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2016 (4) TMI 122 - ITAT AHMEDABAD

2016 (4) TMI 122 - ITAT AHMEDABAD - TMI - Revision u/s 263 - claim of 1/5th of IPO expenses u/s. 35D - Held that:- The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous hut is prejudicial to the Revenue- recourse c .....

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ed in favour of assessee

No disallowance has been made by the A.O u/s. 14A - Held that:- This observation of the Commissioner is also against the true facts of the case, the following observations/findings of the A.O would explain the position. "The submission of the assessee has been considered. Regarding investments, the assessee has put on records from its accounts evidence to demonstrate that the source of investment is out of interest free funds. Further regarding administrative .....

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nds. - Decided in favour of assessee - ITA No. 1279/Ahd/2014 - Dated:- 19-2-2016 - N. K. Billaiya, AM And S. S. Godara, JM For the Appellant : Shri S N Divetia, AR For the Respondent : Smt Vibha Bhalla, CIT/DR ORDER Per N K Billaiya, Accountant Member 1. With this appeal, the assessee has challenged the correctness of the order of the ld. CIT-I, Ahmedabad dated 14.03.2014 pertaining to A.Y. 2009-10 made u/s. 263 of the Act. 2. The assessee contents that the order passed u/s. 263 of the Act by th .....

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ssessee had claimed capital expenses (IPO expense) of ₹ 1,17,14,943/- being 1/5th of ₹ 5,85,74,716/- as preliminary expenses u/s. 35D after commencement of business. As per the applicable provisions of section 35D(1)(ii) for A.Y. 2009-10 the assessee was not eligible to claim the same as the assessee is not an Industrial Undertaking. 2. The assessee had earned exempt dividend income of ₹ 1,15,10,060/-. The A.O had invoked the provisions of section 14A but did not disallow propo .....

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/examined by the A.O during the course of the assessment proceedings itself. Therefore it cannot be said that the assessment order is bad in law in as such it is erroneous and pre-judicial to the interest of the revenue. 6. Per contra, the D.R. strongly supported the findings of the Commissioner. It is the say of the ld. D.R. that the assessment order is erroneous and pre-judicial to the interest of the revenue. The Commissioner has rightly and correctly invoked the powers conferred upon him by .....

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tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under ii, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax .....

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Now, let us see in the light of the above ratio whether the assessment has been made on an incorrect assumption of facts or an incorrect application of law. The first observation of the ld. CIT relates to the claim of 1/5th of IPO expenses u/s. 35D of the Act. The ld. CIT is of the firm belief that since the assessee is not an Industrial Undertaking such capital expenses cannot be claimed u/s. 35D after commencement of business as per provisions applicable for A.Y. 2009- 10. We find that the Gu .....

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pt of industrial undertaking need not necessarily be confined to manufacture and production of articles and even in the absence of either of them there could be an industrial undertaking." 9. In our understanding of the law, this is the reason for which the Hon'ble Kerala High Court (supra) has held the business of lodge to be an industrial undertaking. The finding of the Commissioner that the A.O has not enquired into this is incorrect. We find that the A.O has thoroughly examined this .....

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by the assessee are out of non interest bearing funds whereas the correct facts are that the investments have been made out of interest bearing funds. 12. This observation of the Commissioner is also against the true facts of the case, the following observations/findings of the A.O would explain the position. "The submission of the assessee has been considered. Regarding investments, the assessee has put on records from its accounts evidence to demonstrate that the source of investment is o .....

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