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2016 (8) TMI 414 - GUJARAT HIGH COURT

2016 (8) TMI 414 - GUJARAT HIGH COURT - TMI - Reopening of assessment - while computing deduction u/s.10A for the purpose of computing export turnover, telecommunication charges for export of computer software have not been considered as the same are fixed in nature and not incurred specifically for export of software - Held that:- The impugned notices have been issued beyond the period of 4 years from the end of relevant assessment year. In the present cases the question of telecommunication ex .....

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ckground. The facts being almost identical, we may notice from Special Civil Application No.2147 of 2014. 2. The petitioner is a company registered under the Companies Act. It is engaged in the business of software services and related business. For the Assessment Year 2006- 07, the petitioner had filed a return of income on 31.10.2006 declaring total income of ₹ 61.28 lacs. Said return was taken in scrutiny by the Assessing Officer. He passed a draft order of assessment on 11.2.2009 after .....

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e of ₹ 61,28,140/- was filed on 31.10.2006. Assessment u/s.143(3) of the Act was finalized determining the total income at ₹ 22,46,55290/-. In the assessment order the assessee was allowed exemption u/s.10A of the Act amounting to ₹ 71,16,11,732/- (restricted to ₹ 60,06,59,051/- to the extent of business income available) which was arrived at as under : Profit of the(Rs.71,16,11,732/- x Export turnover business (Rs.315,67,73629/-) Total turnover (Rs.315,67,73,629/-) =Rs.7 .....

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377; 12,61,319/- totaling to ₹ 2,70,75,740/- which is required to be deducted from the Export turnover to compute deduction u/s.10A ibid. The deduction available accordingly will come to ₹ 70,55,08,217/- as shown below: Profit (Rs.71,16,11,732/-) x ETO(Rs.315,67,73,629/- MINUS ₹ 2,70,75,740/-) Total turnover (Rs.315,67,73,629/-) =Rs.70,55,08,217/-. Thus, the deduction computed was excess by ₹ 61,03,515/-. In view of the above, I have reason to believe that the income char .....

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were, however, rejected by the Assessing Officer on 10.12.2013. 5. It can thus be seen that for reopening a scrutiny assessment, the Assessing Officer has issued notice beyond the period of 4 years from the end of relevant assessment year. In Special Civil Application No.2148 of 2014 also, such notice has been issued beyond the period of 4 years and is also based on identical reasons recorded by the Assessing Officer. 6. The assessee was visited with yet another notice for reopening dated 18.11. .....

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was made to the business income of the assessee applying arm's length pricing under section 92-C of the Act. In terms of sub-section (4) of section 92-C, this addition made by way of arm's length price would not qualify for deduction under section 10-A of the Act, despite which such deduction was granted by the Assessing Officer in the original assessment. The second reason was that, according to the Assessing Officer, export turn over for the purpose of exemption under section 10A would .....

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re, could not have reopened the original assessment which was framed after scrutiny. 6. With respect to the first reason recorded by the Assessing Officer, counsel contended that there was no failure on the part of the assessee to disclose any of the facts. If at all any deduction granted ignoring the statutory provisions, it was an error on the part of the Assessing Officer. With respect to the second reason, the counsel submitted that not only true and full disclosure by the petitioner of all .....

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e first reason, as noted, the Assessing Officer was of the opinion that the additions made during the course of the original assessment by applying arm's length price u/s.92-C of the Act would not qualify for deduction under section 10-A of the Act. Even if that be so, nowhere the Assessing Officer had recorded that excess deduction was granted to the petitioner due to failure on the part of the assessee to disclose truly and fully all necessary material facts, a prime requirement under the .....

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frame provided under the statute, but to reopen an assessment beyond the period of four years of the assessment order was simply not one of them since the requirement of such income chargeable to tax having escaped assessment must be relateable to the failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. 9. Coming to the second reason, we may recall, according to the Assessing Officer, various expenditures in the form of telecommunication ch .....

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ion was drawn by counsel Mr.Soparkar for the petitioner to the return file by the assessee which contained detailed computation of exemption under section 10-A of the Act. It refers to the formula of exemption being equal to profit of business multiplied by export turn over divided by total turn over. A note to this computation contained the following disclosure: Note 1) For the purpose of computing export turnover, telecommunication charges for export of computer software have not been consider .....

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are fixed in nature and not incurred specifically for export of software. However, in case such expenses are reduced for the purpose of computing export turn over, the same are also to be reduced from the computation of total turn over. In other words, according to the assessee, if such charges were to be eliminated from the denominator of the ratio by which profit of business is to be multiplied for computing the exemption under section 10-A of the Act, the same would also be eliminated from t .....

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