Section 263 revision upheld for excess Chapter VI-A deductions linked to capital gains and other income.

Revisional jurisdiction under section 263 was upheld where the assessment order had allowed Chapter VI-A deductions under sections 80IA, 80HHC and 80-O beyond the profits of the eligible business, including income attributable to capital gains. The assessment was treated as both erroneous and prejudicial to the interests of the revenue, satisfying the statutory conditions for revision. The Tribunal's approach, which sustained the revision on the main issue while remitting the remaining income-related claim for fresh consideration, was found consistent with law, and the assessee's challenge failed.

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Issues: Whether the revisional power under section 263 of the Income-tax Act, 1961 was validly exercised where the assessment order allowed Chapter VI-A deductions against capital gains and other income, and whether the Tribunal was right in sustaining the revision while directing a fresh consideration on part of the issue.

Analysis: The assessment was found to be erroneous and prejudicial to the interests of the revenue because the Assessing Officer had allowed deductions under sections 80IA, 80HHC and 80-O beyond the profits of the eligible business, including amounts attributable to capital gains. The Court held that the existence of both statutory conditions for exercise of revisional power under section 263 was satisfied. It further held that the Tribunal's view, which upheld the revision on the core issue but modified the direction and remitted the matter for proper consideration on the remaining income-related claim, accorded with the law.

Conclusion: The exercise of jurisdiction under section 263 was upheld, and the assessee's challenge failed.

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