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2008 (11) TMI 612 - AT - Income TaxValidity of revisionary order passed by CIT u/s 263 - CIT held that the deduction allowed u/s 10A in respect of STP Unit-1 without setting off the loss of STP Unit-2 against the income of STP Unit-1 was not in accordance with law - CIT modified the order of the AO for the AY 2003-04 and directed the AO to allow deduction u/s 10A after setting off the loss from STP Unit-2 against the profit of STP Unit-1 - HELD THAT:- The Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd.[2000 (2) TMI 10 - SUPREME COURT] had an occasion to consider the scope of section 263. The Hon'ble Apex Court held that in order to exercise power u/s 263, it is necessary that the order, which is to be revised, is erroneous as well as prejudicial to the interest of revenue. Both the conditions are to be satisfied. If one of the conditions is absent, then power u/s 263 cannot be exercised. It is settled law that when an officer adopts one of the courses permissible in law and it has resulted in a loss of Revenue or when two views are possible and the AO takes one view with which the CIT does not agree, the order cannot be treated as erroneous in so far as it is prejudicial to the interests of Revenue. Thus, when AO has taken one of the possible views then the order of AO cannot be termed as erroneous and the CIT was having no power to cancel that order u/s 263. Since we have cancelled the order of the CIT u/s 263, therefore, we are not giving any finding on the alternative submission. In the result, the appeal of the assessee is allowed.
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