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2015 (10) TMI 2052 - AT - Income TaxValidity of reopening of assessment - Held that - CIT(A) has given a clear finding that the assessing officer has reopened the assessment only on the basis of material facts available with him and not on account of change of opinion. Further the observation of the AO that the assessee did not produce the relevant materials necessary for completion of assessment at the time of completion of original assessment has also been upheld by the Ld CIT(A). At the time of hearing before us the assessee could not contradict these observations made by the Ld CIT(A). Hence we do not find any infirmity in his decision in confirming the validity of re-opening of assessment. Addition of Provision for Wealth tax for computing Book Profit u/s 115JB - Held that - It is a well settled proposition that the provisions of sec. 115JB is a complete code by itself and the additions prescribed therein only can be added to the net profit for computing the book profit under that section. As per clause (a) of Explanation 1 to sec. 115JB what is required to be added to the Net profit is the amount of income tax paid or payable and the provision there for. This clause provide for addition of only income tax and not wealth tax . The question as to whether the wealth tax was actually paid or a mere provision was made in our view is irrelevant for interpreting the above said provision. The very same issue came for consideration before the Hon ble Bombay High Court in the case of Echaj Forging Pvt Ltd (2001 (2) TMI 56 - BOMBAY High Court) and the revenue conceded before the Hon ble High Court that the wealth tax could not be added to the Net profit u/s 115J of the Act. Accordingly we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the addition of provision for wealth tax while computing book profit u/s 115JB of the Act. - Decided in favour of assessee. Addition of gain arising on re-purchase and extinguishment of debenture bonds - Applicability of section 41(1) - CIT(A) deleted the addition - Held that - We are of the view that the Ld CIT(A) was right in law in holding that the provisions of section 41(1) cannot be applied as the amount of surplus is not on account of trading liability and accordingly he was justified in deleting the addition made by the assessing officer. Further as per the ratio laid down in the case of ICDS (2006 (3) TMI 90 - KARNATAKA High Court) the gain realized by the assessee on re-purchase and extinguishment of debentures cannot be considered as income u/s 2(24) of the Act.- Decided in favour of assessee. Addition of Commission/surcharge paid to SUMO Iraq Government agency on the basis of Volker Committee report - CIT(A) deleted the addition - Held that - Consistent with the view taken by the co-ordinate bench of Tribunal in the assessee s own case for AY 2001-02 we uphold the order of Ld CIT(A) in deleting the disallowance of commission/surcharges paid to SUMO and also the transportation charges made by the AO on the basis of Volkar committee report.The facts prevailing in the instant case show that the assessee has not made any payment directly to Iraqi Government. It has paid purchase price to its supplier M/s Alcon Petroleum Ltd. The Ld CIT(A) has given a categorical finding that there is no evidence or material to support the alleged payment of illicit commission/surcharge over and above the purchase price by the assessee to the Iraq Government. Further as per the contract signed between the assessee and M/s Alcon Petroleum Ltd M/s Alcon has also not paid any surcharge to Iraqi Government or their agency for procuring the crude oil. Hence we are of the view that the Ld CIT(A) was justified in deleting this addition by holding that there is no material to support this addition- Decided in favour of assessee.
Issues Involved:
1. Validity of reopening of assessment. 2. Addition of "Provision for Wealth tax" for computing Book Profit u/s 115JB. 3. Addition of gain arising on re-purchase and extinguishment of debenture bonds. 4. Addition of Commission/surcharge paid to SUMO, Iraq Government agency on the basis of Volker Committee report. 5. Addition of inland transportation fee on the basis of Volker Committee report. Issue-wise Detailed Analysis: 1. Validity of Reopening of Assessment: The assessee challenged the reopening of the assessment. The Tribunal upheld the decision of the Ld CIT(A), noting that the reopening was based on material facts available with the assessing officer and not on a change of opinion. The assessee failed to contradict these observations, and thus, the Tribunal found no infirmity in confirming the validity of reopening the assessment. 2. Addition of "Provision for Wealth Tax" for Computing Book Profit u/s 115JB: The assessee contested the addition of "Provision for Wealth tax" for computing book profit under section 115JB. The Tribunal observed that section 115JB is a complete code by itself and only prescribed additions can be made to the net profit. Clause (a) of Explanation 1 to section 115JB specifies the addition of "income tax" but not "wealth tax." The Tribunal referred to the Bombay High Court's decision in CIT Vs. Echaj Forging Pvt Ltd, which held that wealth tax cannot be added to the net profit under section 115J. Consequently, the Tribunal directed the AO to delete the addition of the provision for wealth tax while computing book profit u/s 115JB. 3. Addition of Gain Arising on Re-purchase and Extinguishment of Debenture Bonds: The revenue appealed against the deletion of the addition of gains arising from the re-purchase and extinguishment of debentures/bonds. The Tribunal analyzed section 41(1), which applies to trading liabilities for which a deduction has been allowed. The Tribunal concluded that the funds raised through debentures are capital liabilities, not trading liabilities, and hence, section 41(1) does not apply. The Tribunal also referred to the Bombay High Court's decision in Mahindra and Mahindra Ltd Vs. CIT, which held that waiver of loan principal does not constitute business income and section 41(1) is inapplicable. Additionally, the Tribunal cited the Karnataka High Court's decision in CIT Vs. Industrial Credit and Development Syndicate Ltd, which supported the view that gains from re-purchase of debentures are not income. Therefore, the Tribunal upheld the Ld CIT(A)'s decision to delete the addition. 4. Addition of Commission/Surcharge Paid to SUMO, Iraq Government Agency: The revenue challenged the deletion of the addition of commission/surcharge paid to SUMO based on the Volker Committee report. The Tribunal referred to its earlier decision in the assessee's case for AY 2001-02, where it was held that there was no material evidence to support the alleged payment of illicit commission/surcharge by the assessee to the Iraq Government. The Tribunal noted that the assessee paid the purchase price to Alcon Petroleum Ltd, and there was no direct payment to the Iraqi Government. The Tribunal upheld the Ld CIT(A)'s decision to delete the addition, consistent with the earlier Tribunal decision. 5. Addition of Inland Transportation Fee on the Basis of Volker Committee Report: Similar to the commission/surcharge issue, the revenue appealed against the deletion of the inland transportation fee addition based on the Volker Committee report. The Tribunal, following its earlier decision, upheld the Ld CIT(A)'s deletion of the addition, noting the lack of material evidence to support the claim. Conclusion: The Tribunal partly allowed the assessee's appeal by deleting the addition of the "Provision for Wealth tax" for computing book profit u/s 115JB and upheld the Ld CIT(A)'s deletion of the additions related to gains on debenture re-purchase and the commission/surcharge and transportation fee based on the Volker Committee report. The revenue's appeal was dismissed.
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