TMI Blog2012 (7) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... s factory - AO disallowed deduction of ₹ 2,30,30,088/- on account of entry tax paid by the assessee under the Karnataka Tax Entry of Goods Act, 1979 on the ground the same was allowable against sales tax paid by the assessee. - held that:- deduction allowed. Reassessment proceedings - disclosure - held that:- A reading of the above recorded reasons show that there is no such failure as mentioned in the proviso to Section 147 of the Act exists in the instant case. It is an established position of law that the assessee is required to disclose all primary facts fully and truly and thereafter, it is not the duty of the assessee to tell the Assessing Officer as to what inference is to be drawn from those primary facts or what other secondary facts are required to be examined. - I.T.A. Nos. 606 to 609 /Mds/2012 - - - Dated:- 25-5-2012 - N. S. Saini And Vikas Awasthy , JJ. Appellant by : Shaji P. Jacob Addl. C.I.T DR Respondent by : Saroj Kumar, Advocate ORDER N. S. Saini, Accountant Member : These are appeals filed by the Revenue against the order of Commissioner of Income Tax(A)-III, Chennai dated 30.12.2001 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishment for which some expenditure is unavoidable. Accordingly, in the opinion of the Commissioner of Income Tax(A), 2% of the exempt income would be reasonable expenditure attributable to earning exempt income. He accordingly directed the Assessing Officer to restrict the disallowance to 2% of the exempt income. 6. On the other hand, the Departmental Representative supported the order of the Assessing Officer and submitted that the Assessing Officer has estimated the disallowance at 5% of dividend income, which was reduced to 2% by the Commissioner of Income Tax(A). 7. After considering the rival submissions and perusing the orders of the lower authorities and materials available on record, we find that the undisputed fact that the assessee has earned dividend income of ₹ 2,81,41,586/- during the year under appeal, which was claimed exemption under Section 10(33) of the Act. According to the Assessing Officer, the assessee must have incurred some expenditure for earning dividend income. The assessee has not claimed any expenditure against the earning of the said income, which was exempt from tax. According to him, expenditure incurred for earning exempt income was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the decisions relied upon by the assessee and the submissions of the assessee, held that the ratios of the decisions were applicable to the assessee s case and accordingly allowed the appeal of the assessee. Before us, the Departmental Representative relied on the decision of Bombay High Court in the case of C.I.T. Shah Originals [2010] 327 ITR 19 wherein it was hold that the exchange fluctuations in EEFC accounts arisen of the export activity and does not bear approximate direct nexus with the export transaction so as to fall with the expression derived by the assessee in sub-section(1) of Sec.80HHC. Hence, the exchange difference and the interest accrued from EEFC account could not be treated as business income of assessee. Hence it was the submission that as the facts are not available on record, the matter should be restored back to the file of the Assessing Officer for adjudication afresh in the light of the above decision of the Bombay High Court. 12. On the other hand, the Authorised Representative of the assessee supported the order of the Commissioner of Income Tax(A). 13. After considering the rival submissions and perusing the orders of the lower authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on raw materials and other inputs that are brought into their factory at Bangalore for manufacture of tractors. It was stated that entry tax paid on input raw materials cannot be set off against the sales-tax payable on finished goods as per the provisions of the aforesaid Act. The assessee debited the profit and loss account for the above expenditure and claimed the same as allowable expenditure for tax purposes. The Assessing Officer disallowed the claim of the assessee on the ground that such entry tax paid was allowed to be set off against the sales tax payable on the final products. It was submitted by the Authorised Representative of the assessee that the above levy of tax is covered by section 3(1) of the said Act and not under Section 4B(1) and 4BB(1) of the said Act as contended by the Assessing Officer in his order. It was further submitted that Section 4B(1) of the said Act covers only finished motor vehicles and not others. Tractor does not come under the definition of motor vehicles and therefore, the Assessing Officer s contention that the tax paid is available for set off is not correct. He also argued that since there is no set off available for input raw materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding financial year was offered for tax in assessment year 2004-05 . The C.I.T. (Appeals) deleted the addition vide para 10.3 which reads as under: 10.3. Perusal of the facts reveals that the appellant is claiming deduction on account of entry tax on the basis of its actual payment. The said entry tax paid is adjusted against the sales tax liability as and when the sales are effected. Therefore the issue under consideration is whether the amount of entry tax actually paid by the appellant in the current year is allowable as deduction u/s 43B or not. At this stage we are not concerned as to in what manner the amount of entry tax is adjusted against the sales tax liability. The manner in which entries have been made with reference to sales tax either actually paid or set off against the entry tax paid are entirely a different matter, If the appellant has collected sales tax from the clients but it has not been paid to the Government, then this amount certainly becomes a part of the trading liability. However, in the present case, this is not reason for which the said addition has been made by the AO. In the present case it is not the case of the AO that the appellant has co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val submissions and perusing the orders of the lower authorities and materials available on record, we find that in the instant case Assessing Officer disallowed deduction of ₹ 2,30,30,088/- on account of entry tax paid by the assessee under the Karnataka Tax Entry of Goods Act, 1979 on the ground the same was allowable against sales tax paid by the assessee. The Commissioner of Income Tax(A) held that the assessee s case was covered under the provisions of Sec.3(1) of the under the Karnataka Tax Entry of Goods Act, 1979 and not under Section 4B(1) and 4BB(1) of the said Act, which provides for levy of tax and set off of tax paid on the motor vehicles, that are brought into the State. The assessee was manufacturing tractors and therefore did not fall under the definition of motor vehicles and hence, no set off was available to entry tax paid under Section 3(1) by the assessee. Further, he relied on the decision of the Chennai Bench of Tribunal on the same issue in the case of TVS Motors Ltd.(supra) and allowed the appeal of the assessee. 20. The Departmental Representative could not point out any specific error in the order of the Commissioner of Income Tax(A). He could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, no disallowance was made under Section 40(a)(i). The second reason for reopening was regarding grant of depreciation on brand equity. It was submitted that in this regard the assessee submitted that after going through the information filed by the assessee with the Assessing Officer, depreciation on brand equity was disallowed by the Assessing Officer at the time of making the order under Section 143(3). The order under Section 143(3) specifically refers to the disallowance of depreciation on brand equity. Hence, the second reason for reopening does not exist. It was further submitted that the Assessing Officer was in possession of all relevant information called for before making the assessment and after applying his mind had made the order. It was argued that for mere change of opinion, reopening cannot be made and for this relied on the decision of the Hon bel Supreme Court in the case of C.I.T. Vs. Kelvinator of India Ltd. 320 ITR 561 (SC). Ld. Commissioner of Income Tax(A) after considering the submissions held the reopening to be invalid and while doing so, he observed this as under:- 6. I have carefully considered the facts of the case and the submission of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment was reopened after a lapse of more than four years from the end of the subject assessment year. The AO had already passed assessment order u/s 143(3). The reasons stated by AO for reopening the assessment had been dealt with by the AO in the regular assessment itself. The AO had specifically discussed the disallowance of depreciation on brand equity and the acceptance of the same by the appellant. Further the AO had specifically called for payments to nonresidents and details of TDS. The assessee had furnished the particulars and also explained as to why it had not deducted tax at source on certain payments to non-residents. Having called for the details and accepted the same and having made no disallowance in the assessment order would go to show that the AO had applied his mind in allowing the claim of the appellant while passing the order u/s 143(3). The AO has not shown as to which facts the assessee had omitted to file in the course of the regular assessment proceedings. Hence I am of the considered opinion that the reopening on the same set of facts is merely due to change of opinion. Further, the AO in the order merely mentioned the objection of the appellant but did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent u/s 147 was not valid. Accordingly, the ground is allowed. 24. The Departmental Representative relied on the grounds of appeal taken by the Revenue. 25. The Authorised Representative of the assessee relied on the order of the Commissioner of Income Tax(A). 26. We have heard both the parties and perused the order of lower authorities and materials available on record. In the instant case, the Assessing Officer made the original assessment under Section 143(3) of the Act on 14.02.2006. The assessment was reopened subsequently by issuing of notice under Section 148 on 29.03.2010 for the following reasons as recorded in the assessment order:- The assessee has claimed the following expenditure in the return of income filed for the Assessment Year 2003-04. Commission on Sale ₹ 2.19 lakhs Consultancy charges ₹ 525.51 lakhs Others ₹ 91.78 lakhs While finalizing the assessments under Section 143(3) for Assessment Year 2006-07 and 2007-08, it has come to light that the consultancy charged paid by the assessee is nothing but fee for technical services and accordingly, the same has been disallowed under Section 40(a)(i). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer as to what inference is to be drawn from those primary facts or what other secondary facts are required to be examined. In the instant case, we find from the recorded reasons that no falsity in the primary facts furnished by the assessee could be pointed out by the Assessing Officer or any primary fact was not disclosed by the assessee. We therefore, do not find any good and justifiable reason to interfere with the order of the Commissioner of Income Tax(A). It is confirmed. The ground of appeal of Revenue is dismissed. ITA No.609/Mds./12 (A.Y. 2004-05) 27. The only issue involved in this appeal is that Commissioner of Income Tax(A) erred in holding that gains due to exchange difference can be allowed as business profits for computation of deduction under Section.80HHC of the Act. 28. The brief facts of the case are that the Assessing Officer reduced 90% of exchange difference amounting to ₹ 77,54,426/- from the business profits of the assessee after computing the deduction allowable under Section.80HHC of the Act. On appeal, the Commissioner of Income Tax(A) allowed the appeal of the assessee on the ground that the exchange difference arises due to diff ..... X X X X Extracts X X X X X X X X Extracts X X X X
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