GST Helpdesk   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
GST - Acts SGST - Acts GST - FAQ GST Rates, Exemption CGST Notif. IGST Notif. Exempt Income Salary income
Extracts
Home List
← Previous Next →

2017 (4) TMI 871 - ITAT CHENNAI

2017 (4) TMI 871 - ITAT CHENNAI - TMI - Validity of reopening of assessment - not adjusted the loss of the STP units at Hyderabad and Gurgaon against the profit from other section 10A units, swelling it’s claim for deduction under section10A to that extent - Held that:- A perusal of the assessment order dated 26.12.2008 shows that the assessee had in fact claimed deduction at a higher amount, i.e., without adjusting the loss (being at Rs. . 268.72 lacs), only during the assessment proceedings (v .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ooling of interest’ method in taking over the assets and liabilities of the amalgamating company - Held that:- apart from not claiming any expenditure (claimed @ 1/5th, as provided u/s. 35DD) for the current year, also ‘surrender’ that claimed for the earlier years, citing the receipt from OBL on that account. In fact, if there was any such understanding with OBL, it would not have preferred any claim for merger expenses in the first place, debiting the said expenditure to the account of OBL in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y to the Balance Sheet. This only would be in consistence with what is being stated in the Notes to the Accounts. In other words, the assessee’s claim is contradicted by its’ own accounts as well as it’s return of income. The AO is thus justified in holding a honest belief that what is being stated is not correct, and that therefore income had escaped assessment. The condition of the first proviso to section 147 is satisfied. The reassessment notice is accordingly valid on this count.- Decided a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ere the services rendered are in excess of that billed, revenue has to be recognized irrespective of it being not billed as at the year-end. There being no material to support the reason, which could only be valid where the accounts do not state the correct position, i.e., on facts, the same cannot hold. The said reason accordingly fails. - Decided in favour of assessee - Deduction u/s. 10A - Held that:- The matter is squarely covered by the decision by the Hon'ble Apex Court in CIT vs. Yoko .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on u/s. 35 DD claimed - determining if it is liable for deduction u/s.10A or s. 80 HHE, as the assessee claims in the alternative - Held that:- It is not clear if the assessee has claimed deduction u/s. 35DD in respect of the merger expenses adjusted against the general reserve for the current year. As the assessee has itself in its accounts treated the said amount as income rather than taking it to the balance-sheet. As such, to the extent the assessee has not claimed the expenditure qua merger .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

no expenditure against which the same could be considered as received. Also, the expenditure incurred, where and to the extent claimed as a deduction, cannot also be considered as having been recovered, which would be inconsistent with the assessee’s accounts, duly audited, and the returns, duly verified, furnished for the current, preceding and even succeeding year/s. The same is, as other receipts, in-asmuch as there is no corresponding obligation to return the value received, either in cash o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is of his factual findings. The onus to prove its claim/s, we may add, would be on the assessee. The assessee’s claim is partly allowed on the foregoing terms, disposing the aforesaid grounds of the appeal. - Disallowance of legal and professional fee - Held that:- reference to the Notes to the Accounts to the assessee’s final accounts for AY 2009-10, is part of the legal charges paid to a law firm for acquisition of a US company by the name Data Inc., USA (at USD 6 lacs). The expenditure be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

spondent : Shri A.V.Sreekanth, Jt. CIT ORDER Per Sanjay Arora, AM: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-V, Chennai ( CIT(A) for short) dated 02.12.2013, dismissing the assessee s appeal contesting its assessment u/s. 143(3) r/w s. 147 of the Income Tax Act, 1961 ( the Act hereinafter) dated 26.12.2008 for assessment year (AY) 2005-06. 2. The appeal raises three issues, i.e., apart from that qua jurisdiction; the impugned assessm .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

evenue s case, which ought to be the case, or else it is only a change of opinion which, as is well settled, cannot sustain reassessment (CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC)), also placing reliance on the order by the Tribunal in the assessee s own case for the two immediately preceding years (in ITA Nos. 1908 & 1909/Mds/2012 dated 18.03.2016/copy on record). 3. We have heard the parties, and perused the material on record. 3.1 The reasons for reopening the assessment, as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

laim for deduction under section10A to that extent. A perusal of the assessment order dated 26.12.2008 shows that the assessee had in fact claimed deduction at a higher amount, i.e., without adjusting the loss (being at Rs. . 268.72 lacs), only during the assessment proceedings (vide letter dated 18.12.2008/PB pg. 29) - that per the return of income being upon such adjustment, duly supporting it with a certificate from the CA in Form F, which on verification appeared correct, and allowed on that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ny. In-as-much as the assessee had followed pooling of interest method in taking over the assets and liabilities of the amalgamating company (Orbitech Solutions Ltd), there is no question of the merger resulting in any cash receipt, which was accordingly only income, assessable u/s. 28(iv). The assessee adverted our attention to it s letters dated 18.12.2008 and 22.12.2008 (PB pgs. 29-31), furnished during the assessment proceedings, whereat this aspect was explained, stating the receipt to be a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

while shareholder of Orbitech Solutions Limited (which has been amalgamated with Polaris Software Lab Limited on 1 November 2002) toward the pre merger contingencies and / or any merger related matters. The letters dated 18.12.2008 and 22.12.2008 (supra) reiterate the same, besides adding that the assessee had adjusted Rs. .717 lakhs incurred toward merger with Reserve and Surplus and, further, not availed of deduction under section 35- DD. Surely, if that be the case, no inference as to the rec .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

exceptional; the only rider or caveat being that what the assessee has stated in the assessment proceedings is full and true and nothing material has been omitted to be disclosed. The reason is simple; where not so, the condition of the first proviso to s. 147 would stand satisfied and, besides, the satisfaction of the AO on that basis, i.e., incomplete or untrue facts, can hardly be regarded as a valid satisfaction in law so as to attract the charge of change of opinion . Toward this, we find t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mit ₹ 7.50 cr. as miscellaneous income under the head Other Income . It goes on to state that under the circumstances the assessee cannot now, i.e., after two years of the amalgamation, claim the receipt as the payment of pre merger contingencies/any merger related matters , as stated in the Note B-18. And, accordingly, that pooling of interest cannot result in any cash for the amalgamated company from the amalgamating company. The assessee has not rebutted any of these facts , which clear .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ure on merger, in-as-much as the same could only be reckoned at net of that recovered; rather, generating a surplus. It would, under the circumstances, apart from not claiming any expenditure (claimed @ 1/5th, as provided u/s. 35DD) for the current year, also surrender that claimed for the earlier years, citing the receipt from OBL on that account. In fact, if there was any such understanding with OBL, it would not have preferred any claim for merger expenses in the first place, debiting the sai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

only which could be transferred directly to the Balance Sheet. This only would be in consistence with what is being stated in the Notes to the Accounts. In other words, the assessee s claim is contradicted by its own accounts as well as it s return of income. The AO is thus justified in holding a honest belief that what is being stated is not correct, and that therefore income had escaped assessment. The condition of the first proviso to section 147 is satisfied. The reassessment notice is acco .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

come accrued during the year is to be offered as income for that year. There is nothing on record, or referred to, to suggest that the accounts do not reflect the correct position in this regard. If the amount billed is in excess of the revenue, implying that chargeable on the basis of the services rendered, the same is liable to be shown as a current liability. Similarly, where the services rendered are in excess of that billed, revenue has to be recognized irrespective of it being not billed a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

edies (P.) Ltd. [1999] 237 ITR 13 (SC). The matter is factual, and it has been shown that the assessee did not disclose fully and truly all material facts relevant for its assessment. To put succinctly, the assessee claims the impugned receipt to be against expenditure, so that it stands reimbursed, while at the same time has not only claimed deduction in its respect, so that it has been borne by it, but also continues to do so (in-as-much as the same is on an amortized basis @ 1/5th for each ye .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

various issues on merits. The first issue (Ground 7) is qua deduction u/s. 10A. We have already stated that the AO has taken a view in the matter. He is accordingly precluded from visiting the matter again in the reassessment proceedings inasmuch as he has no power to review his order. Even otherwise, the matter is squarely covered by the decision by the Hon'ble Apex Court in CIT vs. Yokogawa (India) Ltd. (in CA No. 8498 of 2013 dated 16.12.2016), relied upon, clarifying that deduction u/ss. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

st aspect that needs to be considered is if it is income. The head of income is of secondary importance, relevant for determining if it is liable for deduction u/s.10A or s. 80 HHE, as the assessee claims in the alternative. Surely, if it is received, as claimed, toward merger expenses, it is only a capital receipt in the assessee s hands. There is however no material to support this. There is in fact even no corroborative evidence as (say) copy of the agreement pursuant to which it was paid; th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

enditure? It is in fact for these reasons that the reassessment stands upheld qua jurisdiction. Even if the amount is received subsequently, and there was some uncertainty with regard to its receipt, there ought not to be any claim (@ 1/5th) for the current year, as well as the deduction of the merger expenses from the general reserve, which is at Rs. . 467.25 lacs (refer Schedule-2 to the Balance Sheet), which would stand to be adjusted against the amount received. At the same time, it is not c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

extent the assessee has not claimed the expenditure qua merger expenses, which we may though clarify would not include pre-merger expenses, the receipt from the OBL would to that extent be regarded as a reimbursement thereof and, accordingly, only a capital receipt, not liable to tax. This is of course subject to the assessee producing some external material toward evidencing the nature of the receipt, i.e., as toward merger expenses. Further, it s claim qua the balance amount, i.e., received in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version