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2023 (8) TMI 759 - AT - Income TaxBenefit of deduction u/s 80IA - portion of the interest attributable on the bank loan used for granting of ICD for which no interest was either stipulated or being charged was added back to the income by the assessee suo moto - According to CIT(DR), CIT(A) was wrong in not considering the correct view taken by the AO that the interest on borrowed loan which was not used for the business is not an allowable expenditure and is required to be disallowed and added to the income of the appellant - HELD THAT:- As on perusal of the computation of the total income of the assessee it is observed that the interest attributable to the ICD loan extended by the assessee to its associate concern was added back to the taxable income since the same has no connection with the eligible business of the assessee, this was correct and acceptable as per law. Contention of the AO that this was a colourable device to enhance the eligible profit of the company, which falls under the ambit of sub-section 10 of section 80IA cannot be accepted or subscribed to, because, if the interest expenditure incurred on funds granted as loan to the associate company are not added back to the taxable income of the company, it would have been a reduction of the taxable income, which would lead to a wrong or inaccurate presentation of the facts by the assessee. This was also according to the instructions issued by CBDT vide its Circular 37/2016 - The same has also confirmed by the PCIT by dropping the revisionary proceedings u/s 263 on this issue. Thus, the contention of the revenue that the deduction claimed by the assessee was excessive by disallowance of the interest to increase the eligible profit u/s 80IA, so as to claim higher amount of deduction u/s 80IA than the same is available ordinarily on eligible business, is unsustainable. CIT(A) had correctly, appropriately and categorically decided the issue, thus we found no infirmity in the order of Ld CIT(A), the same deserves to be upheld and we do so. Validity of Revision u/s 263 - fresh issue raised - HELD THAT:- PCIT has raised a fresh issue which was neither a part of the notice under section 263 nor it was confronted to the assessee at any point of time during the proceeding’s u/s 263. The new issue raised was to examine working of taxable income under the provisions of section 115JB after taking into consideration of provisions of Company Act 1956, it was restored to the files of AO to adjudicate again after providing opportunity of being heard to the assessee. A fresh issue without hearing the assessee or causing the assessee to make its submissions on the same is against the principle of natural justice. Considering the facts of the case and respectfully following the judicial principle coming out from the case of Universal Music India Pvt. Ltd [2022 (4) TMI 1081 - BOMBAY HIGH COURT] and various judgments, an action taken by the Ld PCIT against the assessee without confronting it to submit its response or defence to the query raised, without giving an opportunity of being heard is illegal and in contravention to the principle of natural justice. Such action is not permissible in revisionary proceedings u/s 263, thus we are of the considered opinion that the order passed u/s 263 deserves to be quashed and we do so. Thus, we allow the appeal of the assessee.
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