TMI Blog2007 (10) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... passed under section 263 of the Income-tax Act is not on the basis of the information as called for per the show-cause notice dated 14-3-2007 issued by the CIT and submissions made in this regard by the appellant. (2)Setting aside the Assessment Order dated 24-3-2005 and in directing the Assessing Officer to make a fresh assessment, keeping in view that the exemption granted under section 10( 23G ) of the Income-tax Act in respect of the sale of equity shares of Gujarat Pipavav Port Ltd. (GPPL) was summarily allowed without proper verification in this regard (claim of exemption made under section 10( 23G ) as made out in the order passed on 27-3-2007 under section 263 of the Income-tax Act. The exemption claimed under section 10( 23G ) of the Income-tax Act was Rs. 53,70,49,727. (3)Setting aside the assessment order dated 24-3-2005 and in directing the Assessing Officer, to make a fresh assessment, keeping in view that the claim made under section 36(1)( iii ) in respect of interest paid to Gujarat Maritime Board (GMB) for the purchase of the shares of GPPL was without application of mind, keeping in view, that the interest would be capital in nature or whether provisions of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed conditions would be exempt from the tax. The CIT examined the claim of the assessee but was not convinced with it and he accordingly held that the assessment order passed by the Assessing Officer is both erroneous and prejudicial to the interest of the revenue. He accordingly set aside the same and asked the Assessing Officer to frame the assessment de novo after affording reasonable opportunity of being heard to the assessee. 5. Now the assessee has preferred an appeal before the Tribunal with the submissions that during the course of assessment proceedings, the issue was thoroughly examined by the Assessing Officer in para Nos. 3 to 7 of the assessment order. During the course of assessment proceedings, the assessee has given a detailed reply in this regard which was duly consid- red by the Assessing Officer before allowing the claim of the assessee. The reply filed before the Assessing Officer is available at pages 18 to 23 of the compilation of the assessee. The assessee has also filed the copy of notification through which M/s. Gujarat Pipavav Port Ltd. (GPP) was notified and approved by the Central Government for the purpose of section 10( 23G ) of the Income-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ful consideration to the rival submissions and from careful perusal of record, we find that this is not a case where the Assessing Officer has not adjudicate the issue at all in the assessment order. We find that during the course of assessment proceedings, a specific query was raised in this regard and the assessee has filed a detailed reply appearing at pages 18 to 23 before the Assessing Officer justifying its claim. The Assessing Officer having examined the detailed reply has adjudicated the issue by passing a speaking order. He has devoted 4 paras on this issue in his assessment order. For the sake of reference as to how the Assessing Officer has examined this issue, we extract the relevant portion of the assessment order in which the Assessing Officer has adjudicated the issue in detail. "3. The assessee-company namely M/s. Seaking Infrastructure Ltd. and others are the promoters of M/s. Gujarat Pipavav Port Ltd. (GPPL) which is having the infrastructure project in Pvt. Sector and sea Port at Pipavav, Gujarat. 4. During the year under consideration, the profit loss account of the assessee-company shows gross income from its logistics and maritime division, income from i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock-in-trade on 31-8-1999, it had credited to the P L account profit of Rs. 53,70,49,727 which was nothing but the long-term capital gains arising on the conversion of shares of GPPL which were disposed in June 2001. Therefore, the cost of the shares for the purposes of computing business income was Rs. 69,13,17,900. GPPL continued to enjoy the said exemption even at the time of conversion and even at the time of disposal of the shares which were held as stock-in-trade after conversion. Therefore, the long-term gains arising on the sale of shares of Rs. 53,70,49,727 is exempt from tax under section 10( 23G ) of the Income-tax Act. Therefore, the balance of Rs. 86,82,100 (Rs.70 crores - Rs. 69.13 crores) is taxed as the assessee s business profit for assessment year 2002-03. 7. Against the business profit of Rs. 86,82,100 the assessee had claimed in the return of income interest of Rs. 2,85,38,204. This interest is for the entire 12 months pertaining to the assessment year 2001-02 of Rs. 1.54 crores and for assessment year 2002-03 of Rs. 1.30 crores. The interest burden paid by the assessee-company in respect of shares converted which were acquired from Gujarat Maritime Board in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 10( 23G ) even otherwise stands satisfied by the assessee-company as Infrastructure Capital Company as defined Explanation-I means company has made investments by way of acquiring shares or providing long- term finance to enterprises wholly engaged in the business as referred to under section 10( 23G ) of the Income-tax Act. Through written reply, assessee has also asked the CIT to explain as to how the assessee-company does not satisfy the condition as stipulated in section 10( 23G ) of the Income-tax Act to claim exemption from long-term capital gain arising on sale of equity shares of GPPL. This argument was not dealt with by the CIT in his revisional order. We have also examined the provisions of section 45 of the Income-tax Act and we find that the long-term capital gain was properly computed as per provisions of section 45 of the Act. We find force in the contention of the assessee that the conversion of stock-in-trade of the investment made does not effect in any manner of whatsoever nature the claim under section 10( 23G ) till such date as shares were held as investments. Undisputedly, the conversion in stock-in-trade was in assessment year 2000-01 when no sale wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of the revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in the loss of revenue; or where two views are possible and the ITO has taken one view with which Commissioner does not agree, it cannot be treated as and erroneous order prejudicial to the interests of the revenue, unless the view taken by the ITO is unsustainable in law". In the case of Gabriel India Ltd. ( supra ), the Jurisdictional High Court also held that where the Assessing Officer has made enquiries with regard to nature of the expenditure incurred by the assessee in the light of detailed explanations furnished by the assessee, the order of the Assessing Officer cannot be called to be erroneous and prejudicial to the interest of revenue. Relevant observations in this regard are extracted hereunder : ". . . . that the ITO in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the ITO on being satisfied with the explanation of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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