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2007 (7) TMI 434 - AT - Income TaxValidity of assumption of jurisdiction for framing reassessment u/s 147 - Minimum alternate tax u/s 115JB - Income escaping assessment - exemption u/s 10A - manufacture and sale of optical/magnetic storage media products, viz., CDs and floppies - 100 per cent EOU units - notice u/s 148 issued seeking to reopen the assessment - HELD THAT - The Assessing Officer in the impugned reassessment has only varied the conscious stand originally taken while concluding the original assessment u/s 143(3) of the Act after due application of mind, without any fresh material/information coming his possession such circumstances, the reopening is based on mere change of opinion and cannot be sustained. Hon ble Delhi High Court did not concur with the view adopted by Hon ble Gujarat High Court in the case of Praful Chunilal Patel 1998 (2) TMI 538 - GUJARAT HIGH COURT , Hon ble Delhi High Court in the case of KLM Royal Dutch Airlines 2007 (1) TMI 138 - DELHI HIGH COURT did not approve its own judgment in the case of Consolidated Photo Finvest Ltd. v. Asstt. CIT 1998 (5) TMI 20 - DELHI HIGH COURT and held the same as not laying down the correct law. We accordingly find merit in the submission of Ld Counsel for assessee that the impugned reassessment was without any fresh material/information in the possession of Assessing Officer and only on the mere change of opinion. Thus there is no valid assumption of jurisdiction u/s 147 and hence reassessment framed u/s 147 has to be cancelled. We hold so. As regards merits of the MAT - The book profit gets substituted for the total income as computed under the Act. The book profit has therefore to be wholly quarantined from the said total income. For the determination of book profits thus any mode and manner of computation of total income under the Act has not to be applied unless specifically provided, as held by the Apex Court in Apollo Tyres Ltd. v. CIT 2002 (5) TMI 5 - SUPREME COURT and as clarified in the Memorandum explaining Provisions of the Finance Bill, 2000. The major difference in the basis adopted by the appellant and the Assessing Officer is on account of adjustment of depreciation. In the books of account, depreciation has been calculated on Straight Line Method (SLM) and the book profit has been computed taking into account the aforesaid basis of book depreciation in terms of clear and unambiguous mandate contained in clause ( iii ) of the proviso to sub-section (2) of section 115JB providing that methods and rates adopted for calculating depreciation would be the same as have been adopted for preparing the accounts that are laid before annual general meeting convened as per the provisions of section 210 of the Companies Act. The Assessing Officer on the other hand has sought to exclude depreciation calculated on the basis of written down value as provided in section 32 of the Act while adding back book depreciation. As a consequence of the aforesaid, exclusion of income net of expenses relatable to units eligible for deduction u/s 10A/10B of the Act has been taken by the Assessing Officer at Rs. 9,825.14 lakhs as against Rs. 13,343.61 lakhs excluded by the appellant. The action of the Assessing Officer is contrary to the scheme of section 115JB of the Act, the unambiguous provisions of clauses ( f ) and (ii) of Explanation thereto and the settled judicial precedent in this regard. In the case of Asstt. CIT v. Varinder Agro Chemicals Ltd. 2007 (1) TMI 201 - ITAT CHANDIGARH-A , the Tribunal following the decision in the case of G.T.N. Textile Ltd. 2000 (8) TMI 35 - KERALA HIGH COURT , held that for the purpose of clause ( iv ) of section 115JA(2) of the Act, what is deductible from the net profits, is not the actual deduction of the eligible undertaking u/s 80-IA of the Act, but the profit of the eligible undertaking computed as per the profit and loss account prepared in accordance with Parts II III of Schedule VI to the Companies Act, 1956. Following the decisions squarely apply to the case of the appellant and the adjustment, in terms of clause (ii)/(from) of Explanation to section 115JB of the Act has to be for the amounts credited/debited to the profit and loss account. As the case may be. We accordingly hold that while computing book profit the amount of Rs. 133.43 crores as claimed by the assessee shall be reduced from the book profit and not the sum of Rs. 98.25 crores as computed by the Assessing Officer. In the result the appeal is allowed.
Issues Involved:
1. Validity of assumption of jurisdiction for framing reassessment under section 147 of the Income-tax Act. 2. Manner of computing book profit under section 115JB of the Income-tax Act. Detailed Analysis: Issue 1: Validity of Assumption of Jurisdiction for Framing Reassessment under Section 147 - Background: The appellant challenged the validity of the reassessment proceedings initiated under section 147 of the Income-tax Act, arguing that it was based on a mere change of opinion without any fresh material or information. - Appellant's Argument: The appellant contended that the reassessment was initiated merely on the basis of reappraisal of the same facts available during the original assessment under section 143(3). The appellant cited several judicial precedents, including the Full Bench decision of the Delhi High Court in *CIT v. Kelvinator of India Ltd.*, which held that reassessment based on a mere change of opinion is invalid. - Tribunal's Findings: The Tribunal agreed with the appellant, noting that the reasons recorded for reopening the assessment did not disclose any new material or information. The Tribunal emphasized that the original assessment was completed after due application of mind by the Assessing Officer, and the reassessment proceedings were merely a change of opinion. - Conclusion: The Tribunal held that there was no valid assumption of jurisdiction under section 147, and hence, the reassessment framed under section 147 was canceled. Issue 2: Manner of Computing Book Profit under Section 115JB - Background: The appellant challenged the computation of book profit under section 115JB, arguing that the Assessing Officer had incorrectly restricted the deduction under section 10A/10B while computing the book profit. - Appellant's Argument: The appellant argued that the book profit should be computed based on the net profit as per the profit and loss account prepared in accordance with Parts II & III of Schedule VI of the Companies Act, 1956. The appellant contended that the Assessing Officer's approach of adjusting the book profit by the deduction admissible under section 10A/10B as per the Income-tax Act was incorrect. - Tribunal's Findings: The Tribunal analyzed the provisions of section 115JB and the relevant judicial precedents, including the decision of the Supreme Court in *Apollo Tyres Ltd. v. CIT*. The Tribunal noted that the book profit should be computed based on the net profit as per the profit and loss account, and any adjustments should be made as specified in the Explanation to section 115JB. - Conclusion: The Tribunal held that the amount of Rs. 133.43 crores, as claimed by the appellant, should be reduced from the book profit, and not the sum of Rs. 98.25 crores as computed by the Assessing Officer. The Tribunal allowed the appeal on this ground. Summary: The Tribunal addressed two main issues in this appeal: the validity of the reassessment proceedings under section 147 and the correct manner of computing book profit under section 115JB. The Tribunal concluded that the reassessment proceedings were invalid as they were based on a mere change of opinion without any fresh material. On the computation of book profit, the Tribunal held that the book profit should be computed based on the net profit as per the profit and loss account, and the appellant's method of computation was correct. The appeal was allowed in favor of the appellant.
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