TATA SONS LTD, MUMBAI v. DCIT SP. RG-1, MUMBAI

ITA 3461/MUM/2009 | 1990-1991
Pronouncement Date: 28-01-2011 | Result: Allowed

Appeal Details

RSA Number 346119914 RSA 2009
Assessee PAN AAACT4060A
Bench Mumbai
Appeal Number ITA 3461/MUM/2009
Duration Of Justice 1 year(s) 8 month(s) 1 day(s)
Appellant TATA SONS LTD, MUMBAI
Respondent DCIT SP. RG-1, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 28-01-2011
Date Of Final Hearing 18-01-2011
Next Hearing Date 18-01-2011
Assessment Year 1990-1991
Appeal Filed On 27-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHRI P.M. JAPTAP A.M. AND SHRI N. V. VASUDE VAN J.M. I.T.A. NO.3461/MUM/2009 ASSESSMENT YEAR : 1990-91 M/S. TATA SONS LTD. BOMBAY HOUSE HOMI MODY STREET MUMBAI-400 001 PAN NO : AAACT4060A DEPUTY COMMISSIONER OF INCOME TAX SP. RG-1 ROOM NO.557 AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020 (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI DINESH VYAS RESPONDENT BY : SHRI HEMANT LAL ORDER PER N. V. VASUDEVAN (JM) : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 30.03.2009 OF COMMISSIONER OF INCOME TAX - 2 MUMBAI PASSED U/S.2 63 OF THE INCOME TAX ACT 1961 (THE ACT) RELATING TO ASSESSMENT YEAR 199 0-91. 2. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE OR DER U/S.263 OF THE ACT WAS PASSED BY THE LEARNED CIT ARE AS FOLLOWS:- THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF FINANCE INVESTMENT AND CONSULTANCY ETC. FOR ASSESSMENT YEAR 1990-91 THE RETURN OF INCOME WAS FILED ON 31.12.1990 DECLARING INCOME OF RS.62 66 588/-. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY HIS O RDER DATED 10.03.1993. IN THIS ORDER THE INCOME OF THE ASSESSEE UNDER THE HEA D INCOME FROM BUSINESS WAS DETERMINED BY THE ASSESSING OFFICER AT SUM OF RS.4 97 38 504/-. THE GROSS TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT SUM OF RS. 11 33 53 911/-. THE DEDUCTION UNDER CHAPTER-VIA OF THE ACT WAS DETERMIN ED AS FOLLOWS:- 2 DEDUCTION UNDER CHAPTER VI A I) U/S.80 G 2 95 125 II) U/S.80M 2 96 99 157 III) U/S.80-O 1 84 76 240 4 84 70 522 3. UNDER SECTION- 80A(2) OF THE ACT THE AGGREGATE AMOUNT OF DEDUCTION UNDER CHAPTER VIA OF THE ACT SHOULD NOT IN ANY CA SE EXCEED THE GROSS TOTAL INCOME OF THE ASSESSEE. SEC.80-AB PROVIDES AS FOLL OWS: DEDUCTIONS TO BE MADE WITH REFERENCE TO THE INCOME INCLUDED IN THE GROSS TOTAL INCOME. 80AB. WHERE ANY DEDUCTION IS REQUIRED TO BE MADE OR ALLO WED UNDER ANY SECTION INCLUDED IN THIS CHAPTER UNDER THE HEADING C.DEDUCTIONS IN RESPECT OF CERTAIN INCOMES IN RESPECT OF ANY INCOM E OF THE NATURE SPECIFIED IN THAT SECTION WHICH IS INCLUDED IN THE GROSS TOTAL INCOME OF THE ASSESSEE THEN NOTWITHSTANDING ANYTHING CONTAINED IN THAT SECTION FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER THAT SECTI ON THE AMOUNT OF INCOME OF THAT NATURE AS COMPUTED IN ACCORDANCE WIT H THE PROVISIONS OF THIS ACT (BEFORE MAKING ANY DEDUCTION UNDER THIS CH APTER) SHALL ALONE BE DEEMED TO BE THE AMOUNT OF INCOME OF THAT NATURE WH ICH IS DERIVED OR RECEIVED BY THE ASSESSEE AND WHICH IS INCLUDED IN H IS GROSS TOTAL INCOME. 4. IT CAN BE SEEN FROM THE AFORESAID COMPUTATION OF TOTAL INCOME DONE BY THE AO THAT THE DEDUCTION UNDER CHAPTER V IA WAS LESS THAN THE INCOME COMPUTED UNDER THE HEAD INCOME FROM BUSINESS. THE ASSESSE E FILED AN APPEAL AGAINST THE ORDER OF THE ASSESSING OFFICER. THE LEARNED CIT(APP EALS)33 MUMBAI BY AN ORDER DATED 20.08.2000 GAVE CERTAIN RELIEF TO THE A SSESSEE. THE AO PASSED AN ORDER DATED 06.10.2003 GIVING EFFECT TO THE RELIEF ALLOWED BY THE LEARNED CIT(APPEALS). IN THIS ORDER THE AO DETERMINED THE I NCOME OF THE ASSESSEE FROM BUSINESS AT RS.1 64 92 652/-. THE GROSS TOTAL INCOM E WAS DETERMINED AT RS.7 16 69 565/-. THE DEDUCTION IN CHAPTER VI-A WAS DETERMINED AS FOLLOWS:- DEDUCTION UNDER CHAPTER VI A I) U/S.80 G 2 95 125 II) U/S.80HHB 2 93 439 III) U/S.80M(80% OF [5 79 37 039 84 38 494] 2 96 99 157 IV) U/S.80-O (ORIGINAL [1 84 76 240 + 62 43 684] 2 47 19 924 5 50 07 645 REVISED TOTAL INCOME 1 66 61 920 3 5. FURTHER APPEAL HAD BEEN PREFERRED BEFORE THE HON BLE ITAT AGAINST THE ORDER DATED 20.08.2000 OF LEARNED CIT(APPEALS) -23 MUMBAI. THE TRIBUNAL PASSED AN ORDER IN ITA NO.5742/MUM/2002 DATED 20.06 .2006. THE ASSESSING OFFICER PASSED AN ORDER DATED 04.12.2006 GIVING EFF ECT TO THE AFORESAID ORDER OF THE ITAT. IN THIS ORDER THE AO HAD DETERMINED THE INCOME UNDER THE HEAD INCOME FROM BUSINESS AT RS.81 63 115/- AND THE GR OSS TOTAL INCOME WAS DETERMINED AT RS.5 68 35 909/-. THE DEDUCTION UNDER CHAPTER IVA WAS DETERMINED AS FOLLOWS:- DEDUCTION UNDER CHAPTER VI A I) U/S.80 G 2 95 125 II) U/S.80M 2 96 99 157 III) U/S.80-O 81 63 115 3 81 57 397 1 86 78 512 6. AS CAN BE SEEN FROM THE AFORESAID ORDER OF THE A O DATED 04.12.2006 THE ASSESSING OFFICER HAS RESTRICTED THE DEDUCTION U/S. 80-O TO THE EXTENT OF INCOME UNDER THE HEAD INCOME FROM BUSINESS. THE ASSESSE E WAS AGGRIEVED BY THE AFORESAID ORDER OF THE ASSESSING OFFICER AND HE TH EREFORE FILED AN APPLICATION U/S.154 OF THE ACT DATED 15.12.2006. IN THIS APPLIC ATION U/S.154 OF THE ACT THE ASSESSEE POINTED OUT THAT THE ASSESSING OFFICER BY HIS ORDER DATED 06.10.2003 WHILE GIVING THE EFFECT TO THE ORDER OF THE LEARNED CIT(APPEALS)33 MUMBAI DATED 20.08.2000 HAS ALREADY COMPUTED THE DEDUCTION U/S.80-O AT RS.2 47 19 924/-. THE ASSESSEE FURTHER BROUGHT TO T HE NOTICE OF THE ASSESSING OFFICER THAT THE ITAT IN THE APPEAL AGAINST THE ORD ER OF THE LEARNED CIT(APPEALS) DATED 20/8/2000 HAD NOT GIVEN ANY DIRECTIONS WITH R EGARD TO THE CLAIM OF DEDUCTION U/S.80-O OF THE ACT NOR ANY DIRECTION WIT H REGARD TO THE DEDUCTION TO BE ALLOWED UNDER CHAPTER-VI-A OF THE ACT VIS--VIS-GRO SS TOTAL INCOME OR INCOME UNDER THE HEAD INCOME FROM BUSINESS. IT WAS THE PLEA OF THE ASSESSEE THAT THE QUESTION OF DETERMINING THE QUANTUM OF DEDUCTION U/ S.80-O OF THE ACT WAS NEVER SUBJECT MATTER OF APPEAL BEFORE ITAT AND THEREFORE CAN NEVER BE CONSIDERED BY THE AO WHILE GIVING EFFECT TO THE ORDER OF THE TRIB UNAL. THE ASSESSING OFFICER ON 4 CONSIDERING THE ABOVE APPLICATION OF THE ASSESSEE F OUND THAT THE CLAIM MADE BY THE ASSESSEE WAS CORRECT AND HE THEREFORE RECTIFI ED HIS ORDER BY DETERMINING THE DEDUCTION U/S.80-O OF THE ACT AT RS . 2 47 19 924/- BY HIS ORDER U/S.154 OF THE ACT DATED 20-02-2007. THE ASSESSEE HAD ALSO FILED AN A PPEAL AGAINST THE ORDER DATED 4-12-2006 WHEREBY THE ASSESSING OFFICER GAVE EFFECT TO THE DIRECTIONS OF THE ITAT ORDER DATED 20.06.2006. THE APPEAL WAS FILED O N 02.01.2007. BY THE TIME THE APPEAL WAS HEARD BY THE LEARNED CIT(APPEALS) T HE ASSESSING OFFICER HAD ALREADY PASSED ORDER U/S.154 OF THE ACT ON 20.02.20 07 WHEREBY HE RECTIFIED THE MISTAKE IN THE AMOUNT OF DEDUCTION TO BE ALLOWED U/ S.80-O OF THE ACT. THE ASSESSEE THEREFORE DID NOT PRESS ADJUDICATION OF I TS GRIEVANCE BEFORE THE LEARNED CIT(APPEALS) AND THEREFORE THE LEARNED CIT(APPEAL S) DISMISSED THE GRIEVANCE OF THE ASSESSEE AS NOT PRESSED. THIS ORDER BY THE L EARNED CIT(APPEALS) WAS PASSED ON 26.10.2007. 7. THE LEARNED CIT IN EXCISE OF HIS POWER U/S.263 O F THE ACT WAS OF THE VIEW THAT THE ORDER DATED 20.02.2007 PASSED U/S.154 OF T HE ACT WHEREBY THE AO DETERMINED THE DEDUCTION U/S.80-O OF THE ACT AT RS. 2 47 19 924/- WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE WAS OF THE VIEW THAT THE DEDUCTION U/S.80-O AND 80HHB OF THE ACT HAD TO BE R ESTRICTED TO THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS. ACCORDING TO THE LEARNED CIT THE ACTION OF THE ASSESSING OFFICER WHILE PASSI NG THE ORDER U/S.154 WAS AGAINST THE PROVISIONS OF SECTION 80AB OF THE ACT. HE THEREFORE ISSUED AN SHOW CAUSE NOTICE U/S.263 OF THE ACT CALLING UPON THE AS SESSEE TO SHOW CAUSE AS TO WHY THE ORDER DATED 20.02.2007 BE NOT REVISED AS I T WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 8. THE ASSESSEE IN ITS REPLY TO THE SHOW CAUSE NOTI CE SUBMITTED THAT THE AO PASSED AN ORDER DATED 06.10.2003 GIVING EFFECT TO T HE ORDER OF LEARNED CIT(APPEALS) DATED 20.08.2000. IN THAT ORDER THE AO DID NOT RESTRICT THE DEDUCTION U/S.80-O AND 80HHB TO THE EXTENT OF THE I NCOME COMPUTED UNDER THE HEAD INCOME FROM BUSINESS. ACCORDING TO THE ASSES SEE THIS WAS THE STAGE AT 5 WHICH THE LEARNED CIT IN EXERCISE OF POWERS U/S.263 COULD HAVE INTERFERED WITH THE ORDER OF THE AO. THE TIME WITHIN WHICH THE LEAR NED CIT COULD HAVE DONE SO U/S.263 WAS TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OUGHT TO BE REVISED WAS PASSED. IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE LEARNED CIT BY SEEKING TO REVISE THE ORDER DATED 20.02.2007 HAS VIRTUALLY REVISED THE ORDER DATED 06.10.2003 OF THE AO. BY DOING SO THE LEARNED CIT IS TRYING TO GET OVER THE BAR OF LIMITATION. IT WAS SUBMITTED THAT WHAT CANNOT BE DONE DIRECTLY CANNOT BE INDIRECTLY BY THE CIT. ANOTHER SUBMISSIO N OF THE ASSESSEE WAS THAT IN TERMS OF SECTION 80A(2) THE DEDUCTION UNDER CHAPTE R-VIA OF THE ACT CANNOT EXCEED THE GROSS TOTAL INCOME AND THERE IS NO PROVI SION TO RESTRICT DEDUCTION UNDER CHAPTER-VI-A OF THE ACT TO INCOME UNDER THE HEAD INCOME FROM BUSINESS. ALTERNATIVELY IT WAS SUBMITTED THAT THERE WERE TWO VIEWS POSSIBLE ON THE ISSUE AND THEREFORE THE JURISDICTION U/S.263 CANNOT BE INVOKED. IN THIS REGARD IT WAS POINTED OUT THAT THE PROVISION U/S.80AB OF THE ACT ON WHICH THE CIT HAD PLACED RELIANCE WAS APPLICABLE ONLY WHILE DETERMINING THE NATURE OF INCOME THAT IS ENTITLED TO DEDUCTION UNDER CHAPTER-VIA OF THE ACT AND NO LIMITS WITH REGARD TO THE QUANTUM OF DEDUCTION TO BE ALLOWED UNDER ANY PR OVISIONS CONTAINED IN CHAPTER VI-A OF THE ACT CAN BE READ INTO THE PROVI SIONS OF SEC.80-AB OF THE ACT. 9. THE LEARNED CIT HOWEVER DID NOT AGREE WITH T HE SUBMISSION OF THE ASSESSEE FOR THE FOLLOWING REASONS:- I HAVE GIVEN MY EARNEST CONSIDERATION TO THE CONTE NTIONS RAISED BY THE ASSESSEE AND I MUST STATE THAT THESE ARE NOT ACCEPT ABLE FOR THE REASONS STATED BELOW: THE ORDER DATED 04.12.2006 IS ONE THAT GIVES EFFECT TO THE ITATS ORDER DATED 20.06.2006. IN THIS ORDER THE BUSINESS INCOME OF THE ASSESSEE HAS BEEN RECOMPUTED AT RS.81 63 115/- AFTER TAKING INTO ACCOUNT THE VARIOUS RELIEFS GRANTED BY THE ITAT. IN GIVING EFFECT TO A N APPELLATE ORDER IT IS THE DUTY OF THE ASSESSING OFFICER NOT ONLY TO ALLOW THE SPECIFIC RELIEFS GRANTED BY THE APPELLATE AUTHORITY BUT ALSO TO CARRY OUT C ONSEQUENTIAL MODIFICATIONS IN THE COMPUTATION OF INCOME NECESSIT ATED BY THE APPELLATE FINDING BEARING IN MIND ALL THE RELEVANT PROVISION OF THE I.T. ACT. THIS POINT CAN BE ILLUSTRATED WITH REFERENCE TO THE PRESENT CA SE. SINCE BY THE ORDER 6 DATED 04.12.2006 THE BUSINESS INCOME OF THE ASSESS EE HAS BEEN REDUCED TO RS.81 63 115/- ALLOWANCE OF THE DEDUCTIONS UNDER S ECTION 80-O AND 80HHB THE ALLOWANCE OF WHICH DEPEND ON THE QUANTUM OF BUSINESS INCOME NEEDED TO BE RECONSIDERED IN VIEW OF THE PR OVISIONS OF SECTION 80 AB. THIS IS WHAT THE ASSESSING OFFICER HAS DONE. HE HAS CORRECTLY GIVEN EFFECT TO THE ORDERS OF THE ITAT BY REGULATING THE DEDUCTION U/S.80-O AND 80HHB TAKING INTO ACCOUNT THE RECOMPUTED BUSINESS I NCOME. IT IS SIGNIFICANT TO NOTE THAT THE ASSESSING OFFICER HAS NOT INTERFERED WITH THE COMPUTATION OF DEDUCTIONS UNDER SECTIONS-80-0 AT RS .2 47 19 924/- AND U/S.80 HHB OF RS.2 93 439/-. THIS HAS CAUSED PREJUD ICE TO THE REVENUE IN THE SENSE THAT EXCESSIVE DEDUCTIONS UNDER THESE SEC TIONS HAVE BEEN GRANTED. THEREFORE THE MISTAKE TO BE CORRECTED U/S .263 HAS BEEN COMMITTED BY THE AO IN THE ORDER DATED 20.02.2007. THE LIMITATION FOR REVISION OF THIS ORDER EXPIRES ONLY BY 31.03.2009 I N TERMS OF SECTION 263(2). HENCE THE ASSESSEES OBJECTION TO THE REVIS IONS BASED ON LIMITATION DESERVED TO BE REJECTED. IT IS ALSO TO BE MENTIONED IN THIS CONNECTION THAT THE RATIO OF THE SUPREME COURT DECISION IN THE CASE OF CIT VS. ALAGENDRAN FI NANCE LTD. (293 ITR 1) AND THAT OF RAJASTHAN H.C IN THE CASE OF CIT VS. HE MRAJ UDYOG (259 ITR 240) CANNOT BE APPLIED TO THE CASE OF THE ASSESSEE AS THE FACTS OBTAINING IN THESE CASES AND THAT OF THE ASSESSEE ARE QUITE DIST INGUISHABLE. THERE IS ALSO NO MERIT IN THE CONTENTION OF THE ASS ESSEE THAT SECTION 80 AB CANNOT BE INVOKED TO RESTRICT THE DEDUCTIONS U/S.80 -0 AND 80 HHB TO THE BUSINESS INCOME. SECTION 8 AB STIPULATES THAT DEDUC TIONS UNDER CHAPTER VI-A ARE TO BE MADE WITH REFERENCE TO THE INCOMES O F THE NATURE ENTITLING THE DEDUCTIONS INCLUDED IN THE GROSS TOTAL INCOME. THE DEDUCTIONS U/S.80-0 AND 80 HHB ARE TO BE ALLOWED WITH REFERENCE TO INCO MES BY WAY OF TECHNICAL SERVICE FEES AND PROJECT EXPORTS BROUGHT TO INDIA FROM OUTSIDE. BOTH KINDS OF INCOME ARE ASSESSABLE UNDER THE HEAD BUSINESS. SUCH BEGIN THE POSITION SECTION 80 AB DOES NOT PERMIT THE ALL OWANCE OF ANY AMOUNT IN EXCESS OF THE BUSINESS INCOME INCLUDED IN THE GROSS TOTAL INCOME. THERE IS ALSO NO MERIT IN THE ARGUMENT OF THE ASSES SEE THAT SINCE ON THE APPLICABILITY OF SECTION 80 AB IN RESTRICTING THE D EDUCTION U/S.80-0 AND 80 HHB TO THE BUSINESS INCOME TWO VIEWS ARE POSSIBLE THE CIT IS PRECLUDED FROM INVOKING HIS POWERS U/S.263 IN VIEW OF THE RAT IO OF THE SUPREME COURT DECISION IN THE CASE OF MALABAR INDUSTRIES CO. LTD. VS. CIT (243 ITR 83) AS THERE CANNOT BE TWO PLAUSIBLE VIEWS ON THIS ISSU E. IN THE LIGHT OF THE FOREGOING DISCUSSION IT IS HELD THAT THE ORDER DATED 20.02.2007 IS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF REVENUE AND THERE IS NOTHING ON FACT OR IN LAW BARRING THE CIT FROM EXERCISING HIS JURISDICTION U/S.263 IF THE I.T ACT. HENCE THE ORD ER DATED 20-02-2007 IS SET ASIDE. THE A.O. IS DIRECTED TO PASS A FRESH ORDER R ESTRICTING THE DEDUCTIONS 7 U/S.80-0 AND 80 HHB TO THE BUSINESS INCOME INCLUDED IN THE GROSS TOTAL INCOME. 10. AGGRIEVED BY THE ORDER U/S.263 THE ASSESSEE H AS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEA RNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE ORDER OF ASSESSMENT U/S.143(3) DATED 10-3-1993 THE AO DETERMINED THE DEDUCTION U/S.80-O AT RS.1 84 76 240 AND DID NOT ALLOW DEDUCTION U/S.80-HHB OF THE ACT. WHILE COMPUTING T OTAL INCOME IN THE ORDER OF ASSESSMENT DATED 10-3-1993 THE INCOME UNDER THE HE AD INCOME FROM BUSINESS WAS ONLY RS.4 97 38 504 WHEREAS THE GROSS TOTAL IN COME WAS RS.11 33 53 911 AND THE DEDUCTIONS UNDER CHAPTER VI-A OF THE ACT W AS RS.4 84 70 522. SINCE THE DEDUCTIONS UNDER CHAPTER VI-A OF THE ACT WAS LE SS THAN THE INCOME UNDER THE HEAD INCOME FROM BUSINESS THE AO DID NOT HAVE AN Y OCCASION TO EXAMINE THE QUESTION WHETHER DEDUCTION UNDER ANY SECTIONS OF CH APTER-VI-A OF THE ACT HAD TO BE RESTRICTED TO THE INCOME UNDER THE HEAD INCO ME FROM BUSINESS BECAUSE OF THE PROVISIONS OF SEC.80-AB OF THE ACT OR IT IS O NLY THE OVERALL CEILING OF DEDUCTION UNDER SEC.80-A(2) THAT HAS TO BE SEEN. I N THE APPEAL AGAINST THE SAID ORDER OF ASSESSMENT DEDUCTION U/S.80-O AND 80-HHB O F THE ACT WAS DIRECTED TO BE ALLOWED AT RS.2 96 99 157 AND RS.2 93 439/- RESP ECTIVELY. IN THE ORDER DATED 06.10.2003 PASSED BY THE AO TO GIVE EFFECT TO THE O RDER OF CIT(A)-XXXIII MUMBAI DATED 20.08.2000 HE HAD DETERMINED THE DED UCTION U/S.80-O AND 80- HHB AT RS.2 96 99 157 AND RS.2 93 439/- RESPECTIVEL Y AND DID NOT THINK IT FIT TO RESTRICT THE DEDUCTION U/S.80-O AND 80-HHB TO THE I NCOME UNDER THE HEAD INCOME FROM BUSINESS WHICH WAS DETERMINED IN THE VERY SAME ORDER AT RS.1 64 92 652. IT WAS CONTENDED THAT THE GRIEVANC E PROJECTED BY THE CIT IN THE ORDER U/S.263 CAN HOLD GOOD ONLY WITH REGARD TO THI S ORDER BECAUSE THIS IS THE FIRST POINT OF TIME WHEN THE AO COULD HAVE AND OUGHT TO H AVE APPLIED HIS MIND TO THE QUESTION WHETHER DEDUCTION UNDER ANY SECTIONS OF CH APTER-VIA OF THE ACT HAD TO BE RESTRICTED TO THE INCOME UNDER THE HEAD INCOME FROM BUSINESS BECAUSE OF THE 8 PROVISIONS OF SEC.80-AB OF THE ACT OR IT IS ONLY THE OVERALL CEILING OF DEDUCTION UNDER SEC.80-A(2) THAT HAS TO BE SEEN. IF AT ALL I T IS THIS ORDER WHICH COULD BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT WAS SUBMITTED BY HIM THAT THE ORDER DATED 4-12-2006 MERELY GAVE EFFE CT TO THE ORDER OF THE ITAT DATED 20.06.2006 IN WHICH THIS ISSUE COULD NOT HAVE BEEN EXAMINED BY THE AO. IT WAS SUBMITTED THAT THE ISSUE BEFORE THE ITAT WER E TOTALLY DIFFERENT AND HAD NOTHING TO DO WITH THE QUESTION AS TO WHETHER DEDUC TION UNDER ANY SECTIONS OF CHAPTER-VI-A OF THE ACT HAD TO BE RESTRICTED TO TH E INCOME UNDER THE HEAD INCOME FROM BUSINESS BECAUSE OF THE PROVISIONS OF SEC.80-AB OF THE ACT OR IT IS ONLY THE OVERALL CEILING OF DEDUCTION UNDER SEC. 80-A(2) THAT HAS TO BE SEEN. SINCE THE ISSUES DEALT WITH IN THE ORDER DATED 06.1 0.2003 AND 20.02.2007 WERE DIFFERENT THERE WOULD BE NO QUESTION OF THE ORDER DATED 06.10.2003 MERGING WITH THE ORDER DATED 4-12-2006. THEREFORE THE ORDER U/ S.154 OF THE ACT DATED 20/2/2007 MODIFYING THE ORDER DATED 4/12/2006 WAS N OT ERRONEOUS AND THEREFORE THE CIT COULD NOT REVISE THE SAID ORDER IN EXERCISE OF HIS POWERS U/S.263 OF THE ACT. IT WAS HIS FURTHER SUBMISSION THAT THE CIT E XERCISED JURISDICTION U/S.263 BY ORDER DATED 30.03.2009. THE PERIOD OF LIMITATION F OR EXERCISING JURISDICTION U/S.263 IN TERMS OF SEC.263(2) IS TWO YEARS FROM TH E END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. T HE PERIOD OF LIMITATION FOR PASSING THE ORDER U/S.263 IF IT IS RECKONED FROM T HE ORDER DATED 06.10.2003 WOULD EXPIRE ON 31.03.2006. IT WAS HIS SUBMISSION THAT H AVING OMITTED TO TAKE APPROPRIATE ACTION U/S.263 OF THE ACT AGAINST THE O RDER DATED 06.10.2003 WITHIN THE PERIOD OF LIMITATION THE CIT CANNOT IN THE GAR B OF REVISING THE ORDER DATED 20.02.2007 SEEK TO REVISE THE ORDER DATED 06.10.200 3 WHICH WAS ALREADY BARRED BY TIME FOR ANY ACTION U/S.263 OF THE ACT. IN THIS REGARD OUR ATTENTION WAS DRAWN TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ALAGENDRA FINANCE LTD. 293 ITR1 (SC) WHEREIN IT WAS HELD THAT WHERE POWER OF REVISION IS EXERCISED U/S.263 OF THE ACT AGAINST AN ORDER OF RE ASSESSMENT ITEMS WHICH WERE NOT SUBJECT MATTER OF REASSESSMENT BUT WHICH WERE S UBJECT MATTER OF ORIGINAL ASSESSMENT COULD NOT BE REVISED. THE HONBLE COURT HELD THAT PERIOD OF 9 LIMITATION WOULD START FROM THE ORIGINAL ORDER OF A SSESSMENT AND NOT FROM THE REASSESSMENT ORDER. THE HONBLE COURT FURTHER HELD THAT WHERE THE ISSUES DEALT WITH IN THE ORDER OF ASSESSMENT AND ORDER OF REASSE SSMENT WERE DIFFERENT DOCTRINE OF MERGER WOULD NOT APPLY AND THE PERIOD OF LIMITAT ION WOULD COMMENCE FROM THE ORIGINAL ASSESSMENTS AND NOT FROM THE REASSESSM ENT. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ASHOKA BUILDCON LTD. VS. ACIT (W.P.NO.10160 OF 2009 DATED 23/4/2010 WHEREIN ON IDENTICAL FACTS FOLLOWING THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF ALAGENDRA FINANCE (SUPRA) IT WAS HELD THAT ORDER U /S.263 WAS BARRED BY TIME. OUR ATTENTION WAS ALSO DRAWN TO DECISIONS OF OTHER HONBLE HIGH COURTS ON IDENTICAL PROPOSITION. WE ARE NOT MAKING ANY REFER ENCE TO THOSE DECISIONS AS THE PRINCIPLES EMANATING FROM THOSE DECISIONS ARE IDENT ICAL. 12. THE LEARNED. D.R. HOWEVER SUBMITTED THAT UNDE R THE PROVISIONS OF SEC.263 THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECOR D OF ANY PROCEEDING UNDER THIS ACT AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE HE MAY EXERCISE JURISDICTION. ACCORDING TO HIM THE EXPRESSION ANY PROCEEDINGS A ND ANY ORDER PASSED THEREIN GIVES A WIDE SCOPE TO THE CIT. THE ORDER DATED 20.02.2007 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE AND THEREFORE THE CIT INVOKED THE PROVISIONS OF SEC.263 OF THE ACT. ACCO RDING TO HIM THE CIT WAS WELL WITHIN HIS JURISDICTION IN PASSING THE IMPUGNE D ORDER. IT WAS ALSO HIS SUBMISSION THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ALAGENDRA FINANCE (SUPRA) AND THE HONBLE BOMBAY HI GH COURT IN THE CASE OF ASHOKA BUILDCON LTD. (SUPRA) WAS A CASE OF REASSESS MENT WHEREAS THE CASE OF THE ASSESSEE THE ORDERS RELATE TO GIVING EFFECT TO THE ORDER OF CIT(A) AND ITAT WHICH CANNOT BE EQUATED WITH ORDER OF ASSESSMENT AN D REASSESSMENT. IT WAS ALSO HIS SUBMISSION THAT THE ISSUES DEALT WITH IN THE OR DER WHICH WAS REVISED U/S.263 WERE CONSEQUENTIAL TO THE ORDERS OF THE APPELLATE A UTHORITIES AND THE AO EXAMINED THEM FOR THE FIRST TIME IN THE ORDER DATED 20.02.2007. 10 13. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS. UNDER SECTION 263 OF THE ACT THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT AND IF HE CONSIDERS THAT ANY ORDER P ASSED THEREIN BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE HE MAY EXERCISE JURISDICTION BY MODIFYING ENHANCING THE ASSESSMENT OR CANCELING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THE EXPRESSION ANY PROCEEDINGS UNDER THIS ACT AND IF CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER NO DOUBT GIVES POWER TO EXAMINE THE RECORD OF ANY PROC EEDINGS UNDER THE ACT. HOWEVER THE COMMISSIONER IF HE WANTS TO EXERCISE J URISDICTION U/S.263 AND REVISE AN ORDER PASSED BY THE ASSESSING OFFICER TH EN HE MUST FIND THE ORDER WHICH HE SEEKS TO REVISE TO BE ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF THE REVENUE. AS RIGHTLY CONTENDED ON BEHALF OF THE ASS ESSEE IN THE ORDER OF ASSESSMENT U/S.143(3) DATED 10-3-1993 THE AO DETER MINED THE DEDUCTION U/S.80- O AT RS.1 84 76 240 AND DID NOT ALLOW DEDUCTION U/S .80-HHB OF THE ACT. WHILE COMPUTING TOTAL INCOME IN THE ORDER OF ASSESSMENT D ATED 10-3-1993 THE INCOME UNDER THE HEAD INCOME FROM BUSINESS WAS ONLY RS.4 97 38 504 WHEREAS THE GROSS TOTAL INCOME WAS RS.11 33 53 911 AND THE DEDU CTIONS UNDER CHAPTER VI-A OF THE ACT WAS RS.4 84 70 522. SINCE THE DEDUCTIO NS UNDER CHAPTER VI-A OF THE ACT WAS LESS THAN THE INCOME UNDER THE HEAD INCOME FROM BUSINESS THE AO DID NOT HAVE ANY OCCASION TO EXAMINE THE QUESTION W HETHER DEDUCTION UNDER ANY SECTIONS OF CHAPTER-VI-A OF THE ACT HAD TO BE REST RICTED TO THE INCOME UNDER THE HEAD INCOME FROM BUSINESS BECAUSE OF THE PROVISIO NS OF SEC.80-AB OF THE ACT OR IT IS ONLY THE OVERALL CEILING OF DEDUCTION UNDE R SEC.80-A(2) THAT HAS TO BE SEEN. IN THE APPEAL AGAINST THE SAID ORDER OF ASSE SSMENT DEDUCTION U/S.80-O AND 80-HHB OF THE ACT WAS DIRECTED TO BE ALLOWED AT RS . 2 96 99 157 AND RS.2 93 439/- RESPECTIVELY. IN THE ORDER DATED 06.1 0.2003 PASSED BY THE AO TO GIVE EFFECT TO THE ORDER OF CIT(A)-XXXIII MUMBAI DATED 20.08.2000 HE HAD DETERMINED THE DEDUCTION U/S.80-O AND 80-HHB AT RS. 2 96 99 157 AND RS.2 93 439/- RESPECTIVELY AND DID NOT THINK IT FIT TO RESTRICT THE DEDUCTION U/S.80- 11 O AND 80-HHB TO THE INCOME UNDER THE HEAD INCOME F ROM BUSINESS WHICH WAS DETERMINED IN THE VERY SAME ORDER AT RS.1 64 92 652 . THE GRIEVANCE PROJECTED BY THE CIT IN THE ORDER U/S.263 CAN HOLD GOOD ONLY WIT H REGARD TO THIS ORDER BECAUSE THIS IS THE FIRST POINT OF TIME WHEN THE AO COULD H AVE AND OUGHT TO HAVE APPLIED HIS MIND TO THE QUESTION WHETHER DEDUCTION UNDER AN Y SECTIONS OF CHAPTER-VI-A OF THE ACT HAD TO BE RESTRICTED TO THE INCOME UNDE R THE HEAD INCOME FROM BUSINESS BECAUSE OF THE PROVISIONS OF SEC.80-AB OF THE ACT OR IT IS ONLY THE OVERALL CEILING OF DEDUCTION UNDER SEC.80-A(2) OF T HE ACT THAT HAS TO BE SEEN. IF AT ALL IT IS THIS ORDER WHICH COULD BE SAID TO BE ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE ORDER DATED 4/12/2006 MERELY GAVE EFFECT TO THE ORDER OF THE ITAT DATED 20.06.2006 IN WHICH THIS ISSUE CO ULD NOT HAVE BEEN EXAMINED BY THE AO. THE ISSUES BEFORE THE ITAT WERE TOTALLY DIFFERENT AND HAD NOTHING TO DO WITH THE QUESTION AS TO WHETHER DEDUCTION UNDER ANY SECTIONS OF CHAPTER-VI-A OF THE ACT HAD TO BE RESTRICTED TO THE INCOME UNDE R THE HEAD INCOME FROM BUSINESS BECAUSE OF THE PROVISIONS OF SEC.80-AB OF THE ACT OR IT IS ONLY THE OVERALL CEILING OF DEDUCTION UNDER SEC.80-A(2) OF T HE ACT THAT HAS TO BE SEEN. SINCE THE ISSUES DEALT WITH IN THE ORDER DATED 06.1 0.2003 AND 20.02.2007 WERE DIFFERENT THERE WOULD BE NO QUESTION OF THE ORDER DATED 06.10.2003 MERGING WITH THE ORDER DATED 4/12/2006. THE AO IN HIS ORDER DAT ED 4.12.2006 WHILE GIVING EFFECT TO THE ORDER OF THE TRIBUNAL ACTED BEYOND HI S JURISDICTION IN RESTRICTING THE DEDUCTION U/S.80-O OF THE ACT TO THE EXTENT OF INCO ME UNDER THE HEAD INCOME FROM BUSINESS. HE REALIZED THIS MISTAKE AND RIGHT LY PASSED ORDER U/S.154 OF THE ACT DATED 20.2.2007. 14. FOR THE REASONS GIVEN ABOVE WE ARE OF THE VI EW THAT THE ORDER DATED 20.2.2007 PASSED BY THE AO U/S.154 OF THE ACT WAS N OT ERRONEOUS. THE ORDER U/S.263 OF THE ACT DATED 30.03.2009 REVISING THE OR DER DATED 20.02.2007 IS BAD IN LAW. ON THIS GROUND THE ORDER U/S.263 IS LIABLE TO BE QUASHED AND IS HEREBY QUASHED. 12 15. BESIDES THE ABOVE THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO RAISED SEVERAL OTHER CONTENTIONS WITH REGARD TO THE ORDER U/S.263 BEING BARRED BY TIME CONTENTION THAT THAT THE ORDER SOUGHT TO BE REVISED ALREADY MERGED WITH THE ORDER OF THE CIT(A) AND THEREFORE HIT BY THE PROHIBITIO N CONTAINED IN EXPLN.(C) TO SEC.263 OF THE ACT FURTHER ARGUMENT THAT EVEN ON MERITS THE STAND TAKEN BY THE CIT IN THE ORDER U/S.263 IS NOT CORRECT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SYNCO INDUSTRIES LTD. VS. AO 299ITR 444 (SC) AND THE FURTHER ARGUMENT THAT THE ISSUE IN ANY EVENT WA S DEBATABLE AND TWO VIEWS WERE POSSIBLE THEREFORE JURISDICTION U/S.263 OF THE ACT COULD NOT HAVE BEEN EXERCISED BY THE CIT . 16. WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF SYNCO INDUSTRIES LTD. (SUPRA) HAD TO DEAL WITH A CASE WHERE AN ASSES SEE WHO WAS ENGAGED IN THE BUSINESS OF OIL AND CHEMICALS HAD A UNIT FOR OIL DI VISION IN SIROHI AND A UNIT FOR CHEMICAL DIVISION IN JODHPUR. FOR AY 90-91 AND 91- 92 IT HAD EARNED PROFITS IN BOTH THE UNITS. BUT IN THE EARLIER YEARS THE ASSE SSEE HAD SUFFERED LOSSES IN THE OIL DIVISION. IN RELATION TO THE DEDUCTION U/S.80-HH A ND 80-I OF THE INCOME-TAX ACT 1961 IT CLAIMED THAT EACH UNIT SHOULD BE TREATED S EPARATELY AND THE LOSSES SUFFERED IN THE EARLIER YEARS BY THE OILD DIVISION WERE NOT ADJUSTABLE AGAINST THE PROFITS OF THE CHEMICAL DIVISION. BUT SINCE THE GR OSS TOTAL INCOME WAS NIL THE AO HELD THAT THE ASSESSEE WAS NOT ENTITLED TO THE BENE FIT OF DEDUCTIONS UNDER CHAPTER-VI-A OF THE ACT. THE TRIBUNAL AND THE HON BLE HIGH COURT AFFIRMED THE VIEW OF THE AO. ON FURTHER APPEAL TO THE HONBLE S UPREME COURT THE HONBLE SUPREME THAT THE LOSS FROM THE OIL DIVISION WAS REQ UIRED TO BE ADJUSTED BEFORE DETERMINING THE GROSS TOTAL INCOME AND THE GROSS TO TAL INCOME WAS NIL THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTIONS UNDER CHAPTER VI-A OF THE ACT. THE HONBLE SUPREME COURT EXPLAINED THE EFFECT OF S EC.80-B(5) OF THE ACT AS FOLLOWS: THE EFFECT OF CLAUSE (5) OF SEC.80-B OF THE INCOME TAX ACT 1961 IS THAT GROSS TOTAL INCOME WILL BE ARRIVED AT AFTER MAKIN G THE COMPUTATION AS FOLLOWS: (I) MAKING DEDUCTIONS UNDER THE APPROPRIAT E COMPUTATION 13 PROVISIONS; (II) INCLUDING THE INCOMES IF ANY UND ER SEC.60 TO 64 IN THE TOTAL INCOME OF THE INDIVIDUAL; (III) ADJUSTING INT RA HEAD AND/OR INTER-HEAD LOSSES; AND (IV) SETTING OFF BROUGHT FORWARD UNABSO RBED LOSSES AND UNABSORBED DEPRECIATION ETC. ONLY IF THE GROSS TO TAL INCOME SO DETERMINED IS POSITIVE THE QUESTION OF ALLOWING THE DEDUCTION UNDER CHAPTER VI-A WOULD ARISE NOT OTHERWISE. IT CAN BE SEEN FROM THE ABOVE DECISION THAT RESTRIC TING DEDUCTION UNDER CHAPTER VI-A OF THE ACT TO THE INCOME UNDER THE HEAD INCO ME FROM BUSINESS WAS NEVER REFERRED TO BY THE HONBLE SUPREME COURT. TH E VIEW OF THE CIT IN THE IMPUGNED ORDER UNDER SEC.263 OF THE ACT IS THEREFO RE CONTRARY TO THE MODE OF COMPUTATION AS EXPLAINED BY THE HONBLE SUPREME COU RT AS ABOVE. 17. THE PURPOSE OF SEC.80-AB OF THE ACT IS AIMED AT ENSURING THAT THE DEDUCTION TO BE ALLOWED UNDER ANY SECTION OF CHAPTE R-VI A OF THE ACT DOES NOT EXCEED THE NET INCOME UNDER A PARTICULAR SOURCE COM PUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. INCOME OF A PARTICULAR NATU RE WHICH CAN BE CLAIMED AS DEDUCTION UNDER CHAPTER-VI A OF THE ACT HAVE TO BE DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND ONLY THAT CAN B E SAID TO BE INCLUDED IN THE GROSS TOTAL INCOME. SECTION 80-AA OF THE ACT WHIC H IS ANALOGOUS TO SEC.80-AB OF THE ACT WAS ENACTED TO GET OVER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CLOTH TRADERS VS. CIT 118 ITR 243(SC) W HEREIN IT WAS HELD THAT DEDUCTION U/S.80-M OF THE ACT HAD TO BE ALLOWED ON THE GROSS DIVIDEND RECEIVED. SINCE A DOUBT MAY ARISE ON ALLOWABILITY OF DEDUCTIO N UNDER OTHER SECTIONS OF CHAPTER VI-A SEC.80-AB WAS ENACTED CLARIFYING THAT ANY DEDUCTION TO BE ALLOWED UNDER ANY PROVISIONS OF CHAPTER VI-A WILL B E ONLY ON THE NET INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE A CT. IN OUR VIEW SEC.80-AB OF THE ACT DOES NOT RESTRICT THE DEDUCTION IN RESPE CT OF INCOME OF A PARTICULAR NATURE TO BE RESTRICTED ONLY TO THE INCOME COMPUTED UNDER THE HEAD INCOME FROM BUSINESS. 18. IN THE LIGHT OF THE ABOVE DECISION OF THE HO NBLE SUPREME COURT AND THE PURPOSE BEHIND ENACTMENT OF THE PROVISIONS OF SEC.8 0-AB OF THE ACT WE ARE OF 14 THE VIEW THAT THE ISSUE AS TO WHETHER DEDUCTION UND ER ANY SECTIONS OF CHAPTER-VI- A OF THE ACT HAD TO BE RESTRICTED TO THE INCOME UN DER THE HEAD INCOME FROM BUSINESS BECAUSE OF THE PROVISIONS OF SEC.80-AB OF THE ACT OR IT IS ONLY THE OVERALL CEILING OF DEDUCTION UNDER SEC.80-A(2) THAT HAS TO BE SEEN IS IN ANY EVENT A DEBATABLE ISSUE ON WHICH THERE COULD BE POSSIBLY TWO VIEWS. THE AO HAVING TAKEN ONE OF THE POSSIBLE VIEWS THE COMMISSIONER C ANNOT EXERCISE JURISDICTION U/S.263 JUST BECAUSE HE DOES NOT AGREE WITH THE VIE W OF THE AO. EVEN ON THIS GROUND THE ORDER U/S.263 IS LIABLE TO BE QUASHED. WE HAVE NOT DEALT WITH THE OTHER ARGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE SINCE WE HAVE AGREED WITH HIM ON TWO COUNTS. 19. FOR THE REASONS STATED ABOVE WE QUASH THE OR DER U/S.263 OF THE ACT. 20. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 28 TH DAY OF JANUARY 2011 SD/- SD/- (P.M. JAGTAP ) ( N. V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DT: 28 TH JANUARY 2011 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. 4. CIT (A) 5. THE DR E- BENCH ITAT MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ROSHANI