Tribunal upholds CIT's order under Section 263, clarifies Section 10B deduction period

CCL. Products India Ltd. Versus DCIT

CCL. Products India Ltd. Versus DCIT - TMI Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act.
2. Interpretation of the ten-year period for deduction under Section 10B.
3. Fresh claims during proceedings under Section 263.

Detailed Analysis:

1. Jurisdiction under Section 263 of the Income Tax Act:
The Tribunal examined whether the Commissioner of Income Tax (CIT) was justified in invoking Section 263 to revise the assessment order. The CIT can exercise revision jurisdiction under Section 263 if the order is erroneous and prejudicial to the interests of the revenue. The Tribunal noted that the Assessing Officer (AO) had not considered the CBDT Circular No. 1 of 2005, which clarified the ten-year period for deduction under Section 10B. The AO's failure to consider this circular constituted non-application of mind, rendering the assessment order erroneous and prejudicial to the revenue. Thus, the CIT's action under Section 263 was valid.

2. Interpretation of the Ten-Year Period for Deduction under Section 10B:
The Tribunal addressed whether the ten-year period for claiming deduction under Section 10B should be counted from the date of commencement of manufacturing as a Domestic Tariff Area (DTA) unit or as an Export Oriented Unit (EOU). The CBDT Circular No. 1 of 2005 clarified that the ten-year period should be reckoned from the date of commercial production, irrespective of the conversion from DTA to EOU. The Tribunal upheld this interpretation, stating that the circular was clear and unambiguous, and thus binding on the AO. Consequently, the assessee's claim for a fresh ten-year period post-conversion to EOU was rejected.

3. Fresh Claims During Proceedings under Section 263:
The Tribunal considered whether the assessee could make fresh claims during the proceedings under Section 263. It is a settled law that fresh claims cannot be entertained during Section 263 proceedings, which are initiated for the benefit of revenue. The assessee's claim that substantial investments resulted in a new undertaking eligible for separate deduction under Section 10B was rejected. The Tribunal emphasized that the benefit under Section 10B is admissible only to a new undertaking and not for expansion. The CIT had rightly refused the fresh claim, and the Tribunal confirmed this decision.

Conclusion:
The Tribunal dismissed the appeal, confirming the CIT's order under Section 263. The AO's failure to consider the CBDT circular made the original assessment order erroneous and prejudicial to the revenue. The ten-year period for Section 10B deduction starts from the date of commercial production, and fresh claims cannot be raised during Section 263 proceedings. The Tribunal upheld the CIT's jurisdiction and decisions on all counts.