TMI Blog2014 (8) TMI 1183X X X X Extracts X X X X X X X X Extracts X X X X ..... time and there is nothing on record to conclude that handling charges pertains to income from exempt activities as well as taxable activities. AO has passed the order after applying his mind to the facts of the case. In such a situation, the order of Assessing Officer cannot be said to be erroneous so as to prejudicial to the interests of revenue to invoke the provisions of section 263. So, the same is set aside. - Decided in favour of assessee. - ITA No.1140/PN/2012 (A.Y: 2002-03) - - - Dated:- 25-8-2014 - Shri Shailendra Kumar Yadav And Shri R.K. Panda, JJ. Appellant by: Shri R.G. Nahar Respondent by: Smt. M.S. Verma, CIT ORDER Shailendra Kumar Yadav, This appeal has been filed by the assessee against the order passed u/s.263 of the I.T. Act by Commissioner of Income Tax-I, Pune, dated 26.03.2012 for A.Y. 2002-03 on the following grounds. 1. On facts and circumstances prevailing in the case and as per provisions scheme of the Act it be held that, the order passed by learned Commissioner of Income Tax u/s.263 is without satisfying the requirements of the said section and without properly resuming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the assessee had made submissions before the CIT, which read as under: The handling charges of ₹ 17,30,89,840/- are directly related to the income from taxable activity of ₹ 18,58,63,814/-. We are enclosing herewith the chart submitted during the course of fresh assessment passed in pursuance to ITAT s order. From the perusal of this working it may please be observed that the taxable income of ₹ 18,58,63,814/- pertains to transport and handling charges whereas the direct expenses incurred in connection with the same under the head handling charges of ₹ 17,30,89,840/- is having direct nexus with the same. The expenses on handling charges are not incurred on deriving the tax free income. It is therefore correctly deducted from the taxable income only. There is no infirmity in the order of the A.O. The order passed by the A.O is apparently on application of mind after verifying the required details and hence cannot be held as erroneous and prejudicial to the interest of revenue. Moreover, the provisions of Rule 8D of the Income Tax Rules do not apply to A.Y. 2002-03. It has been held by Bombay High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of sec.10(29) fall in Chapter III of the Act which speaks about Incomes which do not form part of the total income while Sec.14A though inserted by Finance Act, 2001, effective from 1-04-62 falls in Chapter IV of the Act, which speaks about Heads of Income . The provisions of Sec.14A start with the word For the purpose of computing total income under this Chapter . Chapter III commencing with the words In computing the total income of the previous year of any person, any income falling within any of the following clauses shall not be induced . The Chapter III precedes Ch.IV of the Act. Unless the claim u/s.10(29) is adjudicated the judicial forum is not expected to jump to Chapter IV. Therefore, the order passed by the A.O on 14/12/2009 is proper and is as per provisions of law and not erroneous and prejudicial to the interest of revenue. The proposed action in terms of sec.263 may please be dropped. 5. The CIT having considered the same did not agree with the contentions raised on behalf of the assessee and he observed that there was a claim of ₹ 17,30,89,840/- pertaining to handling charges. The Assessing Officer at the time of comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contentions were raised on behalf of the assessee and having considered the same, the CIT(A) upheld the computation of business income. In second appeal, the Tribunal had set aside the assessment order and restored it back to the Assessing Officer with a direction to re-compute denovo the income. For the sake of convenience, the relevant portion of ITAT order is reproduced hereunder: 6. Now the situation is that neither before the A.O nor before the CIT(A) Rule 8D was placed which provides method for determining amount of expenditure in relation to income not included in total income. It says that where the A.O having regard to the accounts of the assessee of previous year is not satisfied with the correctness of the claim of expenditure made by the assessee or the claim made by the assessee that no expenditure has been incurred in relation to income which does not form a part of the total income under the IT Act, for such previous year, then the A.O shall determine the amount of expenditure in relation to such income in accordance with the method as prescribed in sub-rule of Rule 8. Due to the enactment of this rule, it is now mandatory on the part of the revenue aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port and handling charges appears in the accounts is ₹ 18,58,63,814/- is inclusive of transport and service charges. The total handling charges appearing on expenditure side of ₹ 17,30,89,840 is the actual sum paid to various contractors (After considering the TDS). Thus, there is a direct nexus of expenditure incurred and income reflected in the accounts. Since this activity pertains to taxable income, the expenditure was deducted from transport and handling receipt. The expenditure and handling charges do not pertained to deriving any of the exempted income. The various working submitted during the course of assessment have been verified by the concerned assessing Officer at relevant point of time and there is nothing on record to conclude that handling charges of ₹ 17,30,89,840/- pertains to income from exempt activities as well as taxable activities. The Assessing Officer has passed the order after applying his mind to the facts of the case. In such a situation, the order of Assessing Officer cannot be said to be erroneous so as to prejudicial to the interests of revenue to invoke the provisions of section 263 of the Act. So, the same is set aside. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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