energy Ltd. reported in (2021) 127 taxmann.com 69 wherein the Hon’ble High Court has held that, “the scope of sub-section (5) of Section 80- IA of the Act is limited to determination of quantum of deduction under sub-section (1) of Section 80-IA of the Act by treating ‘eligible business’ as the ‘only source of income’. Sub- section (5) cannot be pressed into service for reading a limitation of the deduction under sub-section (1) only to ‘business income’.”
We note that the view adopted by the Ld.AO is in accordance with the decision of Hon’ble Jurisdictional High Court in case of CIT vs. Accel Transmatic Systems Ltd. (supra) which was available at the time when the assessment order was passed and also now having upheld by Hon’ble Supreme Court in case of CIT vs. Reliance Energy Ltd.(supra). Under such circumstances, we do not find any merit in the initiation of 263 proceedings by the Ld.PCIT. Accordingly we quash the notice Page 11 of 05/03/2019 and the consequent order dated 10/10/2019. Accordingly, the grounds raised by assessee stands allowed. In the result, the appeal filed by the assessee stands allowed. Order pronounced in open court on 14th September, 2022.