2018 (10) TMI 367 - HC - Income Tax

Appeals Dismissed, Revenue Challenge Rejected, Court Remands for Recalculation

The appeals were filed against a common order by the Income-tax Appellate Tribunal Madras 'A' Bench, challenging the treatment of an order as erroneous ... Revision u/s 263 - allowing benefit of netting of interest to the assessee - AO's order treated as erroneous and prejudicial to the revenue - Held that:- The Court need not probe into the fact as to whether the Assessing Officer has faulted or not, since the decision taken by the Assessing Officer has now been upheld by the Hon'ble Supreme Court in ACG Associated Capsules (P) Ltd. vs. Commissioner of Income Tax [2012 (2) TMI 101 - SUPREME COURT OF INDIA] as held the processing charges received by the assessee were part of the business turnover and accordingly the income arising therefrom should have been included in the profits and gains of business of the assessee and ninety per cent of this income also would have to be deducted under Expln. (baa) to s. 80HHHC of the Act. In this case, this Court was not deciding the issue whether ninety per cent deduction is to be made from the gross or net income of any of the receipts mentioned in cl. (1) of the Expln. (baa). - Decided in favour of the assessee Issues involved:1. Appeal against common order dated 27.10.2006 by the Income-tax Appellate Tribunal Madras 'A' Bench.2. Substantial question of law regarding the treatment of an order as erroneous and prejudicial to revenue.3. Challenge to the order passed by Commissioner under Section 263 of the Income Tax Act, 1961.4. Exercise of powers under Section 263 of the Act to revise assessment orders.5. Interpretation of twin conditions for invoking power under Section 263.6. Consideration of conflicting decisions and views by the Assessing Officer.7. Adherence to judicial discipline and binding nature of decisions by Jurisdictional Tribunal and High Court.8. Application of Supreme Court decisions in similar cases.9. Dismissal of appeals filed by the Revenue based on the substantial questions of law framed.10. Remand of the matter for computation in accordance with relevant legal principles.Detailed Analysis:1. The appeals were filed against a common order by the Income-tax Appellate Tribunal Madras 'A' Bench, challenging the treatment of an order as erroneous and prejudicial to revenue. The key issue raised was whether conflicting Tribunal orders at the time affect the assessment of an order's correctness.2. Another set of appeals challenged the order passed by the Commissioner under Section 263 of the Income Tax Act, 1961. The Tribunal dismissed the Revenue's appeals, questioning the correctness of the Commissioner's order, leading to the framing of a substantial question of law regarding the dismissal of the Department's appeal and the allowance of the assessee's appeal without considering the grounds raised.3. The Commissioner exercised powers under Section 263 to revise assessment orders for the respective years. The conditions for invoking such powers, as outlined by the Supreme Court, required the assessment order to be both erroneous and prejudicial to the revenue.4. The Assessing Officer's decision to allow netting of interest to the assessee was challenged by the Commissioner as erroneous and prejudicial to revenue. The Commissioner argued that relevant decisions by the Jurisdictional High court had been ignored.5. The Assessing Officer's reliance on certain decisions, including those by the Tribunal and the Supreme Court, was defended by the assessee's counsel, emphasizing that if two views are possible, the Assessing Officer should not be faulted for the decision made.6. The Court emphasized the importance of following decisions of the Jurisdictional Tribunal and High Court to maintain judicial discipline. The Assessing Officer's adherence to such decisions was deemed crucial, even if multiple views were possible.7. Ultimately, the Court dismissed the appeals filed by the Revenue, citing the application of relevant legal principles and Supreme Court decisions in similar cases. The matter was remanded for computation in line with the law laid down in the relevant Supreme Court decision.This detailed analysis covers the various issues involved in the legal judgment, providing a comprehensive understanding of the case and the Court's reasoning behind its decision.