TMI Blog2009 (1) TMI 535X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed in that year in section 80HHE; and thereafter deduction is also claimed in respect of the same income in some other year in which it has not been offered for tax. Therefore, order of the Tribunal makes the words or in any other assessment year , used in sub-section (5), as redundant. Having considered the rival submissions, we are of the opinion that in view of the order of the Tribunal in the case of Legato Systems India (P.) Ltd. (supra), the issue is debatable. Therefore, we are also of the view that the order of AO could not have been revised on this ground by the ld. CIT as the Assessing Officer had followed one of the possible views in the matter. Capitalization of the project expenses - The case of the assessee was that these were the expenses in executing projects regarding development of packaged software. The expenses were revenue in nature. However, the case of the ld. DR is that these were ongoing expenses on projects, which lead to benefit of enduring nature on development of packaged software. We are of the view, on the basis of reasoning given in respect of deduction under section 10B, that the issue is debatable. Therefore, the order of AO in all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y allowed. However, this point was not taken up finally for the purpose of holding that the order was erroneous and prejudicial to the interests of the Revenue, which finding was restricted to the amounts of Rs. 19,39,452 and Rs. 38,83,44,866. In view of the aforesaid, a notice under section 263 was issued and the assessee was heard. The claim of the assessee was that the project expenses were revenue in nature and that there was no overlapping of the claims made under sections 80HHE and 10B in respect of the same income. Therefore, it was argued that the assessment was not erroneous and prejudicial to the interests of revenue. Ld. CIT considered the facts of the case and submissions of the assessee. She referred to the cases of Swarup Vegetable Products Industries Ltd. (No.1) v. CIT [1991] 187 ITR 412 (All.) and Umashankar Rice Mill v. CIT [1991] 187 ITR 638 (Ori.), and pointed out that if it is found by the Commissioner on the basis of some material available on record that the power under section 263 is available to be exercised, then, he can do so. It was further pointed out that in case he is not of the view that further enquiries were necessary, the revisionary pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dated 10-3-2006 to the Assessing Officer enclosing therewith the approval of the units by Software Technology Park of India, Ministry of Information Technology, Government of India. The assessee filed the justification for deduction in letter dated 29-3-2006, placed in the paper book on pages 105-106, in which it was submitted that the assessee was eligible for claiming deduction under section 10A after receiving approval from the Ministry of Information Technology. 3.1 The case of the Ld. Counsel for the assessee was that since the assessee was conducting the business of developing packaged software, the project expenses were revenue in nature and, therefore, such expenses were correctly allowed by the Assessing Officer. In regard to the deduction under section 10B, it was pointed out that none of the income of any unit was subject-matter of claim under both the sections 80HHE and 10B. In the case of Legato Systems India (P.) Ltd. v. ITO [2005] 2 SOT 719 (Delhi), it was held that the deduction could be claimed even if in the past deduction was claimed under section 80HHE provided that the deduction was not claimed under both the sections for the same income in one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .3 He also relied on the decision of Hon ble Gujarat High Court in the case of CIT v. Arvind Jewellers [2003] 259 ITR 502 . In this case, the Assessing Officer had made the assessment after issuing necessary statutory notices and hearing the assessee. The Tribunal recorded the finding that the Assessing Officer was aware of the gravity of the situation and the interests of the revenue. After obtaining the information, the Assessing Officer passed the order, which was revised by the ld. CIT by pointing out that he had not carried out any investigation while accepting the explanation of the assessee as also while making additions to the total income. The Tribunal set aside the order. The Hon ble Court pointed out that the Assessing Officer had called for all relevant material and obtained the explanation of the assessee. Thereafter, he came to a definite conclusion in the matter. The ld. CIT did not agree with the conclusion arrived at by him. But that could not lead to the inference that the order was erroneous and prejudicial to the interests of the revenue. The case of the ld. Counsel for the assessee was that the enquiry had been made in both the issues and the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( supra ) was followed. It was held that the assessee had placed all the material before the Assessing Officer and clarification was furnished in letter dated 8-11-1995. The Assessing Officer did not discuss the matter but accepted the claim of the assessee. Since all the material was available before the Assessing Officer, the assessment could not be re-opened under section 147 on mere change of opinion. 3.5 The ld. Counsel also relied on the decision of Hon ble Supreme Court in the case of CIT v. Max India Ltd. [2007] 295 ITR 282 in which it was held that an assessment cannot be revised under section 263 merely on change of opinion. The judgment was delivered in the context of section 80HHC and the Hon ble Court pointed out that several views existed when the Commissioner passed the order. The section was amended 11 times and was also subsequently amended respectively. At the time when Commissioner passed revisionary orders, two views were there on the interpretation of section 80HHC. In this view of the matter, it was held that the order could not have been revised under section 263. The case of the ld. Counsel was that the question whether project expenses were revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee must strictly satisfy the pre- conditions for claiming the exemption. In this case the assessee did not satisfy the condition mentioned in sub-section (5) of section 80HHE. Therefore, it was argued that the ld. CIT was right in revising order. It was further pointed out that she merely restored the matter to the file of the Assessing Officer for further verification of the claim of the assessee to which there could be no real and genuine grievance of the assessee, because the assessment was not enhanced. Such is also the case in respect of project expenses, which were prima facie of capital nature, but allowed by the Assessing Officer as deductible expenditure from the income. 5.1 In order to support the contentions, reliance was placed on the decision of Hon ble Rajasthan High Court in the case of Kota Cooperative Marketing Society Ltd. v. CIT [1994] 207 ITR 608 , in which it was held that deduction under section 80P(2) is to be allowed on the income, i.e., after deducting the expenditure incurred for earning the income. This was necessary to ascertain the real profits on which the deduction was admissible. Consequently, the Hon ble Court did not find any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer and he has followed the principles of natural justice, the order passed by him cannot be said to be erroneous and prejudicial to the interests of revenue simply because the ld. CIT does not agree with him and he is of the view that addition of a higher amount should have been made; ( iii )when two opinions are possible in a particular matter and the Assessing Officer follows one view, the order cannot be said to be erroneous and prejudicial to the interests of revenue provided that he follows a possible view; ( iv )if enquiry is not made and deduction is allowed, such an order will tantamount to an order which is erroneous and prejudicial to the interests of revenue; ( v )if material exists on record on the basis of which jurisdiction under section 263 can be exercised, the ld. CIT can exercise such jurisdiction; and ( vi )provisions granting exemptions have to be strictly construed as per language of the statute, but once it is found that the exemption is available, then, the grant of it should be liberally incorporated. 7. In regard to deduction under section 10B, the only grievance of the ld. CIT is that provision contained in sub-section (5) of ..... 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