TMI Blog2017 (8) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... und raised by the assessee. Allowance of expenditure towards stamp duty paid on demerger - Held that:- No doubt, section 35DD provides for deduction towards expenditure incurred wholly and exclusively for the purposes of amalgamation or demerger of an undertaking - But the fact remains that the expenditure incurred for payment of stamp duty is in the nature of expenditure referred to in section 43B - Since the provisions of section 43B has an overriding effect on all other provisions of the Act, any expenditure referred to in that section shall be allowed only on payment basis. - No additions - Decided in favor of assessee. - I.T.A No.2235/Mum/2016 - - - Dated:- 11-8-2017 - Shri Joginder Singh (JUDICIAL MEMBER) And Shri G Manjunatha (ACCOUNTANT MEMBER) For The Appellant : Shri Hiro Rai For The Respondent : Shri Saurabh Kumar Rai ORDER Per G Manjunatha, AM : This appeal filed by the assessee is directed against the order of the CIT(A)-2, Mumbai dated 22-01-2016 and it pertains to AY 2005-06. 2. The brief facts of the case are that the assessee company, engaged in the business of production, processing and marketing of hybrid / improved varieties of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red for the demerger during the impugned assessment year the expenditure in excess of 1/5th of total expenditure incurred shall be disallowed u/s 35DD of the Act. 3. Aggrieved by the assessment order, the assessee preferred appeal before CIT(A). Before CIT(A), the assessee challenged the validity of reopening of assessment on the ground that the assessment was reopened on the basis of change of opinion without there being any fresh tangible material to suggest escapement of income within the meaning of section 147 of the Act. The assessee further contended that the issue of deductions towards stamp duty paid on demerger of investment division and vegetable division was subject matter of verification by the AO during the course of original assessment proceedings and the AO, after satisfying with the explanation of the assessee has chosen to allow the expenditure u/s 43B, therefore, the same cannot be subject matter of re-assessment by reappraisal of the existing facts available on records. As regards deduction claimed towards stamp duty paid on demerger, as per the provisions of section 43B of the Act, any expenditure being in the nature of duties, tax and cess, is allowable as d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO has rightly disallowed expenditure incurred for stamp duty on demerger of units. Aggrieved by the order of CIT(A), the assessee is in appeal before us. 5. Let us first take up legal issue raised by the assessee. The assessee has challenged reopening of the assessment on the ground that the assessment was reopened on the basis of change of opinion without there being any material to suggest escapement of income. The Ld.AR for the assessee submitted that the AO has reopened the assessment merely on change of opinion which is evident from the fact that he has recorded reasons from the information which are available with the AO, and not on any material which came to his knowledge subsequent to original assessment. The Ld.AR further submitted that the issue has been examined by the AO in the original assessment proceedings by way of a specific questionnaire for which the assessee has filed necessary details explaining the claim of deduction for stamp duty incurred on demerge of units. The AO, after satisfying with the explanation of the assessee, has allowed the claim. Therefore, reopening based on same set of facts without any new tangible material, is mere change of opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f original assessment. The assessee further contended that the very same issue has been examined by the AO at the time of original assessment by a specific query for which the assessee has furnished necessary details. The AO, after satisfying with the explanation of the assessee, chosen to allow the deduction claimed u/s 43B of the Act because such expenditure is allowed only on payment basis. Since the AO is referring to the materials already on record and no fresh material came to his knowledge to suggest escapement of income, definitely, it is a case of change of opinion, which is not permissible under the law. 8. Having heard both the sides and considered material on record, we find that the AO has reopened the assessment by recording a reason which clearly shows escapement of income on account of excessive deduction allowed towards expenditure incurred for demerger of certain units. Though the assessee claims to have furnished necessary details before the AO at the time of original assessment, the records clearly indicate that the AO has not examined the issue of deduction claimed towards stamp duty paid on demerger of units which shows non application of mind by the AO to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 years from the date of demerger. 10. Having heard both the sides and considered material on record, we find that the AO has disallowed expenses incurred towards payment of stamp duty on demerger of certain units on the ground that such expenditure is allowed only under the provisions of section 35DD, but not under the provisions of section 43B of the Act. No doubt, section 35DD provides for deduction towards expenditure incurred wholly and exclusively for the purposes of amalgamation or demerger of an undertaking. As per the said provisions, the assessee shall be allowed a deduction of an amount equal to 1/5th of such expenditure for each of the five successive previous years beginning with the previous year in which the amalgamation or demerger takes place. There is no dispute with regard to the nature of expenditure incurred by the assessee. The assessee has incurred expenditure in relation to demerger of its existing undertaking. But the fact remains that the expenditure incurred for payment of stamp duty is in the nature of expenditure referred to in section 43B of the Act. As per the provisions of section 43B, any sum payable by the assessee by way of tax, duty, cess or f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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