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2017 (9) TMI 1022
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....IB(10) and sec. 80IA(4) of the Act. The AO completed the assessment at Rs. 451.88 crores, inter alia, rejecting claim for deduction u/s 80IA(4) of the Act. 3. In AY 2010-11, the assessee declared a total income of Rs. 195.35 crores after claiming deduction u/s 80IB(10) and sec. 80IA(4) of the Act. The AO completed the assessment at Rs. 733.26 crores and in this year also, the assessee's claim for deduction u/s 80IA(4) was rejected. 4. The background relating to claim for deduction u/s 80IA(4) requires elaboration. The Airport authority of India had entered into an agreement dated 04-04-2006 with M/s Mumbai International Airport Limited (MIAL) for modernisation of Mumbai Airport. The Central Government as well as the State Government extended their support to MIAL. The State Government agreed to provide support to MIAL and AAI in clearing the land required by MIAL. The State Government appointed MMRDA as nodal agency for clearing the land required for the airport, since it was occupied by slum dwellers. The MIAL entered into an agreement with MMRDA to free those lands occupied by slum dwellers. Accordingly the MIAL entered into a slum rehabilitation agreement with the assessee....
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...., the assessee sold TDR rights for Rs. 265 crores and claimed a sum of Rs. 105.65 crores as cost related to TDR. Accordingly the profit was estimated at Rs. 159.08 crores (Rs.265 crores less Rs. 105.65 crores) and the assessee claimed deduction of entire profit u/s 80IA(4) of the Act. In the year relevant to AY 2010-11, TDR sale receipts was Rs. 1307.87 crores and the assessee estimated the cost of sales at Rs. 627.61 crores. The assessee also allocated proportionate administration cost to the tune of Rs. 154.89 crores. Accordingly it computed the profit from Airport contract at Rs. 525.36 crores and claimed the same as deduction u/s 80IA(4) of the Act. As noticed earlier, the AO had rejected the above said claim, which was also upheld by Ld CIT(A) and hence the matter reached before the Tribunal. 9. When the appeals were pending before the Tribunal, certain adverse developments took place, i.e., the MIAL terminated the Slum development agreement dated 15.10.2007 entered with the assessee and the termination was conveyed to it, vide letter dated 06.02.2013. Since the very basis of claiming deduction u/s 80IA(4) was removed due to the termination of agreement, the assessee withdr....
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..... 184 crores and the same was allowed by the AO. In AY 2010-11, the AO allowed the claim for additional expenses of Rs. 797.15 crores in the form of Unabsorbed cost of sales of TDR. 10. In assessment year 2012-13, the assessee filed original return of income declaring a total income of Rs. 49.49 crores. Subsequently, it filed a revised return of income declaring total income at NIL. In the revised return of income, it claimed unabsorbed cost of TDR of Rs. 644.31 crores as deduction. The AO allowed the additional claim made in the revised return of income consistent with the view taken by him in AY 2009-10 and 2010-11. 11. The Ld Pr. CIT took the view that the assessing officer has allowed the additional claim of the assessee in all the three years without making necessary enquiries/investigations, prima facie warranted on facts and circumstances of the case. Accordingly he considered the orders passed by AO to give effect to the orders passed by Tribunal in AY 2009-10 and 2010-11 and also the assessment order passed in AY 2012-13, as erroneous and prejudicial to the interests of the revenue. Accordingly he initiated the impugned revision proceedings. 12. Before Ld Pr.CIT, ....
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....ook support of the decision rendered by Hon'ble Supreme Court in the case of M/s Malabar Industrial Co. Ltd (243 ITR 83), wherein it was observed that the scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the AO, the Revenue is losing tax lawfully payable by a person, it will be certainly be prejudicial to the interest of Revenue. If the order of the AO is erroneous in so far as it is prejudicial to the interest of Revenue, the CIT can invoke the provisions of sec. 263 of the Act. The Ld Pr. CIT took the view that the AO has nowhere in the proceedings called for the supporting in respect of various working furnished by the assessee or conducted independent verification of claims made by the assessee. Accordingly the Ld Pr. CIT took the view that the AO did not follow the directions given by the ITAT also. Accordingly he held that the impugned orders passed by AO are erroneous in so far as prejudicial to the interest of Revenue. Accordingly he set aside the impugned orders passed in all the three years under consideration and directed the AO to make fresh orders after m....
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....] 243 ITR 83, the Supreme Court held that the provision "cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer" and "it is only when an order is erroneous that the section will be attracted". The Supreme Court held that an incorrect assumption of fact or an incorrect application of law, will satisfy the requirement of the order being erroneous. An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category. The expression "prejudicial to the interests of the Revenue", the Supreme Court held, it is of wide import and is not confined to a loss of tax. What is prejudicial to the interest of the Revenue is explained in the judgment of the Supreme Court (headnote) : "The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted....
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....h the conclusion.... There must be some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed" The Hon'ble High Court has considered the definitions given to the words "erroneous", "erroneous assessment" and "erroneous judgment" in Black's Law Dictionary and accordingly held that an order cannot be termed as erroneous unless it is not in accordance with law. An order can be termed as "erroneous" only if it is not in accordance with the law. 17. The Hon'ble Delhi High Court has also followed the above said view in the case of CIT Vs. Sunbeam Auto Ltd (2011)(332 ITR 167). The Hon'ble Delhi High Court has also extracted following observations made by the Tribunal:- "38. Still further, the Hon'ble Supreme Court in Malabar Industrial Co. (2000) 243 ITR 83 has held that when two views are possible and the Assessing Officer has taken one of the possible view, then the order cannot be held to be prejudicial to the interest of the Revenue. Since the Commissioner of Income tax could not c....
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...." Similar view has been expressed by Hon'ble Madras High Court in the case of CIT Vs. Amalgamations Ltd (238 ITR 963)." 17. The Ld A.R further submitted that the co-ordinate bench, after considering the legal propositions laid down by Hon'ble High Courts, explained legal position as under:- "19. The law interpreted by the High Court makes it clear that the Ld Pr. CIT, before holding an order to be erroneous, should have conducted necessary enquiries or verification in order to show that the finding given by the assessing officer is erroneous, the Ld Pr. CIT should have shown that the view taken by the AO is unsustainable in law. In the instant case, the Ld Pr. CIT has failed to do so and has simply expressed the view that the assessing officer should have conducted enquiry in a particular manner as desired by him. Such a course of action of the Ld Pr. CIT is not in accordance with the mandate of the provisions of sec. 263 of the Act. The Ld Pr. CIT has taken support of the newly inserted Explanation 2(a) to sec. 263 of the Act. Even though there is a doubt as to whether the said explanation, which was inserted by Finance Act 2015 w.e.f. 1.4.2015, would be applicable ....
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....d by the AO was not in accordance with the enquiries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant." 18. The Ld A.R submitted that the assessee was expected to derive two streams of income, viz., (a) Commercial space in the Airport and (b) TDR rights upon rehabilitation of slum dwellers. He submitted that the TDR rights were given on handing over of the land to SRA authority. Accordingly the assessee allocated the expenses incurred by it between both the streams of income on certain basis. i.e., by giving more weight to the Commercial space to be obtained in the Airport. As stated earlier, the MIAL terminated the contract with the assessee and hence there was no scope of obtaining Commercial space in the airport as envisaged earlier. The contract was terminated on 06- 02-2013 and at that point of time, the appeals filed by the assessee were pending before Tribunal. Hence the assessee sought to reallocate the expenses against the TDR income, which was found to be acceptable to the Trib....
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....bove said facts before Pr. CIT during the course of revision proceedings. He submitted that the Ld Pr. CIT did not appreciate the replies in proper perspective. He submitted that in the case of Narayan Tatu Rane (supra), the co-ordinate bench has expressed the view that the enquiries contemplated in Explanation 2 to sec. 263 is the kind of verification which a person properly instructed would have done. He submitted that the kind of enquiries made by the AO, in the instant cases, would show that he has made proper enquiries with regard to the additional claim of the assessee. 21. The Ld A.R submitted that the Ld Pr. CIT has discussed about the examination of provisions of sec. 40(a)(ia) of the Act in respect of additional claim. He submitted that first of all, the same would not arise, since there is only a change in the amount of expenditure allocated and secondly the Ld Pr. CIT has discussed about the same without seeking explanations from the assessee. He submitted that the decision rendered by Hon'ble Supreme Court in the case of Amitabh Bachchan (286 CTR 113) has been distinguished by the Kolkatta bench of Tribunal in the case of Damodar Valley Corporation (2016)(182 TTJ 76....
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....have narrated the facts relating to the case in the earlier paragraphs. The settled legal position has also been discussed in the previous paragraphs by taking assistance of the order passed by the co-ordinate bench in the case of Narayan Tatu Rane (supra). From the facts discussed and the arguments advanced by the assessee, we notice that the claim for deduction of additional expenses was first put before the Tribunal by the assessee. We notice that the additional claim was made on account of the cancellation of airport contract. The workings furnished by the assessee, which is placed at page no.51 of paper book, would show that the assessee had estimated the expenses initially and allocated the same between TDR receipts and Commercial FSI of Airport. The assessee has given weightage point of 1 to TDR and 5 to commercial space. Accordingly the assessee has arrived at the weighted area and allocated the expenses. The assessee has estimated expenses in the form of (a) Cost of land (b) Rehabilitation cost (Cost of construction of flats for slum dwellers) (c) Approval and SRA charges. 26. After the cancellation of the airport contract, the assessee has so....
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....llotted to the assessee in the airport. The Ld A.R submitted that the assessee has already obtained and sold TDR rights and hence it is constrained to complete the construction of flats, meaning thereby, whether the assessee gets the commercial space in the airport or not, it has to necessarily incur the expenses in construction of flats. Admittedly those expenses are related to TDR rights only and it is the assessee which has decided to allocate part of expenses towards Commercial space also. Considering the peculiar facts surrounding the case, the claim of the assessee to allocate entire expenses towards TDR rights and acceptance of the same, in our view, is one of the possible views. Hence the view taken by Ld Pr. CIT that the assessee should have made the claim after completion of arbitration proceedings cannot be taken as only possible view. 29. It is well settled proposition of law that the twin conditions specified in section 263, viz., the order is erroneous and it should be prejudicial to the interests of revenue should be satisfied cumulatively. The Hon'ble Supreme Court has held in the case of Malabar Industrial Company (supra) that if the assessing officer has taken ....