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II. Direct Taxes Case Laws:
1. CIT Vs. M/s Metal & Chromium Plater (P) Ltd. T.C.A. No. 359 of 2008, Date of Order: 09.11.16, High Court of Madras
Issue:
Whether adjusted book profit calculated as per section 115JB of Income
Tax Act, 1961 would be further eligible for claiming any exemption under
the provisions of Income Tax Act, 1961, except otherwise specifically
barred by the section?
Held: Yes
Brief Facts:
An assessment of A.Y. 2003-04 was completed in terms of Section
143(3) of the Income Tax Act, 1961. The assessee had preferred a claim
for exemption u/s 54EC of the Act. The Assessing Officer has allowed
such exemption in regular computation of income. However, the tax
payable as per regular computation was less than 7.5% of the Book
Profits. Therefore, the provisions of Minimum Alternate Tax (MAT) stood
attracted. While processing the computation of tax in terms of Section
115JB of the Act, the assessing officer denying relief to assessee u/s
54EC the Act.
Held:
The allowance of the claim under Section 54EC has to be seen in the
context of the provisions of Section 115JB which is a self-contained
code of assessment. The levy of tax is on the ‘book profits’ after
effecting various upward and downward adjustments as set out in terms of
the Explanation thereto. The provisions of sub-section (5) of sec 115JB
open the assessment to the application of all other provisions
contained in the Income Tax Act except if specifically barred by that
section itself. Thus, the adjusted book profits would be further
eligible to the benefits set out in the other provisions of the Act and
the plain language of Section 115JB thus admits of the grant of relief
under section 54EC in an assessment thereunder.
The departmental appeal is dismissed.
(Please click here for judgment)
2. Adani Gas Ltd. Vs. PCIT, I.T.A. No. 1252/Ahd/2016, Date of Order: 02.12.2016, ITAT - Ahmedabad
Issue:
Assessment order passed by AO u/s 143(3) which was neither erroneous
nor prejudicial to the interests of the revenue was revised by the PR.
CIT revised u/s 263, is such revision justifiable?
Held: No
Brief
Facts: Assessee company was a wholly owned subsidiary of Adani
Enterprise Ltd. A scheme for demerger u/s 391 to 394 of the Companies
Act, 1956 was prepared and submitted to Hon’ble Gujarat High Court. The
same was approved by Hon’ble High Court on 19-11-2009 and it provided
for transfer w.e.f. 01-01-2007. Consequently, an amount of Rs.33.99
crores was paid towards goodwill which is disclosed separately but was
not amortized in the year itself as the economic benefits there from
were expected to accrue over a period of time based on the foreseeable
life of the business. During the A.Y. 2011-12 Assessee filed Original
return of income claiming depreciation at Rs. 54.74 Crore. However,
Revised return of income was filed on 25.9.2012 claiming depreciation of
Rs.62.18 crores which included depreciation of Rs.7,43,51,086/- claimed
@ 25% on the WDV of goodwill of Rs.29.74 crores.
The case
was selected for scrutiny assessment. Order u/s 143(3) of the Act was
passed allowing claim of assessee. Thereafter, Pr. CIT invoked the
powers u/s 263 of the Act and issued notice contending that the
assessment order u/s 143(3) of the Act is erroneous and prejudicial to
the interest of revenue about excess depreciation claimed on goodwill.
In reply to the notice Assessee submitted that the issue of claiming
depreciation on goodwill was well taken up by AO during assessment
proceedings and all the details relating thereto were furnished and the
claim by Assessee was found to be correct by AO and there was full
application of mind by him as he adopted legally correct view.
Held:
The Hon’ble ITAT is of the view that the AO has accepted the
assessee’s claim of depreciation on goodwill on the reduced WDV as on
01/04/2010 after making enquiries, proper verification and application
of mind and therefore, ld. Pr. CIT has wrongly assumed the jurisdiction
u/s 263 of the Act and the same is uncalled for and unwarranted and
deserves to be quashed.
Hon’ble
ITAT followed the ratio of Hon’ble Supreme Court in the case of Malabar
Industrial Company Ltd. vs. CIT 243 ITR 83, which is identical to
assessee’s case, wherein it was held that "A bare reading of section 263
of the Income-tax Act, 1961, makes it clear that the prerequisite for
the exercise of jurisdiction by the Commissioner suo motu under it, is
that the order of the Income-tax Officer is erroneous in so far as it is
prejudicial to the interests of the Revenue. The Commissioner has to be
satisfied of twin conditions, namely, (i) the order of the Assessing
Officer sought to be revised is erroneous; and (ii) it is prejudicial to
the interests of the Revenue.”
The departmental appeal is dismissed.
(Please click here for judgment)
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