TMI Blog2012 (3) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... bai and the appeal in ITA No.4850/Mum/2010 preferred by the Revenue is directed against the order dated 29.3.2010 passed by the ld. CIT(A) for the assessment year 2004-05. Since the facts are identical and issues involved are interconnected, both these appeals are disposed of by this common order for the sake of conveyance. ITA No.298/Mum/2009 (by the assessee) 2. Briefly stated facts of the case are that the assessee company is engaged in the business of Purchase and Sale of TV Program films rights and audio/videocassettes, Broadcaster of TV Channels, Space selling Agent and Pay TV Subscription distributor. The return was fi led showing total income of Rs.1,92,48,78,470/-. However, the assessment was completed at an income of Rs.1,97,94,13,320/- vide order dated 28.12.2006 passed u/s 143(3) of the Income Tax Act, 1961( in short the Act). On examination of assessment records for the assessment year 2004-05, the ld. CIT observed that the AO while al lowing the deduction u/s 80HHF, the expenditure incurred in foreign currency have not been reduced from export/total turnover and the interest income of Rs.57.76 crores has been considered as part of the business income and has reduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the above issues passed the detailed assessment order discussing of the above issues at pages No.2 to 6 of the assessment order dated 28.12.2006, therefore, the ld. CIT was not justified in invoking the provisions of section 263 of the Act. He further submits that against the assessment order, the assessee has fi led appeal before the ld. CIT(A) and the ld. CIT(A) has again considered the above issue vide appellate order dated 2.1.2008, therefore, the assessment order has been merged with the order passed by the ld. CIT(A) and therefore, the provisions of section 263 cannot be invoked. He further submits that the ld. CIT in his order passed u/s 263 has directed the AO to recompute the entire deduction u/s 80HHF afresh and did not restrict to the points raised in the notice u/s 263, therefore, the ld. CIT travel led beyond the show cause notice which is bad in law and for this proposition the reliance was also placed in CIT V/s Shri Ashish Rajpal (2010) 320 ITR 674 (Del) at page 690. The reliance was also placed on the decisions in (i) CIT V/s Gabriel India Ltd., (1993) 203 ITR 108 (Bom), (i i)Malbar Industrial Co. Ltd. V/s CIT (2000) (243 ITR 83 (SC) and (iii) CIT V/s Max India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Rules, 1962 and compute the disallowance accordingly. In this regard, he submits that in view of the judgment of Hon'ble Jurisdictional High Court in Godrej Boyce Mfg. Co. Ltd. V/s DCIT (2010) 328 ITR 81 (Bom.) Rule 8D is not applicable for the year under consideration and the same is applicable for the assessment year 2008- 09, therefore, the order passed by the ld. CIT is not sustainable in law on this issue also. He, therefore, submits that the order passed by the ld. CIT be cancel led. 7. On the other hand, the ld. DR submits that in view of the findings recorded in the order passed u/s 263, the order passed by the ld. CIT be upheld. 8. We have carefully considered the submissions of the rival parties and perused the materials available on record. It is settled law that the scope of application of section 263 of the Act is governed by the principles set out in Malabar Industrial Co. Ltd. V. CIT (2000) 243 ITR 83(SC) as reaffirmed in CIT V. Max India Ltd (2007) 295 ITR 282 (SC). It has been held that the phrase prejudicial to the interests of the Revenue used in section 263 of the Act has to be read in the conjunction with an erroneous order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... simply because two views are possible and the AO has taken as one view with which the ld. CIT does not agree, which cannot be treated as erroneous and prejudicial to the interests of the Revenue unless the view taken by the AO is found to be unsustainable in law. 11. In M/s Zee Telefilms Ltd. (Now Zee Entertainment Enterprises Ltd.) V/s Addl .CIT in ITA No.265/Mum/2008 (AY-2003-04) dated 29.9.2009 on the simi lar issue and on the identical facts of the case, the Tribunal has held that the interest issue had rightly been considered by the AO as profits of the business vide finding recorded in paragraphs 13 of its order which are reproduced as under : 13. Having heard the rival submissions and perusing the material on record it is noted that the assessee had categorically submitted before the Assessing Officer that it was engaged in the financing business and the interest income resulted therefrom only. The Assessing Officer got satisfied and reduced 90% of the gross interest income from the profits of the business for the purpose of computing deduction u/s.80HHF of the Act. It shows that the interest income was assessed under the head profits and gains of business or profe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that the ld. CIT in his order u/s 263 has directed the AO to apply Rule 8D of the Income Tax Rules in view of the decision of the Special Bench of the Tribunal in the case of Daga Capital Management (P) Ltd. (supra). Since the Hon ble Jurisdictional High Court in the case of Godrej Boyce Mfg. Co. Ltd.(supra) has held that Rule 8D of the Income Tax Rules is applicable with effect from the assessment year 2008-09, therefore, the direction of the ld. CIT to apply Rule 8D for the year under consideration i .e. assessment year 2004- 05 is not sustainable in law. 14. For the reasons as discussed above, the order passed by the ld. CIT u/s 263 is squarely falls outside the purview of section 263 of the Act and hence, the same is cancel led. The grounds taken by the assessee are, therefore, allowed. ITA No.4850/Mum/2010 (by Revenue) 15. The grounds taken by the Revenue read as under: 1. On the facts and in the circumstance of the case and in law, the ld. CIT(A) was not justified in holding that 90% of the net interest and not 90% of the gross interest as held by the AO is to be reduced from the profits of business for the purpose of computation of deduction u/s 80HHF of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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