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2018 (4) TMI 695

the assessment proceedings u/s. 143(3) of the Act. The issues raised by the first appellate authority also stood resolved by ITAT in appeal for A.Y. 2010-11, which stood affirmed by Hon’ble jurisdictional High Court vide their decision [2017 (4) TMI 1035 - DELHI HIGH COURT]. Therefore, respectfully following the decision of Hon’ble jurisdictional High court in the case of assessee itself for A.Y. 2010-11, we do not find any good reason to sustain the decision reached by learned Pr. CIT passed u/s. 263 of the IT Act. As a result, the appeal of the assessee deserves to be allowed. - ITA No. 4951/Del./2016 - Dated:- 19-3-2018 - Shri Bhavnesh Saini, Judicial Member And Shri L.P. Sahu, Accountant Member For The Assessee : Sh. IRA Kapoor, CA For The Revenue : Smt. Simran Bhullar, CIT/DR ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the assessee against the order u/s. 263 of the IT Act, 1961 of Principal Commissioner of Income-tax-11, New Delhi for the assessment year 2011-12. The assessee has filed following concise grounds of appeal : 1. In law and on the facts and circumstances of the case, the learned Principal C.I.T. erred in assuming jurisdiction u/s.263 of the I.T. Act, whe .....

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/s Indian Farmers Fertiliser Cooperative Limited for the A.Y. 2011-12 were called for and examined. The Assessing Officer framed assessment on 27.03.2014(the actual date of order should be 27.03.2015). The AO conducted hearings effectively from 13.03.2015 to 26.03.2015. The AO made the following additions:- Net taxable income as shown in return ₹ 1275,42,22,424/- Add: (a) Dividend income received from OMIFCO, Oman Rs.144,75,81,978/- (b) Disallowance u/s 14A r.w.r. 8D(2)(ii) Rs.20,48,90,000/- Taxable income Rs.1440,66,94,402/- 2. The AO also allowed rebate u/s 90 on account of deduction as per DTAA with OMAN of ₹ 17,37,09,837/-. 3. The AO issued questionnaire vide letter No. 117 dated 20.02.2015. As regards the dividend income, the AO vide point No. 26, 27 & 28 asked the following questions;- 26. In respect of any income covered in DTAA, please furnish detailed note with copy of respective agreement and also give reasons for changing your earlier stand of ont the income covered in DTAA. 27. Give reasons for claiming dividend Income received from OMIFCO as exempt income not claiming relief u/s 90 of the Income Tax Act. 1961. 28. Also explain as to the condition of car .....

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e case may be, or (ii)income-tax chargeable under this Act and under the corresponding law in force in that country or specified territory, as the case may be, to promote mutual economic relations, trade and investment, or (b) for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country or specified territory, as the case may be, or 8. Section 90 clearly mentions that the relief is to be granted in respect of income on which have been paid both income tax under this Act and income tax and income tax in that country or specified territory, as the case may be. The section 90(1)(a)(ii) is in regard to the income tax chargeable under this Act and under the corresponding law in force in that country and moreover, income tax should be chargeable in the Act of either country. 9. From the perusal of record it is found that the assessee has claimed tax credit even though no tax has been paid in either country. 10. The Central Government derives its authority to enter into agreement for avoidance of double taxation from section 90 of the IT Act. The primary objective is not to tax the same income in both the countries. The AO failed t .....

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of the balance sheet further shows the capital work in progress of ₹ 441.68 crores. The assessee has not shown any figure of interest pertaining to capital work in progress. The schedule 6(43rd Annual Report) showing capital work in progress does not show any interest component. The AO did not make any inquiry as regards the application of section 36(1)(iii) proviso. As per para 13 of significant accounting rules, the assessee has mentioned that borrowing costs that are attributable to the acquisition or contract of qualifying asset are capitalized as per the cost of such assets. But the assessee has not given any detail about interest component in the capital work in progress which is to be calculated for the period beginning from the date on which the capital was borrowed for acquisition of the asset till the date of which such asset was first put to use. The AO did not make any inquiry or raised any query for calculating the interest to be capitalized u/s 36(1)(iii) proviso. The AO did not make any further inquiry as whether the calculation made by the assessee, if any, is correct or not. 16. The assessee has shown details of fixed assets in schedule 5 of 43rd annual repo .....

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ount of subsidy has been offered to tax so as to verify the claim of loss on sale of Fertiliser Bonds. Long Term Capital Gain 21. The assessee has shown in the computation of income as per Annexure-C the long term capita! gain. No further particulars have been given by the assessee or asked by the AO as what has been sold by the assessee. 22. Rental Income: The assessee has shown rental income of ₹ 16.24 crores as per schedule 14(43rd Annual report). In the statement of total taxable income, the assessee has shown rental income under the head Income from house property. It appears that assessee is having income on account of communication towers rented to telecom companies like Bharti Airtel and M/s BSNL If that is the case, then the case of the assessee would not fall under the head Income from House Property as these communication towers cannot be called as buildings or lands appurtenant thereto. No enquiry has been made by AO on this aspect. 23. Ongoing through the Annual report it is found that the assessee has following associates:- (i) IFFCO-Tokio Genera! Insurance Company Ltd. (ii) Oman India Fertiliser Company S.A.O.C. (iii) Jordan India Fertiliser Company, L.L.C, (iv .....

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ers dated 06.08.2000 and 11.12,2000 before the Hon'ble ITAT in the case of KRIBHCO. The assessee had also relied upon the decision of the Hon'ble ITAT in the case of M/s KRIBHCO for advancing his arguments in the case of M/s IFFCO. 13. In the similar case i.e. M/s KRIBHCO, the Hon'ble ITAT has given relief to the assessee on the issue of tax credit deemed to be paid in Oman and quashed the proceedings u/s 263. The Department is not accepting the decision of the Hon'ble ITAT in the case of M/s KRIBHCO and the CCIT-1 & CCIT-2 has already authorized the PClT to file appeal before the Hon' ble Delhi High Court. 14. It may be noted that the assessee was specifically asked vide this office letter dated 14.07.2016(reproduced above in para 6 to show whether these letters were before the AO on the basis on which the Hon'ble ITAT has given the relief. 15. The assessee filed reply vide letter dated 27.07.2016 wherein it was admitted by the assessee that these letters were not before the AO. The assessee has simply stated that even if the letters issued by Secretary- General of Taxation are ignored for a moment, the claim of the society for tax credit falls within t .....

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e of the assessee for the A.Y.2010-11. 10. A detailed order was passed on 29.03.2016 u/s.263. 11. The AO is directed to follow the order passed u/s.263 of the A.Y. 2010-11 even for the A.Y. 2011-12. 2. Thereafter at para 12 of his order, the Ld. PCIT has observed that on the issue of allowing tax credit on dividend income, the assessee relied upon two letters dated 6.8.2000 and 11.12.2000 before the Hon. ITAT in the case of KRIBHCO and further that the assessee also relied upon the decision of the Hon. ITAT in the case of KRIBHCO. The Ld. PCIT thereafter observed that in the case of KRIBHCO the Hon. ITAT allowed the assessee s appeal, but the Department is not accepting the decision of the Hon. ITAT in the case of M/s. KRIBHCO and the CCIT-1 and CCIT-2 has already authorized the Ld. PCIT to file appeal before the Hon. Delhi High Court. Thereafter, at para 14 of his order, the Ld. PCIT observed that as per his office letter dated 14.7.2016, the assessee was asked whether the aforesaid two letters were available before the Assessing Officer, on the basis of which the Hon. ITAT has given the relief. The Ld. PCIT has then, at para 15 briefly referred to the assessee s reply dated 27.7. .....

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relations, trade and investments. ii. Assessment Order issued by the Oman Tax Authorities which also mentioned that the Tax Exemption in Oman is granted with the objective of promoting economic development within Oman by attracting Investments. iii. Reference to Preamble of Royal Decree 68 of 2000 which stated the objective of the amendment in tax law to be exigencies of Public Good . iv. Past 5 years Scrutiny Assessment Record of the Society where the claim of Tax Credit has been allowed after enquiries and discussion in the Assessment Orders right from AY 2006-07 to 2010-11. v. Discussion during the Assessment hearings on the luminescent nexus between Dividend Exemption and flow of Investments on the one hand and Investments and Economic Development on the other hand. Based on the above, the Ld. A.O. came to a position and perfectly plausible conclusion on the admissibility of the Tax Credit Claim of the Society. Hence, it is respectfully submitted that the suggestion at para 3 of the SCN to the effect there was lack of enquiry merely because the letters of the SGT were not before the A.O. is fallacious both on the legal ground as well as on Merits. 3.2 In this letter the factual .....

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y assuming jurisdiction u/s.263 of the Act. 4.1 From the above, it is clear that the Hon ble Tribunal while deciding similar appeal for the immediately preceding assessment year has already considered the effect of non-availability of the two letters before the Assessing Officer. However, it has been held that proper enquiries were made by the Assessing Officer and after considering all the facts and the provisions of Article 25 of the DTAA r.w.s. 90 of the Income Tax Act, and also having regard to the view that in the preceding assessment years on identical facts the Department has consistently adopted a view that the assessee is entitled to tax credit on dividend earned by it in Oman. 5. It is respectfully submitted that the relevant issues on which the Ld. Pr.CIT has invoked his jurisdiction u/s.263 of the Act are the same as for the A.Y. 2010-11 in assessee s own case. There is no dispute about this and even the Ld. PCIT had admitted that the facts are identical and, therefore, he has merely directed the Assessing Officer to follow his order for A.Y. 2010-11. In this circumstance, the Hon ble Tribunal is bound to follow its own order for A.Y. 2010-11 when admittedly the facts a .....

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ue has urged as many as 21 questions of law, only one question arises for consideration. The first and the central question pertains to the exercise of jurisdiction by the Principal Commissioner of Income Tax ('Pr CIT) under Section 263 of the Act by the order dated 29th March, 2016 restoring the assessment for the AY in question to the file of the Assessing Officer ('AO') for making a de novo assessment. 4. The Pr CIT sought to order a de novo assessment on two issues. One pertained to the tax credit claimed by the Respondent/Assessee in respect of the dividend income received by its branch in Oman from Fertilizer Company SAOC ('OMIFCO') under the laws of Oman. The other question concerned the capitalization of interest in terms of the proviso to Section 36 (1)(iii)of the Act. 5. The case of the Revenue is that the order of the AO, for the AY in question, was erroneous and prejudicial to the interest of the Revenue and, therefore, in terms of Section 263 of the Act and, more particularly, in view of the Explanation-2 inserted in the said provision with effect from 1st June, 2015, the Pr CIT was justified in passing the order dated 29th March, 2016 under Section .....

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ction 263 of the Act. 10. As regards the issue concerning the capitalization of interest, the Court finds again that the ITAT took note of the fact that detailed enquires were made by the AO in regard to the major additions to the fixed assets, capital work in progress, the manner in which the depreciation was claimed and the details of both secured as well as unsecured loans. The audited financial statements of the Assessee were also compiled, for the earlier AYs including the AY in question, and placed before the AO. The ITAT also took note of the Significant Accounting Policies in the Auditor's Report and the synopsis filed before the AO. It is only after such an elaborate exercise that it was concluded by the ITAT in the impugned order as under: 16. We have carefully considered the submissions and arguments made by the learned counsel of the assessee as well as the learned CJT(O.R.) and heard both the parties at length. We find that the Assessing Officer had made detailed inquiries and examined the entire block of fixed assets. A brief note on capital work in progress was also filed and queries regarding the manner in which the depreciation was claimed was also raised. Furt .....

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5. However, on this aspect, the ITAT has specifically held in para 17 of the impugned order as under: 17. Before concluding we would also like to deal with the recent insertion, of Explanation 2 to Section 263 of the Act. We have already held above that in respect of both the issues i.e. allowing credit of deemed taxes paid on dividend in Oman as well as capitalization of interest u/s 36 (1) (iii) detailed enquiries as well as verification have been made by the AO. Further it is also not the case of the Ld. Pr. CIT that the order is not in accordance with any instruction direction issued by the Board or is not in accordance with any decision of Hon'ble Delhi High Court or the Apex Court of India. Accordingly the order passed by the AO cannot be regarded as deemed to be erroneous or prejudicial to the interest of the Revenue under Explanation 2 of the Act. 12. For the above reasons, this Court is of the considered view that no substantial question of law arises for consideration from the impugned order of the ITAT. The appeal is, accordingly, dismissed but in the circumstances, with no orders as to costs. 7. We further observe that almost all the issues on which show cause notic .....

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