TMI Blog2015 (1) TMI 1447X X X X Extracts X X X X X X X X Extracts X X X X ..... upholding the reassessment. Double taxation/double deduction is not permissible under the Act. In the case under consideration the assessee had claimed the amount of ₹ 2. 96 Crores as goodwill and had amortised it in the books of accounts. In addition to it, the assessee wanted it to the part of unabsorbed losses to be carried forward. Clearly, it is not permissible as per the provisions of the Act - assessee should not have reduced the UD in the computation of book profits u/s. 115 JB - Even if the AO while passing order u/s. 143(3) had allowed an impermissible deduction, it would not bar him from initiating proceedings u/s. 147. The purpose behind the section is to compute the income that has escaped assessment. In the case under consideration brought forward UD of SSAPLwas allowed in excess during the original assessment proceedings. So, if the AO initiated re-assessment procee dings to withdraw the excess allowance, no fault can be found with him. In Kelvinator of India [ 2010 (1) TMI 11 - SUPREME COURT] AO has power of reopen an assessment provided there is tangible material to come to the conclusion that there was escapement of income from assessment and that rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok profit u/s. 115JB of the Income-tax Act, 1961( the Act ) on the alleged ground that the said amount had been capitalized and considered as goodwill. 2.2. He also erred in not appreciating the correct fact that the write off of Goodwill amount was not claimed as deduction under the I. T. Act in the subsequent years and as such not resulted into double benefit to the assessee. 2.3. The Appellant prays that the said amount be allowed as reduction from the book profit u/s/115JB of the Act. 3. The Appellant craves leave to add to alter or amend the above grounds of appeal. The has also filed following additional grounds of appeal: 1.1. On the facts and in circumstances of the case and in law, the Assistant Commissioner of Income-tax [LTU], Mumbai ( the A. O. ) erred in not allowing depreciation under Explanation 3(b) to sec. 32(1) of the Income Tax Act, 1961 ( the Act ) on the sum of ₹ 8, 86, 57, 302/- being goodwill shown in the books of accounts of the Appellant, part of which being brought forward business losses of Schenectady Specialities Asia Pvt. Ltd. ( SSAPL ) as per books of accounts disallowed by the A. O. at ₹ 2, 96, 83, 027/- while computing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 473/- was a//owed to the assessee towards unabsorbed depreciation as per books. From the books of accounts for the year ended 31. 03. 2003 (after merger of Schenectady Specialties Asia P. Ltd(SSAPL w. e. f. 27. 09. 2002), it was seen that unabsorbed depreciation brought forward as per books of accounts was only ₹ 6, 88. 70, 446/-. Hence there was excess deduction allowed to the assessee amounting to ₹ 2, 96, 83, 027/-. As there is a failure on the part of the assessee to disclose fully and truly and truly all material facts necessary for its assessment, I have reason to believe that income chargeable to tax has escaped assessment for this assessment year, coming within the meaning of section 147 of the Income-tax Act, 1961. The assessee vide its letter dated 22. 07. 2008 objected to reopening of assessment stating that the facts of brought forward losses were mentioned in the fixed asset schedule, notes to computation of income and computation u/s. 115JB of the Act, that all material facts were made available to the AO. After considering the submissions of the assessee, the AO held that mere mentioning the facts about brought forward losses did not absolve i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the section was reason to believe , that reason had to be a reason of a prudent person and under explanation 1 to the proviso mere production of the Balance Sheet, P L A/c or account books would not necessarily amount to disclosure within the meaning of the proviso. Deliberating upon the facts of the case the FAA held that the AO had overlooked the afore-stated item, that the AO noticed the mistake subsequently, that at the time of passing the original order of assessment he could not be said to have opined on the above item, that there was no change of opinion, that the AO had overlooked the excess deduction claimed by the relating to UD of ₹ 2, 96, 83, 027/-. Finally, he upheld the re-opening. 4. Next issue is disallowance of set-off of brought forward Unabsorbed Depreciation(UD)of ₹ 2, 96, 83, 027/-, that was raised by the assessee as ground no. 2. The AO found that the assessee had claimed set off of UD, amounting to ₹ 2. 96 Crores, as per the books of a/cs. of Schenectady Specialities Asia P. Ltd. (SSAPL) merged with the assessee. Before the AO the claimed that while computing book profit u/s. 115JB the said adjustment of losses or UD whichever was lowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee had reduced unabsorbed loss of 15. 43 Crores or UD of ₹ 2. 96 Crores whichever was lower as available in the books of the transferor company upto 31. 3. 2002, while computing the book profit u/s. 115JB, that in the scheme of merger said losses/ UD including loss incurred for the period from 1. 4. 2002 to 26. 9. 2002 aggregating to ₹ 19. 21 Crores had been capitalised, that the difference between the accumulated losses and fresh capital issued by the assessee-company was capitalised, that it was treated as goodwill in the books of the , that same goodwill was amortised equally over a period of 60 months in the books of the accounts, that while computing book profit u/s. 115JB of the Act the assessee had claimed benefit of losses brought forward aggregating to ₹ 15. 43 Crores or unabsorbed depreciation of ₹ 2. 96 Crores ignoring the fact that the difference between the loss and value of share capital issued had already been capitalised and had been considered as goodwill. He further held that if deduction for loss as claimed by the assessee while computing book profit u/s. 115JB was allowed it would result into double benefit to the once in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enting share capital extinguished of SSAPL)], capitalization of fresh capital, aggregating to ₹ 8. 86 Crores and treatment of goodwill in the books of the assessee, we are of the opinion that the FAA was justified in upholding the reassessment. It is said that double taxation/double deduction is not permissible under the Act. In the case under consideration the assessee had claimed the amount of ₹ 2. 96 Crores as goodwill and had amortised it in the books of accounts. In addition to it, the assessee wanted it to the part of unabsorbed losses to be carried forward. Clearly, it is not permissible as per the provisions of the Act. In short, the assessee should not have reduced the UD in the computation of book profits u/s. 115 JB of the Act. In our opinion, even if the AO while passing order u/s. 143(3) had allowed an impermissible deduction, it would not bar him from initiating proceedings u/s. 147 of the Act. The purpose behind the section is to compute the income that has escaped assessment. In the case under consideration brought forward UD of SSAPL, amounting to ₹ 2, 96, 83, 027/-was allowed in excess during the original assessment proceedings. So, if the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X
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