2017 (9) TMI 1022 - AT - Income Tax

Tribunal rules in favor of assessee, rejects revision orders

The Tribunal allowed the assessee's appeals, setting aside the revision orders passed by the Principal Commissioner of Income Tax. The Tribunal held that ... Revision u/s 263 - Claiming deduction u/s 80IB(10) and sec. 80IA(4) - profits related to TDR receipts less cost related thereto in the form of purchase of land, construction of flats etc. - the assessee determined the cost relating to TDR sales on estimated basis and allocated the same against the proceeds of TDR sales, accordingly it computed profit from TDR sales and claimed the same as deduction u/s 80IA(4) as it is the claim of the assessee that it is involved in development of infrastructure facility - Held that:- In the instant case, the Ld Pr. CIT has not, for the reasons discussed in the preceding paragraph, shown that the view taken by the assessing officer was not sustainable in law. On the contrary, the assessee has demonstrated that it was constrained to make additional claim in view of the cancellation of the airport contract and further the said additional claim was not in the form of any additional expenses as presumed by Ld pr. CIT, but in the form of allocation of actual expenses. We have noticed that the assessee had earlier allocated the estimated expenses between the two streams of income, viz., (a) TDR receipts and (b) Commercial space in Airport. After cancellation of airport contract, it had allocated actual expenses against TDR receipts. It is quite common in the case of construction contracts that the income and expenses are disclosed on estimated basis in the initial years. When the whole scenario changed, the Tribunal found merit in the plea of the assessee that the allocation of expenses on the basis of then prevailing conditions should be changed. We have already expressed the view that the claim of the assessee as well as acceptance of the same by the AO cannot be said to be unsustainable in law, if one considers the principle of taxing the real income. Hence we agree with the contentions of the assessee that the view taken by the AO is a possible view, in which case, the impugned revision orders cannot be sustained. Accordingly we set aside the impugned revision orders passed by Ld Pr. CIT. - Decided in favour of assessee. Issues Involved:1. Validity of revision orders passed by Ld Pr. CIT u/s 263 of the Act for assessment years 2009-10, 2010-11, and 2012-13.2. Eligibility of the assessee to claim deduction u/s 80IA(4) of the Act.3. Allocation of expenses related to TDR sales.4. Examination of additional claims by the assessing officer.5. Applicability of section 40(a)(ia) of the Act.6. Consideration of expenses related to the cancellation of the contract in the appropriate assessment year.7. Jurisdiction of Ld Pr. CIT under section 263 of the Act.Detailed Analysis:1. Validity of Revision Orders Passed by Ld Pr. CIT u/s 263:The assessee challenged the revision orders passed by Ld Pr. CIT for assessment years 2009-10, 2010-11, and 2012-13. The Ld Pr. CIT initiated revision proceedings under section 263, considering the orders passed by the AO as erroneous and prejudicial to the interests of the revenue. The Tribunal examined whether the AO had conducted necessary enquiries and whether the orders were sustainable in law. The Tribunal concluded that the AO had applied his mind and conducted due verification, and thus, the revision orders were not justified.2. Eligibility to Claim Deduction u/s 80IA(4):The assessee claimed deduction u/s 80IA(4) related to infrastructure development activities, specifically the development of the Mumbai Airport. The AO had initially rejected this claim, and the Tribunal had restored the matter to the AO for reconsideration. The Tribunal observed that the claim was withdrawn by the assessee due to the termination of the agreement with MIAL, which formed the basis of the deduction claim.3. Allocation of Expenses Related to TDR Sales:The assessee reallocated expenses related to TDR sales after the termination of the airport contract. The Tribunal noted that the assessee had initially allocated expenses between TDR receipts and commercial space in the airport. Post-termination, the assessee allocated actual expenses solely to TDR receipts. The Tribunal found this reallocation to be a reasonable and possible view, considering the changed circumstances.4. Examination of Additional Claims by the Assessing Officer:The Ld Pr. CIT argued that the AO allowed additional claims without proper verification. The Tribunal, however, found that the AO had examined the relevant details and made a reasoned decision. The AO's rejection of the assessee's revised book profit claim further indicated that the AO had applied his mind to the claims.5. Applicability of Section 40(a)(ia):The Ld Pr. CIT raised concerns about the applicability of section 40(a)(ia) to the additional claims. The Tribunal noted that this issue was not directly relevant as the matter pertained to the reallocation of already recorded expenses, not new claims. The Tribunal emphasized that the AO had considered the claims appropriately.6. Consideration of Expenses Related to Cancellation of Contract:The Ld Pr. CIT contended that expenses arising from the contract's cancellation should be considered in the year of cancellation (AY 2013-14) or when arbitration proceedings conclude. The Tribunal disagreed, stating that the expenses were related to TDR rights and were incurred in the relevant assessment years. The Tribunal found the AO's acceptance of the revised allocation of expenses to be a possible view.7. Jurisdiction of Ld Pr. CIT under Section 263:The Tribunal reiterated the legal principles governing the invocation of section 263. It emphasized that the Ld Pr. CIT must demonstrate that the AO's order was erroneous and prejudicial to the revenue. The Tribunal concluded that the AO's order was a possible view and not unsustainable in law, thus invalidating the revision orders.Conclusion:The Tribunal allowed the assessee's appeals, setting aside the revision orders passed by Ld Pr. CIT. The Tribunal held that the AO had conducted necessary enquiries and taken a possible view, and the revision orders were not justified. The Tribunal emphasized the importance of taxing real income and the necessity of finality in legal proceedings.