1983 (7) TMI 122 - AT - Income Tax

Summary

Issues: Validity of reopening u/s 147(b) of the IT Act,1961; Sec. 80J computation; Depreciation and development rebate; Computation of sec. 80J.

Validity of Reopening u/s 147(b) of the IT Act,1961:
The case involved the validity of reopening the assessment for the assessment year 1976-77 under section 147(b) of the IT Act. The issue arose from the receipt of a subsidy in 1976 by the assessee, which the Income Tax Officer (ITO) believed should have reduced the cost of assets for depreciation calculation. However, the Tribunal held that the subsidy did not reduce the cost in a previous assessment year. The ITO issued a notice for reopening the assessment in 1981, but the Tribunal found that there was no valid reason to believe that income had escaped assessment. The Tribunal emphasized that there was no nexus between the subsidy received and the escapement of income for the relevant assessment year. The reopening was deemed baseless and canceled.

Sec. 80J Computation:
The issue of Sec. 80J computation was raised due to a retrospective amendment. The CIT (A) had a certain view on this matter, but the reassessment was canceled, leaving this issue undecided. The Tribunal did not provide a definitive ruling on this issue due to the cancellation of the reassessment.

Depreciation and Development Rebate:
Regarding depreciation and development rebate, the Tribunal followed its previous decision in the assessee's case for the assessment year 1977-78, where it was held that the subsidy received did not reduce the cost. Therefore, the Tribunal rejected the department's appeal on this ground, affirming that depreciation and development rebate should be allowed without any reduction in cost.

Computation of Sec. 80J:
The Tribunal also addressed the computation of Sec. 80J in light of a Madras High Court decision. Following the precedent set by the Madras High Court, the Tribunal rejected the department's appeal on this ground as well.

In conclusion, the Tribunal allowed the appeal of the assessee and dismissed the departmental appeal. The judgment highlighted the importance of a valid reason to believe that income had escaped assessment for the reopening of an assessment under section 147(b) of the IT Act. The decision also emphasized the treatment of subsidies in cost calculations for depreciation and development rebate purposes, based on previous rulings and legal interpretations.