Section 263 revision fails where depreciation was examined in scrutiny and the dispute is only a revenue-neutral timing difference.
Section 263 revision is not sustainable where the Assessing Officer has examined the depreciation claim in scrutiny and taken a permissible view; an audit objection or alleged non-following of a CBDT circular does not by itself establish error and prejudice to the Revenue. The note also treats rights acquired under a concession agreement as an intangible asset, or a business/commercial right of similar nature, eligible for depreciation under section 32(1)(ii). Where the dispute is only between depreciation and amortisation of an already accepted block of intangible assets, the issue is revenue neutral and amounts only to a timing difference, so it does not justify revision.
Issues: (i) Whether revisionary jurisdiction under section 263 could be invoked on the basis of an audit objection and alleged non-following of CBDT Circular No. 09/2014 when the Assessing Officer had examined the depreciation claim during scrutiny; (ii) whether the assessee was entitled to depreciation under section 32(1)(ii) on the rights acquired under the concession agreement as an intangible asset, and whether the alternative treatment suggested by the Circular could render the assessment order prejudicial to the interests of the Revenue.
Issue (i): Whether revisionary jurisdiction under section 263 could be invoked on the basis of an audit objection and alleged non-following of CBDT Circular No. 09/2014 when the Assessing Officer had examined the depreciation claim during scrutiny.
Analysis: The impugned revision was founded on an audit objection and on the premise that the Assessing Officer was bound to apply the CBDT Circular. The record showed that the depreciation issue was specifically examined in scrutiny proceedings through notices and replies, and the absence of an elaborate discussion in the assessment order did not establish lack of enquiry. Revision under section 263 requires both error and prejudice to Revenue, and an order passed after enquiry and adoption of a permissible view cannot be revised merely because another view is possible.
Conclusion: Revisionary jurisdiction under section 263 was not validly assumed on these grounds, and the impugned order was unsustainable.
Issue (ii): Whether the assessee was entitled to depreciation under section 32(1)(ii) on the rights acquired under the concession agreement as an intangible asset, and whether the alternative treatment suggested by the Circular could render the assessment order prejudicial to the interests of the Revenue.
Analysis: The rights obtained under the concession agreement were treated as a licence or, in any event, as a business or commercial right of similar nature within section 32(1)(ii). The year under appeal concerned depreciation on the opening WDV of an already accepted block of intangible assets, and the controversy was therefore confined to the method of allowance. On the authorities considered, the claim was revenue neutral, because the difference between depreciation and amortisation was only one of timing. Since the assessment had already accepted the claim in earlier years and the issue had been enquired into, the order could not be branded prejudicial to Revenue on this basis.
Conclusion: The assessee's depreciation claim on the concession right was accepted, and the alternative amortisation approach did not justify revision.
Final Conclusion: The revision order under section 263 was quashed, and the assessee's appeal succeeded.
Ratio Decidendi: Section 263 cannot be invoked unless the assessment order is both erroneous and prejudicial to the interests of the Revenue, and where the disputed claim has been enquired into and the controversy is only a timing difference on a revenue-neutral issue, revision is impermissible.
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