JUDGMENT judgment of court was delivered by A. K. Menon J.-By this appeal, following five questions of law are proposed by Revenue: (a) Whether, on facts and in circumstances of case and in law, Tribunal was correct in holding that issue of incorrect allocation of revenue has merged in Commissioner of Income-tax (Appeals) order even though this issue was neither examined by Assessing Officer nor was before Commissioner of Income-tax? (b) Whether, on facts and in circumstances of case and in law, Tribunal was correct in interpreting clause 7 of association of persons agreement dated March 24, 2003, with respect to method of allocation of revenue between member of association of persons? (c) Whether, on facts and in circumstances of case and in law, Tribunal was correct in accepting calculation of eligible quantum of deduction under section 80-IB(10) of Act? (d) Whether, on facts and in circumstances of case and in law, Tribunal was correct in allowing deduction under section 80-IB(10) of Act on share of M/s. Sanand Properties Pvt. Ltd. (one of members of association of persons) in view of clause 7 of association of persons agreement dated April 29, 2003? (e) Whether, on facts and in circumstances of case and in law, Tribunal was correct in holding that power under section 263 of Act was wrongly invoked? assessee is in association of persons being promoters and builders which was constituted by agreement dated April 29, 2003, between M/s. Raviraj Kothari and Co., partnership firm ("RRK") and M/s. Sanand Properties Pvt. Ltd. ("SPPL"). They have filed return of income for assessment year 2007-08 showing total income of Rs. 4,13,610 after claiming deduction of Rs. 14,54,47,283 under section 80-IB(10) of Income-tax Act, 1961. Assessing Officer completed assessment under section 143(3) and computed total income at Rs. 14,63,04,860 after disallowing deduction claimed under section 80-IB(10). assessee filed appeal before Commissioner of Income-tax (Appeals) who held that assessee had fulfilled all conditions laid down in section 80-IB(10) and directed Assessing Officer to allow claim for deduction. This order of Commissioner of Income-tax (Appeals) was challenged in Appellate Tribunal by Revenue which appeal came to be dismissed. Meanwhile, during pendency of appeal before Tribunal, Commissioner of Income-tax issued notice under section 263 of Act asking assessee to show cause as to why assessment order should not be set aside. According to Commissioner, in accordance with clause (7) of association of persons agreement, SPPL was to receive 35 per cent. of sale proceeds of project and out of balance 65 per cent., all expenditure of association of persons was to be met, after which net balance constituted share of income of RRK. notice under section 263 specified that manner of allocation of revenue provided assessee with undue benefit by way of higher claim of deduction under section 80-IB(10) contrary to clause (7) of association of persons agreement. It was contended that share of revenue pertaining SPPL was not eligible for deduction under section 80-IB(10). After considering written submissions of assessee and other material on record, Commissioner of Income-tax (Appeals) set aside assessment order and directed Assessing Officer to recompute income on basis of clause (7) of association of persons agreement. assessee challenged this order passed under section 263 before Appellate Tribunal. Tribunal held that on merits as well as on issue of merger, power under section 263 has been wrongly invoked and, therefore, quashed order passed by Commissioner of Incometax (Appeals). In its order dated October 12, 2012, Appellate Tribunal dealt with contents of association of persons agreement and in particular clause (7) of agreement which is reproduced at page 7 of order of Appellate Tribunal. relevant extract of clause (7) is reproduced below under heading sharing of revenue and income: "Out of aforesaid amounts received from purchasers of housing units (representing gross sale proceeds of units inclusive of value of land) SPPL shall be entitled to, as its share of revenue/income, amounting comprising 35 per cent. of such receipts. It is hereby agreed and understood between parties hereto, that SPPL may actually withdraw such share of revenue/ income to which it is entitled as per understanding between parties from time to time. Out of balance 65 per cent. of aforesaid receipts representing gross sale proceeds, all required and relevant expenditure for purpose of business of association of persons shall be met with and whatever net balance remains thereafter, shall be determined as share of revenue/income of RKC. RKC will be at liberty to actually withdraw its share of revenue/ income as worked out hereinabove from time to time." After considering this clause, Tribunal proceeded to reproduce working of profit and distribution between two members of association of persons. Tribunal, then, proceeded to consider fact that main case of assessee was that Commissioner of Incometax (Appeals) is factually wrong in stating that account of assessee has not been prepared in accordance with clause (7) of agreement. Clause (7) of agreement as well as manner in which assessee has distributed revenue are already reproduced in order and, according to Tribunal, plain reading of clause (7) would reveal that out of amount received from purchasers of housing units, SPPL shall be entitled as its share of revenue/income comprising 35 per cent. of receipts and from balance 65 per cent., all expenses for purpose of business of association of persons was to be met with and remaining amount would be share of income of RRK. Having considered views of Commissioner of Income-tax (Appeals) and in light of material before it, Tribunal concluded that Commissioner of Income-tax's interpretation of clause (7) was incorrect. According to Tribunal, quantum of deduction under section 80-IB(10) will According to Tribunal, quantum of deduction under section 80-IB(10) will depend upon income earned from project in question. quantum of deduction will not depend on mode of distribution of shares amongst members of association of persons as income of association of persons is taxable at maximum marginal rate. It is also observed by Tribunal that allowability or otherwise of deduction under section 80-IB(10) is not dependent upon manner in which profit has been distributed amongst members of association of persons but depended upon income earned from eligible project and fulfilment of conditions laid down in section and also deductions available to undertaking and not to individual constituent of undertaking. Tribunal was clearly of view that Commissioner of Incometax had erred in his order. learned Commissioner of Income-tax was debarred from exercising jurisdiction under section 263 since subject matter of appeal was deduction under section 80-IB(10). On issue of merger, Tribunal held that power under section 263 has been incorrectly invoked. assessment order passed by Assessing Officer was neither erroneous nor prejudicial to interests of Revenue. impugned order of Commissioner of Income-tax was, therefore, quashed and set aside by Tribunal. This court in Income Tax Appeal No. 1027 of 2013, CIT v. K. Sera Sera Productions Ltd. [2015] 374 ITR 503 (Bom) (see order dated March 18, 2015) had occasion to consider similar set of facts where section 263 and issue of merger were invoked. In that case, assessee had sold its share of theatrical rights to one M/s. RGV Enterprises for Rs. 25 lakhs and on showing of revenue, revisional authority issued show- cause notice by invoking powers under section 263 of Act because assessee which was engaged in business of production and financing and distribution of cinematographic films had filed return of income on September 10, 2009, declaring income at Rs. 87,64,620. assessment order under section 148(3) read with section 153A of Income-tax Act, 1961, was passed by Assessing Officer on December 31, 2009, assessing income of assessee at Rs. 14,37,20,890. assessee claimed to have incurred expenses of Rs. 6,99,73,052 for production of film and claimed that it has earned income of Rs. 11,25,00,000 from film. Later on, however, assessee claimed before Assessing Officer that this was not income from production of film but this was sum received as share application money from various persons. Assessing Officer did not accept this contention and considered income at Rs. 11,25,00,000. revisional authority was aware of fact that assessee had preferred appeal before Commissioner of Income-tax (Appeals), first appellate authority while dealing with ground that claim of assessee cannot be sustained. In that case, doctrine of merger was invoked by Tribunal while upholding objection raised by assessee. conclusion of Tribunal was based on factual material. We have heard Mr. Malhotra, learned counsel for appellant and Mr. Mistri, learned senior counsel, appearing for respondent at considerable length. Mr. Malhotra submitted that interpretation placed by Assessing Officer and computing total income of Rs. 14,63,04,860 was correct. He further submitted that disallowance of deduction claimed under section 80-IB(10) was justifiable and considered that respondent shall not be entitled to claim benefits of said section 80-IB(10) on account of manner in which clause (7) of association of persons agreement has been worded. According to him, manner in which association of persons agreement was worded by assessee, disentitled assessee to claim benefit of section 80-IB(10). Mr. Mistri, on other hand, faulted reasoning of Assessing Officer and supported order of Tribunal. He submitted that assessee had complied with all conditions of section 80-IB(10) and, therefore, entitled to claim deduction. Moreover, he submitted that interpretation of clause (7) of association of persons agreement by Assessing Officer was incorrect and correct interpretation of said clause (7) entitled SPPL constituent of assessee to appropriate 35 per cent. sale proceeds as provided under said clause before deduction of cost of project. According to Mr. Mistri, after SPPL appropriates its share of 35 per cent. of sale proceeds, balance 65 per cent. would be used by assessee to pay overall cost including cost of development and all expenses for project. Only thereafter residual amount could be appropriated by RRK. project. Only thereafter residual amount could be appropriated by RRK. Having considered various submissions, we are clearly of view that contract between two parties was self-explanatory and interpretation placed by assessee on clause (7) and claiming deduction under section 80- IB(10) is in order. interpretation of one of Assessing Officer could not have substituted parties interpretation of relevant clause (7) of association of persons agreement with his own reasoning and that too to detriment of assessee. facts, in present case also, reveal that conclusions arrived at by Tribunal, vide order dated October 12, 2012, are neither perverse nor giving rise to any error of law apparent on face of record. issue cannot be reopened in manner sought to be done in present case and section 263 of Act could not be resorted to for purpose. order of Assessing Officer had obviously merged with order of first appellate authority. Accordingly, we find that subject appeal does not raise any substantial question of law. appeal is, therefore, dismissed. There will be no orders as to costs. *** Commissioner of Income-tax v. Fortaleza Developer