M/s Tacon Infrastructure Pvt. Ltd., PORBANDAR V. The Commissioner of Income Tax, JAMNAGAR

ITA 149/RJT/2011

• Counselvise Citation: 14924914 RSA 2011
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-06-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 20-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANKUR GARG
• Assessee Lawyers: ANKIT GOKANI
• Keywords: Business income; Retrospective amendment
• Section: 143(3); 56; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH: RAJKOT BEFORE SHRI T K SHARMA, JM AND SHRI D K SRIVASTAVA, AM ITA NO. 149 /RJ T/2011 ASSESSMENT YEAR : 200 6 - 07 M/S. TACON INFRASTRUCTURE PVT LTD TACON COMPLEX, 3 WADI PLOT, M G ROAD, NR KAMLA BAG, PORBANDAR PAN: AABCT 4416 D V. CIT, JAMNAGAR ITA NO. 429/RJT/2012 ASSESSMENT YEAR : 2006 - 07 ACIT, CIRCLE - 2, JAMNAGAR V. M/S. TACON INFRASTRUCTURE PVT . LTD DATE OF HEARING : 05 .06 .2013 DATE OF PRONOUNCEMENT : 21 .0 6 .2013 ASSESSEE BY : SHRI ANKIT GOKANI, CA REVENUE BY : SHRI ANKUR GARG, DR ORDER D. K. SRIVASTAVA : THE APPEAL BEARING ITA NO.149/RJT/2011 FILED BY THE ASSESSEE IS DIRECTED AGAINS T T HE ORDER PASSED BY THE LD . COMMISSIONER OF INCOME - TAX, JAMNAGAR U/S 263 OF THE INCOME - TAX ACT BY WHICH HE SET ASIDE THE ORIGINAL ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER ON 26.12.2008 WHILE THE OTHER APPEAL BEARING ITA NO.429/RJT/2012 FILED B Y THE REVENUE IS DIRECTED AGAINST THE APPELLATE ORDER PASSED BY THE LD . CIT(A) ON 27.04.2012 BY WHICH HE HAS DIRECTED THE ASSESSING OFFICER TO TREAT THE INTEREST INCOME AMOUNTING TO RS.20,24,847/ - AS BUSINESS INCOME OF THE ASSESSEE FOR COMPUTING RELIEF U/S 80IA. IT MAY BE MENTIONED THAT THE AFORESAID ORDER PASSED BY THE LD CIT(A) ON 27.0 4 .2012 RELATES TO ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER U/S 143(3) ON 19.09.2011 PURSUANT TO THE DIRECTION S GIVEN BY THE LD COMMISSIONER OF INCOME - TAX U/S 263. 2. IN ITA NO.149/RJT/2011 , THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS: - 1. LEARNED COMMISSIONER OF INCOME TAX ERRED IN LAW AS WELL AS ON FACTS IN PASSING ORDER U/S. 263 OF THE ACT THOUGH THE ORDER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE REVENUE . 2. LEARNED COMMISSIONER OF INCOME TAX ERRED IN LAW AS WELL AS ON ACTS IN NOT ACCEPTING THE CONTENTION OF THE APPELLANT THAT INTEREST EARNED RS.20,24,847/ - IS RELATED TO CONS TRUCTION ACTIVITY AND TAXABLE UNDER THE HEAD 2 ITA NOS. 149/RJT/2011 & 429/RJT/2012 PROFIT & GAINS OF BUSINESS PROFESS ION AND NOT UNDER THE HEAD INCOME FROM OTHER SOURCES THOUGH SUPPORTED BY VARIOUS LEGAL JUDICIAL PRECEDENT. 3. THE ASSESSEE HAS ALSO TAKEN FOLLOWING ADDITIONAL GROUND OF APPEAL: - LD CIT ERRED IN LAW AS WELL AS ON FACTS IN PASSING ORDER U/S 263 OF THE ACT THOUGH THE ORDER OF AO HAS MERGED WITH ORDER OF CIT(A) AND THEREFORE CIT HAS NO JURISDICTION IN VIEW OF SECTION 263(1)(C) OF THE ACT. 4 . IN ITA NO.249/RJT/2012, THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS: - 1. THE CIT (A) ERRED IN LAW AND ON FAC TS IN DIRECTING THE AO TO TREAT THE INTEREST INCOME AMOUNTING TO RS.2024847/ - AS BUSINESS INCOME OF THE ASSESSEE. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THAT THE REVENUE CRAVES LEAVE TO ADD, AMEND, ALTER OR WITHDRAW ANY GROUNDS OF APPEAL. 5 . THE ASSESSEE IS A PRIVATE LIMITED COMPANY. IT FILE D ITS RETURN OF INCOME ON 26.12.2006 RETURNING TOTAL INCOME AT RS.64,38,820/ - . THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXECUTION OF INFRASTRUCTURE PROJECTS. THE ASSESSEE HAD CLAIMED DEDUCTION AMOUNTING TO RS.1,48,59,822/ - U/S 80IA OF THE INCOME - TAX ACT WHICH WAS DISALLOWED BY THE ASSESSING OFFICER IN THE ORIGINAL ORDER OF ASSESSMENT PASSED U/S 143(3) OF THE INCOME - TAX ACT ON 26.12.2008 WITH THE FOLLOWING OBSERVATIONS: - THE SUBMISSION MADE BY THE ASSESSEE WAS CONSIDERED. THE SAME, HOWEVER IS NOT ACCEPTA BLE FOR THE REASONS GIVEN IN THE ASSESSMENT ORDERS FOR A.Y. 2001 - 200 TO 2005 - 2006. DURING THIS YEAR ALSO THE REQUIRED CONDITIONS ARE NOT FULFILLED I N THIS YEAR ALSO. 3 ITA NOS. 149/RJT/2011 & 429/RJT/2012 ( I ) THERE IS NO AGREEMENT BETWEEN THE ASSESSEE AND GOVERNMENT. ( II ) THE ASSESSEE HAS CARRIED OUT W ORK CONTRACT ONLY. ( III ) THE ASSESSEE HAS NOT CARRIED OUT THE DEVELOPMENT OF INFRASTRUCTURE FACILITY WITH ITS OWN FUNDS AS IT IS GETTING PAID BY THE GOVERNMENT. ( IV ) THE INVESTMENT IS NOT RECOUPED DURING THE SPECIFIED PERIOD BY WAY OF TOLL TAX, CESS, FEES, LEASE RENT ETC. IN VIEW OF THE ABOVE AND FOR THE SAME REASONS AS MENTIONED IN THE ASSESSMENT YEAR 2001 - 2002 TO 2005 - 2006, THE CLAIM OF DEDUCTION OF R.1,48,59,822/ - MADE U/S.80IA(4) OF THE I.T. ACT IS DISALLOWED. PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE I.T. ACT IS BEING INITIATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 6 . THE AFORESAID DISALLOWANCE MADE BY THE ASSESSING OFFICER IN THE ORIGINAL ORDER OF ASSESSMENT WAS SUBJECT MATTER OF APPEAL BEFORE THE CIT(A). BY HIS ORDER DATED 25.03.2009, TH E LD CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION AMOUNTING TO RS.1,38,04,911/ - U/S 80IA TO THE ASSESSEE. THE DEPARTMENT CHALLENGED THE AFORESAID ORDER PASSED BY THE LD CIT(A) BEFORE THIS TRIBUNAL WHICH WAS DISPOSE D OF BY THIS TRIBUNAL ON 26.08.2011 BY ITS ORDER DATED 26.08.2011 RELATING TO ASSESSMENT YEAR 2006 - 07 (ITA NO.839/RJT/2009) IN WHICH THE SUBMISSION OF THE ASSESSEE THAT THE REVENUE HA D ALREADY FILED APPEAL ON IDENTICAL ISSUE BEFORE THE HONBLE JURISDICTION AL HIGH COURT AGAINST THE ORDER PASSED BY THIS TRIBUNAL FOR EARLIER A SSESSMENT Y EAR S, I.E., AY 2001 - 02 TO 2005 - 06 , WAS ALSO NOTED . ON APPLICATION FILED BY THE ASSESSEE U/S 158A OF THE INCOME - TAX ACT, THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO DECIDE TH E ISSUE ON THE BASIS OF JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT FOR ASSESSMENT YEARS 2001 - 02 TO 2005 - 06. RESULTANTLY, THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A) ALLOWING DEDUCTION U/S.80IA TO THE ASSESSEE IN THE ASSESSMEN T YEAR UNDER APPEAL WAS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7 . IN THE MEANTIME, THE RECORDS OF ORIGINAL ASSESSMENT WERE CALLED FOR AND EXAMINED BY THE LD . COMMISSIONER OF INCOME - TAX U/S 263 OF THE INCOME - TAX ACT. HE NOTICED THAT THE ASSESSEE HAD EARNED INTEREST INCOME OF RS.20,24,847/ - AND ALSO 4 ITA NOS. 149/RJT/2011 & 429/RJT/2012 PAID INTEREST AMOUNTING TO RS. 73,51,132/ - . HE ALSO NOTICED THAT THE ASSESSEE HAD NETTED INTEREST PAYMENTS AGAINST INTEREST RECEIPTS AND IN TH AT PROCESS CLAIMED INTEREST EXPENSES AMOUNTING TO RS.53,26,285/ - . THE LD COMMISSIONER OF INCOME - TAX WAS OF THE VIEW THAT THE INTEREST EARNED BY THE ASSESSEE W AS LIABLE TO BE TAXED AS INCOME FROM OTHER SOURCES U/S 56 AND NOT AS BUSINESS INCOME U/S 28. HE FURTHER NOTICED THAT THE ASSESSING OFFICER DID NOT EXAMINE THE A FORESAID ASPECT WHILE COMP LETING THE ORIGINAL ASSESSMENT. HE THEREFORE CONSIDERED THE ORIGINAL ORDER OF ASSESSMENT AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. RESULTANTLY, HE CANCELLED THE ORIGINAL ORDER OF ASSESSMENT AND DIRECTED THE ASSESSIN G OFFICER TO REFRAME THE ASSESSMENT AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. RELEVANT PARAGRAPHS IN THE IMPUGNED ORDER PASSED BY THE LD COMMISSIONER OF INCOME - TAX READ AS UNDER: - 4. I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSIONS MADE BY THE ASSESSEE. HOWEVER THE SA M E CANNOT BE ACCEPTED. NETTING OFF INTEREST INCOME IS NOT PERMISSIBLE IN VIEW OF THE DECISIONS CITED AS UNDER SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS VS. CIT (262 ITR 278) HELD THAT THE WORDS DERIVED FROM IND USTRIAL UNDERTAKING (IUT) SHOULD HAVE DIRECT NEXUS BETWEEN PROFIT OF BUSINESS AND INCOME DERIVED FROM UNDERTAKING. THE ITAT AHMEDABAD BENCH A IN THE CASE OF NEPTUNE STEEL VS. ACIT CIR - 2, BARODA AND AUTO STAMPING (P) LTD VS DCIT CIR - 2 BARODA FOLLOWING THE DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF RANI PALIWAL VS. CIT (2003) 185 CTR 333) HELD THAT NETTING OF INTEREST IS NOT PERMISSIBLE BUT GROSS INTEREST INCOME IS TO BE EXCLUDED WHILE ALLOWING THE DEDUCTION . 6. I THEREFORE HOLD THAT THE ASSES SMENT FINALIZED BY THE AO U/S 143(3) ON 26/12/208 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY, THE ASSESSMENT IS SET ASIDE WITH THE DIRECTION TO THE AO TO REFRAME THE ASSESSMENT AFRESH AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BE ING HEARD. AO SHOULD ALSO TAKE STEPS TO RECOVER THE DEMAND RAISED, BY THE DUE DATE. 5 ITA NOS. 149/RJT/2011 & 429/RJT/2012 8 . THE AFORESAID REVISIONAL ORDER PASSED BY THE LD. COMMISSIONER IS NOW THE SUBJECT MATTER OF APPEAL AT THE INSTANCE OF THE ASSESSEE BEFORE THIS TRIBUNAL. 9 . PURSUANT TO THE AFORESAID ORDER PASSED BY THE LD COMMISSIONER OF INCOME - TAX, THE ASSESSING OFFICER HAS PASSED A FRESH ASSESSMENT ORDER ON 19.09.2011 U/S 143(3) R.W.S. 263 OF THE INCOME - TAX ACT IN WHICH HE HAS EXCLUDED INTEREST INCOME AMOUNTING TO RS.20,24,847/ - FOR C OMPUTING RELIEF U/S 80IA, WITH THE FOLLOWING OBSERVATIONS: - 6. THE ASSESSEES ARGUMENT IS CONSIDERED. HOWEVER THE SAME IS NOT ACCEPTABLE. THE WRITTEN SUBMISSIONS ON THE ISSUE ARE SIMILAR TH WHAT HAS BEN PRESENTED BEFORE THE LD. CIT, JAMNAGAR. THE REQUES T TO KEEP THE PROCEEDINGS IN ABEYANCE SINCE THE ASSESSEE IS IN APPEALS AGAINST THE ORDER OF THE CIT, JAMNAGAR, PASSED U/S.263, CANNOT BE ACCEDED TOO, SINCE WHAT EVER MAY BE THE OUT COME OF THE APPEALS, THE SAME WOULD BE GIVEN EFFECT TOO ACCORDINGLY. AS REG ARDS THE ISSUE AT HAND, IT HAS BEEN DECIDED THAT NETTING OFF INTEREST INCOME IS NOT PERMISSIBLE. THIS IS IN VIEW OF THE DECISIONS CITED AS UNDER - SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS VS. CIT (262 ITR 278) HELD THAT THE WORDS DERIVED FROM INDU STRIAL UNDERTAKING (IUT) SHOULD HAVE DIRECT NEXUS BETWEEN PROFIT OF BUSINESS AND INCOME DERIVED FROM UNDERTAKING. THE ITAT AHMEDABAD BENCH A IN THE CASE OF NEPTUNE STEEL VS. ACIT CIR - 2, BARODA AND AUTO STAMPING (P) LTD VS DCIT CIR - 2 BARODA FOLLOWING THE DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF RANI PALIWAL VS. CIT (2003) 185 CTR 333) HELD THAT NETTING OF INTEREST IS NOT PERMISSIBLE BUT GROSS INTEREST INCOME IS TO BE EXCLUDED WHILE ALLOWING THE DEDUCTION. AS THE APEX JUDICIARY HAS CLEARLY R EJECTED THE CONCEPT OF NETTING OF INTEREST INCOME, THEREFORE, THE INTEREST INCOME EARNED BY THE ASSESSEE OF RS.20,24,847/ - IS TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT UNDER THE HEAD PROFIT FROM BUSINESS OR PROFESSION AS THE ASSESSEE WAS E NGAGED IN CONSTRUCTION ACTIVITY. 10 . ON APPEAL AGAINST THE AFORESAID ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER ON 19.09.2011 U/S 143(3) R.W.S. 263 OF THE INCOME - TAX ACT, THE LD 6 ITA NOS. 149/RJT/2011 & 429/RJT/2012 CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO TREAT THE AFORESAID IN TEREST INCOME AS BUSINESS INCOME AGAINST WHICH THE REVENUE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. 11 . AT THE TIME OF HEARING BEFORE US, IT WAS SUBMITTED BY THE LD DEPARTMENTAL REPRESENTATIVE THAT THE INTEREST INCOME WAS NOT IN THE NATURE OF OPERATIONAL PROFIT AND THEREFORE IT C OULD NOT BE SAID THAT IT HA S BEEN DERIVED FROM THE ELIGIBLE BUSINESS IN SUPPORT OF THE AFORESAID SUBMISSION, HE HEAVILY RELIED UPON THE JUDGMENT OF HONBLE SUPREME COURT IN LIBERTY INDIA V. CIT , 379 ITR 218. THE LD AUTHORIZED REPRE SENTATIVE FOR THE ASSESSEE FAIRLY CON CEDED THAT INTEREST INCOME WAS NOT ELIGIBLE FOR RELIEF U/S 80IA IN VIEW OF THE DECISION REFERRED BY THE LD DEPARTMENTAL REPRESENTATIVE. ITA NO. 149/RJT/2011: AY 2006 - 07 : APPEAL BY THE ASSESSEE 1 2 . IN SUPPORT OF APPE AL, WRITTEN SUBMISSIONS WERE FILED BY THE ASSESSEE , WHICH READ AS UNDER: - 1. CIT JAMNAGAR HAS PASSED ORDER U/S 263 OF THE ACT DATED 29/3/2011 FOR EXCLUDING INTEREST INCOME OF RS.20,24,847/ - FROM BUSINESS INCOME AND TAXING SAME UNDER THE INCOME FROM OTHER SOURCES AND ALSO NOT GRANTING DEDUCTION U/S 80IA OF THE ACT ON NET INTEREST. 2. FIRSTLY CIT HAS NO JURISDICTION TO PASS AN ORDER U/S 263 OF THE ACT BECAUSE THE ORDER OF AO HAS MERGED WITH THE ORDER OF CIT(A) DATED 25/03/2009 WHERE IN THE CIT(A) HAS CONSI DERED THE DEDUCTION U/S 80IA(4) OF THE ACT IN THE CASE OF THE APPELLANT. CIT(A) IN HIS ORDER HAS GRATED DEDUCTION TO THE APPELLANT AFTER TAKING THE NET INTEREST EXPENDITURE OF RS.53,26,285/ - OF THE ACT. HENCE THE ORDER OF AO HAS MERGED WITH THE ORDER OF CI T(A). FURTHER THE SAME MATTER CAME BEFORE HON ITAT IN ITA NO.390/RJT/2009 AND ITA NO.839/RJT/2009 WHEREIN RESPONSE TO APPLICATION U/S 158A HAS PRONOUNCED ORDER ON 26/8/2011. THEREFORE THE ORDER OF CIT DOES NOT HAVE JURISDICTION TO PASS AN ORDER U/S 263 OF THE ACT RWS 263(1)(C) OF THE A CT. RELIANCE PLACED UPON: - 7 ITA NOS. 149/RJT/2011 & 429/RJT/2012 A ) CIT V. NIRMA CHEMICAL WORKS LIMITED 309 ITR 67 (GUJ) B ) OIL INDIA LIMITED V. CIT 138 ITR 836 C ) CIT V. SHRI ARBUDA MILLS LIMITED 231 ITR 50 (SC) D ) CIT V. SHALIMAR HOUSING AND FINANCE LIMITED 320 ITR 157 (MP ) E ) FORTALEZA DEVELOPERS V. CIT TAXMANN.COM 411 PARA 6.1 TO 6.4 F ) SOBHA DEVELOPERS LIMI9TED V. CIT 30 TAXMANN.COM 321(BANG) PARA NO.16 TO 19 G ) K SERA SERA PRODUCTIONS V. CIT 54 SOT 157 3. THE ORDER OF AO HAS NOT ALLOWED ANY DEDUCTION TO THE APPELLANT U/S 80IA(4 ) OF THE ACT AND CIT(A) HAS ALLOWED THIS DEDUCTION IN PART WHICH WAS CARRIED BY REVENUE AS WELL AS THE APPELLANT IN APPEAL BEFORE ITAT. 4. THE ORDER OF AO IS NOT ERRONEOUS AS IT TOOK ONE OF THE VIEWS ON THE ISSUE THAT WHETHER THE INTEREST IS PART OF THE I NCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING AS ON THE DATE OF ORDER DIVERGENT VIEWS WERE AVAILABLE. THE ORDER WAS PASSED ON 26/12/2008. ON THAT DATE THE FOLLOWING DECISION WERE IN FAVOUR OF THE ASSESSEE THAT ON INTEREST INCOME THE DEDUCTION U/S 80IA IS A VAILABLE AND NETTING OFF IS ALSO AVAILABLE. A . CIT V. JAGDISHPRASAD M JOSHI 318 ITR 420 DATED 25/11/2008 B . ASST CIT V. MAXCARE LAB 92 ITD 11 (CK) PARA NO.20 AND 21 THEREFORE WHERE THERE ARE TWO VIEW ARE AVAILABLE THE ORDER OF AO CANNOT BE ERRONEOUS, RELIANCE PLACED UP ON CIT V. MAX INDIA LIMITED 295 ITR 282 (SC). IN VIEW OF ABOVE APPELLANT PRAYS BEFORE YOUR HONOUR THAT ORDER PASSED U/S 263 BY CIT IS UNSUSTAINABLE IN LAW AND MAY BE QUASHED. 1 3 . IT WAS ALSO SUBMITTED BY THE LD AUTHORIZED REPRESENTATIVE FOR T HE ASSESSEE THAT THE ORIGINAL ORDER OF ASSESSMENT WAS PASSED BY THE ASSESSING OFFICER ON 26.12.2008 IN WHICH THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA WAS DISALLOWED IN ITS ENTIRETY. HE FURTHER SUBMITTED THAT THE AFORESAID ORIGINAL ORDER OF ASSESSME NT WAS SUBJECT MATTER OF APPEAL BEFORE THE LD CIT(A) , WHICH WAS DISPOSED OF BY THE LD CIT(A) ON 25.03.2009 BY WHICH HE PARTLY ALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA. HE CONTENDED THAT THE IMPUGNED ORDER WAS PASSED BY THE LD COMMISSIONER O F INCOME - TAX ON 29.03.2011, I.E. , AFTER THE CIT(A) 8 ITA NOS. 149/RJT/2011 & 429/RJT/2012 HAD ALREADY PASSED HIS APPELLATE ORDER BY WHICH HE HAD SUBSTANTIALLY ALLOW ED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA. IT WAS SUBMITTED THAT THE ENTIRE ISSUE RELATING TO ADMISSIBILITY OF DEDUCTION INCLUDING ITS QUANTIFICATION U/S 80IA THUS STOOD CONSIDERED BY THE LD CIT(A) IN HIS APPELLATE ORDER PASSED ON 25.03.2009 AND THEREFORE THE ORIGINAL ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER ON 26.12.2008 STOOD MERGED IN THE ORDER PASSED BY THE LD CIT(A) ON 25.03.2009. ACCORDING TO HIM, THE LD COMMISSIONER OF INCOME - TAX WAS NOT LEGALLY COMPETENT TO CANCEL OR SET ASIDE THE ORIGINAL ORDER OF ASSESSMENT AS IT ALREADY STOOD MERGED IN THE ORDER PASSED BY THE LD CIT(A) ON 25.03.2009. 1 4 . IN REPLY, THE LD DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ISSUE OF ADMISSIBILITY OF INTEREST INCOME FOR RELIEF U/S 80IA WAS NE ITHER CONSIDERED IN THE ORIGINAL ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER N OR IN THE APPELLATE ORDER PASSED BY THE LD CIT(A) AN D THEREFORE THE ISSUE OF ELIGIBILITY OF INTEREST INCOME FOR RELIEF U/S 80IA WOULD NOT STAND MERGED IN THE APPELLATE ORDER PASSED BY THE LD CIT(A) AGAINST THE ORIGINAL ORDER OF ASSESSMENT. IN THIS CONNECTION, HE INVITED OUR ATTENTION TO EXPLANATION(C) TO SU B - SECTION ( 1 ) OF SECTION 263 A CCORDING TO WHICH THE REVISIONAL POWERS OF THE COMMISSIONER OF INCOME - TAX U/S 263 SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS HA VE NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEALS. ACCORDING TO HIM, THE ISSUE OF ELIGIBILITY OF INTEREST IN COMPUTING RELIEF U/S 80IA WAS NEITHER CONSIDERED BY THE ASSESSING OFFICER IN THE ORIGINAL ORDER OF ASSESSMENT NOR BY THE LD CIT(A) IN HIS APPELLATE ORDER AGAINST THE ORIGINAL ORDER OF ASSESSMENT AND THEREFORE IT WAS OPEN TO THE L D COMMISSIONER OF INCOME - TAX TO EXERCISE REVISIONAL JURISDICTION IN THIS BEHALF. 1 5 . WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CONSIDERED THEIR SUBMISSIONS INCLUDING THE AUTHORITIES REFERRED TO BY THEM . WE HAVE PERUSED THE ORIGINAL ORDER OF ASSESSMENT AS WELL AS THE APPELLATE ORDER PASSED BY THE LD CIT(A) AGAINST THE ORIGINAL ORDER OF ASSESSMENT. THERE IS ABSOLUTELY NO DISCUSSION OR CONSIDERATION OR DECISION EITHER BY THE ASSESSING OFFICER OR BY THE LD CIT(A) WITH REGARD TO THE ELIGIBILITY OF INTEREST INCOME FOR RELIEF U/S 80IA. PROVISIONS OF EXPLANATION (C) TO SUB - SECTION ( 1 ) OF SECTION 263 ARE ABSOLUTELY CLEAR IN THIS BEHALF. IN CIT V. SHRI ARBUDA 9 ITA NOS. 149/RJT/2011 & 429/RJT/2012 MILLS LIMITED , 231 ITR 50 (SC), THE HONBLE SUPREME COURT HAS CONSIDERED THE EFFECT OF EXPLANATION (C) TO SUB - SECTION ( 1 ) OF SECTION 263 AND HAS HELD AS UNDER: - THE CONSEQUENCE OF THE SAID AMENDMENT MADE WITH RETROSPECTIVE EFFECT IS THAT THE POWERS UNDER SECTION 263 OF THE COMMISSIONER SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN AN APPEAL. ACCORDINGLY, EVEN IN RESPECT OF THE AFORESAID THREE ITEMS, THE POWERS OF THE COMMISSIONER UNDER SECTION 263 SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO THEM BECAUSE THE SAME HAD NOT BEEN CONSIDERED AND DECIDED IN THE APPEAL FILED BY THE ASSESSEE. THIS IS SUFFICIENT TO ANSWER THE QUESTION WHICH HAS BEEN REFERRED. 1 6 . IN CIT V. JAY KUMAR B. PATEL , 236 ITR 469 (SC), THE HONBLE SUPREME COURT HAS HELD THAT THE COMMISSIONER HAS POWER TO INITI ATE REVISION PROCEEDINGS IN RESPECT OF ISSUES NOT DEALT WITH BY THE CIT(A). IN THE PRESENT CASE ALSO , THE LD CIT(A) HAS NOT DEALT WITH THE ISSUE REGARDING THE ELIGIBILITY OF INTEREST INCOME FOR RELIEF U/S 80IA. 1 7 . THE DOCTRINE OF MERGER HAS ITS ORIGIN I N COMMON LAW. IT IS ADOPTED ON THE PRINCIPLE OF PROPRIETY IN THE HIERARCHY OF JUSTICE DELIVERY SYSTEM. ITS SCOPE AS WELL AS APPLICABILITY IS HOWEVER SUBJECT TO STATUTORY PROVISIONS. EXPLANATION (C) TO SUB - SECTION ( 1 ) TO SECTION 263 ENABLES THE COMMISSIONER TO INITIATE REVISION PROCEEDINGS IN RESPECT OF ISSUES NOT DEALT WITH BY THE CIT(A) IN HIS APPELLATE ORDER. AS ALREADY STATED EARLIER, THE ISSUE OF ELIGIBILITY OF INTEREST INCOME FOR RELIEF U/S 80IA HAS NOT BEEN DEALT WITH BY THE LD . CIT(A) IN HIS APPELLA TE ORDER AND THEREFORE IT IS HELD THAT THE LD . COMMISSIONER WAS WELL WITHIN HIS POWERS TO IN VOKE REVISION JURISDICTION U/S 263 IN RESPECT THEREOF. IT IS FURTHER NOTICED THAT THE ASSESSING OFFICER HAS NEITHER MADE REQUISITE ENQUIRIES IN THE COURSE OF ORIGIN AL ASSESSMENT PROCEEDINGS NOR DEALT WITH THE MATTER IN THE ORIGINAL ORDER OF ASSESSMENT. THE ORIGINAL ORDER OF ASSESSMENT HAS RIGHTLY BEEN HELD BY THE LD . COMMISSIONER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IN OUR CONSIDERED VIEW, THE LD . COMMISSIONER HAS RIGHTLY EXERCISED HIS JURISDICTION U/S 263 IN THE MATTER UNDER APPEAL. HIS ORDER IS THEREFORE CONFIRMED. APPEAL FILED BY THE ASSESSEE IS DISMISSED. 10 ITA NOS. 149/RJT/2011 & 429/RJT/2012 ITA NO. 429/RJT/2012: AY 2006 - 07 : APPEAL FILED BY THE REVENUE 1 8 . IN TERMS OF SUB - SECTION (1) OF SECTION 80IA, PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM ITS ELIGIBLE BUSINESS IS ELIGIBLE FOR RELIEF. IN ORDER TO CONSTITUTE PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM ITS ELIGIBLE BUSINESS, IT MUST BE SHOW N THAT IT IS IN T HE NATURE OF OPERATIONAL PROFITS OF ELIGIBLE BUSINESS. OPERATIONAL PROFITS ARISE FROM THE TURNOVER OF THE ELIGIBLE BUSINESS. ANY PROFIT OR GAIN ARISING FROM A SOURCE OTHER THAN TURNOVER OF ELIGIBLE BUSINESS MAY (OR MAY NOT) BE BUSINESS INCOME. BUT ALL THE ITEMS OF BUSINESS INCOME MAY NOT BE OPERATIONAL PROFITS. THEY MAY BE IN THE NATURE OF NON - OPERATIONAL BUSINESS PROFITS ALSO. WHAT QUALIFIES FOR DEDUCTION U/S 80IA IS PROFIT AND GAIN DERIVED FROM THE ELIGIBLE BUSINESS AND NOT THE ENTIRE INCOME ATTRIBUTABL E TO ELIGIBLE BUSINESS. IMPUGNED INTEREST INCOME IS NOT IN THE NATURE OF OPERATIONAL PROFITS AND HENCE CANNOT BE SAID TO HAVE BEEN DERIVED FROM THE ELIGIBLE BUSINESS FOR THE PURPOSE OF COMPUTING RELIEF U/S 80IA. BESIDES, THE LD . AUTHORIZED REPRESENTATIVE F OR THE ASSESSEE HIMSELF HAS FAIRLY CON CEDED THAT THE ISSUE UNDER APPEAL WAS COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA V. CIT (SUPRA). IN THIS VIEW OF THE MATTER, THE APPEAL FILED BY THE REVENUE I S ALLOWED. ORDER PRONOUNCED ON 21 . 06 . 201 3 SD/ - SD/ - (T. K. SHARMA) ( D. K. SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT: 21 .0 6 .2013 B T COPY OF ORDER FORWARDED TO: - 1 . APPELLANT M/S. TACON INFRAST RUCTURE PVT LTD, PORBANDAR 2 . RESPONDENT - ACIT, CIRCLE - 2, JAMNAGAR 3 . CONCERNED CIT , JAMNAGAR 4 . CIT (A) , JAMNAGAR 5 . DR, ITAT, RAJKOT 6 . GUARD FILE. BY ORDER TRUE COPY PRIVATE SECRETARY, ITAT, RAJKOT