M/s. GRASIM INDUSTRIES LTD., MUMBAI v. DCIT CIR . - 6(3), MUMBAI

ITA 3104/MUM/2008 | 2005-2006
Pronouncement Date: 11-03-2011 | Result: Allowed

Appeal Details

RSA Number 310419914 RSA 2008
Assessee PAN AAACG4464B
Bench Mumbai
Appeal Number ITA 3104/MUM/2008
Duration Of Justice 2 year(s) 10 month(s) 4 day(s)
Appellant M/s. GRASIM INDUSTRIES LTD., MUMBAI
Respondent DCIT CIR . - 6(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 11-03-2011
Date Of Final Hearing 12-01-2011
Next Hearing Date 12-01-2011
Assessment Year 2005-2006
Appeal Filed On 07-05-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G MUMBAI. BEFORE SHRI PRAMOD KUMAR ACCOUNTANT MEMBER AND SHRI V. DURGA RAO JUDICIAL MEMBER ITA NO.3104/MUM/2008 (ASSESSMENT YEAR : 2005-06) M/S. GRASIM INDUSTRIES LIMITED CENTURY BHAVAN DR. A.B.ROAD WORLI MUMBAI-400 025 PAN AAACG4464B VS. DY. COMMISSIONER OF INCOME TAX CIRCLE 6(3) AAYAKAR BHAVAN MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.D. MISTRY & SHRI NITESH JOSHI . RESPONDENT BY : SHRI PAVAN VED. PER V. DURGA RAO : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINS T THE ORDER PASSED U/S.263 OF THE INCOME TAX ACT 1961 (THE ACT ) OF THE LEARNED COMMISSIONER OF INCOME TAX-VI MUMBAI DT.28.3.2008 RELATING TO THE ASST. YEAR 2005-06. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A CO MPANY HAD AVAILED BENEFIT OF SALES TAX DEFERMENT SCHEME 1989 OF THE GOVERNMENT OF RAJASTHAN. THE SCHEME PROVIDES FOR DEFERRED PAYMEN T OF 50% OF SALES TAX LIABILITY UNDER THE RAJASTHAN SALES TAX ACT UPTO A MAXIMUM PERIOD OF 11 YEARS. THE ASSESSEE WAS GRANTED ELIGIBILITY CERTIF ICATE OF RS.186.90 CRORES UNDER THE SCHEME W.E.F. 19.7.1995 FOR ELEVEN YEARS. AS ON 31.1.2005 THE ASSESSEE OFFERED DEFERRED SALES TAX LOAN OF RS.106. 47 CRORES UNDER THE SCHEME. THE GOVERNMENT OF RAJASTHAN GAVE OPTION TO THE UNITS FOR AVAILING BENEFIT UNDER THE SCHEME TO REPAY THE LOAN LIABILIT Y EVEN BEFORE THE STIPULATED REPAYMENT DATE. PURSUANT TO THE GOVERNM ENT OFFER THE ASSESSEE- ITA 3104/MUM/08 2 COMPANY OPTED TO MAKE REPAYMENT OF LOAN LIABILITY O F RS.106.47 CRORES. DURING THE PREVIOUS YEAR RELEVANT TO THE ASST. YEA R 2005-06 THE ASSESSEE- COMPANY PAID AN AMOUNT OF RS.72.12 CRORES TO THE ST ATE GOVERNMENT IN DISCHARGING OF TOTAL LIABILITY OF RS.106.47 CRORES RESULTED IN EXTINGUISHMENT OF LOAN LIABILITY OF RS.34.35 CRORES BEING THE EXCESS OF LOAN LIABILITY OVER THE AMOUNT PAID. THE SURPLUS ARISING OUT OF PAYMENT OF LOAN AMOUNTING TO RS.34.35 CRORES WAS CREDITED TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT HE HAS ALL OWED THE CLAIM OF THE ASSESSEE AS A CAPITAL RECEIPT. ACCORDING TO THE LE ARNED COMMISSIONER THE ACTION OF THE ASSESSING OFFICER IN ALLOWING THE CLA IM OF THE ASSESSEE IS ERRONEOUS ON THE GROUND THAT IT IS A CAPITAL RECEIP T. THE AMOUNT OF RS.34.35 CRORES HAS ALREADY BEEN CLAIMED AS A DEDUCTION IN E ARLIER YEAR ON ACCOUNT OF SALES TAX LIABILITY. THIS AMOUNT OF RS.34.35 CRORES BECAME TAXABLE IN THE ASST. YEAR 2005-06 IN VIEW OF THE PROVISIONS OF SEC TION 41(1) OF THE ACT. THE LEARNED COMMISSIONER WAS OF THE VIEW THAT THE ASSES SMENT MADE BY THE A.O. IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY PROCEEDINGS U/S. 263 WAS INITIATED BY NOTING DT.24.3.2008. IN RESPONSE TO THE ABOVE NOTICE THE ASSESSEE HAS SUBM ITTED A WRITTEN REPLY DT.27.3.2008 AND THE SAME IS REPRODUCED HEREUNDER : IN THE COMPUTATION OF INCOME THE ASSESSEE HAD DIS CLOSED BY WAY OF NOTE AT POINT NO.15 THAT SURPLUS OF RS.34.3 5 CRORES ARISING OUT OF PREPAYMENT OF SALES TAX LOAN IS A CA PITAL RECEIPT AND IS EXCLUDED FROM PROFIT AS PER PROFIT AND LOSS ACCO UNT WHILE COMPUTING TAXABLE INCOME RELYING ON THE RATIO OF TH E DECISION OF BOMBAY HIGH COURT IN THE CASE OF MAHINDRA & MAHINDRA VS. CIT (261 ITR 501). DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSEE HAD MADE DETAILED SUBMISSION AS REGARDS TAXABILITY OF S URPLUS ARISING ITA 3104/MUM/08 3 ON PREPAYMENT SALES TAX LIABILITY. A COPY OF THE S AID SUBMISSION HAS ALSO BEEN ATTACHED ALONG WITH THIS REPLY DATED 27/3/2008. AN ORDER U/S. 143(3) WAS PASSED BY THE ASSESSING OF FICER BY SPECIFICALLY REDUCING SURPLUS ON PREPAYMENT OF SAL ES TAX LOAN BEING CAPITAL RECEIPT IN NATURE AMOUNTING TO RS.34 .35 CRORES FROM PROFITS AS PER BOOKS OF ACCOUNTS FOR TAXABLE B USINESS INCOME. MENTIONING OF THE WORDS BY THE ASSESSING OFFICER B EING CAPITAL RECEIPT IN NATURE CLEARLY SHOWS THAT THE ASSESSING OFFICER AFTER CONSIDERING SUBMISSIONS OF THE ASSESSEE COMPANY RE ACHED TO THE CONCLUSION THAT THE ACTION OF THE PREPAYMENT OF SAL ES TAX LOAN WAS A CAPITAL RECEIPT NOT LIABLE TO TAX. THUS IT HAS BEEN SUBMITTED THAT THERE IS NO ERROR I N THE ASSESSMENT ORDER. FURTHER ACTION U/S. 263 CAN BE T AKEN ONLY IF TWO CONDITIONS ARE SPECIFIED SIMULTANEOUSLY. FIRST LY THE ORDER PASSED BY THE ASSESSING OFFICER SHOULD BE ERRONEOUS AND SECONDLY IT SHOULD ALSO BE PREJUDICIAL TO THE INTEREST OF RE VENUE. IF EITHER OF THE TWO CONDITIONS IS NOT SATISFIED THEN THE CIT HAS NO JURISDICTION TO REVISE THE ORDER U/S.263 IN SUPPORT OF THIS PROPOSITION SEVERAL CASE LAWS HAVE BEEN RELIED UPO N. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS IT HAS BEEN SUBMITTED THAT ALTHOUGH THE SALES TAX COLLECTED FRO M CUSTOMERS WAS A TRADING RECEIPT BUT DUE TO DEFERRAL SCHEME T HE SAME IS DEEMED TO HAVE BEEN PAID TO THE GOVERNMENT THEREBY DISCHARGING THE LIABILITY. THE SALES TAX LOAN GRAN TED BY THE GOVERNMENT IS NOW IN THE FORM OF A LOAN LIABILITY A ND NOT A TRADING RECEIPT. IT HAS FURTHER BEEN SUBMITTED THAT UNDER THE PROVIS IONS OF SECTION 41(1) OF THE INCOME TAX ACT WHERE AN ASSESSEE IS B ENEFITED BY WAY OF CESSATION OR REMISSION OF LIABILITY HE IS M ADE CHARGEABLE TO TAX ON THE AMOUNT OF SUCH REMISSION/CESSATION. HOWEVER THIS PROVISION FASTENS THE TAX LIABILITY ONLY ON THE ASS ESSEE WHO HAD BEEN GRANTED DEDUCTION OR AN ALLOWANCE IN THE PAST. IN THIS CASE THE ASSESSEE WAS NEVER ALLOWED DEDUCTION OR ALLOWAN CE OF THE LOAN GRANTED BY THE RAJASTHAN GOVERNMENT BY WAY OF DEEMED PAYMENT OF SALES TAX LIABILITY. BESIDES THE LIABI LITY THAT IS REMITTED SHOULD BE IN THE NATURE OF TRADING LIABILI TY SO AS TO ATTRACT THE RIGOURS OF THIS PROVISIONS. IN THE ASSESSEES C ASE SALES TAX LOAN CANNOT BE SAID TO BE A TRADING LIABILITY. THE LEARNED COMMISSIONER CONSIDERING THE EXPLANATIO N OF THE ASSESSEE HAS OBSERVED THAT THE ISSUE UNDER CONSIDERATION IS WHET HER THIS SURPLUS AMOUNTING TO RS.34.35 CRORES ARISING OUT OF PREPAYM ENT OF SALES TAX LOAN AND CREDITED TO THE PROFIT AND LOSS ACCOUNT CONSTIT UTES CAPITAL RECEIPT OR REVENUE RECEIPT. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS COLLECTED ITA 3104/MUM/08 4 SALES TAX FROM THE CUSTOMERS WHICH WAS LIABLE TO P AY TO THE GOVERNMENT OF RAJASTHAN. UNDER THE SALES TAX DEFERMENT SCHEME 19 89 OF RAJASTHAN GOVERNMENT THE ASSESSEE WAS NOT REQUIRED TO PAY 50 % OF SALES TAX LIABILITY IMMEDIATELY BUT THE SAME WAS CONVERTED INTO LOAN AM OUNT WHICH WAS PAYABLE IN INSTALMENTS UP TO MAXIMUM PERIOD OF ELEV EN YEARS. THEREFORE THE LIABILITY WHICH WAS CONVERTED INTO LOAN AMOUNT WAS BASICALLY SALES TAX LIABILITY AND THE CHANGE IN NOMENCLATURE OF THE SALES TAX LIA BILITY TO SALES TAX LOAN LIABILITY WILL NOT ALTER THE NATURE OF LIABILITY AN D HELD THAT SALES TAX COLLECTED BY THE ASSESSEE IS A TRADING RECEIPT LIABLE TO BE TAXE D. AS PER THE PROVISIONS OF SECTION 41(1) OF THE I.T. ACT 1961 WHETHER A DEDUC TION HAS BEEN ALLOWED TO THE ASSESSEE IN THE ASSESSMENT FOR ANY YEAR IN RESP ECT OF TRADING LIABILITY INCURRED BY THE ASSESSEE. SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE HAS OBTAINED SOME BENEFIT IN RESPECT OF SU CH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION. THEREFORE THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFIT OR GAINS OF BUSINESS O R PROFESSION CHARGEABLE TO INCOME TAX AS THE INCOME OF PREVIOUS YEAR IN WHICH SUCH BENEFIT IS RECEIVED. IN THE PRESENT CASE EXTINGUISHMENT OF LOAN LIABILI TY OF RS.34.35 CRORES HAS TAKEN PLACE IN ASST. YEAR 2005-06. THIS LOAN LIABI LITY IS IN THE NATURE OF SALES TAX LIABILITY AND THEREFORE TRADING LIABILITY IN NA TURE AND RIGHTLY TAXABLE UNDER THE PROVISIONS OF SECTION 41(1) OF THE ACT. THIS I S SO BECAUSE IN RESPECT OF SALES TAX LIABILITY OF RS.34.35 CRORES. THE ASSESSE E HAS BEEN GRANTED DEDUCTION AS PER THE PROVISIONS OF SECTION 43B OF T HE ACT AS ADMITTED BY THE ASSESSEE. THE LIABILITY OF THE ASSESSEE IS SAME TH AT OF SALES TAX AND ONLY NOMENCLATURE HAS BEEN CHANGED FROM SALES TAX LIABIL ITY TO LOAN LIABILITY. THIS ITA 3104/MUM/08 5 CONVERSION ONLY GIVES THE ASSESSEE A FACILITY TO PA Y THE SALES TAX LIABILITY IN INSTALMENTS OVER A PERIOD OF YEARS THEREFORE REMI SSION OF LOAN LIABILITY AMOUNTS TO REMISSION OF SALES TAX LIABILITY ONLY. ACCORDINGLY THE LEARNED COMMISSIONER HAS HELD THAT REMISSION OF TRADING LIA BILITY OF RS.34.35 CRORES IS CLEARLY TAXABLE IN THE YEAR OF REMISSION I.E. A. Y. 2005-06 UNDER THE PROVISIONS OF SECTION 41(1) OF THE ACT. THE REMISS ION OF SUCH LIABILITY CANNOT BE TREATED AS A CAPITAL RECEIPT. IN SO FAR AS THE WRITTEN SUBMISSION MADE BY THE ASSESSEE AGAINST THE INVOKING OF SECTION 263 T HE LEARNED COMMISSIONER OBSERVED THAT THE A.O. HAS TREATED THE REMISSION OF LIABILITY TO THE EXTENT OF RS.34.35 CRORES WRONGLY TREATED AS A CAPITAL RECEI PT AND THE SAME IS TAXABLE U/S.41(1) OF THE ACT. THEREFORE THE FIRST CONDITIO N THAT THE ORDER OF THE ASSESSING OFFICER SHOULD BE ERRONEOUS IS SATISFIED. MOREOVER SINCE THIS AMOUNT OF RS.34.35 CRORES HAS BEEN HELD AS TAXABLE THE ASSESSING OFFICER FAILED TO TAX WHILE PASSING THE ASSESSMENT ORDER T HE ORDER OF THE ASSESSING OFFICER IS PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE BOTH THE CONDITIONS ARE SATISFIED FOR INVOKING THE PROVISION S OF SECTION 263 OF THE ACT AND DIRECTED THE ASSESSING OFFICER. THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO MODIFY THE ASSESSMENT ORDER BY BRINGING TO TAX THE SURPLUS AMOUNTING TO RS.34.35 CRORES. 3. ON BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITT ED THAT ALL THE DETAILS IN RESPECT OF CLAIM MADE BY THE ASSESSEE WERE SUBMI TTED BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER AFTER C ONSIDERING THE DETAILS FILED ITA 3104/MUM/08 6 BY THE ASSESSEE ALLOWED THE CLAIM. THE LD. COUNSEL HAS FILED THE PAPER BOOK CONSISTING OF PAGES FROM 1 TO 65. HE HAS DRAWN OUR ATTENTION TO PAGE NOS.30 TO 32 AND SUBMITTED THAT THE DETAILS IN RESPECT OF THE CLAIM WERE FILED BEFORE THE ASSESSING OFFICER. HE HAS POINTED OUT THAT ALL T HE DETAILS IN RESPECT OF THE CLAIM WERE MADE AVAILABLE IN THE PAPER BOOK PAGES F ROM 34 TO 47. THE LEARNED COUNSEL FURTHER SUBMITTED THAT AFTER CONSID ERING THE ENTIRE MATERIAL FILED BY THE ASSESSEE THE ASSESSING OFFICER CAME T O A CONCLUSION THAT THE SURPLUS OF REPAYMENT OF SALES TAX LOAN BEING A CAPI TAL RECEIPT AND ALLOWED THE CLAIM OF THE ASSESSEE. ACCORDING TO THE COMMISSION ER THE NATURE OF THE RECEIPT IS REVENUE RECEIPT. THEREFORE THE ONLY IS SUE WHETHER THE RECEIPT IS CAPITAL OR REVENUE AND THE VIEW TAKEN BY THE ASSESS ING OFFICER WAS SUPPORTED BY THE DECISION OF SPECIAL BENCH OF ITAT IN THE CAS E OF M/S. SULZER INDIA LIMITED VS. JCIT (ITA NOS.2871 & 2944/MUM/10 DT.10. 11.2010) THEREFORE IT IS NOT A CASE THAT SECTION 263 CAN BE INVOKED. HE RELIED ON THE DECISIONS OF THE MALABAR INDUSTRIAL CO. LTD. VS. CIT (243 ITR 83 ) (SC) AND CIT VS. MAX INDIA LIMITED (295 ITR 282) (SC) BY RELYING ON THE ABOVE TWO CASE LAWS HE HAS SUBMITTED WHERE TWO VIEW ARE POSSIBLE AND THE A SSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NO T AGREE THE VIEW TAKEN BY THE A.O. IT CANNOT BE TREATED AS ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN SO FAR AS MERITS OF THE CASE AR E CONCERNED THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS SQ UARELY COVERED BY THE DECISION OF THE M/S. SULZER INDIA LIMITED (SUPRA). 5. ON THE OTHER HAND LEARNED D.R. HAS SUBMITTED TH AT THE CIRCULAR CONSIDERED BY THE SPECIAL BENCH IN THE CASE OF M/S. SULZER INDIA LIMITED ITA 3104/MUM/08 7 (SUPRA) FOR ONLY LIMITED PURPOSE I.E. SECTION 43B NOT FOR THE PURPOSE OF THE INCOME TAX ACT. THE LEARNED D.R. FURTHER SUBMITTED THAT THE SPECIAL BENCH OF THE BOMBAY TRIBUNAL IN THE CASE OF M/S. SUZLER INDI A LTD NOT DECIDED THE ISSUE IN PROPER PROSPECTIVE AND SUPPORTED THE ORDER PASSED BY THE COMMISSIONER U/S.263. 6. WE HAVE HEARD BOTH THE SIDES PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE RAJASTHAN GOVERNMENT GAVE AN OPTION TO THE ASSESSEE AVAILING THE BENEFIT UNDER T HE SCHEME TO REPAY THE LOAN LIABILITY EVEN BEFORE THE STIPULATED REPAYMENT DATE. PURSUANT TO THE GOVERNMENT OFFER THE ASSESSEE COMPANY OPTED TO MAK E REPAYMENT OF LOAN LIABILITY OF RS.106.47 CRORES. DURING THE PREVIOUS YEAR RELEVANT TO THE ASST. YEAR 2005-06 THE ASSESSEE-COMPANY PAID AN AMOUNT O F RS.72.12 CRORES TO THE STATE GOVERNMENT IN DISCHARGING OF TOTAL LIABIL ITY OF RS.106.47 CRORES RESULTED IN EXTINGUISHMENT OF LOAN LIABILITY OF RS. 34.35 CRORES BEING THE EXCESS OF LOAN LIABILITY OVER THE AMOUNT PAID. THE SURPLUS ARISING OUT OF PAYMENT OF LOAN AMOUNTING TO RS.34.35 CRORES WAS CR EDITED TO THE PROFIT AND LOSS ACCOUNT AND THE ASSESSEE HAS FILED ALL THE DET AILS IN RESPECT OF THE ABOVE AND CREDITED THE AMOUNT TO THE PROFIT AND LOSS ACCO UNT (PAPER BOOK PAGES 32 35 TO 37). THE ASSESSING OFFICER HAS ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT SURPLUS ON PAYMENT OF SALES TAX LOA N BEING A CAPITAL RECEIPT IN NATURE. ACCORDING TO THE COMMISSIONER THE SURP LUS AMOUNT OF LOAN AMOUNTING TO RS.34.35 CRORES TAXABLE U/S.41(1) OF T HE ACT BECAUSE THE LOAN LIABILITY WHICH IS IN THE NATURE OF SALES TAX LIABI LITY IS ONLY A TRADING LIABILITY AND NOT CAPITAL IN NATURE THEREFORE THE REMISSION ON SUCH LIABILITY CANNOT BE ITA 3104/MUM/08 8 TREATED AS A CAPITAL RECEIPT. THE ASSESSING OFFICER HAS TREATED THE RECEIPT AS CAPITAL RECEIPT. THE SPECIAL BENCH OF ITAT IN THE CASE OF M/S. SUZLER INDIA LIMITED (SUPRA) IN SIMILAR SET OF FACTS HAS HELD TH AT SECTION 41(1) HAS NO APPLICATION. IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA) THE HONBLE SUPREME COURT OBSERVED AS UNDER : A BARE READING OF SECTION 263 OF THE INCOME TAX A CT 1961 MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCI SE 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 ASSES SING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS P REJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSE NT IF THE ORDER OF THE INCOME TAX OFFICER IS ERRONEOUS BUT IS NOT P REJUDICIAL TO THE REVENUE OR IF ;IT IS NOT ERRONEOUS BUT IS PREJUDICI AL TO THE REVENUE-RECOURSE CANNOT BE HAD TO SECTION 263(1) O F THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLI CATION OF LAW; WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERR ONEOUS. IN THE SAME CATEGORY FULL ORDERS PASSED WITHOUT APPLYING T HE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS NO T AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD I N ITS ORDINARY MEANING IT IS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENT RUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE INCOM E TAX OFFICER THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PER SON IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY TH E ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDI CIAL TO THE INTERESTS OF THE REVENUE FOR EXAMPLE WHEN AN INCO ME TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN L AW AND IT HAS RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME TAX OFFICER HAS TAKEN ONE VIEW WITH WHIC H THE COMMISSIONER DOES NOT AGREE IT CANNOT BE TREATED A S AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTA INABLE IN LAW. ITA 3104/MUM/08 9 SUBSEQUENTLY IN CASE OF CIT VS. MAX INDIA LIMITED (SUPRA) BY FOLLOWING THE AFORESAID DECISION OF THE MALABAR INDUSTRIAL CO. LT D. HAS OBSERVED THAT UNDER SECTION 263 HAS TO BE READ CONJUNCTION WITH E XPRESSION ERRONEOUS ORDER PASSED BY THE A.O. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE A.O. CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF REVENUE. FOR EXAMPLE WHEN AN ITO HAS ADOPTED ONE COURSE PER MISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW IF THE COMMISSIONER DOES NOT AG REE IT CANNOT BE TREATED AS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVE NUE UNLESS THE VIEW TAKEN BY THE A.O. IS UNSUSTAINABLE IN LAW. IN THE PRESENT CASE IN OUR OPINION THE VIEW TAKEN BY THE A.O. IS ONE OF THE POSSIBLE VIEW AND IT IS NOT A CASE TO INVOKE SECTIO N 263 OF THE ACT. IT IS NOT EVEN REVENUES CASE THAT ASSESSING OFFICER NOT APPL IED THE MIND WITH REGARD TO TAXABILITY ON ACCOUNT OF REMISSION OF LIABILITY BUT ALL THAT IT IS CONTENDED BEFORE US IS ASSESSING OFFICER REACHED INCORRECT CO NCLUSION. HOWEVER NOT ONLY THAT THE ASSESSING OFFICER HAD FORMED A POSSIB LE VIEW OF THE MATTER BUT ALSO THE VIEW SO FORMED BY HIM IN THE LIGHT OF THE SPECIAL BENCH DECISION IN THE CASE OF SULZER INDIA LIMITED (SUPRA) WHICH IS B INDING PRECEDENT FOR US REFLECTS CORRECT LEGAL POSITION. IN VIEW OF THE FA CTS AND CIRCUMSTANCES OF THE CASE AND ALSO FOLLOWING THE AFORESAID DECISIONS OF THE HONBLE SUPREME COURT WE SET ASIDE THE ORDER PASSED BY THE COMMISSIONER U /S.263 AND RESTORE THE ORDER OF THE ASSESSING OFFICER. ITA 3104/MUM/08 10 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. PRONOUNCED IN THE OPEN COURT ON 11 TH MARCH 2011. SD/- SD/- (PRAMOD KUMAR) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DT.11 TH MARCH 2010. *GPR COPIES OF THE ORDER FORWARDED TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT MUMBAI (4) CIT(A) MUMBAI (5) DR (6) GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES ITA 3104/MUM/08 11 DATE INITIALS 1. DRAFT DICTATED ON 09/03/2011 2. DRAFT PLACED BEFORE AUTHOR 3. DRAFT PROPOSED & PLACED BEFORE SECOND MEMBER 4. DRAFT DISCUSSED & APPROVED BY SECOND MEMBER 5. APPROVED DRAFT COMES TO SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER.