MAHYCO SEEDS LTD. (MERGED WITH MAHARASHTRA HYBRID SEEDS CO. LTD.), MUMBAI V. DCIT 1 (2), MUMBAI

ITA 2235/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0428 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 09-05-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 06-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 43B; 143(3); 142(1); 115JB; 147; 148; 28

Judgement Text

1 ITA NO.2235/MUM/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.2235/MUM/2016 (ASSESSMENT YEAR 2005-06) M/S MAHYCO SEEDS LTD M/S MAHARASHTRA HYBRID SEEDS CO LTD, RESHAM BHAVAN, 4 TH FLOOR, 84, VEER NARIMAN ROAD, MUMBAI-400 020 PAN : AAACE08881E VS DY.CIT, 1(2), MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI HIRO RAI RESPONDENT BY SHRI SAURABH KUMAR RAI DATE OF HEARING 27-06-2017 DATE OF PRONOUNCEMENT 11-08-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE CIT(A)-2, MUMBAI DATED 22-01-2016 AND IT PERTAINS T O AY 2005-06. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY, ENGAGED IN THE BUSINESS OF PRODUCTION, PROCESSING AND MARKETING OF HYBRID / IMPROVED VARIETIES OF SEEDS, HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005- 06 ON 31-10-2005 DECLARING TOTAL INCOME AT RS.NIL. THE ASSESSMENT WAS 2 ITA NO.2235/MUM/2016 COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961 ON 17-12-2007 DETERMINING TOTAL INCOME AT RS.2,41,14,190 U/S 115JB OF THE INC OME-TAX ACT, 1961. SUBSEQUENTLY, THE CASE HAS BEEN REOPENED U/S 147 OF THE ACT ON THE GROUND THAT INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSE SSMENT BECAUSE OF ESXCESSIVE DEDUCTION ALLOWED TOWARDS AMORTIZATION O F EXPENDITURE IN CASE OF AMALGAMATION OR DEMERGER, WHICH IS OTHERWISE ALLOWA BLE OVER A PERIOD OF 5 YEARS FROM THE DATE OF INCURRING OF SUCH EXPENDITUR E. THE AO HAS ALLOWED THE EXDPENDITURE CONTRARY TO THE SPECIFIC PROVISIONS PR OVIDED U/S 35DD WHICH RESULTED IN UNDER ASSESSMENT OF INCOME TO THE TUNE OF RS.42,24,138 AND ACCORDINGLY ISSUED NOTICE U/S 148 CALLING FOR RETUR N OF INCOME FROM THE ASSESSEE. SUBSEQUENTLY, THE CASE HAS BEEN SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN R ESPONSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED AND FILED OBJECTIONS FOR REOPENING OF THE ASSESSMENT ON THE GROUND THAT THE AO PROPOSED REOPENING MERELY ON CHANGE OF OPINION WITHOUT ANY FRESH MATER IAL CAME TO HIS KNOWLEDGE SUBSEQUENT TO COMPLETION OF ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT THE EXPENDITURE INC URRED TOWARDS DEMERGER OF ITS EXISTING UNITS IS IN THE NATURE OF DUTIES AND C ESS WHICH ARE ALLOWABLE ON PAYMENT BASIS AS PER THE PROVISIONS OF SECTION 43B OF THE ACT. SINCE THE SAID EXPENDITURE HAS BEEN PAID DURING THE PREVIOUS YEAR RELEVANT ASSESSMENT YEAR, 3 ITA NO.2235/MUM/2016 THE ASSESSEE HAS RIGHTLY CLAIMED DEDUCTION FOR STAM P DUTY PAID ON DEMERGER OF INVESTMENT DIVISION AND VEGITABLE DIVISION. THE AO , AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE OBSERVED THAT THE ASSE SSEE HAS INCURRED STAMP DUTY FOR DEMERGER OF ITS EXISTING UNITS AND SUCH DE MERGER WAS TAKEN PLACE IN THE FINANCIAL YEAR RELEVANT TO AY 1998-99. IN VIEW OF THE SPECIFIC PROVISIONS PROVIDED U/S 35DD OF THE ACT, ANY EXPENDITURE INCUR RED FOR AMALGAMATION OR DEMERGER OF AN UNDERTAKING, THE ASSESSEE SHALL BE A LLOWED A DEDUCTION OF AN AMOUNT EQUAL TO 1/5 TH OF SUCH EXPENDITURE FOR EACH OF THE FIVE SUCCESSIV E PREVIOUS YEARS BEGINNING WITH THE PREVIOUS YEAR IN WHICH THE AMALGAMATION OR DEMERGER TAKES PLACE. SINCE THE ASSESSEE HAS CLAIM ED TOTAL EXPENDITURE INCURRED FOR THE DEMERGER DURING THE IMPUGNED ASSES SMENT YEAR THE EXPENDITURE IN EXCESS OF 1/5 TH OF TOTAL EXPENDITURE INCURRED SHALL BE DISALLOWED U/S 35DD OF THE ACT. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PRE FERRED APPEAL BEFORE CIT(A). BEFORE CIT(A), THE ASSESSEE CHALLENGED THE VALIDITY OF REOPENING OF ASSESSMENT ON THE GROUND THAT THE ASSESSMENT WAS RE OPENED ON THE BASIS OF CHANGE OF OPINION WITHOUT THERE BEING ANY FRESH TAN GIBLE MATERIAL TO SUGGEST ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION 147 OF THE ACT. THE ASSESSEE FURTHER CONTENDED THAT THE ISSUE OF DEDUCT IONS TOWARDS STAMP DUTY PAID ON DEMERGER OF INVESTMENT DIVISION AND VEGETAB LE DIVISION WAS SUBJECT 4 ITA NO.2235/MUM/2016 MATTER OF VERIFICATION BY THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AND THE AO, AFTER SATISFYING WITH THE E XPLANATION OF THE ASSESSEE HAS CHOSEN TO ALLOW THE EXPENDITURE U/S 43B, THEREF ORE, THE SAME CANNOT BE SUBJECT MATTER OF RE-ASSESSMENT BY REAPPRAISAL OF T HE EXISTING FACTS AVAILABLE ON RECORDS. AS REGARDS DEDUCTION CLAIMED TOWARDS S TAMP DUTY PAID ON DEMERGER, AS PER THE PROVISIONS OF SECTION 43B OF T HE ACT, ANY EXPENDITURE BEING IN THE NATURE OF DUTIES, TAX AND CESS, IS ALL OWABLE AS DEDUCTION ONLY ON PAYMENT BASIS. SINCE THE SAID EXPENDITURE HAS BEEN PAID DURING THE FINANCIAL YEAR RELEVANT TO AY 2005-06, THE ASSESSEE HAS RIGHT LY CLAIMED DEDUCTION TOWARDS SUCH EXPENDITURE. THE CIT(A), AFTER CONSID ERING RELEVANT SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE ASSESSMENT HAS BEEN REOPENED MERE LY ON CHANGE OF OPINION AS THE AO HAD REASON TO BELIEVE THAT INCOME CHARGEA BLE TO TAX HAS BEEN ESCAPED ASSESSMENT BECAUSE OF EXCESSIVE DEDUCTION A LLOWED TOWARDS EXPENDITURE INCURRED FOR AMALGAMATION OR DEMERGER I N CONTRAVENTION OF THE SPECIFIC PROVISIONS OF SECTION 35DD OF THE ACT. TH E CIT(A) FURTHER OBSERVED THAT AS PER THE PROVISIONS OF SECTION 35DD(2), NO DEDUCT ION SHALL BE ALLOWED IN RESPECT OF THE EXPENDITURE MENTIONED IN SUB SECTION (1), UNDER ANY OTHER PROVISIONS OF INCOME-TAX ACT AND HENCE, THERE IS NO MERITS IN THE CONTENTION OF THE ASSESSEE THAT SUCH EXPENDITURE IS ALLOWABLE U/S 43B ONLY ON PAYMENT BASIS. 5 ITA NO.2235/MUM/2016 SINCE THE AO HAS NOT EXAMINED THE ISSUE IN RIGHT PE RSPECTIVE AND ALSO NOT APPLIED HIS MIND TO THE PROVISIONS PROVIDED IN SECT ION 35DD WHILE COMPLETING THE ASSESSMENT, WHICH RESULTED IN ESCAPEMENT OF INC OME, THEREFORE, THE SAME CANNOT BE CONSIDERED AS MERE CHANGE OF OPINION. WI TH THESE OBSERVATIONS, HE DISMISSED THE LEGAL GROUND RAISED BY THE ASSESSEE C HALLENGING VALIDITY OF REOPENING OF ASSESSMENT. 4. INSOFAR AS DEDUCTION CLAIMED TOWARDS STAMP DUTY PAI D ON DEMERGER OF UNITS, THE CIT(A) OBSERVED THAT AS PER THE PROVISIO NS OF SECTION 35DD(1), IF AN ASSESSEE INCURS ANY EXPENDITURE WHOLLY AND EXCLUSIV ELY FOR THE PURPOSE OF AMALGAMATION OF AN UNDERTAKING, THE ASSESSEE SHALL BE ALLOWED DEDUCTION OF AN AMOUNT EQUAL TO 1/5 TH OF SUCH EXPENDITURE FOR EACH OF THE FIVE SUCCESSIV E YEARS BEGINNING WITH THE PREVIOUS YEAR IN WHICH THE AMALGAMATION OR DEMERGER TAKES PLACE. AS PER SUB SECTION (2) OF SE CTION 35DD, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE EXPENDITURE MENT IONED IN SUB SECTION (1), UNDER ANY OTHER PROVISIONS OF INCOME-TAX ACT. A PL AIN READING OF SUB SECTIONS (1) AND (2) MAKES IT CLEAR THAT EXPENDITURE INCURRE D FOR AMALGAMATION OR DEMERGER SHALL BE ALLOWED ONLY U/S 35DD, BUT NOT UN DER ANY OTHER PROVISIONS OF THE ACT. THOUGH THE EXPENDITURE INCURRED IS IN THE NATURE OF DUTY BECAUSE OF SPECIFIC PROVISIONS PROVIDED BY WAY OF SECTION 3 5DD, THE SAME CANNOT BE CONSIDERED U/S 43B AND HENCE, THE AO HAS RIGHTLY DI SALLOWED EXPENDITURE 6 ITA NO.2235/MUM/2016 INCURRED FOR STAMP DUTY ON DEMERGER OF UNITS. AGGR IEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 5. LET US FIRST TAKE UP LEGAL ISSUE RAISED BY THE ASSE SSEE. THE ASSESSEE HAS CHALLENGED REOPENING OF THE ASSESSMENT ON THE GROUN D THAT THE ASSESSMENT WAS REOPENED ON THE BASIS OF CHANGE OF OPINION WITH OUT THERE BEING ANY MATERIAL TO SUGGEST ESCAPEMENT OF INCOME. THE LD.A R FOR THE ASSESSEE SUBMITTED THAT THE AO HAS REOPENED THE ASSESSMENT M ERELY 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 NO T ON ANY MATERIAL WHICH CAME TO HIS KNOWLEDGE SUBSEQUENT TO ORIGINAL ASSESS MENT. THE LD.AR FURTHER SUBMITTED THAT THE ISSUE HAS BEEN EXAMINED BY THE A O IN THE ORIGINAL ASSESSMENT PROCEEDINGS BY WAY OF A SPECIFIC QUESTIO NNAIRE FOR WHICH THE ASSESSEE HAS FILED NECESSARY DETAILS EXPLAINING THE CLAIM OF DEDUCTION FOR STAMP DUTY INCURRED ON DEMERGE OF UNITS. THE AO, AFTER S ATISFYING 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 OPINION, WHICH IS NOT PERMISSIBLE UNDER THE PROV ISIONS OF THE ACT. IN SUPPORT OF HIS ARGUMENT, HE RELIED UPON FOLLOWING JUDGEMENT S:- 320 ITR 561 (SC) CIT VS KELVINATOR OF INDIA LTD 295 ITR 333 (BOM) SIEMENS INFORMATION SYSTEM LTD V S ASST.CIT 297 ITR 119 (BOM) M.J. PHARMACEUTICALS LTD V DY. CI T 7 ITA NO.2235/MUM/2016 308 ITR 190 (BOM) ASTEROIDS TRADING & INVESTMENTS P TD VS DY CIT 301 ITR 407 (BOM) IDEA CELLULAR LTD VS DC 308 ITR 195 (BOM) ASISAN PAINTS LTD V DC 393 ITR 673 (BOM) CIT VS ARONI COMMERCIAL LTD 6. ON THE OTHER HAND, THE LD.DR STRONGLY SUPPORTED THE ORDER OF THE CIT(A). HE FURTHER SUBMITTED THAT THE AO HAS REOPENED THE A SSESSMENT WITH A VALID REASON OF BELIEF TO SUGGEST ESCAPEMENT OF INCOME WI THIN THE MEANING OF SECTION 147 OF THE ACT. THE LD.DR, REFERRING TO TH E PROVISIONS OF SECTION 147 SUBMITTED THAT WHAT IS REQUIRED FOR REOPENING OF TH E ASSESSMENT IS OBJECTIVE SATISFACTION OF THE AO WITH REGARD TO MATERIALS WHI CH EXISTED AT THE TIME OF FORMATION OF BELIEF BUT NOT SUBJECTIVE SATISFACTION OF ESCAPEMENT OF INCOME. ONCE THERE IS A REASON TO BELIEVE THAT INCOME CHARG EABLE TO TAX HAD BEEN ESCAPED ASSESSMENT, THEN THE AO CAN REOPEN THE ASSE SSMENT EVEN THOUGH NO FRESH MATERIAL CAME TO HIS KNOWLEDGE SUBSEQUENT TO COMPLETION OF ORIGINAL ASSESSMENT. IN FACT, THE ASSESSMENT COULD BE REOPE NED BASED ON EXISTING MATERIALS WHEN THE ISSUE WAS NOT EXAMINED TOTALLY B Y THE AO, IN THE ORIGINAL ASSESSMENT PROCEEDINGS. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIAL AV AILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AO REOPENED THE ASSESSMENT ON THE GROUND THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT BECAUSE OF EXCESSIVE DEDUCTION ALLOWED T OWARDS EXPENDITURE INCURRED FOR AMALGAMATION OR DEMERGER. THE AO HAS RECORDED REASONS FOR 8 ITA NO.2235/MUM/2016 REOPENING OF THE ASSESSMENT. ON PERUSAL OF THE REA SONS RECORDED FOR REOPENING OF THE ASSESSMENT, WE FIND THAT THE AO HA S REFERRED TO RECORDS THAT WERE AVAILABLE AT THE TIME OF COMPLETION OF ORIGINA L ASSESSMENT WHICH SUGGESTS ESCAPEMENT OF INCOME. ACCORDING TO THE AO, THE ISS UE OF DEDUCTION CLAIMED TOWARDS DEMERGER OF UNITS IS ALLOWED IN CONTRAVENTI ON OF SPECIFIC PROVISIONS OF SECTION 35DD, WHICH RESULTED IN ESCAPEMENT OF INCOM E. THE ASSESSEE CLAIMS THAT THE ASSESSMENT WAS REOPENED MERELY ON THE BASI S OF CHANGE OF OPINION WITHOUT ANY FRESH MATERIAL THAT CAME TO THE KNOWLED GE OF THE AO SUBSEQUENT TO COMPLETION OF 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 ASSESS EE HAS FURNISHED NECESSARY DETAILS. THE AO, AFTER SATISFYING WITH THE EXPLANA TION OF THE ASSESSEE, CHOSEN TO ALLOW THE DEDUCTION CLAIMED U/S 43B OF THE ACT B ECAUSE SUCH EXPENDITURE IS ALLOWED ONLY ON PAYMENT BASIS. SINCE THE AO IS RE FERRING 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 C HANGE 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 RECORDIN G A REASON WHICH CLEARLY SHOWS ESCAPEMENT OF INCOME ON ACCOUNT OF EXCESSIVE DEDUCTION ALLOWED 9 ITA NO.2235/MUM/2016 TOWARDS EXPENDITURE INCURRED FOR DEMERGER OF CERTAI N UNITS. THOUGH THE ASSESSEE CLAIMS TO HAVE FURNISHED NECESSARY DETAILS BEFORE THE AO AT THE TIME OF ORIGINAL ASSESSMENT, THE RECORDS CLEARLY INDICAT E THAT THE AO HAS NOT EXAMINED THE ISSUE OF DEDUCTION CLAIMED TOWARDS STA MP DUTY PAID ON DEMERGER OF UNITS WHICH SHOWS NON APPLICATION OF MI ND BY THE AO TO THE FACTS IN THE RIGHT PERSPECTIVE OF SPECIFIC PROVISIONS OF SECTION 35DD OF THE ACT. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT REOPENING IS MADE O N THE BASIS OF MERE CHANGE OF OPINION. THOUGH THE ASSESSEE HAS RELIED UPON A PLETHORA OF JUDGEMENTS IN SUPPORT OF ITS ARGUMENTS, ALL THE JUDGEMENTS REFERR ED TO BY THE ASSESSEE ARE RENDERED UNDER DIFFERENT FACTS. IN MOST OF THE CAS ES, THE ISSUE HAS BEEN EITHER EXAMINED BY THE AO IN THE ORIGINAL ASSESSMENT PROCE EDINGS OR THE ASSESSEE HAS FULLY DISCLOSED ALL MATERIAL FACTS NECESSARY FO R COMPLETING THE ASSESSMENT. IN THIS CASE, ON PERUSAL OF THE FACTS, WE FIND THAT THE ASSESSMENT ORDER IS SILENT ON THE APPLICATION OF MIND BY THE AO TO THE CORRECT FACTS IN THE LIGHT OF THE SPECIFIC PROVISIONS OF SECTION 35DD OF THE ACT. TH EREFORE, WE ARE OF THE VIEW THAT IT IS NOT A CASE OF MERE CHANGE OF OPINION AND HENCE, WE REJECT THE LEGAL GROUND RAISED BY THE ASSESSEE. 9. HAVING SAID SO, LET US EXAMINE THE ISSUE ON MERIT. THE FACTS RELATING TO THE IMPUGNED ADDITION ARE THAT THE ASSESSEE HAS DEM ERGED ITS INVESTMENT 10 ITA NO.2235/MUM/2016 DIVISION IN THE FINANCIAL YEAR 1997-98 RELEVANT TO AY 1998-99 AND VEGETABLE DIVISION IN THE FINANCIAL YEAR 2000-01 RELEVANT TO AY 2001-02. THE ASSESSEE HAS INCURRED STAMP DUTY ON DEMERGER OF ITS UNITS WHICH HAS BEEN PAID IN THE FINANCIAL YEAR RELEVANT TO AY 2005-06. THE ASSESSE E HAS CLAIMED STAMP DUTY PAID ON DEMERGER OF ITS UNITS IN THE FINANCIAL YEAR RELEVANT TO AY 2005-06 U/S 43B OF THE ACT ON PAYMENT BASIS. THE AO DISALLOWED EXPENDITURE INCURRED TOWARDS STAMP DUTY PAID ON DEMERGER OF ITS UNITS OV ER AND ABOVE 1/5 TH OF SUCH EXPENDITURE ON THE GROUND THAT EXPENDITURE INCURRED FOR AMALGAMATION OR DEMERGER OF AN UNDERTAKING SHALL BE ALLOWED A DEDUC TION OF AN AMOUNT EQUAL TO 1/5 TH OF SUCH EXPENDITURE FOR EACH OF THE FIVE SUCCESSIV E PREVIOUS YEARS BEGINNING WITH THE PREVIOUS YEAR IN WHICH THE AMALG AMATION OR DEMERGER TAKES PLACE. ACCORDING TO THE AO, WHEN A SPECIFIC PROVISION IS PROVIDED FOR DEALING WITH EXPENDITURE INCURRED FOR DEMERGER, THE ASSESSEE CANNOT IMPORT SOME OTHER PROVISIONS OF THE ACT TO GET THE EXPENDI TURE ALLOWED ON PAYMENT BASIS ON THE GROUND THAT SUCH EXPENDITURE IS IN THE NATURE OF STATUTORY LEVIES. SINCE DEMERGER HAS TAKEN PLACE IN THE ASSESSMENT YE ARS 1998-99 TO 2002-03, NO DEDUCTIONS CAN BE ALLOWED TOWARDS SUCH EXPENDITU RE, AFTER EXPIRY OF 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 TOWARD S PAYMENT OF STAMP DUTY 11 ITA NO.2235/MUM/2016 ON DEMERGER OF CERTAIN UNITS ON THE GROUND THAT SUC H 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 PRO VIDES 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 1/5 TH OF SUCH EXPENDITURE FOR EACH OF THE FIVE SUCCESSIVE PREVIOU S 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 IN CURRED BY THE ASSESSEE. THE ASSESSEE HAS INCURRED EXPENDITURE IN RELATION TO DE MERGER OF ITS EXISTING UNDERTAKING. BUT THE FACT REMAINS THAT THE EXPENDI TURE INCURRED FOR PAYMENT OF STAMP DUTY IS IN THE NATURE OF EXPENDITURE REFER RED 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 FEE BY WHATEVER NAME CALL ED UNDER ANY LAW, FOR THE TIME BEING IN FORCE, SHALL BE ALLOWED (IRRESPECTIV E OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE A SSESSEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) ONL Y IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS Y EAR IN WHICH SUCH SUM IS ACTUALLY PAID. SINCE THE PROVISIONS OF SECTION 43B HAS AN OVERRIDING EFFECT ON ALL OTHER PROVISIONS OF THE ACT, ANY EXPENDITURE REFERR ED TO IN THAT SECTION SHALL BE 12 ITA NO.2235/MUM/2016 ALLOWED ONLY ON PAYMENT BASIS. IN THIS CASE, THERE IS NO DOUBT WITH REGARD TO THE NATURE OF EXPENDITURE. THE ASSESSEE HAS INCURR ED EXPENDITURE FOR PAYMENT OF STAMP DUTY WHICH IS IN THE NATURE OF DUTY, CESS OR FEES BY WHATEVER NAME CALLED UNDER THIS ACT. SINCE THE ASSESSEE HAS INCU RRED EXPENDITURE WHICH IS IN THE NATURE OF DUTY, CESS OR FEES AND SUCH EXPENDITU RE HAS BEEN PAID DURING THE FINANCIAL YEAR RELEVANT TO AY 2005-06, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION TOWARDS SUCH EXPENDITURE U/S 43B. WE FURTHER OBSER VE THAT THE AO HIMSELF HAS ACCEPTED THAT THE SAID EXPENDITURE HAS BEEN PAI D DURING THE FINANCIAL YEAR RELEVANT TO AY 2005-06 BUT RELATABLE TO EARLIER YEA R AND DISALLOWED IN THAT YEAR. IT IS NOT A CASE OF AO THAT THE EXPENDITURE HAS BEE N ALLOWED IN THE EARLIER YEAR AND FURTHER DEDUCTION DURING THE CURRENT YEAR WOULD AMOUNT TO DOUBLE DEDUCTION. SINCE THE EXPENDITURE INCURRED BY THE ASSESSEE IS IN THE NATURE OF EXPENDITURE REFERRED TO IN SECTION 43B WHICH IS ALL OWABLE ONLY ON PAYMENT BASIS, THE ASSESSEE HAS RIGHTLY CLAIMED EXPENDITURE TOWARDS STAMP DUTY PAID ON DEMERGER. THE CIT(A), WITHOUT APPRECIATING THE FACTS, SIMPLY UPHELD ADDITIONS MADE BY THE AO. HENCE, WE REVERSE THE FI NDINGS OF THE CIT(A) AND DIRECT THE AO TO ALLOW EXPENDITURE CLAIMED TOWARDS STAMP DUTY PAID ON DEMERGER U/S 43B OF THE ACT. 13 ITA NO.2235/MUM/2016 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH AUGUST, 2017. SD/- SD/- (JOGINDER SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 11 TH AUGUST, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI