TaxTMI 
TaxTMI 
2022 (8) TMI 860
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and void since the order passed by the Assessing Officer ['AO'] is not prejudicial to the interests of the revenue. 2.2 The CIT ought to have appreciated that assumption of jurisdiction under section 263 of the Act based on audit objection is unsustainable. 2.3 The CIT ought to have appreciated that assumption of jurisdiction under section 263 of the Act is invalid since the Assessing Officer has completed the assessment after duly verifying all particulars of income / expenses and as such initiation of proceedings under section 263 of the Act amounts to review of assessment order which is unwarranted. 2.4 The CIT ought to have appreciated that, based on identical facts for the immediately preceding AY 2012-13, the Hon'ble Tribunal had already held the principle issue in favour of the Appellant and as such assumption of jurisdiction under section 263 of the Act to relook the same facts is unwarranted. 2.5 The CIT erred in remitting the issue back to the files of the Assessing Officer without appreciating the fact that the Appellant had already made detailed submissions before the AO / CIT and as such there was no necessity to remit ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was submitted that for AY 2012-13 onwards, the assessee carried out only Segment-II business activities and therefore, the appellate orders for AYs 2009-10 and 2010-11 which were in respect of Segment-I business activity would not be applicable for this year. The appellate order for AY 2012-13 was stated to be reversed by the Tribunal in ITA No.962/Mds/2016 order dated 16-02-2017 wherein findings was given by Tribunal that findings of earlier years with regard to incubation of new entities would not apply to AY 2012-13. The Ld. AO was also directed to consider various streams of income earned by the assessee and allow the related expenses incurred on such income under appropriate heads. It was also submitted that the AO called for specific details regarding nature of income and expenditure and therefore, revision u/s. 263 would not be valid. 6. However, the Ld. PCIT noted that the Tribunal, in its order for earlier years upheld the position of the department that the incubation expenses incurred by the assessee were pre-operative expenses for promoting new units and as such these are not deductible as revenue expenditure. The assessee acted as a provider and a facilitator. The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urned loss filed by the assessee. 8. We find that coordinate bench has passed one order in case of this assessee (authored by one of us) for AYs 2011-12, 2012-13 & 2014-15 vide ITA Nos.233/Chny/2019 & ors. on 14.03.2022 wherein the findings rendered by the bench was as under: - Our findings and Adjudication 11. After going through the orders of Tribunal in earlier years, we find that in order for AY 2012-13, it was the observation of the Tribunal that the assessee had not debited any expenditure towards 'incubation expenses'. It was also observed by the bench that the assessee had not carried out any Segment-I business activity i.e. incubation of new entities during the year under appeal and it had carried out only Segment-II business activity. This vital fact was lost sight by the lower authorities. The allowability of the expenses in the Profit & Loss account was to be adjudicated based on the findings to be given with regard to various streams of income in the form of shared services / infrastructure services etc. by the lower authorities and the head of income thereon. Accordingly, Ld. AO was directed to go through relevant agreements and give findings as t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sable under the head 'income from other sources'. As per statutory mandate, the expenditure expanded by the assessee to earn such an income would be an allowable deduction u/s 57(iii). Since the directions of Ld. CIT(A) are in accordance with law, we concur with the findings of Ld. CIT(A) in the impugned order and accordingly, dismiss the appeal of the revenue. Cross-Appeals for AY 2011-12 13. In this year, the assessee has earned total receipts of Rs.937.97 Lacs as detailed in para-5 of assessment order dated 12.03.2014. The assessee incurred expenditure of Rs.1284.12 Lacs. The Ld. AO, after examining the expenditure, specifically disallowed incubation expenses, capital expenditure (consultancy and legal / professional charges) and diminution in the value of investments. However, in the alternative, Ld. AO disallowed entire expenditure for various reasons as stated in para-10 of the order. In other words, the returned loss of Rs.1427.79 Lacs was reduced to Rs.143.66 Lacs after disallowing entire expenditure. The interest on fixed deposits for Rs.53.55 Lacs was brought to tax as 'income from other sources'. 14. The Ld. CIT(A) noted that in this year, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r sources'. As per statutory mandate, the expenditure expanded by the assessee to earn such an income would be an allowable deduction u/s 57(iii). In AY 2011-12, the assessee had carried out activities under both the segments. The Ld. CIT(A), following Tribunal's order for AY 2009-10, upheld the disallowance of incubation expenses, consultancy and legal / professional charges since the same was incurred for conducting studies and research for setting up of individual units in different sectors. It was further held that the receipts of the assessee would fall under the head 'income from other sources' and the assessee would be entitled to claim related expenditure u/s 57(iii) except expenses falling under the head incubation expenses, consultancy and legal / professional charges. This adjudication has also been confirmed by the bench in order dated 14.03.2022. In AY 2014-15, entire receipts were brought to tax by Ld. AO as 'income from other sources' and the assessee was allowed deduction of 2% of the receipts. The Ld. CIT(A) noted that the assessee offered substantial income towards capital gain followed by Segment-II operation. No expenses were incurred for Segment-I activit....