2022 (11) TMI 913 - HC - Income Tax

High Court emphasizes verifying material for deductions under Income Tax Act, rules in favor of assessee.

The High Court clarified that the power of remand for relief granted by the CIT(A) under Section 250(4) of the Income Tax Act cannot be exercised without ... CIT-A Power u/s 250(4) - procedures envisaged by section 250(4) - Deduction u/s 80JJAA - fresh claims made by the assessee - remand of the relief allowed by the CIT( A) in exercise of powers under first part of section 250(4) - HELD THAT:- Admittedly, the issue of grant of deduction u/s 80JJAA has been decided in assessee’s favour in the preceding Assessment Year (‘AY’) 2007-08 by a Coordinate Bench of this Court in the case of Assessee itself being International Tractors Ltd. [2021 (4) TMI 1033 - DELHI HIGH COURT] held fresh claims made by the assessee, as allowed by the Commissioner of Income-tax (Appeals), will have to be sustained. Deduction of loss on exchange rate fluctuations - Deduction of loss on account of exchange rate fluctuation has not been dealt with in the aforesaid judgment, yet the logic/reasoning given in the said judgment applies as the Tribunal has not given any cogent reason for remanding the matter. Consequently, as the impugned order is non-reasoned, the same is set aside and the detailed order passed by CIT(A) on all issues including the issue of loss arising on account of exchange rate fluctuation is sustained. Issues:1. Interpretation of Section 250(4) of the Income Tax Act.2. Remand of relief allowed by CIT(A).3. Grant of deduction under section 80JJAA.4. Deduction of loss on exchange rate fluctuations.Interpretation of Section 250(4) of the Income Tax Act:The High Court examined whether the two procedures under Section 250(4) of the Income Tax Act are distinct and if the first part of the section necessitates providing an opportunity to the Assessing Officer. The court clarified that the power of remand for relief granted by the CIT(A) under the first part of Section 250(4) cannot be exercised in the absence of perversity, as it would render the power futile. The court also assessed if the ITAT was correct in setting aside the grant of deduction under section 80JJAA and the deduction of loss on exchange rate fluctuations, both allowed by the CIT(A) after due verification under Section 250(4) of the Act.Remand of Relief Allowed by CIT(A):The court referred to a previous judgment where the issue of deduction under Section 80JJAA was decided in favor of the assessee in a prior assessment year. The court emphasized that the Tribunal should have focused on whether the CIT(A) had diligently verified the material before allowing the deductions claimed by the assessee. The court held that a remand was unnecessary unless the Tribunal had clearly identified any deficiencies in the CIT(A)'s examination. The court upheld that the CIT(A) was authorized under Section 250(4) to request documents for verifying the sustainability of claimed deductions. As the Tribunal did not provide sufficient reasoning for remanding the matter, the court set aside the impugned order and upheld the detailed order of the CIT(A) on all issues, including loss due to exchange rate fluctuations.Grant of Deduction under Section 80JJAA:The court ruled in favor of the assessee, stating that the issue of grant of deduction under Section 80JJAA had been decided in the assessee's favor in a previous assessment year. The court emphasized that the Tribunal should have focused on whether the CIT(A) had properly verified the material before allowing the deductions claimed by the assessee. As the Tribunal did not provide adequate reasoning for remanding the matter, the court set aside the impugned order and upheld the detailed order of the CIT(A) on all issues, including the grant of deduction under Section 80JJAA.Deduction of Loss on Exchange Rate Fluctuations:Although the previous judgment did not address the deduction of loss on exchange rate fluctuations, the court applied the same logic and reasoning to this issue. As the Tribunal did not provide a cogent reason for remanding the matter, the court set aside the non-reasoned impugned order and upheld the detailed order of the CIT(A) on all issues, including the deduction of loss on exchange rate fluctuations. Consequently, the court allowed the appeal in favor of the assessee and decided the questions of law in favor of the assessee and against the revenue.