TMI Blog2014 (9) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... cial reserve was before the obligation to maintain the fund came into effect on 1st April, 1998 - The withdrawals that have occasioned in the each of the above petitions do not fall foul of law - There are no errors apparent on the face of the record – Decided against revenue. - Income Tax Appeal No. 604 of 2011, Income Tax Appeal No. 603 of 2011, Income Tax Appeal No. 487 of 2012, Income Tax Appeal No. 492 of 2012 - - - Dated:- 12-9-2014 - S. C. Dharmadhikari And A. K. Menon,JJ. For the Appellant : Mr Vimal Gupta, Sr. Counsel with Mr Vipul Bajpayee for the Appellants in ITXA No.603/2011 and 604/2011 and Mr Suresh Kumar for the Appellants ITXA No.487/2012 and 492/2012. For the Respondent : Mr Arun Sathe with Ms Aarti Sathe and Mr Kalpesh Turalkar JUDGMENT (Per A. K. Menon,J. ) The above appeals raise the following common questions of law : (a) Whether on the facts and in the circumstances of the case and in law the Tribunal was right in quashing the order of the Commissioner of Income Tax passed u/s. 263 of the Income Tax Act ? (b) Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that two views ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al reserve, created by a financial corporation. The deduction was admissible provided the assessee is approved by the Central Government. The aggregate of the amounts carried over to the special reserve from time to time could not exceed twice the amount of paid up share capital and general reserves. 4. Subsequently, the aforesaid provision was amended by the Finance Act, 1997 with effect from 1.4.1998 whereby the words and maintained were added in section 36(1)(vii) after the word created . Thus the reserve fund created was required to be maintained. If the amount so maintained was moved out of reserve fund, the same would be liable to tax in that year. The assessee's contention is that once it transferred the amount to the special reserve prior to amendment it is not prevented from using the same in any manner and in the instant case withdrawal of those funds viz ₹ 10 crores and ₹ 25 crores respectively would not render these amounts liable to tax. At the same time section 41 of the Act was also amended and a new sub-section (4A) was introduced in section 41 by virtue of which any amount withdrawn from this special reserve, would be subject to tax to the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any amount subsequently withdrawn from the special reserve shall be admitted to be profit and gain of the business and accordingly chargeable to the Income-tax as income of the previous year in which such amount is withdrawn. Section 41 (4A), we have noted was brought into effect by the Finance Act on 1.4.1998 and it is case of the respondent-assessee that this provision has no application to the amounts remitted in special reserve prior to 1.4.1998. 6. Mr.Gupta relied upon the judgment of Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83 wherein the Apex Court dealt with power under section 263 and held that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer. It is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of rendering the Order erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. Mr.Gupta therefore sought to support his submission on the basis that Malabar Industrial Co. Ltd. (supra) justifies the action of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing officer. Every loss of revenue as a consequence of an error of an Assessing Officer cannot be treated as prejudicial to the interests of the revenue. Similarly, the order passed by the tribunal in favour of the assessing officer is not to be considered as prejudicial to the interests of the revenue if the order was passed on the basis of an erroneous conclusion. 10. After hearing both sides, we are of the view that merely because, the tribunal adopts one of two views possible and that has resulted in loss of the Revenue it cannot be treated as erroneous order prejudicial to the interest of the Revenue unless the view taken by the tribunal is unsustainable in law. In the present case we are unable to accept the contentions of the revenue that the order is unsustainable in law. We will shortly deal with the reasons for arriving at this conclusion. However, before proceeding to do so we will briefly refer to some of the judgments relevant to the issue of two views being possible. 11. This court held in the matter of Grasim Industries Ltd. (supra) that the condition precedent to the exercise of jurisdiction under section 263 was that the order sought to be revised must b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Loss account. This note clarifies that the special reserve had been created over the years out of the profits and that first of these reserves relates to the amount which had been transferred upto financial year 1995-96. Thus, it is not as though the Assessee has surreptitiously transferred any amount nor it is the case of the revenue that transfer of such funds from the special reserve was in any manner contrary to any law. The case of the revenue is that where two views were possible, the view which is prejudicial to the revenue ought not to be taken. 13. Having considered the judgment of Malabar Industrial Co. Ltd. (supra) in our view there was no justification for invoking section 263 and setting aside the order of the assessing officer. The order of the assessing officer was upheld by the Tribunal since it held one of two possible views. Neither view could be stated to be erroneous and/or prejudicial to the interests of the revenue nor was the order passed without following principles of natural justice or without application of mind. 14. In the circumstances even after applying the test of in Malabar Industrial Co. Ltd. (supra) there appears no justification in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
