INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous or prejudicial order - MAT payable exceeded income tax liability under normal provisions -

Issue arose as to whether order passed by AO was not prejudicial to interest of revenue when Minimum Alternate Tax (MAT) under section 115JB payable by assessee was more than tax liability payable under normal provision. Held: As per scheme of Income Tax Act, assessee is supposed to pay income tax as per Minimum Alternate Tax under section 115JB which is more than tax liability computed under normal provision of Act. If it was presumed that issue discussed by PCIT was correct and after giving effect of issue raised by PCIT, even then tax liability under normal provision would be below than tax liability under section 115JB, therefore there was no loss to Revenue. Therefore, order of AO might be erroneous but it was not prejudicial to interest of the revenue. In order to exercise jurisdiction under section 263 PCIT needs to satisfy two conditions namely, order is erroneous and order is prejudicial to interest of revenue. In assessee`s case one of conditions “prejudicial to the interest of the revenue” was not satisfied, therefore, order passed by PCIT was quashed.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2011-12

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