2023 (11) TMI 637 - AT - Income Tax

CIT's revision under Section 263 regarding MAT computation under Section 115JB was improper and set aside

ITAT Mumbai held that CIT's revision u/s 263 regarding MAT computation u/s 115JB was improper. The assessee correctly used standalone financial ... Revision u/s 263 - Computation on MAT u/s 115JB - As per CIT profit adopted by the AO for the purpose of section 115JB is not proper - profit declared by the assessee in its standalone financial statements is less than profit declared in the consolidated financial statements - HELD THAT:- We observe that the assessee has declared its book profit in its standalone Profit and Loss Account which was offered for taxation under Income-tax Act for the purpose of computation of income under normal provisions as well as to determine the book profits u/s. 115JB - As per the requirement under Companies Act, assessee has to submit the consolidated financial statements of the assessee company where assessee has stepdown subsidiaries and associate companies. Accordingly, assessee has submitted along with its financial statements, a consolidated financial statements of the group company being a holding company of its subsidiaries and its associates. The stepdown subsidiaries and other associate companies are independent assessees in the eyes of law and they have declared their financial statements and profits independently and filed the relevant return of income. Therefore, the Profit and Loss declared by the subsidiaries and associate companies cannot be assessed to tax in the hands of the assessee second time. Therefore, the observation of the Ld.Pr.CIT to reassess the declared profit by the subsidiaries and other associates in the hands of the assessee is not proper. Therefore, he has merely remitted the issue back to the file of the Assessing Officer to redo the assessment without giving a finding that the profit declared by the assessee is erroneous in so far as it is prejudicial to the interest of the Revenue. Accordingly, order passed u/s. 263 of the Act is set-aside and the grounds raised by the assessee is accordingly allowed Issues Involved:The appeal against the order of the Learned Principal Commissioner of Income Tax, Mumbai -2 under section 263 of the Income-tax Act, 1961 for the A.Y.2018-19.Details of the Judgment:1. Assessment Proceedings:The assessee, engaged in manufacturing, filed a return declaring total income of Nil for A.Y. 2018-19. The assessment under sections 143(3), 143(3A), and 143(3B) of the Act was completed, making certain additions. Subsequently, the Principal Commissioner observed errors in the assessment order and issued a notice under section 263, deeming it prejudicial to revenue's interest.2. Contentions of the Assessee:The assessee contended that the computation under section 115JB was correct and disputed the figure of book profits mentioned in the notice. The Principal Commissioner clarified that the figure in question pertained to the Consolidated Financial Statements, not the Standalone Financial Statements, leading to a contradiction in the assessee's submissions.3. Principal Commissioner's Decision:The Principal Commissioner found the assessment order erroneous and prejudicial to revenue's interest as the Assessing Officer failed to examine the issue properly. He directed a de novo assessment, prompting the assessee to appeal, challenging the PCIT's decision.4. Appellate Tribunal's Analysis:The Tribunal noted discrepancies between the standalone and consolidated profits declared by the assessee. It emphasized that profits of subsidiaries and associates cannot be taxed twice, setting aside the PCIT's order and allowing the appeal filed by the assessee.5. Conclusion:The Tribunal concluded that the Principal Commissioner's directive to reassess the profits of subsidiaries and associates in the hands of the assessee was not justified. The order under section 263 was set aside, and the grounds raised by the assessee were upheld, resulting in the appeal being allowed.6. Final Decision:The appeal was allowed by the Appellate Tribunal, overturning the Principal Commissioner's order under section 263 of the Income-tax Act, 1961.