Revision — (i) Powers of Commissioner — Reassessment — Order of AO dropping reassessment proceedings after issuance of notice and considering assessee’s objections — Order of AO not administrative order — No jurisdiction in Commissioner to examine correctness of decision taken by AO; (ii) Export — Exemption — Disqualification where shareholding of assessee changes — Documents showing shareholding pattern in assessee continued to be same and share transfers were without beneficial interest — AO dropping reopening proceedings — Finding that shares transferred only to comply with legal requirements and beneficial ownership never transferred — Revision not sustainable

Revision — (i) Powers of Commissioner — Reassessment — Order of AO dropping reassessment proceedings after issuance of notice and considering assessee’s objections — Order of AO not administrative order — No jurisdiction in Commissioner to examine correctness of decision taken by AO; (ii) Export — Exemption — Disqualification where shareholding of assessee changes — Documents showing shareholding pattern in assessee continued to be same and share transfers were without beneficial interest — AO dropping reopening proceedings — Finding that shares transferred only to comply with legal requirements and beneficial ownership never transferred — Revision not sustainable

For the A.Y. 2001-02 the assessment of the assessee was reopened. After receiving the response from the assessee, the Assessing Officer dropped the proceedings holding that there was no change in the beneficial shareholding of the company in terms of section 10A(9) of the of the Income-tax Act, 1961 . The Commissioner after examining the records issued notice u/s 263 proposing to revise the order dropping the reassessment proceedings because the Assessing Officer failed to appreciate that the beneficial shareholding of the company had changed with the acquisition of shares in M Inc., U.S.A. company, which owned 100 per cent shares of a Mauritius company, which was the holding company of the assessee.

The Tribunal allowed the assessee’s appeal.

On appeal by the Revenue, the Madras High Court upheld the decision of the Tribunal and held as under:

“i) The Commissioner had no jurisdiction to invoke his power u/s. 263 of the Act to examine the correctness of the decision taken by the Assessing Officer dropping the reopening proceedings after issuance of notice u/s. 148 of the Act and after considering the objections filed by the assessee.

ii) The U.S.A. company had addressed the Registrar of Companies in Chennai conveying its no objection to the change of name. The assessee had explained its organisational structure stating that 100 per cent. of the equity capital of MWS was held by MAPL, a company incorporated in Mauritius, that the shareholding pattern in the assessee continued to be the same, that all the shares in the assessee were held by MAPL, Mauritius and that during 2000-01, no share transfers occurred, that only 2 shares were transferred to BW Inc., USA in March 2002 and that too without beneficial interest in the shares and that MAPL continued to hold the beneficial interest in the shares. This was duly supported by necessary records. These facts were taken note of and the Assessing Officer had dropped the reopening proceedings. Thus, it was on an opinion formed by the Assessing Officer and after being satisfied that there was no case made out for reopening and after recording that the ownership or beneficial interest of the assessee had not changed and continued to be with the Mauritius company and therefore, section 10A(9) of the Act was not attracted and accordingly, proceedings under section 147 of the Act were dropped.

iii) The Tribunal was right in coming to the conclusion that the shares were transferred only to comply with the legal requirements and the beneficial ownership was never transferred. Hence, the order passed by the Tribunal did not call for any interference.”