ACIT, CHENNAI V. M/s. Tractors and Farm Equipment Ltd., CHENNAI

ITA 608/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61186 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-05-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 22-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SAROJ KUMAR
• Keywords: Business income; Depreciation; Search and seizure; Earning of tax free income; Non-deduction of tax; Difference of opinion; Reason to believe; Change of opinion
• Section: 43B; 143(3); 80HHC; 14A; 260A; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI (BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ) .. I.T.A. NOS.606 TO 609 /MDS/2012 ASSESSMENT YEARS:2000-01,2002-03,2003-04 & 2004-05 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE III(2), NEW BLOCK, 4 TH FLOOR, 121, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI 600 034. (APPELLANT) V. M/S.TRACTORS AND FARM EQUIPMENT LTD., 35, NUNGAMBAKKAM HIGH ROAD, NUNGAMBAKKAM, CHENNAI 600 0234. PAN : AAACT 2761 Q (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB ADDL. C.I.T DR RESPONDENT BY : SHRI SAROJ KUMAR, ADVOCATE DATE OF HEARING : 15.05.12 DATE OF PRONOUNCEMENT : 25.05.12 O R D E R PER N.S.SAINI, ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE REVENUE AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX(A)-III, CHENNAI DATED 30 .12.2001 ITA NO.606 TO 609 /MDS/12 2 PASSED IN ASSESSMENT YEAR 2000-01, DATED 30.12.2001 PASSED IN ASSESSMENT YEAR 2002-03, DATED 30.12.2001 PASSED IN ASSESSMENT YEAR 2003-04 AND DATED 30.12.2001 PASSED IN ASSESSM ENT YEAR 2004-05. ITA NO.606/MDS./2012 (A.Y. 2000-01) 2. THE FIRST ISSUE INVOLVED IN THIS APPEAL IS THAT COMMISSIONER OF INCOME TAX(A) ERRED IN DELETING THE DISALLOWANCE UN DER SECTION 14A AND HOLDING THAT INVOKING THE PROVISIONS OF RULE 8D IS NOT IN ORDER. 3. THE AR SUBMITTED THAT IN THE INSTANT CASE THE A SSESSEE HAD SHOWN DIVIDEND INCOME OF ` 2,81,41,586/- AND CLAIMED EXEMPTION UNDER SECTION.10(33) OF THE ACT. THE ASSESSING OFF ICER MADE AN ESTIMATED DISALLOWANCE OF EXPENDITURE ATTRIBUTABLE TO EARNING OF THE DIVIDEND @ 5% OF THE DIVIDEND RECEIVED BY FOLLOWIN G THE DECISION OF THE HONBLE MADRAS BENCH OF THE TRIBUNAL IN THE CA SE OF IND BANK MERCHANT BANKING SECURITIES LTD. IN ITA NO.420/MDS. /98 DATED 14.04.2004 AND ACCORDINGLY DISALLOWED ` 14,07,080/-. 4. BEFORE THE COMMISSIONER OF INCOME TAX(A), THE A SSESSEE SUBMITTED THAT NO EXPENDITURE WAS INCURRED IN RELAT ION TO EARNING THE EXEMPT INCOME AS THE INCOME BY WAY DIVIDEND FROM CO MPANIES ARE ITA NO.606 TO 609 /MDS/12 3 MOSTLY FROM ITS SUBSIDIARIES WHICH ARE BEING HELD F OR A LONG TIME. THE ASSESSEE ALSO CONTENDED THAT THE TRIBUNAL IN ASSESS EE'S OWN CASE FOR ASSESSMENT YEAR 2004-05 IN ITA NO.732/MDS./2009 DATED 04.09.2009 HELD THAT NO DISALLOWANCE TO BE MADE UND ER SECTION14A IN RESPECT OF EXEMPT INCOME. THE ASSESSEE ALSO FI LED DETAILED BREAKUP OF THE EXEMPT INCOME AND THE INVESTMENTS FR OM WHICH INCOME IS DERIVED TO DRIVE HOME THE POINT THAT INVE STMENTS HAVE BEEN HELD FOR A LONG TIME. 5. ON APPEAL, COMMISSIONER OF INCOME TAX(A) RESTRI CTED THE DISALLOWANCE TO 2% FROM 5% OF THE DIVIDEND INCOME B Y OBSERVING THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ACIT VS. GODREJ & BOYCE MFG. CO. LTD 328 ITR 81 (BOM.) HELD THAT EVEN FOR THE PERIOD PRIOR TO ASSESSMENT YEAR 2008-09, FOR WHICH RULE 8 D IS NOT APPLICABLE, DISALLOWANCE UNDER SECTION.14A CAN BE M ADE ON A REASONABLE BASIS. THE COMMISSIONER OF INCOME TAX(A) HAS HELD THAT THE ASSESSEE IS HOLDING SHARES AND UNITS OF MORE T HAN FORTY COMPANIES/MUTUAL FUNDS. IT WAS THEREFORE NECESSARY TO TRACK THE MOVEMENT OF SHARES, TAKE RELEVANT DECISIONS, DEPOSI TS AND ENCASH CHEQUES, MAINTAIN THE TREASURY DEPARTMENT ETC. TO E ARN THE ABOVE ITA NO.606 TO 609 /MDS/12 4 EXEMPT INCOME. THESE REQUIRE INVOLVEMENT OF MANPOWE R AND ESTABLISHMENT FOR WHICH SOME EXPENDITURE IS UNAVOID ABLE. ACCORDINGLY, IN THE OPINION OF THE COMMISSIONER OF INCOME TAX(A), 2% OF THE EXEMPT INCOME WOULD BE REASONABLE EXPENDI TURE ATTRIBUTABLE TO EARNING EXEMPT INCOME. HE ACCORDING LY DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO 2 % OF THE EXEMPT INCOME. 6. ON THE OTHER HAND, THE DEPARTMENTAL REPRESENTAT IVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED TH AT THE ASSESSING OFFICER HAS ESTIMATED THE DISALLOWANCE AT 5% OF DIV IDEND INCOME, WHICH WAS REDUCED TO 2% BY THE COMMISSIONER OF INCO ME TAX(A). 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PE RUSING THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD, WE FIND THAT THE UNDISPUTED FACT THAT THE ASSESSEE HAS EARNED DI VIDEND INCOME OF ` 2,81,41,586/- DURING THE YEAR UNDER APPEAL, WHICH W AS CLAIMED EXEMPTION UNDER SECTION 10(33) OF THE ACT. ACCORDIN G TO THE ASSESSING OFFICER, THE ASSESSEE MUST HAVE INCURRED SOME EXPENDITURE FOR EARNING DIVIDEND INCOME. THE ASSES SEE HAS NOT CLAIMED ANY EXPENDITURE AGAINST THE EARNING OF THE SAID INCOME, ITA NO.606 TO 609 /MDS/12 5 WHICH WAS EXEMPT FROM TAX. ACCORDING TO HIM, EXPEN DITURE INCURRED FOR EARNING EXEMPT INCOME WAS NOT ALLOWABLE DEDUCTI ON TO THE ASSESSEE ACCORDING TO THE PROVISIONS OF SECTION 14A OF THE ACT. HE, THEREFORE, MADE ESTIMATED DISALLOWANCE OF 5% OF THE DIVIDEND INCOME TOWARDS EXPENDITURE INCURRED BY THE ASSESSEE FOR EA RNING DIVIDEND INCOME, THEREBY ARRIVING A DISALLOWANCE OF ` 14,07,080/-. ON APPEAL THE CIT(A) RESTRICTED THE DISALLOWANCE FROM 5% TO 2 % OF THE DIVIDEND INCOME. 8. THE DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND, SUPPORTED THE ORDER OF THE ASSESSING OFFICER IN ESTIMATING TH E INCOME AT 5% FOR EARNING THE SAME AND AUTHORISED REPRESENTATIVE OF T HE ASSESSEE SUPPORTED THE ORDER OF COMMISSIONER OF INCOME TAX(A ) IN ESTIMATING SUCH EXPENDITURE AT 2% OF THE DIVIDEND INCOME. DE PARTMENTAL REPRESENTATIVE COULD NOT BRING ANY MATERIAL ON RECO RD TO SHOW THAT THE ESTIMATE OF EXPENDITURE AT 2% BY THE COMMISSION ER OF INCOME TAX(A) AS EXPENDITURE FOR EARNING THE DIVIDEND INCO ME WAS LOWER THAN THE ACTUAL EXPENDITURE INCURRED BY THE ASSESSE E IN EARNING THE SAID INCOME. IN ABSENCE OF ANY SUCH MATERIAL BEING BROUGHT ON RECORD, WE DO NOT FIND ANY GOOD AND JUSTIFIABLE REA SON TO ITA NO.606 TO 609 /MDS/12 6 INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INC OME TAX(A). IT IS CONFIRMED. THE GROUND OF APPEAL OF REVENUE IS DISMI SSED. 9. THE SECOND ISSUE IN THIS APPEAL RELATES TO THE ORDER OF THE COMMISSIONER OF INCOME TAX(A) HOLDING THAT GAINS DU E TO EXCHANGE DIFFERENCE CAN BE ALLOWED AS BUSINESS PROFITS FOR C OMPUTATION OF DEDUCTION UNDER SECTION 80HHC. 10. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SING OFFICER WHILE COMPUTING DEDUCTION ALLOWABLE TO THE ASSESSEE UNDE R SECTION 80HHC OF THE ACT EXCLUDED 90% OF ` 88,40,013/- ON ACCOUNT OF EXCHANGE DIFFERENCE EARNED BY THE ASSESSEE. ON APP EAL THE ASSESSEE CONTENDED BEFORE THE COMMISSIONER OF INCOM E TAX (A) THAT THE EXCHANGE DIFFERENCE HAS ARISEN OUT OF EXCHANGE FLUCTUATION DIFFERENCE BETWEEN THE DATE OF ACCOUNTING OF SALE A ND THE DATE OF ACTUAL REALIZATION OF THE MONEY AND IT SHOULD BE TR EATED AS PROFITS OF BUSINESS. THE ASSESSEE PLACED RELIANCE ON THE FOLL OWING DECISIONS: 1. SOUTH INDIA SHIPPING V. C.I.T. 240 ITR 224 (MAD. ) 2. TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. V . C.I.T. 227 ITR 3. C.I.T. V. STERLING FOODS 237 ITR 579 (SC) ITA NO.606 TO 609 /MDS/12 7 4. CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. 113 I TR 84 (SC) 5. C.I.T. V. PANDIAN CHEMICALS LTD. 233 ITR 497 (MA D.) 11. THE COMMISSIONER OF INCOME TAX(A) CONSIDERING THE DECISIONS RELIED UPON BY THE ASSESSEE AND THE SUBMISSIONS OF THE ASSESSEE, HELD THAT THE RATIOS OF THE DECISIONS WERE APPLICAB LE TO THE ASSESSEES CASE AND ACCORDINGLY ALLOWED THE APPEAL OF THE ASSE SSEE. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE DECIS ION OF BOMBAY HIGH COURT IN THE CASE OF C.I.T. SHAH ORIGINALS [20 10] 327 ITR 19 WHEREIN IT WAS HOLD THAT THE EXCHANGE FLUCTUATIONS IN EEFC ACCOUNTS ARISEN OF THE EXPORT ACTIVITY AND DOES NOT BEAR APP ROXIMATE DIRECT NEXUS WITH THE EXPORT TRANSACTION SO AS TO FALL WIT H THE EXPRESSION DERIVED BY THE ASSESSEE IN SUB-SECTION(1) OF SEC.80 HHC. HENCE, THE EXCHANGE DIFFERENCE AND THE INTEREST ACCRUED FROM E EFC ACCOUNT COULD NOT BE TREATED AS BUSINESS INCOME OF ASSESSEE . HENCE IT WAS THE SUBMISSION THAT AS THE FACTS ARE NOT AVAILABLE ON RECORD, THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE A SSESSING OFFICER FOR ADJUDICATION AFRESH IN THE LIGHT OF THE ABOVE DECIS ION OF THE BOMBAY HIGH COURT. ITA NO.606 TO 609 /MDS/12 8 12. ON THE OTHER HAND, THE AUTHORISED REPRESENTATI VE OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX(A). 13. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND P ERUSING THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD, WE FIND THAT IN THE INSTANT CASE ASSESSING OFFICER WHILE COMPUTI NG DEDUCTION ALLOWABLE TO THE ASSESSEE UNDER SECTION.80HHC OF TH E ACT REDUCED 90% OF EXCHANGE DIFFERENCE AMOUNTING TO ` 88,40,013/- FROM THE BUSINESS PROFITS OF THE ASSESSEE. ON APPEAL, THE AS SESSEE RELIED ON THE DECISIONS STATED BEFORE THE LOWER AUTHORITIES. WE FIND THAT THE HONBLE GUJARAT HIGH COURT IN THE CASE OF C.I.T. V S. AMBA IMPEX 282 ITR 144 (GUJ.) HAS HELD THAT EXCHANGE DIFFERENCE ON ACCOUNT OF REALIZATION OF EXPORT PROCEEDS BY THE ASSESSEE FORM S PART AND PARCEL OF THE SALE PROCEEDS OF THE ASSESSEE AND HENCE, WAS THE BUSINESS INCOME OF THE ASSESSEE. IN THE PRESENT CASE, THE F ACTS EMERGING FROM THE ORDER OF THE COMMISSIONER OF INCOME TAX (A ) ARE NOT THAT THE EXCHANGE DIFFERENCE WAS EARNED BY THE ASSESSEE OUT OF EEFC ACCOUNT. ON THE OTHER HAND, THE FACTS ARE THAT THE ASSESSEE ITA NO.606 TO 609 /MDS/12 9 SUBMITTED THAT THE EXCHANGE FLUCTUATION DIFFERENCE AROSE DUE TO DIFFERENCE IN EXCHANGE BETWEEN THE DATE OF ACCOUNTI NG OF SALE AND THE DATE OF ACTUAL REALIZATION OF THE SALE PROCEEDS AND THEREFORE, THE SAME SHOULD BE TREATED AS PROFITS OF BUSINESS. TH EREFORE, THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF C.I.T. VS. SHAH ORIGINALS(SUPRA) IS NOT APPLICABLE TO THE PRES ENT CASE OF THE ASSESSEE. HENCE, WE DO NOT FIND ANY GOOD AND JUSTI FIABLE REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INC OME TAX(A). IT IS CONFIRMED. THE GROUND OF APPEAL OF REVENUE IS DISMI SSED. ITA NO.607/MDS./12 (A.Y. 2002-03) 14. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT COMMISSIONER OF INCOME TAX(A) ERRED IN DELETING THE DISALLOWANCE OF ENTRY TAX ON RAW MATERIALS AND OTHER INPUTS THAT ARE BROUGHT INTO T HE ASSESSEES FACTORY AT BANGALORE FOR MANUFACTURE OF TRACTORS. 15. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSING OFFICER OBSERVED THAT ASSESSEE HAD DEBITED AN AMOUNT OF ` 2,30,30,088/- TOWARDS ENTRY ITA NO.606 TO 609 /MDS/12 10 FEE UNDER THE HEAD MISCELLANEOUS CHARGES IN THE P ROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER OBSERVED THAT THE EN TRY TAX WAS ADJUSTABLE ONLY FROM SALES-TAX AND WILL NOT FORM PA RT OF THE EXPENDITURE DEBITED TO PROFIT AND LOSS ACCOUNT. ACC ORDINGLY, HE DISALLOWED DEDUCTION FOR THE SAME TO THE ASSESSEE. 16. BEFORE THE COMMISSIONER OF INCOME TAX(A) THE ASSESSEE SUBMITTED THAT THE ASSESSEE PAID THE ENTRY TAX UNDER THE KARNATAKA TAX ENTRY OF GOODS ACT, 1979 ON RAW M ATERIALS AND OTHER INPUTS THAT ARE BROUGHT INTO THEIR FACTOR Y AT BANGALORE FOR MANUFACTURE OF TRACTORS. IT WAS STATED THAT EN TRY TAX PAID ON INPUT RAW MATERIALS CANNOT BE SET OFF AGAINST THE S ALES-TAX PAYABLE ON FINISHED GOODS AS PER THE PROVISIONS OF THE AFORESAID ACT. THE ASSESSEE DEBITED THE PROFIT AND LOSS ACCOUNT FOR THE ABOVE EXPENDITURE AND CLAIMED THE SAME AS A LLOWABLE EXPENDITURE FOR TAX PURPOSES. THE ASSESSING OFFICE R DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT SUCH E NTRY TAX PAID WAS ALLOWED TO BE SET OFF AGAINST THE SALES TA X PAYABLE ON THE FINAL PRODUCTS. IT WAS SUBMITTED BY THE AUTHO RISED ITA NO.606 TO 609 /MDS/12 11 REPRESENTATIVE OF THE ASSESSEE THAT THE ABOVE LEVY OF TAX IS COVERED BY SECTION 3(1) OF THE SAID ACT AND NOT UND ER SECTION 4B(1) AND 4BB(1) OF THE SAID ACT AS CONTENDED BY THE ASSESSING OFFICER IN HIS ORDER. IT WAS FURTHER SUB MITTED THAT SECTION 4B(1) OF THE SAID ACT COVERS ONLY FINISHED MOTOR VEHICLES AND NOT OTHERS. TRACTOR DOES NOT COME UN DER THE DEFINITION OF MOTOR VEHICLES AND THEREFORE, THE ASS ESSING OFFICERS CONTENTION THAT THE TAX PAID IS AVAILABLE FOR SET OFF IS NOT CORRECT. HE ALSO ARGUED THAT SINCE THERE IS N O SET OFF AVAILABLE FOR INPUT RAW MATERIALS FOR MANUFACTURE O F GOODS, THE SAME HAS TO BE TREATED AS MATERIAL COST FOR GOODS S OLD THOUGH THE ENTRY TAX PAID WAS ALLOWABLE UNDER SECTION 43B IN THE YEAR OF PAYMENT. THE COMMISSIONER OF INCOME TAX(A) AFTE R CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND RE LYING ON THE DECISION OF THE CHENNAI BENCH OF TRIBUNAL ON A SIMILAR CASE IN THE CASE OF TVS MOTORS LTD VS. C.I.T. IN IT A NO.893/MDS./2007 DATED 22.05.2008 FOR ASSESSMENT YE AR 2003-04 WHERE IT WAS HELD THAT ENTRY TAX PAID WAS A N ALLOWABLE EXPENDITURE EVEN IF A SET OFF IS AVAILABLE AGAINST SUCH PAYMENT ITA NO.606 TO 609 /MDS/12 12 WHEN THE VEHICLE IS SOLD LATER. THE COMMISSIONER O F INCOME TAX(A) QUOTED THE ORDER OF THE TRIBUNAL AS UNDER:- '28. AS FAR AS FOURTH ISSUE IS CONCERNED, DURING TH E ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAD CLAIMED DEDUCTION AMOUNTING TO RS 1,19, 77,063/- TOWARDS ENTRY TAX PAID TO VARIOUS DATES. THIS ENTRY TAX WAS REQUIRED TO BE PAID FOR ENTRY OF VEHICLES TO VARIOUS STATES WHICH HAVE BEEN DISPATCHED FOR SALE. IT WAS FURTHER NOTICED THAT AS PER SALE TAX RULE OF T.N. GOVERNMENT, THE ENTRY TAX PAID WAS ALLOWED TO BE SET OFF AGAINST SALES TAX PAYABLE BY THE ASSESSEE. THE ASSE SSEE COMPANY WAS REQUESTED THAT ONCE THE SALE TAX COLLECTED WAS NOT DEBITED TO PROFIT AND LOSS ACCOUNT THEN WHY THIS DEDUCTION SHO ULD BE ALLOWED. IT WAS EXPLAINED THAT THE CLAIM WAS MADE UNDER SEC 43B ON THE BASIS OF PAYMENT TO THE GOVERNMENT, THE ASSESSING OFFICER THOUGH AGREED THAT ENTRY TAX WAS ALLOWABLE ON PAYMENT BASI S BUT SINCE SET OFF WAS AVAILABLE AGAINST THIS SALES TAX AND THE AS SESSEE HAD NOT SET OFF THE SALES TAX, THE DEDUCTION WAS NOT ALLOWED. 29. BEFORE C.I. T. (APPEALS) IT WAS SUBMITTED THAT ENTRY TAX WAS PAYABLE UPON THE ENTRY OF VEHICLES INTO THE STATE O F TN AND ORISSA. FURTHER ENTRY TAX PAID IS ALLOWED TO BE SET OFF AGA INST SALES TAX LIABILITY ARISING ON THE SALE OF VEHICLES WHICH WAS SUFFERED ENTRY TAX IN SUCH STATES. IT WAS FURTHER SUBMITTED THAT ENTRY TA X PAID BUT UNADJUSTED AGAINST THE SALE TAX LIABILITY I.E. CLOS ING AMOUNT OF ENTRY TAX WAS CLAIMED AS ALLOWABLE EXPENDITURE. SINCE THE SAME HAS ALREADY BEEN PAID THIS COULD NOT BE SET OFF BECAUSE SALES TAX WAS ITA NO.606 TO 609 /MDS/12 13 COLLECTED ON SALE OF SUCH STOCK SUBSEQUENTLY AND TH EN ACCORDINGLY OFFERED AS INCOME IN THE YEAR IN WHICH THE SAME WAS RECEIVED. IT WAS ALSO EXPLAINED THAT AN AMOUNT 0 RS 1,19,77,063/- RE CEIVED DURING THE SUCCEEDING FINANCIAL YEAR WAS OFFERED FOR TAX I N ASSESSMENT YEAR 2004-05 . THE C.I. T. (APPEALS) DELETED THE ADDITION VIDE PARA 10.3 WHICH READS AS UNDER: 10.3. PERUSAL OF THE FACTS REVEALS THAT THE APPELL ANT IS CLAIMING DEDUCTION ON ACCOUNT OF ENTRY TAX ON THE BASIS OF I TS ACTUAL PAYMENT. THE SAID ENTRY TAX PAID IS ADJUSTED AGAINST THE SAL ES TAX LIABILITY AS AND WHEN THE SALES ARE EFFECTED. THEREFORE THE ISSU E UNDER CONSIDERATION IS WHETHER THE AMOUNT OF ENTRY TAX AC TUALLY PAID BY THE APPELLANT IN THE CURRENT YEAR IS ALLOWABLE AS DEDUC TION U/S 43B OR NOT. AT THIS STAGE WE ARE NOT CONCERNED AS TO IN WH AT MANNER THE AMOUNT OF ENTRY TAX IS ADJUSTED AGAINST THE SALES T AX LIABILITY. THE MANNER IN WHICH ENTRIES HAVE BEEN MADE WITH REFEREN CE TO SALES TAX EITHER ACTUALLY PAID OR SET OFF AGAINST THE ENTRY T AX PAID ARE ENTIRELY A DIFFERENT MATTER, IF THE APPELLANT HAS COLLECTED SA LES TAX FROM THE CLIENTS BUT IT HAS NOT BEEN PAID TO THE GOVERNMENT, THEN THIS AMOUNT CERTAINLY BECOMES A PART OF THE TRADING LIABILITY. HOWEVER, IN THE PRESENT CASE, THIS IS NOT REASON FOR WHICH THE SAID ADDITION HAS BEEN MADE BY THE AO. IN THE PRESENT CASE IT IS NOT THE C ASE OF THE AO THAT THE APPELLANT HAS COLLECTED SALES TAX FROM THE CLIE NTS AND IT HAS RETAINED IT WITHOUT MAKING PAYMENT TO THE GOVERNMENT EXCHEQUER. ON THE CONTRARY, THE ISSUE IS ENTIRELY DIFFERENT WH ETHER THE ENTRY TAX ACTUALLY PAID BY THE APPELLANT DURING THE YEAR UNDE R CONSIDERATION IS ALLOWABLE AS DEDUCTION OR NOT. I AM OF THE VIEW, TH AT ON THE FACTS ITA NO.606 TO 609 /MDS/12 14 BROUGHT ON RECORD BY THE AO, THE APPELLANT IS CLEAR LY ENTITLED TO DEDUCTION ON ACCOUNT OF TOTAL AMOUNT OF ENTRY TAX A CTUALLY PAID BY IT IN THE CURRENT YEAR. THEREFORE, THE ADDITION MADE B Y THE AO IS HEREBY DELETED. 30. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE RE ITERATED THE SUBMISSIONS MADE BEFORE THE C.I.T.(APPEALS). HE FUR THER SUBMITTED THAT ENTRY TAX WAS ACTUALLY PAID AND THEREFORE, IT IS CLAIMED UNDER SEC. 43B OF THE ACT. THOUGH THIS ENTRY TAX IS PERMITTED TO BE SET OFF AGAINST SALES TAX PAYABLE AS AND WHEN IT IS REDUCED FROM TH E SALES TAX PAYABLE ON ACCOUNT OF SALES TAX IS CLAIMED ONLY AT THE LOWER AMOUNT. 31. ON THE OTHER HAND, THE ID. DEPARTMENTAL REPRES ENTATIVE STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFIC ER. 32. AFTER CONSIDERING THE SUBMISSIONS OF THE PARTI ES, WE ARE OF THE VIEW THAT THE C.I.T. (APPEALS) HAS CORRECTLY AD JUDICATED THE ISSUE BECAUSE IF THE ASSESSEE HAS NOT RECEIVED OR COLLECT ED THE SALES TAX ON ACCOUNT OF SALES MADE BY IT, THEN NATURALLY ENTRY T AX CANNOT BE SET OFF AGAINST SUCH SALES TAX. EVEN, THE ASSESSING OFFICER HAS ADMITTED THAT THE DEDUCTION ON ACCOUNT OF ENTRY TAX IS ALLOWABLE IF THE PAYMENT IS ACTUALLY MADE AND ADMITTEDLY PAYMENT OF ENTRY TAX H AS BEEN MADE BY THE ASSESSEE. THEREFORE, WE FIND NOTHING WRONG WITH THE ORDER OF THE CIT(APPEALS). THE REVENUE'S APPEAL IS DISMISSED.' ITA NO.606 TO 609 /MDS/12 15 FOLLOWING THE ABOVE QUOTED ORDER, COMMISSIONER OF INCOME TAX(A) HELD THAT ENTRY TAX PAID BY THE ASSESSEE FO R GOODS ENTERING KARNATAKA FOR BEING USED IN THEIR MANUFACTURING FAC ILITY IN THAT STATE IS AN ALLOWABLE DEDUCTION UNDER SECTION 43B. 17. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE REL IED ON THE GROUNDS OF APPEAL TAKEN BY THE REVENUE WHERE IN GRO UND NO.2.2 OF THE APPEAL, IT IS STATED THAT THE REVENUE HAS NOT A CCEPTED THE DECISION OF THE TRIBUNAL IN THE CASE OF TVS MOTORS LTD. (SUPRA) AS IT HAS FILED AN APPEAL UNDER SECTION 260A OF THE ACT. 18. ON THE OTHER HAND, THE AUTHORISED REPRESENTATI VE OF THE ASSESSEE SUPPORTED THE ORDER OF COMMISSIONER OF INC OME TAX(A). 19. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PE RUSING THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD, WE FIND THAT IN THE INSTANT CASE ASSESSING OFFICER DISALLOWED DE DUCTION OF ` 2,30,30,088/- ON ACCOUNT OF ENTRY TAX PAID BY THE ASSESSEE UNDER ITA NO.606 TO 609 /MDS/12 16 THE KARNATAKA TAX ENTRY OF GOODS ACT, 1979 ON THE G ROUND THE SAME WAS ALLOWABLE AGAINST SALES TAX PAID BY THE ASSESSE E. THE COMMISSIONER OF INCOME TAX(A) HELD THAT THE ASSESSE ES CASE WAS COVERED UNDER THE PROVISIONS OF SEC.3(1) OF THE UND ER THE KARNATAKA TAX ENTRY OF GOODS ACT, 1979 AND NOT UNDER SECTION 4B(1) AND 4BB(1) OF THE SAID ACT, WHICH PROVIDES FOR LEVY OF TAX AND SET OFF OF TAX PAID ON THE MOTOR VEHICLES, THAT ARE BROUGHT INTO THE STATE. THE ASSESSEE WAS MANUFACTURING TRACTORS AND THEREFORE D ID NOT FALL UNDER THE DEFINITION OF MOTOR VEHICLES AND HENCE, NO SET OFF WAS AVAILABLE TO ENTRY TAX PAID UNDER SECTION 3(1) BY THE ASSESSEE. FURTHER, HE RELIED ON THE DECISION OF THE CHENNAI BENCH OF TRIBUNAL ON THE SAME ISSUE IN THE CASE OF TVS MOTORS LTD.(SUPRA) AND ALLOWED THE APPEAL OF THE ASSESSEE. 20. THE DEPARTMENTAL REPRESENTATIVE COULD NOT POIN T OUT ANY SPECIFIC ERROR IN THE ORDER OF THE COMMISSIONER OF INCOME TAX(A). HE COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ABOVE QUOTED DECISION OF THE TRIBUNAL WAS REVERSED IN APPEAL BY A HIGHER FORUM. WE THEREFORE, DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO ITA NO.606 TO 609 /MDS/12 17 INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INC OME TAX(A). IT IS CONFIRMED. THE GROUND OF APPEAL OF REVENUE IS DISMI SSED. ITA NO.608/MDS./12 (A.Y. 2003-04) 21. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT COMMISSIONER OF INCOME TAX(A) ERRED IN HOLDING THAT THE REASSESSMEN T PROCEEDINGS WERE INVALID . 22. THE BRIEF FACTS OF THE CASE ARE THAT THE ORIGI NAL ASSESSMENT ORDER UNDER SECTION 143(3) WAS COMPLETED ON 14.02.2 006. THE ASSESSING OFFICER REOPENED THE ASSESSMENT ON THE GR OUND THAT THE ASSESSEE HAD FAILED TO DEDUCT TDS ON COMMISSION ON SALES OF ` 2.19 LAKHS, CONSULTANCY CHARGES OF ` 525.51 LAKHS AND OTHERS OF ` 91.78 LAKHS. HE ALSO REFERRED TO THE ORDER UNDER SECTION 143(3) FOR ASSESSMENT YEARS 2006-07 & 2007-08 WHERE IT WAS FOU ND THAT THE CONSULTANCY CHARGES PAID BY THE ASSESSEE WAS NOTHIN G BUT FEE FOR TECHNICAL SERVICES ON WHICH TAX IS REQUIRED TO BE D EDUCTED. SINCE THE ABOVE EXPENDITURE WAS REQUIRED TO BE DISALLOWED UND ER SECTION ITA NO.606 TO 609 /MDS/12 18 40(A)(I) AND SINCE CLAIM OF DEPRECIATION ON BRAND E QUITY ALSO NEEDED TO BE EXAMINED, THE CASE WAS REOPENED. 23. THE ASSESSEE STRONGLY OBJECTED TO REOPENING OF THE ASSESSMENT UNDER SECTION 147 AFTER A LAPSE OF MORE THAN FOUR YEARS. IN ITS SUBMISSION, THE ASSESSEE STATED THAT REASON GIVEN BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT WAS DEALT WITH BY THE ASSESSING OFFICER IN THE ORIGINAL ORDER MADE U NDER SECTION 143(3) AND THERE WAS NO NEW INFORMATION AVAILABLE T O REOPEN THE ASSESSMENT. IT WAS SUBMITTED THAT THE FIRST REASON FOR REOPENING WAS DUE TO NON-DEDUCTION OF TAX AT SOURCE FOR PAYMENT T O NON-RESIDENTS. IT WAS SUBMITTED THAT DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER HAD CALLED FOR CERTAIN PARTIC ULARS AS PER QUESTIONNAIRE DATED 28.10.2005. THE INFORMATION CA LLED FOR INCLUDED DETAILS OF PAYMENTS MADE IN FOREIGN CURRENCY AND TA X DEDUCTED THEREON AND A NOTE ON DEPRECIATION CLAIM ON BRAND E QUITY. IN RESPONSE TO THE INFORMATION CALLED FOR, THE ASSESSE E FILED ALL THE RELEVANT DETAILS BY ITS LETTER DATED 12.12.2005. S UBSEQUENTLY, THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) BY THE ITA NO.606 TO 609 /MDS/12 19 ASSESSING OFFICER ON 14.02.2006 AFTER MAKING CERTAI N ADDITIONS AND DISALLOWANCE. HOWEVER, NO DISALLOWANCE WAS MADE UN DER SECTION 40(A)(I). THE SECOND REASON FOR REOPENING WAS REGA RDING GRANT OF DEPRECIATION ON BRAND EQUITY. IT WAS SUBMITTED THA T IN THIS REGARD THE ASSESSEE SUBMITTED THAT AFTER GOING THROUGH THE INF ORMATION FILED BY THE ASSESSEE WITH THE ASSESSING OFFICER, DEPRECIATI ON ON BRAND EQUITY WAS DISALLOWED BY THE ASSESSING OFFICER AT THE TIME OF MAKING THE ORDER UNDER SECTION 143(3). THE ORDER UNDER SECTIO N 143(3) SPECIFICALLY REFERS TO THE DISALLOWANCE OF DEPRECIA TION ON BRAND EQUITY. HENCE, THE SECOND REASON FOR REOPENING DOES NOT EXI ST. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER WAS IN POSSESSION OF ALL RELEVANT INFORMATION CALLED FOR BEFORE MAKING THE A SSESSMENT AND AFTER APPLYING HIS MIND HAD MADE THE ORDER. IT WA S ARGUED THAT FOR MERE CHANGE OF OPINION, REOPENING CANNOT BE MADE AN D FOR THIS RELIED ON THE DECISION OF THE HONBEL SUPREME COURT IN THE CASE OF C.I.T. VS. KELVINATOR OF INDIA LTD. 320 ITR 561 (SC). LD . COMMISSIONER OF INCOME TAX(A) AFTER CONSIDERING THE SUBMISSIONS HEL D THE REOPENING TO BE INVALID AND WHILE DOING SO, HE OBSERVED THIS AS UNDER:- ITA NO.606 TO 609 /MDS/12 20 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE SUBMISSION OF THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSE E. I HAVE ALSO GONE THROUGH THE DECISIONS RELIED ON BY THE AO AND LD. A UTHORISED REPRESENTATIVE OF THE ASSESSEE. THE RETURN OF THE A PPELLANT FOR THE RELEVANT ASSESSMENT YEAR WAS PROCESSED UNDER SECTIO N 143(1) ON 30.3.04. SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETE D UNDER SECTION.143(3) ON 14.02.06. THE ASSESSING OFFICER D URING THE ASSESSMENT PROCEEDINGS HAD CALLED FOR INFORMATION O N VARIOUS EXPENSES, INCOME AND OTHER RELEVANT DETAILS BY HIS LETTER DAT ED 28.10.2005 A COPY OF WHICH HAS BEEN FURNISHED BY THE APPELLANT. THE I NFORMATION CALLED FOR INCLUDED THE FOLLOWING: I. DEPRECIATION CLAIM ON BRAND EQUITY AMOUNT OF RS .4.95 CRORES UNDER ITEM 3 OF THE SAID LETTER AND II. EXPENDITURE IN FOREIGN EXCHANGE UNDER VARIOUS HEADS AND TAX DEDUCTED THEREON. IF TDS WAS NOT APPLICABLE, THE RE ASONS FOR THE SAME VIDE ITEM 14 OF THE SAID LETTER. THE REQUIRED INFORMATION WAS FILED BY THE ASSESSEE BY ITS LETTER DATED 12.12.2005 A COPY HAS BEEN PRODUCED BY THE APPELLAN T. THE ASSESSEE ALSO PRODUCED A COPY OF THE RELEVANT AGREEMENT FOR USE O F BRAND IN RESPECT OF CLAIM OF DEPRECIATION ON BRAND EQUITY AND DETAILS O F EXPENDITURE IN FOREIGN CURRENCY ALONG WITH REASON FOR NON-DEDUCTIO N OF TAX FOR CERTAIN PAYMENTS. THE AO DISALLOWED THE DEPRECIATION ON BRA ND EQUITY GIVING REASONS THEREFOR. NO DISALLOWANCE WAS MADE BY THE A O ON EXPENDITURE IN ITA NO.606 TO 609 /MDS/12 21 FOREIGN CURRENCY. THE AO MADE OTHER ADDITIONS DISAL LOWING CERTAIN EXPENDITURE CLAIMED BY THE APPELLANT AND COMPLETED THE ASSESSMENT. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED BY THE AO BY ISSUE OF NOTICE U/S 148 DATED 29.03.2010. THE AO BY HIS LETTER DATED 21 .10.2010 INFORMED THE APPELLANT THAT HE HAD REASON TO BELIEVE THAT IN COME HAS ESCAPED ASSESSMENT AS THE CLAIM FOR DEPRECIATION ON BRAND E QUITY NEED TO VERIFIED FOR CORRECTNESS AND FAILURE TO DEDUCT TAX ON FOREIG N EXPENDITURE IN THE NATURE OF COMMISSION ON SALES, CONSULTANCY CHARGES AND OTHERS ARE LIABLE TO BE DISALLOWED U/S 40(A)(I) OF THE ACT. THE APPELLANT BY ITS LETTER DA TED 15.11.2010 OBJECTED TO THE REOPENING OF THE ASSESSM ENT STATING THAT THE GROUND ON WHICH THE ASSESSMENT WAS PROPOSED TO BE R EOPENED IS NOT TENABLE AS ALL THE INFORMATION RELATING TO THE ISSU ES HAVE BEEN PRODUCED BEFORE THE AO AT THE TIME OF REGULAR ASSESSMENT U/S 143(3). 6.1 THE ISSUE HAS TO BE DECIDED AGAINST THE ABOVE FACTUAL BACKGROUND. THE ASSESSMENT WAS REOPENED AFTER A LAP SE OF MORE THAN FOUR YEARS FROM THE END OF THE SUBJECT ASSESSMENT YEAR. THE AO HAD ALREADY PASSED ASSESSMENT ORDER U/S 143(3). THE REASONS STATED BY AO FOR REOPENING THE ASSESSMENT HAD BEEN DEALT WITH BY THE AO IN THE REGULAR ASSESSMENT ITSELF. THE AO HAD SPECIFICALLY DISCUSS ED THE DISALLOWANCE OF DEPRECIATION ON BRAND EQUITY AND THE ACCEPTANCE OF THE SAME BY THE APPELLANT. FURTHER THE AO HAD SPECIFICALLY CALLED F OR PAYMENTS TO NON- RESIDENTS AND DETAILS OF TDS. THE ASSESSEE HAD FURN ISHED THE PARTICULARS AND ALSO EXPLAINED AS TO WHY IT HAD NOT DEDUCTED TA X AT SOURCE ON CERTAIN PAYMENTS TO NON-RESIDENTS. HAVING CALLED FOR THE DE TAILS AND ACCEPTED THE SAME AND HAVING MADE NO DISALLOWANCE IN THE ASSESSM ENT ORDER WOULD GO TO SHOW THAT THE AO HAD APPLIED HIS MIND IN ALLOWIN G THE CLAIM OF THE ITA NO.606 TO 609 /MDS/12 22 APPELLANT WHILE PASSING THE ORDER U/S 143(3). THE AO HAS NOT SHOWN AS TO WHICH FACTS THE ASSESSEE HAD OMITTED TO FILE IN THE COURSE OF THE REGULAR ASSESSMENT PROCEEDINGS. HENCE I AM OF THE CONSIDERE D OPINION THAT THE REOPENING ON THE SAME SET OF FACTS IS MERELY DUE TO CHANGE OF OPINION. FURTHER, THE AO IN THE ORDER MERELY MENTIONED THE O BJECTION OF THE APPELLANT BUT DID NOT GIVE ANY REASONS FOR REJECTIN G THE OBJECTIONS. AT THIS JUNCTURE, IT WOULD BE RELEVANT TO DISCUSS THE DECIS ION OF THE HON'BLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA (S UPRA) WHERE IT WAS HELD AS UNDER: ' .... .POST 1 ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' TAILING WHICH, WE ARE AFRAID, S. 147 WOULD GIVE ARBITRARY POWERS TO THE AO TO REOPEN THE ASSESSMENT ON THE BASIS OF 'MERE CHANGE OF OPINION' WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BE TWEEN POWER TO REVIEW AND POWER TO RE ASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRECONDITIONS AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED AS CONTENDED BY THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPINION AS IN BUILT TEST CO CHECK THE ABUSE OF POWER BY THE A.O. HENCE, AFTER 1 APRIL, 1989 THE AO HAS POWER TO REOPEN PROVIDED THERE IS 'TANGIBLE MAT ERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE LIVE LINK WITH THE FO RMATION OF THE BELIEF. ITA NO.606 TO 609 /MDS/12 23 THERE IS NO REASON AS TO WHY THE RATIO OF THE ABOVE DECISION WOULD NOT BE APPLICABLE TO THE FACTS OF THE INSTANT CASE. FURTHE R, AS HELD BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT V CHOLAMANDALA M INVESTMENTS AND FINANCE CO. LTD, 309 ITR 310(MAD), THE AO CANNOT RE OPEN THE ASSESSMENT BEYOND FOUR YEARS FROM THE END OF THE ASSESSMENT YE AR IF THE ASSESSEE HAD FILED ALL THE PARTICULARS NECESSARY FOR MAKING ASSE SSMENT. THE OTHER DECISIONS CITED BY THE ASSESSEE ALSO SUPPORTS THIS VIEW. IN THE CASE OF CIT V ANNAMALAI FINANCE LTD., 275 ITR 451 (MAD) THE HON'B LE JURISDICTIONAL HIGH COURT HAS HELD THAT WHERE THE ASSESSEE HAS FUL LY AND TRULY DISCLOSED ALL MATERIAL FACTS NECESSARY FOR COMPLETING THE ASSESSM ENT U/S 143(3) , NOTICE U/S 148 ISSUED BEYOND FOUR YEARS WAS NOT VALID. IN CASE OF INCORRECT OPINION FORMED BY THE AO, IT CANNOT BE SAID THAT THERE WAS NON-DISCLOSURE OF PRIMARY FACTS BY ASSESSEE TO JUSTIFY REASSESSMENT A FTER EXPIRY OF FOUR YEARS FROM THE RELEVANT ASSESSMENT YEAR [GUJARAT CARBORI & INDUSTRIAL LTD. VS., JCIT 307 ITR 271 (GUJ)]. IN VIEW OF THE ABOVE FACTU AL POSITION AND AUTHORITATIVE PRECEDENTS, IT IS HELD THAT THE REOPE NING OF ASSESSMENT U/S 147 WAS NOT VALID. ACCORDINGLY, THE GROUND IS ALLOWED. 24. THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE GROUNDS OF APPEAL TAKEN BY THE REVENUE. 25. THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX(A). ITA NO.606 TO 609 /MDS/12 24 26. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDER OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER MADE THE ORIGINAL ASSESSMENT UNDE R SECTION 143(3) OF THE ACT ON 14.02.2006. THE ASSESSMENT WA S REOPENED SUBSEQUENTLY BY ISSUING OF NOTICE UNDER SECTION 148 ON 29.03.2010 FOR THE FOLLOWING REASONS AS RECORDED IN THE ASSESS MENT ORDER:- THE ASSESSEE HAS CLAIMED THE FOLLOWING EXPENDITURE IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2003-04. COMMISSION ON SALE ` 2.19 LAKHS CONSULTANCY CHARGES ` 525.51 LAKHS OTHERS ` 91.78 LAKHS WHILE FINALIZING THE ASSESSMENTS UNDER SECTION 143( 3) FOR ASSESSMENT YEAR 2006-07 AND 2007-08, IT HAS COME TO LIGHT THAT THE CONSULTANCY CHARGED PAID BY THE ASSESSEE IS NOTHING BUT FEE FOR TECHNICAL SERVICES AND ACCORDINGLY, THE SAME HAS BEEN DISALLOWED UNDER SEC TION 40(A)(I). SIMILARLY PAYMENT OF COMMISSION ON SALES AND PAYMEN TS MADE UNDER OTHERS ALSO WERE LIABLE TO TAX DEDUCTION UNDER SE CTION 195 AND AS THE ASSESSEE FAILED TO DEDUCT TAX, THE EXPENDITURE CLAI MED TOWARDS THE ABOVE WERE ALSO DISALLOWED UNDER SECTION 40(AI). ITA NO.606 TO 609 /MDS/12 25 IN VIEW OF THE ABOVE, THE EXPENDITURE CLAIMED UND ER THESE HEADS FOR THE ASSESSMENT YEAR 2003-04 ALSO DESERVES TO BE DIS ALLOWED INVOKING OF THE PROVISIONS OF SECTION 40(AI). THE ASSESSEE HAS CLAIMED DEPRECIATION ON BRAND EQUI TY AT ` 1,23,95,833/- HOWEVER, THE DETAILS OF AGREEMENTS AND TERMS AND CO NDITIONS THEREIN HAVE TO BE EXAMINED TO ASCERTAIN THE CORRECTNESS OR OTHE RWISE OF THE DEPRECIATION CLAIMED. IN VIEW OF THE ABOVE, THE DEP RECIATION CLAIMED IN THE ABSENCE OF RELEVANT DETAILS IS TO BE WITHDRAWN. THE ASSESSEE HAS NOT DISCLOSED ALL THE MATERIAL FA CTS FULLY AND TRULY NECESSARY FOR THE ASSESSMENT AT THE TIME OF SCRUTIN Y. IT IS TO BE FURTHER NOTED THAT AS PER EXPLANATION 1 TO SECTION 147, PRODUCTION OF BOOKS AT THE TIME OF SCRUTINY WILL NO T AMOUNT TO DISCLOSE OF ALL FACTS NECESSARY FOR ASSESSMENT. THE COMMISSIONER OF INCOME TAX(A) HAS HELD THE RE OPENING OF THE ASSESSMENT AS INVALID FOR THE REASONS QUOTED ABOVE IN THIS ORDER. WE FIND THAT IN THE INSTANT CASE REOPENING OF THE A SSESSMENT WAS MADE BY ISSUE OF NOTICE UNDER SECTION 148 ON 29.03. 2010, WHICH WAS BEYOND THE PERIOD OF FOUR YEARS OF THE RELEVANT ASS ESSMENT YEAR. THEREFORE, PROVISO TO SECTION 147 OF THE ACT IS APP LICABLE IN THE INSTANT CASE. ACCORDING TO THE SAID PROVISO, THE A SSESSMENT FRAMED ITA NO.606 TO 609 /MDS/12 26 UNDER SECTION.143(3) OF THE ACT CANNOT BE REOPENED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSME NT YEAR UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE T O A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT, FOR THAT ASSESSMENT YEAR. A READING OF THE ABOVE RECORDED RE ASONS SHOW THAT THERE IS NO SUCH FAILURE AS MENTIONED IN THE PROVIS O TO SECTION 147 OF THE ACT EXISTS IN THE INSTANT CASE. IT IS AN ESTAB LISHED POSITION OF LAW THAT THE ASSESSEE IS REQUIRED TO DISCLOSE ALL PRIMA RY FACTS FULLY AND TRULY AND THEREAFTER, IT IS NOT THE DUTY OF THE ASS ESSEE TO TELL THE ASSESSING OFFICER AS TO WHAT INFERENCE IS TO BE DRA WN FROM THOSE PRIMARY FACTS OR WHAT OTHER SECONDARY FACTS ARE REQ UIRED TO BE EXAMINED. IN THE INSTANT CASE, WE FIND FROM THE RE CORDED REASONS THAT NO FALSITY IN THE PRIMARY FACTS FURNISHED BY T HE ASSESSEE COULD BE POINTED OUT BY THE ASSESSING OFFICER OR ANY PRIMARY FACT WAS NOT DISCLOSED BY THE ASSESSEE. WE THEREFORE, DO NOT FI ND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF T HE COMMISSIONER OF ITA NO.606 TO 609 /MDS/12 27 INCOME TAX(A). IT IS CONFIRMED. THE GROUND OF APPE AL OF REVENUE IS DISMISSED. ITA NO.609/MDS./12 (A.Y. 2004-05) 27. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT COMMISSIONER OF INCOME TAX(A) ERRED IN HOLDING THAT GAINS DUE TO EX CHANGE DIFFERENCE CAN BE ALLOWED AS BUSINESS PROFITS FOR COMPUTATION OF DEDUCTION UNDER SECTION.80HHC OF THE ACT. 28. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSING OFFICER REDUCED 90% OF EXCHANGE DIFFERENCE AMOUNTING TO ` 77,54,426/- FROM THE BUSINESS PROFITS OF THE ASSESSEE AFTER COMPUTIN G THE DEDUCTION ALLOWABLE UNDER SECTION.80HHC OF THE ACT. ON APPEA L, THE COMMISSIONER OF INCOME TAX(A) ALLOWED THE APPEAL OF THE ASSESSEE ON THE GROUND THAT THE EXCHANGE DIFFERENCE ARISES D UE TO DIFFERENCE BETWEEN THE DATE OF ACCOUNTING OF SALES AND THE DAT E OF ACTUAL REALIZATION OF THE MONEY AND THEREFORE, IT WAS PART OF THE SALE PROCEEDS OF ASSESSEE HAS HELD BY THE HONBLE GUJAR AT HIGH COURT ITA NO.606 TO 609 /MDS/12 28 IN THE CASE OF C.I.T. VS. AMBA IMPEX 282 ITR 144 (G UJ.) WE HAVE DISMISSED THE APPEAL OF REVENUE ON THE SAME GROUND ON THIS ISSUE IN ITA NO.606/MDS./12 FOR ASSESSMENT YEAR 2000-01 IN P ARA-13 OF THIS ORDER. FOR THE VERY SAME REASON, WE CONFIRM THE ORD ER OF THE COMMISSIONER OF INCOME TAX (A) AND DISMISS THE GROU ND OF APPEAL OF REVENUE. 29. IN THE RESULT, ALL THE APPEALS OF REVENUE ARE D ISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 25 TH MAY, 2012 AT CHENNAI SD/- SD/- (VIKAS AWASTHY) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 25 TH MAY, 2012. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE