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M/s. Kochi Refineries(Now merged with M/s. Bharat Petroleum Corporation Ltd.) Versus The Joint Commissioner of Income-tax

2015 (3) TMI 611 - ITAT MUMBAI

Revision u/s 263 - CIT had observed that, firstly, the Tribunal has not accepted the computation of deduction u/s 80-I on the profits of CPP and has mainly directed to allow the deduction u/s 80- IA in accordance with law - Held that:- In the original assessment order, the AO did not allow the claim of deduction u/s 80-IA in respect of the CPP unit. Finally, the said deduction has been allowed by the Tribunal following the earlier year order of the Tribunal in assessee’s own case. How the comput .....

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ue of claim of deduction u/s 80-I including the determination of ratio of CPP stands merged with the order of the Tribunal. The AO has mainly followed the direction of the Tribunal and allowed the deduction as per the profit determined. Such a variation of deduction u/s 80- I, now cannot be disturbed by examining the claim of deduction of expenses denovo as held by him. The ratio of asset of gross block of fixed assets has been worked out in the manner, which has been determined and upheld in th .....

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ssment order dated 30.11.2000 and not in the second order. Such an order, now cannot be revised u/s 263, as it is clearly barred by limitation. - Decided in favour of assessee. - ITA No.492/Coch/2007, ITA No.493/Coch/2007 - Dated:- 5-3-2015 - Shri N.K.Billaiya And Shri Amit Shukla JJ. For the Appellant : Shri Girish Dave For the Respondent : Shri Kishan Vyas [CIT-DR] ORDER Per Amit Shukla (JM) : The aforesaid appeals have been filed by the assessee against separate impugned orders dated 26.03.20 .....

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rbitrary and unauthorized. 2. The impugned order does not attract the provisions of Section 263 of the Income Tax Act, 1961 as the Commissioner has exercised his powers when the Assessing Authority has given effect to the orders passed by the Income Tax Appellate Tribunal. It is submitted that therefore, invoking provisions of Section 263 is bad in law. 3. It is submitted that to invoke Section 263, two conditions are to be satisfied viz. that the order passed by the Assessing Authority is erron .....

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evious years the officer has given effect to the orders passed by the Tribunal and the same has become final and therefore, there is no reason for invoking Section 263. 2. Besides this, the assessee has also raised following as additional grounds challenging the validity of the order u/s 263, on the ground of limitation :- 1.1 The Commissioner of Income-tax has erred in passing the impugned Order u/s 263 of the Income-tax Act, 1961 beyond the time limit specified in section 263 of the Income-tax .....

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, the assessee is a Public Sector Undertaking, engaged in the business of Refining of Crude Oil to produce various Petroleum Products. The company has filed its return of income for the assessment year 1997-98 on 28.11.1997 at an income of ₹ 34,10,92,480. The said return of income was revised on 31.03.1999, disclosing taxable income as per section 115JA at ₹ 32,67,85,616. The business income was shown at ₹ 34,85,46,038. From the said income, the assessee had claimed deduction u .....

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ded income from other sources also, the Assessing Officer (AO) allowed deduction u/s 80-I on Aromatic Unit at ₹ 3,82,39,669, which was the same as claimed by the assessee. So far as deduction u/s 80-IA on CEP Unit, the AO determined the income relating to CEP Unit at ₹ 69,63,50,214, and thereby allowed deduction u/s 80-IA at 30%, which worked out at ₹ 20,89,05,064. So far as claim of deduction u/s 80-IA for CPP Unit, the same was rejected by the AO. Thus, the claim of deduction .....

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o the ITAT order dated 25.11.2004, whereby the total income was determined at ₹ 11,33,87,900 after allowing the deduction u/s 80-I and 80- IA. The working of the AO for arriving at the total income and deductions under Chapter VI-A was as under:- Business income as per order Dated 8-6-2001 [CIT(A)] Rs.189,36,96,537 Less : Reduction by ITAT: (1)Disallowance of capital expenditure on current repairs allowed as revenue expenditure. Rs.76,97,392 (2) Expenditure on feasibility studies allowed a .....

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3,17,93,062 Gross total income ₹ 16,73,27,517 Less : Deduction under Chapter VI-A (1) Deduction u/s 80G Rs.10,17,500 (2) Deduction u/s.80-IA in respect of CEP Business income Rs.13,55,34,455 Ratio -0.3611 Income relating to CEP ₹ 4,89,41,492 30% thereof ₹ 1,46,82,497 (3) Deduction u/s 80-I on Aromatic unit Rs.3,82,39,669 ₹ 5,39,39,616 Revised Total income Rs.11,33,87,900 4. From the above, it is seen that so far as the deduction u/s 80-I on Aromatic unit, there is no cha .....

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d CEP is more than the gross business income, which is in violation of the provisions of section 80AB and section 80B(5). The learned CIT observed that, the aggregate profit of the eligible units has been worked out at ₹ 20,19,00,172 as against the business income determined at ₹ 13,55,34,455. The eligible deduction which should have been worked out should be ₹ 3,63,30,688 as against ₹ 5,29,22,166 (3,82,39,669 + 1,46,82,497), which has been allowed by the AO. After consid .....

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dated 28.02.2005 giving effect to the ITAT order is erroneous and prejudicial to the interest of the Revenue as the deductions under Chapter VI-A had exceeded the gross total income. Therefore, he set aside the said order with a direction to redo the same, restricting the deduction u/s 80-I to the business income of ₹ 13,55,34,455. He further held that, since the assessee itself has submitted that profit of the CEP is in negative, therefore, no deduction is to be computed u/s 80-IA for CEP .....

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ancement of business income at various stages. If at all, the claim of deduction can be said to be erroneous, then the same should reckoned or said to have arisen in the original assessment order dated 23.03.2000. He submitted that, there is another angle in claim of deduction u/s 80-IA, that, the assessee has also made a claim for deduction u/s 80-IA with regard to Captive Power Plant (CPP), which was included in the Capital Expansion Project (CEP). In the original assessment order, the AO has .....

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his proposition is covered by the decision of the Hon ble Supreme Court in the case of CIT v. Alagendran Finance Limited [(2007) 293 ITR 1 (SC)], wherein the Hon ble Apex Court held that the CIT, while exercising its revisionary jurisdiction, can reopen the order of assessment only in relation to an issue which was not the subject matter of reassessment proceedings. The period of limitation provided u/s 263(2), then, would begin to run from the date of order of original assessment order and not .....

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itself was varying due to disallowances and additions, which were subject matter of appeal before the CIT(A) and ITAT. Thus, on the face of it, the order of the CIT u/s 263 should be quashed, firstly, being barred by limitation, and secondly, he cannot set aside or disturb the order which is merely giving effect to the ITAT order. 7. On the other hand, the learned Departmental Representative, strongly relied upon the order of the CIT and submitted that the AO, while giving effect to the order o .....

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ned order u/s 263, is setting aside the order passed by AO giving effect to the Tribunal order. The said order has been held to be erroneous insofar as prejudicial to the interest of the Revenue by the learned CIT on the ground that, the deduction under Chapter VI-A should be restricted to the business income of the assessee finally determined and it cannot exceed the gross total income of the assessee. The case of Mr.Dave before us is that, the impugned order is barred by limitation, because th .....

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unit have been varied right from the stage of filing of revised return to the stage of ITAT order, due to enhancement and reduction of the gross total income. In the original assessment order, the AO has determined the gross total income and deductions under Chapter VI-A in the following manner:- Gross Total Income: (1) Business Rs.1,92,84,13,774 (2) Other Sources ₹ 3,17,93,062 Total Income Rs.1,96,02,06,836 Less : Deduction u/s 80G as per claim ₹ 10,17,500 Rs.1,95,91,89,336 Deductio .....

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us expenses made by the AO. After giving effect to the ITAT order, the gross total income has been determined and deduction under Chapter VI-A has to be allowed proportionately in accordance with provisions of law. What the learned CIT has observed in his show cause notice and also in the impugned order is that, once the assessee s business income has been finally determined, then the deductions under Chapter VI-A, which is to be allowed, should be in accordance with the provisions of sections 8 .....

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in facts. One very important fact which is evident from the impugned order is that, the assessee itself has admitted that in the wake of ITAT order and the computation of income thereof, the profit of CEP unit is in negative, and therefore, no deduction is to be computed u/s 80-IA for CEP for the current year. If the AO is giving effect to the appellate orders and determines the income, then he has to comply with the provisions of the Act unless there is a specific direction by the appellate aut .....

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tion 80A(2) read with sections 80AB and 80B(5). Accordingly, we affirm the order of the learned CIT. 8.2 Now coming to the argument of the learned Counsel, Shri Girish Dave, that the impugned proceedings u/s 263 is barred by limitation and the case of the assessee is covered by the decision of the Hon ble Supreme Court in the case of CIT v. Alagendran Finance Limited (supra), we find that first of all, the learned CIT has not transgressed upon the issue of determination of either the profit of e .....

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be counted from that date. As discussed above, here in this case, it has not been disputed that prior to the passing of Tribunal order, the gross total income and business income had far exceeded the profits of the eligible units. Hence, there was no occasion by any of the lower authorities to touch upon the issue of section 80A(2) or 80AB or 80B(5). Its is only when the effect of the ITAT order was given, the business income got substantially reduced and accordingly the deductions u/s 80-I 80-I .....

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rder is dismissed. 9. Now we will take up the appeal for assessment year 1998-99 (ITA No.493/Coch/2007). In this year also, the assessee has raised exactly similar grounds which have been raised in the appeal for the assessment year 1997-98. However, in this year, the subject matter of dispute in the impugned order passed u/s 263, is with regard to quantum and computation of deduction u/s 80-I for CPP. In this year, the assessee has filed its return of income on 30.11.1998 at an income of ₹ .....

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at, the Tribunal in assessee s own case for the assessment year 1996-97 and 1997-98 has allowed the similar deduction. Accordingly, the AO was directed to grant the benefit in accordance with the law. In the order giving effect to the ITAT order, the AO has computed the income in the following manner:- Business income as per order Dated 8-3-2002 before deduction under Chapter VI-A Rs.138,35,63,753 Less : Reduction by ITAT: (1) Disallowance of capital expenditure on current repairs allowed as rev .....

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29,61,145 (8) Addl. Depreciation on MODVAT reversal. ₹ 17,58,606 ₹ 53,57,05,698 Balance ₹ 84,78,58,055 Add : (1) Receipts from Oil Co-ordination Committee excluded from 1997-98 assessable for the year Rs.145,96,00,000 (2) 50% claim of Depr on Visbreaker revamp unit withdrawn, consequent to ITAT s order for 97-98 ₹ 17,33,61,514 (3) Depreciation claimed On AAWMS disallowed ₹ 70,56,740 Rs.164,00,18,254 Total Business income Rs.248,78,76,309 Add : Income from other sou .....

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of ₹ 4,20,59,945 ₹ 31,16,38,585 Revised Total income Rs.223,46,20,640 10. Thus, the profit of CPP was arrived at ₹ 14,01,99,816 and deduction u/s 80-I at ₹ 4,20,59,945. The aforesaid order of the AO dated 01.03.2005 giving effect to the ITAT order, is the subject matter of revision u/s 263 by the CIT. The case of the CIT is that, major part of the assessee s claim for depreciation on assets installed in CPP has been allowed by the Tribunal for this year as well as for the .....

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imed as revenue in account. (iv) Personnel expenses of workers and direct expenses. (v) Proportionate managerial and overhead expenses. 10.1 He held that the method of computing the profit of CPP unit for the purpose of granting deduction u/s 80-I in the order giving effect is erroneous and prejudicial to the interest of Revenue. After considering the assessee s submission and on detailed reasoning, he held that the assessee s claim that, Tribunal has accepted the method of computation of deduct .....

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less expenses incurred in relation to CPP unit. 11. Before us, the learned Counsel Shri Girish Dave, submitted that the claim of deduction u/s 80-IA with regard to the CPP was disallowed by the AO. Finally, the Tribunal vide order dated 25.11.2004 has allowed the claim of deduction u/s 80-I. Therefore, the learned CIT cannot set aside or revise the order, which is mainly giving effect to the ITAT order. Thus, not only the learned CIT has transgressed his revisionary jurisdiction, but also the im .....

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A in respect of the CPP unit. Finally, the said deduction has been allowed by the Tribunal following the earlier year order of the Tribunal in assessee s own case. The relevant finding of the Tribunal in this regard is as under:- 24. The tenth ground raised by the assessee-company is that the CIT(A) has erred in confirming the disallowance of deduction available u/s 80I in respect of the Captive Power Plant. This ground is allowed, in view of the decision taken by the Tribunal in assessee s appe .....

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