c AO after due diligence and enquiry has reached to a conclusion and has formed a particular opinion, then the Principal CIT or CIT cannot exercise powers under s. 263 to form a different opinion or take a divergent view—From time to time, the AO raised several queries to examine the claim/deduction under s. 80-IA, which is evident from the fact that assessee had placed copy of audit report in Form No. 10CCB in support of deduction under s. 80-IA along with past assessment history and orders for the earlier assessment years, wherein this issue has been discussed and allowed by the respective AOs—Detailed justification for deduction claimed under s. 80-IA which gives the entire history and background along with all the notifications and approval granted by various governmental authorities were placed before the AO in response to the queries raised by him—As regard sale of undertaking its subsidiary, assessee has filed the ‘business transfer agreement’ entered for sale of undertaking along with the ‘Valuation Report’ of the Government approved valuer wherein the valuation of the property has been done as per the prevailing market rate—That apart, the assessee also filed detailed report of the Accountant regarding the ‘related party transaction’ undertaken by the assessee with its subsidiary in Form No. 3CEB along with the transfer pricing document wherein the entire details of the specified domestic transaction and the manner in which ALP has been determined has been provided—Thus, entire transfer pricing document was filed to justify ALP of the sale of industrial park—AO examined the allowability of claim under s. 80-IA after calling for all these evidences and examining the entire facts brought on record and in fact made part disallowance of such deduction—Hence, it cannot be held that AO has not conducted any enquiry or investigated the issue which he was required to do before allowing the claim of deduction under s. 80-IA or has allowed the claim without examining the assessee’s transaction with its subsidiary—In Instruction No. 3 of 2003,dt. 20th May, 2003 guidelines for reference to the TPO has been made only in respect of determination of ALP in relation to the international transaction under s. 92B—There is no whisper about specified domestic transaction as there was no concept of specified domestic transaction under the IT Act when said instruction was issued—Hence, the assessment order cannot be said to be erroneous for the reason that the AO did not make a reference the TPO in accordance with the said instructions—Once there was no CBDT instruction or guidelines for reference to the issue involving specified domestic instruction of the TPO at the time of passing the assessment order, there is no question of any non-compliance of CBDT Instruction by the AO—Instruction No. 15 of 2015, dt. 16th Oct., 2015 which was issued after the passing of the assessment order also laid down the guidelines only with respect to international transaction under s. 92B and not specified domestic transaction—Thus, even after the completion of the assessment, there was no such guideline or instruction by the CBDT pertaining to specified domestic transaction—Thus, there was no violation or contravention of any CBDT instruction by the AO—Hence, it would be incorrect to ascribe any dereliction on the part of the AO that he has failed to conduct requisite inquiry to find out the ALP for the transaction by failing to make reference to the TPO—Therefore, the observation of the CIT for holding the assessment order to be prejudicial to the interest of the Revenue for the reason that the AO has not followed the CBDT Instruction No. 3 of 2003 cannot be sustained at all—Instruction No. 3 of 2016, dt. 10th March, 2016 was not applicable at all at the time of passing of the assessment order—Contention of the Departmental Representative that such an instruction should be read retrospectively, i.e., prior to the issue of such instruction, cannot be upheld for the reason that the AO at the time of passing the assessment has to see the instructions available at the relevant time and he cannot visualize that in future some kind of guideline or instruction would come on the basis of which he has to make the assessment—Even otherwise as per the said instruction, the AO can make reference to the TPO only under the situation and circumstances laid down in the said instruction and not in all cases—In this case the assessee has filed the accountant’s report under s. 92E and the requisite audit Form No. 3CEB supporting the ALP—CIT has not specified as to which of the conditions laid down in the CBDT instructions have been violated or that the AO has not followed the same—Hence, no fault can be found in the AO’s opinion in not making reference to the TPO for the specified domestic transaction—As regards the allowability of deduction under s. 80-IA in respect of profits on sale of industrial park, the developer cannot be denied the deduction on income arising out of development or profits derived on transfer of such industrial park—Proviso below cl. (iii) of sub-s (4) of s. 80-IA does not operate to deny or deprive the developer the benefit or deduction even after development of the park and thereafter when it is transferred to the transferee—There is no provision to the effect that if an industrial park which is developed and operated by the assessee is sold to another person, then the profits derived from such sale is not eligible for deduction under s. 80-IA—Accordingly, it cannot be held that under the law the profit earned on sale of industrial park is not eligible for deduction under s. 80-IA—Sec. 80-IA(8) itself clarifies that profits from transfer of the eligible business is a business income eligible for deduction under s. 80-IA—Assessee has shown entire profit from sale of industrial profit as business income—Once such business income has been accepted and no adverse comment has been given by the CIT, then such a profit arising from sale of industrial park ostensibly falls within s. 80-IA(4)—Hence, there was no legal infirmity by AO in allowing the claim of deduction on the profits earned from the sale of industrial park—Admittedly, the AO has examined the approved valuer’s report who has given a detailed report of the market value of the transfer of industrial park and also transfer pricing report given by the accountant—Hence, applicability of s. 80-IA(8) has been examined by the AO—If the AO has carried out detailed enquiry and has examined all the records called upon by him after raising queries, then the CIT without pointing out as to how such an enquiry is inadequate or not proper cannot set aside the assessment—In this case, AO has made proper enquiries and verification after calling for all the records and after applying his mind has allowed the deduction in accordance with law—CIT cannot sit on the judgment of the AO without pointing out any legal or factual infirmity or without carrying out his own enquiry—Therefore, impugned order passed by the CIT under s. 263 stating that the AO has not made proper enquiry while making the assessment is set aside

Revision—Erroneous and prejudicial order—Lack of proper enquiry—Assessee had filed all the relevant details for investment made in mutual funds on which assessee has earned dividend income—It was also stated before the AO that entire money invested in the mutual funds were out of sales consideration received from the sale of industrial park and this was shown from the bank statements filed during the course of assessment proceedings—This issue was discussed threadbare and it was specifically pointed out that interest on bank loan related to the period prior to making of the investment and the bank loan was fully paid from the sale consideration of the industrial park, i.e., bank loan was fully paid before making the investment in the mutual funds—In such a situation ostensibly, no interest could have been disallowed—It was also stated before the AO that no direct or indirect expenditure was incurred to earn the dividend income—After verifying these facts AO accepted the assessee’s plea and no disallowance was made—If the AO is satisfied having regard to the accounts that no expenditure can be attributed to earring of exempt income, then no disallowance is called for—Disallowance under s. 14A is not automatic whenever there is any kind of exempt income—It has to be seen with regard to nature of expenses debited and whether any expenditure can be calculated—There is no whisper by the CIT as to why disallowance under s. 14A was called for on the facts of the case—Therefore, CIT could not set aside the assessment by making a simple observation that the AO should have examined the applicability of s. 14A, without making any specific finding or examination of facts and material on record

ETT LTD. vs. COMMISSIONER OF INCOME TAX

(2019) 33 NYPTTJ 210 (Del)