The Chennai Bench of Income Tax Appellate Tribunal (ITAT) quashed the order of the Principal Commissioner of Income Tax, stating that the Assessing Officer (AO) correctly allowed deduction under section 80IA of the act.
Madurai Power Corporation (assessee) is a corporation that filed an Income Tax Return (ITR) declaring Rs. 9.95 Crores after claiming a deduction under section 80IA of Rs. 41.21 Crores. The AO disallowed the amount of Rs. 53.24 Lakhs and issued a notice to re-open the assessment.
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The AO raised two issues after hearing the reply of the assessee. The AO observed that the depreciation allowance claimed by the assessee was 15% on high-efficiency boilers, but the depreciation eligible was 80% on the Written Down Value (WDV).
Therefore, the AO alleged that the assessee claimed less depreciation thereby claiming excess deduction. However, the assessee replied to the AO that the Boilers were generating electricity and also submitted that these boilers cannot be termed as energy-saving devices. The AO accepted this contention of the assessee.
Additionally, the AO alleged that depreciation claimed 5% on the building as against eligible depreciation at 10% for the building acquired from Standard Chartered Bank. In conclusion, the AO made an addition of Rs. 59,43,390 for a short claim of depreciation which resulted in excess of deduction under section 80IA of the act.
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The PCIT interfered with the action of the AO under section 263 of the act and issued notice to the assessee raising the same issue of depreciation on High-efficiency Boilers.
The assessee replied with the contention that these boilers were not energy-saving devices and also submitted that the AO had taken a plausible view, therefore the PCIT need not have exercised the revisional jurisdiction on this issue.
Despite the reply, the PCIT held that the order of AO was erroneous and prejudicial to the interest of the revenue. The PCIT also directed the AO to pass a fresh order. Aggrieved by the order, the assessee filed an appeal before ITAT.
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The tribunal heard both parties. The tribunal relied on the judgment of the Supreme Court in the case of Malabar Industries Ltd V. CIT, in which the apex court laid down two conditions for invoking jurisdiction under section 263 of the act. The tribunal observed these conditions were i) the AO order being erroneous and ii) the erroneous order causing prejudice to the interest of the Revenue.
The two-member bench comprising Aby T. Varkey (Judicial Member) and Jagadish (Accountant Member) held that the AO enquired about the claim of less depreciation and accepted the reply of the assessee. The tribunal noted that the AO acted after taking inquiry and applied his mind.
Therefore, the tribunal held that it cannot be said that the AO has erred in passing the reassessment order and held that the AO has taken a plausible view.
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Therefore, the bench quashed the order of PCIT stating that it is unsustainable in law. Thereby, the appeal of the assessee was allowed.
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