TMI Blog2022 (4) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... rges and maintenance charges and miscellaneous income and lease premium. As the AO has applied his mind to the facts of the case and reached to a conclusion that the assessee has claimed deduction based on some evidences that means, he has taken a possible view. It is to be noticed that the Hon ble Madras High Court in the case of Arul Mariammal Textiles Ltd.,[ 2018 (8) TMI 1729 - MADRAS HIGH COURT ] has categorically held that interest on margin money by way of fixed deposits kept with the assessee s banker so as to enable bank to open a foreign letter of credit which was essential for purpose of import of critical components for carrying on business of the assessee, was eligible for claim of deduction u/s.80IA of the Act We noted that the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd.[ 2000 (2) TMI 10 - SUPREME COURT ] as categorically held that once the AO after making due enquiries adopted one of the view and granted partial relief, CIT is not permitted to exercise power u/s.263 of the Act because when two views are possible and CIT does not agree with the view taken by the AO, the assessment order cannot be treated as erroneous as well as prejudicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2014- 15 in ITA No.1312/CHNY/2018 reads as under:- 1.1 The impugned order of the CIT u/s263 is erroneous, opposed to law and facts and is liable to be set aside. 1.2 The CIT erred in passing the order without application of mind and without adverting to the detailed submissions made before him. 2.1 The CIT erred in invoking the provisions of Section 263 in so far as the assessment order is neither prejudicial to the interests of the Revenue nor erroneous. 2.2 The CIT erred in holding that the Assessing Officer did not conduct proper verifications or enquiries and has not applied his mind with respect to the issues considered in the 263 order, which is contrary to the records. 3. At the outset, the ld.counsel for the assessee stated that originally the assessee had challenged these orders of PCIT before the Tribunal in ITA No.1311 1312/CHNY/2018 and the Tribunal vide order dated 19.07.2018 confirmed the revision order passed by the PCIT and the assessee carried the matter before the Hon ble Madras High Court and the Hon ble Madras High Court, in both the years in TCA Nos. 823 826 of 2018 vide order dated 31.01.2020 admitted the following substanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessments u/s.263 of the Act, for these assessment years. The ld.counsel for the assessee took us through the grounds raised which are reproduced above. The ld.counsel first of all took us through the show cause notice issued by PCIT dated 20.02.2018, which is enclosed in assessee s Paperbook at pages 93 to 96, wherein the PCIT has doubted the issue of contribution to guidance amounting to ₹ 5,00,000/- and claim of deduction u/s.80IA of the Act on interest income of ₹ 1,80,03,358/-, sundry income of ₹ 10,55,33,636/- and other operating revenue of ₹ 7,34,67,288/- which represents interest on old loans and advances. This is as regards to assessment year 2013-14. As regards to assessment year 2014-15, the same contribution to guidance amounting to ₹ 5,00,000/- and the claim of deduction u/s.80IA of the Act i.e., excess claim of deduction of ₹ 54,19,14,875/-. 4. The ld.counsel for the assessee first of all took us through the claim of deduction made u/s.80IA of the Act in the return of income at page 24 of assessee s paper-book. The ld.counsel stated that the AO vide letter dated 25.04.2016 (which is enclosed in assessee s paper-book at pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Grant received ₹ 18,05,129 e) Interest on water charges, Maintenance Charges etc., - ₹ 7,03,262 f) Misc income ₹ 39,99,697 The assessee replied vide letter dated 02.12.2016 and the relevant answer reads as under:- b. Income eligible for deduction u/s. 80IA: In computing the profit and gains of the Oragadam Project, the eligible business under section 80IA of the Income Tax Act, 1961, we have included the following income. i. Plot maintenance charges 36,50,582 ii. Water Charges 5,74,02,133 iii. Rent 2,03,17,777 iv. Grant received 18,05,129 v. Interest on water charges, Maintenance Charges etc., 7,03,262 vi. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessment year 2013-14, the AO in view of the above allowed the claim of assessee after considering the submissions in details on both the issues. 6. The ld.counsel for the assessee stated that in such situation, the Hon ble Madras High Court in the case of AVM Cine Products vs. DCIT, [2021] 123 taxmann.com 41 has considered the allowability of claim of deduction u/s.80IA of the Act on interest earned by assessee and the Hon ble High Court vide para 25 to 27 held as under:- 25. WE do not find any such occasion to artificially bifurcate and dissect the interest income earned by the assessee in the present case in its ordinary course of business, so as to take it out of the ambit of deduction available to it under section 80-IA of the Act. The efforts on the part of the Revenue authorities to create such artificial compartments in the business income of the assessee, merely to reduce the quantum of deduction available to the assessee under section 80-IA of the Act of which the eligibility of the assessee is not even in doubt, is nothing but a whimsical and the arbitrary view of the Revenue authorities and the same is opposed to common sense and business prudence of a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which falls outside the purview of such like provision, which provides for deduction. 25. In the instant case, the requirement of the Assessee to furnish the fixed deposit was a pre-condition to enable the Assessee to open a foreign Letter of Credit for the purpose of import of critical components for the manufacture of wind mill. This incidentally had earned some interest. As pointed out by the Hon'ble Supreme Court in Shree Rama Multi Tech Ltd., it is not the Assessee's surplus money, which was deposited by way of fixed deposit, which had earned interest; on the contrary, it was a pre-condition for the purchaser/Assessee to enable him to import the critical component for the purpose of manufacturing. Furthermore, it is not the case of the Revenue that the amount was deposited in fixed deposit solely for the purpose of earning interest nor it is the case of the Revenue that the amount, which was deposited in fixed deposit was a surplus money, which was lying idle in the hands of the Assessee. Therefore, whatever income accrued is merely incidental and not the prime purpose of doing the act in question, which resulted into accural of some additional income and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, calling upon him to justify the genuineness of the gifts. The Respondent-Assessee responded to the same by giving evidence of the communications received from his father and his sister i.e. the donors of the gifts along with the statement of their Bank accounts. On perusal, the Assessing Officer was satisfied about the identities of the donors, the source from where these funds have come and also the creditworthiness/capacity of the donor. Once the Assessing Officer was satisfied with regard to the same, there was no further requirement on the part of the Assessing Officer to disclose his satisfaction in the Assessment Order passed thereon. Thus, this objection on the part of the Revenue, cannot be accepted. 8. It is next submitted that the donor had not been examined by the Assessing Officer. It is not in every case that every evidence produced has to be tested by cross examination of the person giving the evidence. It is only in cases where the evidence produced gives rise to suspicion about its veracity that further scrutiny is called for. If there is nothing on record to indicate that the evidence produced is not reliable and the Assessing Officer was satisfied with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as also the genuineness of the gift. The CIT in his order of Revision, does not indicate any doubts in respect of the genuineness of the evidence produced by the Assessee. The satisfaction of the Assessing Officer on the basis of the documents produced is not shown to be erroneous in the absence of making a further enquiry. It is made clear that our above observations should not be inferred to mean that it is open to the Assessing Officer to enquire into the source of source for the purpose of the present facts. This is a case where a view has been taken by the Assessing Officer on enquiry. Even if this view, in the opinion of the CIT is not correct, it would not permit him to exercise power under Section 263 of the Act. In fact, the Apex Court in Amitabh Bachchan (supra) has observed that there can be no doubt that where the view taken by the Assessing Officer is a possible view, interference under Section 263 of the Act, is not permissible. 6.3 The ld.counsel stated that even Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd., vs. CIT, [2000] 243 ITR 83 held that if there exists two views, the CIT could not exercise jurisdiction u/s.263 of the Act as per sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment of Tamil Nadu and functions as an Industrial Guidance and Export Promotion Bureau of Tamil Nadu. This entity acts as a conduit between the prospective investors / entrepreneurs and the Government of Tamil Nadu for signing of Memorandum of Understanding and bringing investments in the state of Tamil Nadu. The assessee for these two assessment years i.e., AY 2013-14 2014-15 claimed deduction u/s.80IA of the Act in respect of interest income amounting to ₹ 1,80,03,358/-, sundry income of ₹ 10,55,33,636/- and other operating revenue of ₹ 7,34,67,288/- which represents interest on old loans and advances. This is for assessment year 2013-14. As regards to assessment year 2014-15, the assessee claimed deduction u/s.80IA of the Act to the tune of ₹ 93,40,83,416/- but the AO disallowed the claim of deduction u/s.80IA on various incomes (including interest of ₹ 8,78,78,580/-). The AO disallowed claim of deduction u/s.80IA of the Act. The AO in both the years allowed contribution to guidance of ₹ 5 lakhs in each of the years claimed by assessee as deduction. 8.1 Subsequently the PCIT issued show-cause notice for both the years stating that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the AO, the assessment order cannot be treated as erroneous as well as prejudicial to the interest of Revenue unless the view taken by the AO is unsustainable in law. Hence, keeping in mind entirety of facts, we are of the view that in both the years, the PCIT erred in revising the assessments u/s.263 of the Act without holding the assessments framed by the AO u/s.143(3) of the Act after due enquiry and investigation as erroneous as well as prejudicial to the interest of Revenue. In such circumstances, we set aside the revision orders passed by PCIT in both the assessment years and allow the appeals of assessee. 9. Coming to ITA Nos.2093 954/Chny/2019 for the assessment years 2013-14 2014-15, these appeals are arising out of consequential assessments i.e., impugned orders of CIT(A) in ITA No. 255/2018-19/CIT(A)-15 35/2018-19/CIT(A)-15 dated 30.04.2019 31.01.2019 for the assessment years 2013-14 2014- 15 respectively. Since, the revision order has already been quashed by us, these orders of lower authorities giving effect to consequential order will not survive and hence, in these two assessment years, the orders of the lower authorities are set aside and the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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