TMI Blog2017 (3) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... ry inquiry before finalizing the said regular assessment. Whether the assessee’s remuneration in question could be held to be income from other sources or attempt to cause substantial loss to the Revenue? - Held that:- We notice herein as well that the assessee’s payer has already disallowed the sum in question of ₹ 48crores (supra). Learned counsel files before us copy of its assessment order in scrutiny accepting the said disallowance. We observe in these peculiar facts that it would not be proper for the Revenue to adopt different course of action in case of a payer and a payee since the assessee is entitled to make corresponding adjustment u/s. 28(v) of the Act. We accordingly find force in assessee’s arguments challenging learned PCIT’s order passed u/s.263 of the Act. The same is therefore reversed. - Decided in favour of assessee - ITA No.2713/Ahd/2015 - - - Dated:- 16-3-2017 - SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Assessee : Shri Jigar M. Patel, A.R. For The Revenue : Shri Jagadish, CIT. D.R. ORDER PER S. S. GODARA, JUDICIAL MEMBER This assessee s appeal for assessment year 2009-10 arises ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Memorandum agreement dated 15/3/2008. iii) The partnership firm being an industrial undertaking in Sikkim is entitled to get 80IC deduction of entire its business profit and therefore, the Firm itself disallowed the remuneration paid to the assessee company on the ground that the company is not working partner. During the A Y 2009-19, as per IT return, the firm has claimed entire business income as deduction u/s.80IC, after disallowing so called partners' remuneration of ₹ 48.00 crore. The fact is that the remuneration was paid for the providing business marketing auxiliary services to the Firm through its infrastructure and network. iv) The assessee company under pretext of disallowance of partner's remuneration in Firm's income claimed it as exempt income under section 28(v) of the Income Tax Act. In fact, the company received service charges for providing auxiliary marketing services to the Firm and for which it has used its network and infrastructure spread all over India. v) It is worth noting that the original partnership agreement did not envisage any payment of remuneration to M/s. Cadila Healthcare and in the subsequent Addendum issued h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts Camphor Works, 231 ITR 53, that the revisional power conferred on the Commissioner u/s 263 is of wide amplitude. Reliance is also placed on CIT vs. Seshasayee Paper Boards Ltd., (2000) 242 ITR 490 (Madras), CIT vs. South India Shipping Corporation Ltd. (1998) 233 ITR 546 (Mad.), etc. Moreover, the recent amendment in Act w.e.f. 1-4-2015 leaves no scope for any doubt in the matter as lack of enquiry is enough to invoke the provision of section 263. 7. As regards the merits, the assessee has contended that the payment of ₹ 48.00 crores was towards discharging of various functions related to marketing, auxiliary, and after sales services executed by the assessee for Zydus Healthcare, Sikkim. It can therefore be construed that the assessee has provided the infrastructure in the form of dealership net work and has also given services to the firm as agreed upon. It is therefore not comprehensible as to on what basis the assessee is considered as a sleeping partner by the firm. The assessee has 96% share in the partnership firm namely, Zydus Healthcare, Sikkim and has also received share of profit and interest from the firm. As per the Memorandum of Undertaking dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuted at the fag end of the financial year. An unsigned copy of this MOU is found in the assessment record. The AO has clearly erred in not verifying the typical facts of the case and not conducting the requisite inquiries to ascertain the tax evasion, if any. by misuse of the provisions of section 40(b) and 28(v) of the Act. 8. Considering the above facts and findings, it is evident that the AO has neither examined the issue involved nor conducted necessary inquiries on the same. The AO has thus erred in not bringing to tax the amount of ₹ 48,00,00,000/- received by the assessee from the firm as per the agreement executed with the firm. As a result thereof, there was substantial loss of revenue to the exchequer since the amount of ₹ 48,00,00,000/- was neither taxed in the case of the assessee nor the firm Zydus Healthcare, Sikkim which added back the said expense and then claimed deduction u/s 80IC on the enhanced income. The assessment order is not only erroneous but also prejudicial to the interest of the Revenue in terms of provisions of section 263 of the Act. Accordingly, it is held that the assessment order passed u/s 143(3) r.w.s. 144C(5) dated 23-01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bench in assessee s case itself reported that [2015] 67 SOT 188 (Ahmedabad-Tribunal) has already reversed an identical exercise of Section 263 jurisdiction in the immediate preceding assessment year by holding that the Assessing Officer had duly conducted the necessary inquiry before finalizing the said regular assessment. 7. We further deem it appropriate to deal with merits of the issue as to whether the assessee s remuneration in question could be held to be income from other sources or attempt to cause substantial loss to the Revenue. We notice herein as well that the assessee s payer has already disallowed the sum in question of ₹ 48crores (supra). Learned counsel files before us copy of its assessment order in scrutiny accepting the said disallowance. We observe in these peculiar facts that it would not be proper for the Revenue to adopt different course of action in case of a payer and a payee since the assessee is entitled to make corresponding adjustment u/s. 28(v) of the Act. We accordingly find force in assessee s arguments challenging learned PCIT s order passed u/s.263 of the Act. The same is therefore reversed. 8. The assessee succeeds in its instant appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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