TMI Blog2023 (1) TMI 1034X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. Queries may have been raised by those Departments and material may have been placed by assessee for their consideration. In such cases a probable view is that such materials as produced before those Departments have not come into the notice of the Assessing Authority for the determination of full and true disclosure. However, in this case all materials have admittedly been placed before the TPO who is integral to the conduct of assessment proceedings. All materials filed by an assessee before the TPO are well available as part of the assessment records. There has been a full and true disclosure by the petitioner as a result that proceedings for re-assessment beyond a period of four years must fail. The impugned order rejecting the objections of the petitioner to assumption of jurisdiction under Section 147, has taken recourse to Explanation 1 to Section 147 of the Act. Reiterating the view in M/s.Asianet Star Communications Private Limited [ 2019 (6) TMI 356 - MADRAS HIGH COURT] hold that Explanation 1 cannot override the statutory condition under the proviso to Section 147. Explanation 1 would apply only in a situation where the materials filed by an assessee are s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner had tendered explanation along with proof of recovery of the pre-operative expenditure subsequent to commencement of operations of the Vizag unit. 7. A show cause notice had been issued by the officer reiterating the query on the operations of the Vizag unit and the details of expenditure charged to profit and loss account (P L account). Vide its submissions dated 21.01.2016 and 02.02.2016, the petitioner expanded on the submissions already made reiterating the methodology followed for claiming the expenditure. 8. The TPO was thus convinced of the claim and made no adjustment towards the expenditure incurred. The order passed by the TPO on 29.01.2016 contains some discussion in this regard. The TPO s order was forwarded to the Assessing Officer who thereafter proceeded to compute the total income of the petitioner in conformity with the ALP determined by him. 9. While matters were resting so, the impugned notices under Section 148 dated 02.07.2018 came to be issued. The petitioner responded stating that its return filed originally may be taken as filed in respect of the notice under Section 148. In line with the procedure set out under the judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond a period of four years, the petitioner relies on the proviso to Section 147, which sets out a limitation of four year for re-assessment extendable to six years, if the revenue is able to establish that no full and true disclosure was made by the petitioner at the first instance. 12. The reasons on the basis of which the impugned proceedings have been initiated refers to information available with this office and specifically the application filed by the petitioner for Advance Pricing Agreement (APA), wherein it had included the Vizag unit but not the Irungattukottai segment. 13. This was relied upon by the Assessing Officer to conclude that the two units were different and the Vizag Unit had started functioning only in FY 2015-16. All expenditure incurred prior thereto was, according to the Officer, pre-operative and capital in nature, thus liable to be disallowed. 14. Per contra, the petitioner would maintain that the Vizag unit had not just been the subject matter of deliberation before the TPO but that all details specifically in regard to the claim of expenditure had been placed before the Officer. To this effect, a note was placed before the Officer on 27.10.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner of Income-tax, Corporate Circle 5(2), Chennai (W.A.Nos.1171 1172 of 2015, dated 27.10.2015) (viii)Karti P.Chidambaram v. The Assistant Commissioner of Income Tax, Non Corporate Circle-3, Room No.623-A, 6th Floor, Wanaparthy Block, 121, MG Road, Nungambakkam, Chennai-600 034 (WP.Nos.1589 of 2017 and batch, dated 13.11.2017) (ix)M/s.S.P.Mani and Mohan Diary, S4, Jeevanantham Street, Kollampalayam, Erode 638 002 v. The Assistant Commissioner of Income tax, Central Circle I, Gandhiji Road, Erode 638 001 (WP.No.3648 of 2018, dated 26.09.2019) (x)Commissioner of Income Tax, Corporate Ward 3(4), Chennai v. B.Suresh Kumar (TCA.No.317 of 2020, dated 16.09.2020) (xi)Income Tax Officer, Ward No.16(2) v. TechSpan India (P) Ltd. [302 CTR 74] (xii)Marico Ltd. v. The Assistant Commissioner of Income Tax- 12(3)(2) and Others (W.P.No.1917 of 2019, dated 21.08.2019) (xiii)The Assistant Commissioner of Income Tax 12(3)(2) and Others v. Marico Ltd. (Special Leave Petition (Civil) Diary No.7367 of 2020, dated 21.08.2019) (xiv)M/s.Indian Bank, 66 Rajaji Salai, Chennai-600 001 v. The Deputy Commissioner of Income Tax, Company Circle I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain manufacturing and R D assets and drug pipeline) of Orchid Chemicals Pharmaceuticals Limited ( Orchid ) on March 30, 2010 pursuant to a Business Transfer Agreement dated December 15, 2009 between the parties. The Company is executing plans to expand its manu- facturing capacity at Irungattukottai and is also engaged in setting up a new injectables manufacturing facility at Vizag utilizing the site on the long term leases acquired from Orchid in March 2010. 23. The expenditure under construction period has also been specifically referred to in the accompanying financials as capital work-inprogress , as follows: B3.4. Expenditure under construction period: Direct expenditure on assets under construction or development is shown under Capital work-in-progress, while indirect expenditure is expensed. 24. The audit report at column 17A elaborates on the amounts debited to profit and loss account making specific reference to prepaid expenses relating to the work in progress in the Vizag unit. The narration is as follows: 17. Amounts debited to the profit and loss account, being:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acturing and Vizag segment have different characterizations and should not be looked together. Further, the drugs proposed to be manufactured from Vizag segment have no linkage to the operations of IKKT manufacturing and R D segments. * Vizag is a third party segment since during FY 2011-12, no international transactions arose from Vizag segment and all costs incurred pertain to pre-commencement costs (third party costs). * These costs are recovered from Hospira Group up on commercialization of operations in FY 2015-16 and aggregating would amount to double charge to the AE causing undue hardship. 28. The details of recoupment of expenses have been set out in paragraphs 5.10 to 5.12 of order dated 29.01.2016 readings as follows: VIZAG DIVISION: 5.10 Besides, the assessee has apportioned the expenses grouped under corporate division of Rs.18,16,60,260 to all the segments including Vizag. This office is of the opinion that Vizag unit being a non starter and the expenditure incurred for the said unit have been separately captured and taken to the balance sheet as capital work in progress. No further apportionment of the corporate expenses was required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew that the answer should be in the affirmative. 32. Details in regard to the expenditures incurred in connection with the Vizag segment and the manner of characterization of the same have been provided before the officer and in my view, the assessee has made a full disclosure of primary as well as secondary materials before both the Assessing and the Transfer Pricing Officers. 33. There are instances where re-assessments are initiated based on information obtained from different units/sources with the Income Tax Department including the Criminal Investigation Department or All India Information. Queries may have been raised by those Departments and material may have been placed by assessee for their consideration. 34. In such cases a probable view is that such materials as produced before those Departments have not come into the notice of the Assessing Authority for the determination of full and true disclosure. However, in this case all materials have admittedly been placed before the TPO who is integral to the conduct of assessment proceedings. All materials filed by an assessee before the TPO are well available as part of the assessment records. 35. I am thus of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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