TMI Blog2004 (4) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... ss. However, dividend income, interest income and rental income to the tune of Rs. 2,56,650, Rs. 3,68,109 and Rs. 69,600 were found to be ineligible for deduction under s. 32AB on the premise that these items did not fall under the head "Profits and gains of business or profession". Resultantly, the deduction under s. 32AB was reduced. The learned CIT(A) echoed the action of the AO. 2.1 Before us, the learned counsel for the assessee contended that the aforesaid items were eligible for the purposes of deduction under s. 32AB and hence, the learned CIT(A) failed to appreciate the legal position in this regard. He relied on certain decisions to bring home his point of view. 2.2 In the opposition, the learned Departmental Representative contended that the abovereferred three items of income were taxable either under the head "Income from house property" or "income from other sources" and hence were liable to be excluded for computation of deduction under s. 32AB as they were not falling under the head "Profits and gains of business or profession". 2.3 We have heard the rival submissions and perused the relevant material on record in the light of precedents cited before us. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business or profession" in sub-s. (1) is confined only to the determination of the maximum amount of deduction under s. 32AB. To put in simple words, if out of profits of the business of Rs. 600, income under the head "Profits and gains of business or profession" is Rs. 100 and the amount of calculation under s. 32AB comes to Rs. 120 then such deduction is to be reduced to the level of Rs. 100 only, namely, to the extent of the availability of the income falling under the head "Profits and gains of business or profession". Insofar as the computation of Rs. 120 is concerned, the same has to be reckoned with reference to the profits of the business as considered under sub-s. (3) which, in turn, refers to the profits as per the requirements of Parts II and III of Schedule VI of the Companies Act, 1956, subject to increases and reductions as specified. Merely because an item of income falls under the head "Income from house property" or "Income from other sources", that cannot be excluded from the profits of the business as per sub-s. (3). Our view finds support from the decision rendered in the case of Carborandum Universal Ltd. vs. CIT (2004) 187 CTR (Mad) 48 : (2004) 265 ITR 372 (Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO was justified in allowing 1/6th deduction on account of repairs in relation in such income. 4. Ground No. 3 deals with the depreciation on trucks. The assessee owned seven trucks out of which four were running at Phagwara and three at Nizamabad. As regards the trucks being run at Phagwara, the assessee claimed depreciation at 50 per cent. On being called upon to show if the trucks were in fact used for hire purposes, the assessee produced certain details taken note at p. 4 of the assessment order. The AO found that as per the explanation and also the verbal discussion with the assessee, it was stated that the trucks were used for the purpose of carrying/supplying the goods of the company to different parties. Keeping into consideration these facts, the AO restricted the rate of depreciation to 33.33 per cent as against 50 per cent claimed by the assessee. No relief was allowed in the first appeal. 4.1 We have heard both the sides and perused the relevant material on record. It is the claim of the assessee that the trucks were used for own business as well as on hire also. In the case of CIT vs. Sardar Stone (1995) 125 CTR (Raj) 197 : (1995) 215 ITR 350 (Raj), the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime of original assessment because the following items of income were opined to be wrongly treated as business income: 1. Income from sale of fixed assets 2. Rental income 3. Interest income 4. Dividend income Thus, the total income which was excluded by the AO for the purposes of allowing deduction under s. 32AB amounted to Rs. 32,96,120. The assessee assailed the initiation of reassessment proceedings before the first appellate authority but without success. 7.2 Before us, the learned counsel for the assessee made elaborate submissions by contending that in the proceedings under s. 143(3), the AO had allowed deduction under s. 32AB with respect to the items in question. It was stated that even in the earlier years, the said items were treated as business income. It was urged that once the Department has opined that the abovesaid items are taxable under the head "Business income", it was not open to change such view and initiate reassessment proceedings on that count. Reliance was placed on the decision of the Hon'ble apex Court in the case of CIT Anr. vs. Foramer France (2003) 185 CTR (SC) 512 : (2003) 264 ITR 566 (SC) and that of the Delhi High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, if he has reason to believe that any income chargeable to tax has escaped assessment, subject to the provisions of ss. 148 to 153. The resultant position that crops up is that whereas in the unamended era, the reassessment was possible if (a) the income chargeable to tax escaped assessment by reason of omission or failure on the part of the assessee to make return under s. 139 or to disclose fully and truly all material facts or (b) by virtue of information in the possession of AO leading him to believe about the escapement of income, in the post-amendment period after 1st April, 1989, the purview of section has been expanded and the resort to the reassessment is possible where "the AO has reason to believe that any income chargeable to tax has escaped assessment". Such reason to believe about the escapement may be by reason of earlier cl. (a) or (b) of s. 147 or due to any other reason. The crux of the matter is that so long as the AO has reason to believe that any income chargeable to tax has escaped assessment, subject to other provision, he is empowered to initiate the proceedings with the exception that it should not be a mere change of opinion. Adverting to the facts, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne)(TM) 527, in which one of us (the learned JM) was a party. There is no dispute about the fact that the ratio laid down in the above referred judgments holds the field even after the amendment carried out in s. 147 w.e.f. asst. yr. 1989-90 and consequently the reassessment on a change of opinion is invalid. But before applying the ratio decidendi of these judgments to the facts of the case, it is relevant to find out whether there is any change of opinion of the AO? Change of opinion takes place when, on the facts and circumstances of the case, the view already taken is substituted with another contrary view. If, however, between the time when original view was taken and the revised opinion is adopted, there occur some external events which necessitate the modification in the earlier view, it cannot be said that there is change of opinion. In the instant case, after allowing deduction under s. 32AB as claimed, it transpired through the opinion of the internal audit party that the assessee had been allowed more deduction than the amount to which it was actually entitled. This compelled the AO to reconsider the matter and on such reconsideration, in the light of the opinion express ..... X X X X Extracts X X X X X X X X Extracts X X X X
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