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2012 (12) TMI 693 - AT - Income TaxJurisdiction power u/s 263 by CIT(A) - non preparation of accounts on the basis of clause 7 of the AOP agreement dated 29.04.2003 - deduction under Section 801B(10) - Held that:- According to clause-7 of the agreement SPPL is entitled to 35% share of the gross sale proceeds of the units inclusive of the value of the land. According to distribution in the account of the assessee SPPL has received Rs.15.11 crore which is 35% of gross sale proceeds of the unit amounting to Rs.43.17 crores. A sum of Rs.11.62 crore is credited to the account of SPPL on account of land etc. and Rs.3.49 crore is considered as profit share of SPPL. Out of balance 65%, after including the MSEB and incidental charges and reducing the developmental charges a sum of Rs. 10.76 crore has been considered as profit share of RRKC. Therefore, the distribution of profit made by the assessee between its members is in accordance with clause 7 of the agreement. The interpretation of clause-7 sought to be adopted by CIT will be against the very intent and purpose for which the assessee AOP has been formed and if such interpretation is adopted it will tantamount to denial of existence of AOP which is not even the case of CIT. The assessee AOP in the present case has been assessed as AOP and found to have fulfilled the condition laid down in section 80 IB(10) and has been held to be eligible for such deduction. The quantum of deduction under section 80 IB (10) will depend on the income earned from eligible project. The quantum of deduction will not depend upon the mode of distribution of shares amongst the members of AOP as income of AOP is taxable at maximum marginal rate. Therefore, manner in which the AOP distribute its project has no bearing over eligible quantum of deduction under section u/s. 80IB (10) as the eligible quantum will be gross receipts from the project reduced by expenses incurred on the project. Distribution of revenue in the account of the assessee is inappropriate and has been benefited by larger deduction - Held that:- Such observations of CIT are incorrect, firstly, on the ground that even distribution of revenue in the books of account of the assessee cannot be said to be contrary to the purpose and intent described in clause-7 of the agreement. Secondly, the allowability or otherwise of deduction under section 80 IB(10) is not dependent upon the manner in which the profit has been distributed among the members of AOP but it depend upon the fulfillment of the conditions laid down in that section and also the deduction is available to an undertaking and not to the individual constituent of an undertaking - the impugned assessment order is neither erroneous nor prejudicial to the interest of revenue on account of allocation of profit between members as per accounts of the assessee as allocation of profit in the accounts of the assessee is in accordance with clause-7 of the agreement and manner of allocation of profit in the account cannot alter the quantum of deduction available to AOP under section 80 IB(10). Doctrine of merger - held that:- As per Oil India Ltd. vs. CIT [1981 (9) TMI 64 - CALCUTTA HIGH COURT] if an assessment is subject matter of appeal then any ground which was held in favour of asssee can also be held against him though the appeal was preferred by the assessee. Such jurisdiction of AAC is undisputable and once the appeal has been preferred before the AAC on any aspect of the quantum, the Ld. CIT cannot assume jurisdiction otherwise an anomalous position would arise - Thus as in the present case once deduction under section 80 IB(10) was subject matter of appeal before Ld. CIT(A), it covered all aspects of the matter relating to deduction under section 80 IB(10) and the order of AO on that issue had merged with the order of CIT(A). Therefore, according to clause (c) of Explanation to section263(1), Ld. CIT was debarred from exercising jurisdiction u/s.263 as the subject matter of the appeal was deduction under section 80 IB (10) - in favour of assessee.
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