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Nxp India Private Limited vs. The Principal Commissioner Of Income Tax - (Income Tax Appellate Tribunal) (09 Oct 2020)

Revision proceedings shall lie if the assessment order is erroneous and prejudicial to the interests of revenue

MANU/IL/0366/2020

Direct Taxation

The assessee has filed present appeal challenging the revision order passed by Learned Principal Commissioner of Income Tax, New Delhi under Section 263 of the Income Tax Act, 1961 for the assessment year 2012-13. The contention of the assessee is that, the initiation of revision proceeding is without authority of law and jurisdiction.

The assessment in the hands of the assessee was completed by the assessing officer, being Assistant Commissioner of Income tax. The company was amalgamated with NXP India (P) Ltd, New Delhi. Hence the Ld Pr. CIT called for assessment record and took the view that the assessment order is erroneous and prejudicial to the interests of revenue. Accordingly, he initiated revision proceedings under Section 263 of the Act.

It is submitted that, the assessee is not the owner of the asset and the lessor is entitled to claim depreciation under the Income tax Act, as per the decision rendered by Hon'ble Supreme Court in the case of ICDS Ltd vs. CIT, Mysore. Hence, the assessee, being a lessee, is not entitled to claim depreciation on the assets taken on lease. He submitted that, the assessee, being limited company, is required to mandatorily follow the Accounting Standards issued by the Institute of Chartered Accountants of India. The assessee has followed Accounting Standard -19 for book purposes, as per which it is required to capitalise the value of leased assets and claim depreciation thereon along with the interest component.

As per the decision rendered by Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd., revision proceedings shall lie, if the assessment order is erroneous and prejudicial to the interests of revenue. Explanation 2 to Section 263 (1) of the Act inserted by Finance Act, 2015 w.e.f. 1st June, 2015 deems an assessment order to be erroneous and prejudicial to the interests of revenue if, in the opinion of the Principal Commissioner or Commissioner, the order is passed without making inquiries or verification which should have been made or the order is passed allowing any relief without inquiring into the claim etc.

In the instant case, the assessee has furnished a reply with regard to the claim of principal component of lease payment and the treatment given in the books of account for leased assets. However, as pointed out by Learned PCIT, the AO did not further probe the matter, which should have been made. In present Tribunal also, the Learned Authorised Representative could not immediately show that, the assessee has not claimed depreciation on leased assets. He has submitted that, he will furnish the details and accordingly forwarded a reconciliation statement. The AO should have also examined the submission of the assessee. Accordingly, the assessment order is rendered erroneous and prejudicial to the interests of revenue in terms of Explanation 2 to Section 263 of the Act. The revision order passed by Learned PCIT is upheld. The appeal of the assessee is dismissed.

Tags : ASSESSMENT   REVISION PROCEEDINGS   LEGALITY  

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