2013 (8) TMI 667 - AT - Income Tax

Re-opening of Assessment under section 147 of the Income Tax Act - Assessing Officer granted additional depreciation in the regular assessment and also agreed for deduction u/s. 80HHC on DEPB entitlement Held that - Thereafter, assessing Officer not came in to possession of any tangible fresh material to come to the conclusion that the deduction granted to the assessee in respect of additional depreciation and 80HHC deduction in respect of sale proceeds of DEPB entitlement is incorrect - There is no dispute that the assessee furnished full details in the original return of income and there is only change of opinion and the Assessing Officer did not demonstrate what material came to his knowledge for reopening the assessment which was not available at the time of completion of regular assessment Relying upon the Apex Court judgment in the case of CIT vs. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT OF INDIA , it has been held that reopening of assessment is not in accordance with law Decided in favor of Assessee. Availability of Additional depreciation u/s 32(1)(iia) Held that - Relying upon the judgment in the case of ACIT vs. SIL Investment Ltd. 2012 (6) TMI 83 - ITAT DELHI , eligibility for additional depreciation stands admitted Profit element of DEPB can be reduced from the export profits for the purpose of working out the deduction u/s. 80HHC Held that - It is a well-settled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in Explanation (baa) to section 80HHC read with the words used in clauses (iiid) and (iiie) of section 28; the assessee was entitled to a deduction under section 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee Appeal allowed Decided in favor of Assessee.

Summary

Issues Involved:
1. Validity of the notice under section 148.
2. Disallowance of additional depreciation.
3. Disallowance of deduction under section 80HHC in respect of export benefits received.

Issue-wise Detailed Analysis:

1. Validity of the notice under section 148:
The assessee contended that the notice under section 148 was invalid as all facts were available to the Assessing Officer (AO) during the original assessment under section 143(3). The AO reopened the assessment on the grounds of excess additional depreciation and non-adherence to conditions for deduction on 90% export benefits. The assessee argued that there was no fresh information warranting reassessment and relied on the Supreme Court judgment in CIT vs. Kelvinator of India Ltd., which mandates "tangible material" for reopening an assessment. The Tribunal agreed with the assessee, noting that the AO had no new information or tangible material post the original assessment, rendering the reopening as mere "change of opinion," which is not permissible. Consequently, the Tribunal quashed the reopened assessment.

2. Disallowance of additional depreciation:
The AO disallowed the additional depreciation claimed by the assessee, arguing it could not be spread over multiple years. The assessee claimed 50% of the eligible additional depreciation in the preceding year and the balance in the current year, in line with section 32(1)(iia). The Tribunal referred to the decision in ACIT vs. SIL Investment Ltd., which allowed the balance 50% of additional depreciation in the subsequent year. Thus, the Tribunal ruled in favor of the assessee, allowing the additional depreciation claim.

3. Disallowance of deduction under section 80HHC in respect of export benefits received:
The AO disallowed the deduction under section 80HHC on the DEPB (Duty Entitlement Pass Book) benefits, citing the assessee's failure to meet additional conditions for export turnover exceeding Rs. 10 crores. The assessee argued that only the profit element of DEPB should be reduced from export profits, relying on the Supreme Court judgment in Topman Exports vs. CIT. The Tribunal noted that the DEPB credit and profit on its transfer are treated as separate income items under section 28(iiib) and 28(iiid) respectively. The Tribunal concluded that the assessee was entitled to the deduction as per the Supreme Court's interpretation, which differentiates between the face value of DEPB and the profit on its transfer. Therefore, the Tribunal allowed the deduction under section 80HHC.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the reopened assessment and permitting the claims for additional depreciation and deduction under section 80HHC. The order emphasized adherence to judicial precedents and statutory interpretations, ensuring the assessee's claims were in accordance with the law.