Commissioner Of Income Tax-3 v. Sea Glimpse Investments Pvt. Ltd

ASN IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (L) NO.1242 OF 2012 Commissioner of Income Tax-3.v. Sea Glimpse Investments Pvt. Ltd. ...Appellant. ...Respondent. Mr. Vimal Gupta, Sr. Advocate with Ms. Padma Divakar for the Appellant. Mr. Vipul Joshi with Mr. P.C. Tripathi for the Respondent. CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ. DATE :15TH JANUARY, 2013 PC: Objection waived. 2)question of law for consideration of this Court. In this appeal the revenue has pressed the following Whether on the facts and in the circumstances of the case and in law the Tribunal was right in setting aside the order of the Commissioner of Income Tax passed u/s. 263 of the Income Tax Act? 3) While completing the assessment for the assessment year 2006-07 the Assessing officer by order dated 30.9.2008 determined the assessee's income at Rs.5.79 crores and book profits at Rs.45.73 crores for the purposes of Section 115JB of the Income Tax Act, 1961 (“the Act”). The assessee had claimed ASN income of Rs.24.34 lacs as exempt. . The Assessing Officer out of total expenditure claimed of Rs.4.43 crores disallowed an amount of Rs.2.14 lacs under Section 14A of the Act. This dis-allowance was made on the basis of the ratio of the exempted income by total income visa vis expenditure of Rs.4.43 crores. However, in view of carried forward losses the business income was determined at Nil and tax was payable on book profits under Section 115JB of the Act. 4) The Commissioner of Income Tax issued notice under Section 263 of the Act on the ground that the Assessing officer has not correctly made dis-allowance which resulted in lower dis-allowance and consequent under assessment of income. The Commissioner of Income Tax by order dated 30/3/2011 directed the Assessing officer to re-compute the dis-allowance of interest on borrowed funds invested in shares (dividend income from which is exempted) at Rs.1.0353 crores under Section 14A of the Act. 5)Being aggrieved the respondent assessee filed an appeal to the Tribunal. The Tribunal by order dated 21/3/2012 held that the exercise of jurisdiction under Section 263 of the Act was not called for as the order of the Assessing officer was not prejudicial to the revenue. In the order of assessment originally passed on 30/9/2008 as the tax payable on book profits is more than the tax payable on regular income the respondent was ASN assessed to tax on book profits under Section 115JB of the Act. The consequent reassessment order passed by the Assessing officer after the order of Commissioner of Income Tax under Section 263 of the Act also determined the business loss at Nil and the respondent was assessed to tax on book profits under Section 115 JB of the Act. Thus the assessed income/ book profits continue to be the same even after dis-allowance of higher amounts under Section 14A of the Act. Therefore, no prejudice is caused to the revenue by the order dated 30/9/2008 of the Assessing Officer. 6)We note that one of the ingredient to exercise jurisdiction under Section 263 of the Act is not satisfied viz. prejudice to the revenue. As pointed out by the Tribunal the respondent is being assessed to tax on book profits under Section 115JB of the Act and even if the dis-allowance is higher than that allowed by Assessing officer under Section 14A of the Act would not have any effect on the book profits on which the tax is payable. Thus the entire exercise is academic. 7)In view of the above, we see no reason to entertain the proposed question. 8) Accordingly, the appeal is dismissed with no order as to costs. (M.S.SANKELCHA, J.) (J.P. DEVADHAR, J.)