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2012 (10) TMI 1001 - AT - Income TaxDisallowance qua assessee’s claim of deduction under section 80-IB - Held that:- In view of analysis of the facts of the case, we hold that the assessee’s produce manufactured is an item covered by Item Nos.27& 28 of Eleventh Schedule of the ‘Act’ being a rubber fitting. Accordingly, we hold that the CIT(A) has rightly upheld the rejection of assessee’s claim of deduction/s 80IB of the Act. Decided in favour of the Revenue. Royalty fee - contention of the assessee is that its claim of royalty expenditure @ 2% of the total sales paid to M/s. LRC Products Ltd. as technical know-how fee is liable to accepted in toto instead 75% as upheld by CIT(A) - Held that:- CIT(A) has not rightly deleted the disallowance of expenditure as made by the Assessing Officer to the tune of 25%. Therefore, we hold that the payment made by the assessee in the shape of technical knowhow fee by way of royalty @ 2% of the gross sales is Revenue expenditure. So, the issue is decided in favour of the assessee. Logo charges - revenue or capital expenditure - Held that:- title of the ‘logo’ in question has not passed over to the assessee. Further, there is no acquisition of assets or part of any capital asset. Usage of logo by the assessee is only for displaying it on the product manufactured i.e. rubber contraceptives. That too, for a limited period as provided in the agreement in lieu of payment @ 2% of the gross sales. When we apply the tenor of the case law above cited to the facts of the instant case, we hold the instant ‘logo’ charges are also revenue expenditure within the meaning of Sec.37 of the Act in the nature of wholly and exclusively for the purpose of assessee’s business. Consequently, we see no reason to interfere in the findings of the CIT(A).- Decided in favour of the assessee. Reopening of assessment - Held that:- A perusal of the reasons recorded, makes it clear that there is no allegation against the assessee that there was any failure on its part in not disclosing full and true particulars regarding its claim of deduction under section 80HHC as necessary for the assessment. Therefore, the re-opening, in our opinion, does not withstand the test of first proviso of Sec.147. We also notice that neither the Assessing Officer nor the CIT(A) have specifically considered the thin line providing reopening of an assessment in two different scenarios(supra). The reasons contained in the notice further make it un-ambiguous that the Assessing Officer had earlier accepted the assessee’s claim of deduction during the assessment already finalized. Later on, i.e. formed another opinion on merits. This, in our considered view, is nothing but mere change of opinion by Assessing Officer which is not permissible in the eyes of law. We reiterate the trite proposition of law that an assessment already finalized can only be reopened under the specific instances stated under section 147 of the Act; and not beyond the circumstances stated therein.Therefore, we hold that the reopening in question is not valid in the eyes of law - Decided in favour of assessee. Disallowance under section 14A - Held that:- Rule 8D of the Income Tax Rules, 1962 is only applicable with effect from Assessment Year 2008-09 i.e. not qua impugned Assessment Year 2005-06. It is in the light of said decision that the CIT(A) has interfered in the findings of the Assessing Officer correctly directed to disallow 2 percent as expenditure in earning the exempt income. See GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Decided in favour of assessee. Deduction under section 80-IB on income from sale of DEPB - AO declined the assessee’s claim and held that though the DEPB could be related to inputs consumed, but since the source of the DEPB sold is Government’s scheme, therefore, the same cannot be held to have been derived from an industrial undertaking - Held that:- It is noticed that the Hon’ble Supreme Court in in case of Topman Exports Vs. CIT [2012 (2) TMI 100 - SUPREME COURT OF INDIA] has held that it is not the sale price of DEPB or DFRC (Duty Free Replenishment Certificate) which has to be taken into consideration for the purpose of taxability. Rather their Lordships of the Hon’ble Apex Court have been pleased to hold that it is the net profit instead of sale price of DEPB, which has to be taken into consideration for the purpose of assessment. Coming to the facts of the instant case, we see that the A.O. as well as the CIT(A) have not adverted to these vital aspects of the issue involved. Faced with this situation, we deem it appropriate that the Assessing Officer shall re-examine the issue in accordance with law - Decided in favour of assessee for statistical purposes.
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