Section 263 revision fails where the Assessing Officer examines the material and adopts a plausible view on exemption and depreciation.

Section 263 revision is confined to assessment orders that are both erroneous and prejudicial to the Revenue, and it cannot be used to replace a plausible view already taken after examining the material. On the exemption claim under section 10(29) for income from letting warehouses and cargo complexes, the Assessing Officer had considered the statutory framework, remand directions, and relevant facts, so revision was invalid. On depreciation, the terminal building was examined on the functionality test with technical material showing plant-like components and integrated airport systems, so revision was again invalid and depreciation as plant was upheld.

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Issues: (i) Whether the revisional order under section 263 of the Income-tax Act, 1961 was valid in relation to exemption under section 10(29) on income from letting of warehouses and cargo complexes; (ii) Whether the revisional order under section 263 of the Income-tax Act, 1961 was valid in relation to depreciation on the terminal building treated as a plant.

Issue (i): Whether the revisional order under section 263 of the Income-tax Act, 1961 was valid in relation to exemption under section 10(29) on income from letting of warehouses and cargo complexes.

Analysis: The assessee had placed before the Assessing Officer the statutory framework, the remand directions of the Tribunal, the relevant factual material, and the historical transfer of airport warehousing functions. The assessment order referred to the assessee's reply, the statutory function to establish warehouses and cargo complexes, the nature of the income earned from letting of warehouses, and the claim that the conditions of section 10(29) stood satisfied. The material showed that the Assessing Officer had considered the issue on remand and accepted the claim after examination of the record and explanation. The revisional authority did not demonstrate any objective error in the assessment order or any unsustainable view of law. A brief order does not by itself justify revision where the underlying issue has been examined.

Conclusion: The revisional order on this issue was invalid and the exemption under section 10(29) was rightly allowed to the assessee.

Issue (ii): Whether the revisional order under section 263 of the Income-tax Act, 1961 was valid in relation to depreciation on the terminal building treated as a plant.

Analysis: The Tribunal had directed the Assessing Officer to re-examine the nature of the terminal building by applying the functionality test and to consider the detailed material furnished by the assessee. The assessment order showed consideration of the assessee's reply, the technical material describing the specialized features and functional components of the airport terminal, and the CBDT order relied upon in earlier proceedings. The record contained a detailed explanation of the terminal's operational features and its integrated plant-like components such as elevators, escalators, conveyor systems, fire-fighting systems, aerobridges, and related installations. The revisional authority's insistence on a fresh report amounted to substituting its own view despite the material already examined by the Assessing Officer.

Conclusion: The revisional order on this issue was also invalid and depreciation treating the terminal building as plant was rightly allowed.

Final Conclusion: The assessment order was not shown to be erroneous or prejudicial to the interests of the Revenue on either issue, and the assessee's appeals succeeded in full.

Ratio Decidendi: Section 263 cannot be invoked unless the assessment order is both erroneous and prejudicial to the interests of the Revenue, and revision is not permissible where the Assessing Officer has examined the material and adopted a plausible view after due consideration.

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