M/S.agasthiya Granite P Ltd v. The Assistant Commissioner Of Income Taxcompany I(1)Coimbatore-641 018

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MR.JUSTICE N.SESHASAYEE M/s.Agasthiya Granite P Ltd,229, Trichy Road,Ondipudur, Coimbatore-641 016.... Appellant Vs. The Assistant Commissioner of Income TaxCompany I(1)Coimbatore-641 018. ... Respondent Appeal filed under Section 260A of Income Tax Act, 1961,against the order dated 28.04.2006 passed by the Income TaxAppellate Tribunal, Madras “D” Bench, Chennai, in I.T.A.No.2305(Mds)/2004 for the assessment year 2001-02. Preferred against the order passed by the Commissioner ofIncome Come Tax – I, Coimbatore dated 19.07.2004 in ProceedingsNo.C.No.120(3)/2004-05/CBE/CIT/-I Against the proceedings of theDeputy Commissioner of Income tax, company Circle – I(1),Coimbatore dated 29.12.2002 in PAN NO.AABCA78185.For Appellant:Mr.S.Sriraman Heard Mr.S.Sriraman, learned counsel for theappellant/assessee and Mr.T.R.Senthil Kumar, learned counsel forthe respondent/Revenue. https://hcservices.ecourts.gov.in/hcservices/ 2. This Tax Case (Appeal) has been admitted on thefollowing substantial questions of law: “i. Whether the Tribunal is correct inconfirming the order of the Commissioner of Income-tax passed in terms of Section 263 of the Actwithout considering the grounds challenging theassumption of jurisdiction to pass the said revisionorder? ii. Whether the Tribunal is correct inconcluding that the provisions of Section 80 HHC(4B) of the Act would mandate exclusion of thededuction allowed under Section 80 IB of the Actwhile quantifying the deduction under Section 80 HHCof the Act? iii. Whether the Tribunal is correct incoming to the conclusion that the decision renderedby the Co-ordinate Bench under identicalcircumstances would not applicable to the presentcase in view of non-consideration of the scope ofSection 80 HHC (4B) of the Act in the said decisioneve though the provisions of Sections 80 IB and 80HHC of the Act are mutually exclusive and eventhough the deduction claimed under the said sectionshad not exceeded the gross total income?” 3. This case came up before us for hearing on10.04.2018, and it was brought to the notice of this Court bythe learned counsel for the Revenue that identical issue raisedin this tax case appeal has been referred for considerationbefore the Hon'ble Full Bench. Therefore, we directed theRegistry to put up the order of reference. Accordingly, whenthe case is heard today, we had the benefit of going through theorder of reference and the order passed by the Hon'ble FullBench, dated 01.07.2011. 4. The Hon'ble Full Bench took note of the fact thatthere were two conflicting decisions viz., [2008] 304 ITR 319(SCM Creations vs. Assistant Commissioner of Income-Tax) and[2009] 315 ITR 400 (General Optics (Asia) Ltd., vs. DeputyCommissioner of Income-tax) and found that identical issue ispending in appeal before the Hon'ble Apex Court in Special LeavePetition in C.C.9649/2010 dated 16.07.2010 has been admitted inthe case of C.I.T.-I, Chennai vs. M.R.F. LTD., Chennai. In thelight of the same, the Full Bench reference was directed to beadjourned and await the result of the appeal pending before theHon'ble Apex Court. 5. Learned counsel for the Revenue has produced the caseinformation details from the Registry of the Hon'ble SupremeCourt to show that the matter is still pending before theHon'ble Supreme Court. 6. Be that as it may, the first question of law we arerequired to consider is whether the Tribunal is correct inconfirming the order passed by the Commissioner of Income-taxpassed in terms of Section 263 of the Income Tax Act, 1961(hereinafter referred to as “the Act”) without considering thegrounds challenging the assumption of jurisdiction to pass therevision order. 5. Learned counsel for the Revenue has produced the caseinformation details from the Registry of the Hon'ble SupremeCourt to show that the matter is still pending before theHon'ble Supreme Court. 6. Be that as it may, the first question of law we arerequired to consider is whether the Tribunal is correct inconfirming the order passed by the Commissioner of Income-taxpassed in terms of Section 263 of the Income Tax Act, 1961(hereinafter referred to as “the Act”) without considering thegrounds challenging the assumption of jurisdiction to pass therevision order. 7. Question nos.2 and 3 are on the claim for deductionunder Sections 80 HHC (4B) and 80 IB of the Act, which shouldawait the decision of the Hon'ble Supreme Court in terms of theorders passed by the Hon'ble Full Bench. However, in theinstant case, the first question of law to be considered iswhether the Commissioner of Income-tax could have exercised thepowers under Section 263 of the Act. The primordial requirementfor exercising such a power has been explained by the Hon'bleSupreme Court in CIT vs. Max India Ltd. reported in (2007) 295ITR 282 (SC). It was pointed out that the phrase “prejudicialto the interest of the Revenue” under Section 263 has to be inconjunction with the expression “erroneous” order passed by theassessing officer. 8. It was further pointed out that every loss of revenueas a consequence of an order of the assessing officer cannot betreated as prejudicial to the interest of the Revenue. TheHon'ble Supreme Court, by way of illustration, pointed out thatwhen the income tax officer adopted one of the coursespermissible in law and it has resulted in loss of revenue; orwhere two views are possible and the income tax officer hastaken one view with which the Commissioner of Income Tax doesnot agree, it cannot be treated as an erroneous orderprejudicial to the interest of the Revenue, unless the viewtaken by the income tax officer is unsustainable in law. Thefact that the two views existed is evident from the order ofreference passed by the Hon'ble Full Bench quoted above.Therefore, the Commissioner of Income Tax could not have invokedthe power under Section 263 of the Act, as the income taxofficer had adopted one of the two views possible. 9. Admittedly, the order of assessment was passed on29.12.2002, much prior to the decision in SCM Creations (supra),which was rendered in the year 2008, and the decision in thecase of General Optics (Asia) Ltd. (supra), which was renderedin the year 2009. The assessing officer interpreted theprovisions and passed the order of assessment. The view takenby the assessing officer is clearly supported by the decision ofthe High Court of Madhya Pradesh in the case of J.P.TobaccoProducts (P) Ltd., vs. Commissioner of Income Tax reported in(1998) 229 ITR 0123 and the decision of the Bombay High Court inthe case of Commissioner of Income Tax vs. Nima Specific FamilyTrust reported in (2001) 248 ITR 0029. 10. In J.P.Tobacco Products (P) Ltd. (supra), it washeld that for the purpose of computing relief, relief grantedunder Section 80 HH cannot be deducted from the gross totalincome. 11. In Nima Specific Family Trust (supra), it was heldthat Section 80HH(9), only talks about priority and does notrefer to quantum of deduction as was the case under Section 80J(1); where assessee is entitled to deduction under Section 80HHas well as Section 80-I, deduction of 20 per cent of sameprofits has to be allowed first under Section 80HH and then afurther deduction of 20 percent of same profits has to beallowed under Section 80-I subject to overall limit underSection 80A(2). 12. Thus, we are convinced that the view taken by theassessing officer was a plausible view. If it results in lossof Revenue, it cannot be treated as prejudicial to the interestof Revenue for the purpose of invoking the power under Section263 of the Act. 11. In Nima Specific Family Trust (supra), it was heldthat Section 80HH(9), only talks about priority and does notrefer to quantum of deduction as was the case under Section 80J(1); where assessee is entitled to deduction under Section 80HHas well as Section 80-I, deduction of 20 per cent of sameprofits has to be allowed first under Section 80HH and then afurther deduction of 20 percent of same profits has to beallowed under Section 80-I subject to overall limit underSection 80A(2). 12. Thus, we are convinced that the view taken by theassessing officer was a plausible view. If it results in lossof Revenue, it cannot be treated as prejudicial to the interestof Revenue for the purpose of invoking the power under Section263 of the Act. 13. Thus, for the above reasons, we answer question no.1as framed above in favour of the assessee and against theRevenue and allow the appeal in part. Question nos.2 and 3 areleft open. No costs. Sd/-Assistant Registrar(CS-IV) //True Copy// abr Sub Assistant Registrar https://hcservices.ecourts.gov.in/hcservices/ To 1.The Registrar, Income Tax Appellate Tribunal, Madras “D” Bench, Chennai. Madras “D” Bench, Chennai. 2.The Commissioner of Income-tax (Appeals)-I, Coimbatore. Coimbatore. 3. The Deputy Commissiioner of Income Tax Company Circle (1),Coimbatore.Coimbatore. +1cc to Mr.T.R. SENTHIL KUMAR, Advocate, S.R.No. 28498 T.C.(Appeal) No.450 of 2007 GMI(CO) TR(27/04/2018)