TMI Blog2011 (3) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... that 'tyre' is a rubber fitting. The material used for tyre is definitely rubber and as per Item No.27 of Eleventh Schedule which prescribes the list of articles or things not eligible for deduction u/s 80IA, disentitles the assessee from this claim. - Benefit of deduction u/s 80IA denied to assesssee. - ITA Nos. 1374 to 1377/Mds/2010, ITA Nos. 1676 to 1679/Mds/2010 - - - Dated:- 11-3-2011 - Hari Om Maratha, Abraham P. George, JJ. R. Vijayaraghavan for the Appellant Shaji P. Jacob for the Respondent ORDER Hari Om Maratha: This is a bunch of eight appeals - four each by the assessee and the Revenue, in which same assessee is involved. We have heard them together and proceed to decide them by a common order for the sake of convenience and brevity. I.T.A. Nos. 1676 to 1679/Mds/2010 2. These are appeals of the Revenue respectively for assessment years 2002-03, 2004-05, 2006-07 and 2007-08. The first common issue involved in all these appeals relates to expenditure incurred on MRF Pace Foundation, only the amounts of expenditure claimed are different in respective assessment years. 3. For the sake of convenience, we first deal with appeal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce bowlers of cricket in India. It has been claimed that this expenditure has been wholly and exclusively incurred for the purpose of business. It was claimed that the Foundation selects young men and trains them in the art of pace bowling. The trainees undergo a systematic and scientific training and they are taught the latest techniques. As per the assessee, it promotes this in the form of product endorsement, training of bowlers through the Pace Foundation which has made 'MRF' a household name in India. So, in the light of this and the regular programme it was tried to impress upon us that these activities of the assessee help in sale of MRF products in India and other countries. In fact, in the given case, the assessee has not sponsored any sports activity for its sale promotion instead it has formed a pace-foundation for providing training to fast bowlers for the cricket game. But we are unable to go with the assessee as activity of the assessee cannot, by any stretch of imagination, be treated as business activity. It may sound high that this assessee is doing something good for the public, but it is not so in the fiscal parlance because it has not funded these expenses from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to charging of interest u/s 234D of the Act. The Assessing Officer has charged interest u/s 234D in his order dated 23.12.2009 for refunds granted earlier for giving effect to appellate order, etc. The case of the assessee is that interest u/s 234D can be charged only if the refund originates from an order passed u/s 143(1) and not otherwise. In this regard, reliance has been placed on the Hon'ble Madras High Court in the case of CIT vs Ramco Industries, Tax Case No.1343/2009. This addition made on account of charging of interest u/s 234D, has been deleted by the ld. CIT(A). 6. After hearing both sides, we are in agreement with the ld. CIT(A) because the provision of section 234D was introduced with effect from 1.6.2003 and to have effect from assessment year 2004-05. Hence, interest u/s 234D cannot be charged for earlier years even though the assessments of those years were framed after 1.4.2003 and refund was granted after the said date. This issue stands covered in favour of the assessee by the decision of the ITAT, Delhi in the case of ITO vs Ekta Promoters, 113 ITD 719(Delhi)(SB) and also by the decision in the case of Oracle India(P) Ltd vs Dy. CIT, 118 TTJ (Del) 812. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion or is a case of review on the same set of facts and not on account of concealment of any particulars by the Appellant; hence the order is to be quashed as being without jurisdiction. 3. The Commissioner of Income tax (Appeals) erred in confirming the exclusion of DEPB credit entitlement while computing the deduction u/s 80HHC. The ld CIT erred in his inference regarding DEPB credit in law and jurisdiction. 3.1 The Commissioner of Income tax (Appeals) ought to have appreciated that the amendment Act of 2005 only relates to "Profit on transfer of DEPB". In the case of the appellant there was no transfer of DEPB during the previous year, consequently no profit was earned. The DEPB was consumed in the business of the appellant. The amended provisions do not apply to the appellant company and therefore the DEPB in export profits should be allowed. 3.2 The CIT erred in relying on the decision of the Bombay High Court which is not applicable to the facts of the case. 4. The Commissioner of Income-tax(Appeals) erred in confirming the withdrawal of 80IA benefits made by the Assessing Officer. The ld. CIT failed to note that the inclusion of this item for reassessment is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as return filed in response to notice issued u/s 148. Later on, a notice u/s 143(2) was issued on 7.5.2009. The assessee requested for the supply of reasons of reopening which was duly communicated to the assessee on 3.6.2009. The reason recorded by the Assessing Officer read as under: "1. As per Taxation Law Amendment 2005, if the export turnover exceeds Rs. 10 crores, the benefit of deduction on the DEPB receipts u/s 80 HHC shall be given subject to the fulfillment of conditions laid down as per the above amendment to the section 80HH(3) of the act. Hence, the assessee has to prove that, it had opted to chose either duty draw back or DEPB being the duty remission scheme and the rate of the duty drawback was higher than the DEPB during that period. The corresponding proviso is reproduced as under, "Provided also that in the case of an assessee having export turnover exceeding rupees ten crores during the previous year, the profits computed under clause (a) or clause (b) or clause (e) of this sub-section or after giving effect to the first proviso, as the case may be, shall be further increased by the amount which bears to ninety per cent of any sum referred to in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me has been claimed wrongly as business expenditure. Hence the income has escaped the assessment. 3. The assessee has claimed deduction u/s. 80IA to the extent of Rs.15,16,64,360/- during the year stating that it is engaged in the business of manufacture and sale of automobile tyres and its related products etc. The above claim of the assessee u/s.80IA during the year shall not be allowed, since it is engaged in the business of manufacture and sale of rubber products, the items, which has been mentioned in the assessee 11th Schedule of the Act. As per the 11th Schedule Column Number 27 of the Income Tax Act, it has been mentioned as under:- "Crown corks or other fittings of cork, rubber, polyethylene or any other material" The manufacture of the above items is not eligible for claim of deduction u/s.80IA. Hence, the assessee is not entitled for any benefit u/s.80IA. Based on the above facts, it is clear that assessee has not produced the material facts fully and truly before the tax authorities for the purpose of claim of deduction u/s.80IA of the Income-tax Act. Therefore, I have the reason to believe that the income has escaped the assessment with in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give a clear picture that the Assessing Officer has got material evidence to form his opinion for taking recourse to section 147 r.w.s 148 of the Act. There cannot be two opinions. The point of time when the reasons are recorded after forming opinion of 'escapement of income' is only relevant. Hence, this plea of the ld.AR is not tenable in the eyes of law. It is true that u/s 147, the Assessing Officer can either assess or re-assess but for taking action thereunder, he has to record reasons that income chargeable to tax has escaped assessment. It is also mandated by section 148(2) to record reasons in writing. The re-assessment proceedings u/s 147 are further subject to sections 148, 149, 150, 151, 152 and 153. But in the present case, we are required to decide the limited issue regarding the validity of proceedings undertaken after four years of the assessment year in question. Before we do that, we may mention that in the statement of facts filed before the ld. CIT(A), the assessee has mentioned that the assessment order has traveled upto the Tribunal and the Tribunal has passed order dated 2.11.2007. Nothing has come on record as to whether the Tribunal has given a direction to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an escapement of income from assessment and the reasons recorded have a link with the formation of his belief, he has the power u/s 147 of the Act. Any interpretation made by the Hon'ble Supreme Court would go back to the date of law itself and it would be a valid reason for re-assessment of the already made assessment order. This was so held by the Hon'ble Supreme Court in the case of Sarwan Kumar vs Madan Lal Aggarwal, 4 SCC 147. 17. Likewise, any decision of the Hon'ble Jurisdictional High Court which remained unconsidered and was brought to the knowledge of the authority subsequently, this also constituted material information to re-open the proceedings u/s 147 of the Act as held in the case of A.L.A Firm vs CIT, 189 ITR 285(S.C). This ratio was again cemented by the decision of Hon'ble Supreme Court in the case of ITO vs Saradbhai M. Lakhani, 243 ITR 1. But what will be the effect if a retrospective amendment is brought in the Act as to whether it would also relate back to the date of insertion of the provision and would tantamount to a reason for making a re-assessment if the changed law has resulted any escapement of income. The Hon'ble Gujarat High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This law was laid down by the Hon'ble Supreme Court in the case of Sri Krishna Pvt. Ltd etc vs ITO and Others, 221 ITR 538. The words 'omission or failure to disclose fully and truly all material facts necessary for assessment for that year postulates a failure of the assessee to disclose fully and truly all 'material facts necessary' for his assessment. What facts are 'material' and 'necessary' for assessment will differ from case to case. The material should not only be full but also be true. If some material found in the evidence produced before the Assessing Officer which the Assessing Officer could have uncovered but did not, then it is the duty of the assessee to bring it to the notice of the assessing authority. This omission or failure may be either deliberate, or even inadvertent, that is immaterial, but in case there is omission to disclose the material facts then subject to the other conditions jurisdiction to reopen is attracted. 19. The assessee had shown expenditure of Rs. 1.59 crores towards promotion of sales but while dealing with assessment year 2006-07 it was revealed that this expenditure solely related to promoting the MRF Pace Foundation which is entirely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has claimed deduction of Rs. 15,14,97,778/- u/s 80IA of the Act. Initially, this was allowed but in re-assessment proceedings this deduction was withdrawn because the company's products were not found to be eligible for deduction u/s 80IA as it manufactures articles specified in Eleventh Schedule of the Act. Item 27 of Eleventh Schedules appended to the Income-tax Act, 1961 reads as under: "Crown corks, or other fittings of cork, rubber, polyethylene or any other material." 23. A bare reading of this schedule makes it amply clear that manufacture of tyres of rubber which falls under Item 27 which exclude the item from the benefit of section 80IA. In this schedule, crown corks, or other fittings of cork, rubber, polyethylene or any other material has been mentioned clearly. The use of the words 'crown corks' makes it abundantly evident that other fittings of cork or rubber are also hit by this provision and the argument of the ld.AR that the rubber fittings will take colour from crown corks is not sustainable in the eyes of law. The meaning of this item No.27 is very clear and the statute has intended to debar manufacture of rubber fittings from such benefit. The use of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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