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of <h1>Income-tax additions affecting s.80P(2)(a)(i) deduction: s.263 revision rejected as not prejudicial to revenue, circular applied.</h1> Whether revision under s.263 was sustainable when the impugned direction would not be 'prejudicial to the interests of the Revenue' was the dominant ... Revision u/s 263 - deduction u/s 80P(2)(a)(i) - HELD THAT:- We find force in the arguments of the LD counsel that in the light of Circular No. 37/2016 dated 02-11-2016, the assessee is entitled to claim chapter VIA deduction u/s 80P(2)(a)(i) of the IT Act on the addition which is going to increase its business income, which is deductible u/s 80P(2)(a)(i). Therefore, direction issued by LD PCIT in the order passed u/s 263 of the IT Act will only result in an academic exercise & hence the order cannot be said to be prejudicial to the interest of revenue. We therefore set-aside the order passed by LD PCIT u/s 263 directing to revise the assessment order. Appeal filed by the assessee is allowed. In a recalled proceeding limited to Ground No. 2, the issue was disallowance of an NPA provision of Rs. 42,51,668 debited to the Profit & Loss Account. The revisionary authority had directed revision under section 263 on the premise that the Assessing Officer failed to disallow the provision as 'not allowable as per section 28 to 43B.' The assessee contended that even if the provision were disallowed and added back, taxable income would not increase because, per CBDT Circular No. 37/2016 dated 02-11-2016, Chapter VIA deduction must be granted on 'resultant income increased due to additions/ disallowances,' and the enhanced business income would remain deductible under section 80P(2)(a)(i). The Department accepted the circular's applicability. The Tribunal held that, in light of the circular, the addition would be offset by the corresponding deduction under section 80P(2)(a)(i), making the section 263 direction 'only result in an academic exercise' and therefore the order 'cannot be said to be prejudicial to the interest of revenue.' The section 263 order was set aside and Ground No. 2 allowed.
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