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2012 (7) TMI 654 - AT - Income TaxDisallowance u/s 14A read with rule 8D - expenditure on earning dividend - held that - Departmental Representative could not bring any material on record to show that the estimate of expenditure at 2% by the Commissioner of Income Tax(A) as expenditure for earning the dividend income was lower than the actual expenditure incurred by the assessee in earning the said income. - Order of CIT(A) confirmed. Gain due ot exchange difference - business profit - held that - the facts 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 submitted that the exchange fluctuation difference arose due to difference in exchange between the date of accounting of sale and the date of actual realization of the sale proceeds and therefore, the same should be treated as profits of business. - Decided against the revenue. Expenditure on account of entry tax on raw materials and other inputs that are brought into the assessee s factory - AO disallowed deduction of ₹ 2,30,30,088/- on account of entry tax paid by the assessee under the Karnataka Tax Entry of Goods Act, 1979 on the ground the same was allowable against sales tax paid by the assessee. - held that - deduction allowed. Reassessment proceedings - disclosure - held that - A reading of the above recorded reasons show that there is no such failure as mentioned in the proviso to Section 147 of the Act exists in the instant case. It is an established position of law that the assessee is required to disclose all primary facts fully and truly and thereafter, it is not the duty of the assessee to tell the Assessing Officer as to what inference is to be drawn from those primary facts or what other secondary facts are required to be examined.
Issues Involved:
1. Disallowance under Section 14A and applicability of Rule 8D. 2. Treatment of exchange difference gains for deduction under Section 80HHC. 3. Disallowance of entry tax on raw materials and other inputs. 4. Validity of reassessment proceedings under Section 147. Issue-wise Detailed Analysis: 1. Disallowance under Section 14A and Applicability of Rule 8D: The first issue concerns the disallowance under Section 14A. The assessee claimed exemption on dividend income, and the Assessing Officer estimated a disallowance of 5% of the dividend income. The Commissioner of Income Tax(A) reduced this to 2%, reasoning that some expenditure is inevitable for managing investments. The Tribunal upheld this reduction, noting that the Departmental Representative failed to provide evidence that 2% was an unreasonable estimate. The Tribunal confirmed the Commissioner of Income Tax(A)'s order, dismissing the Revenue's appeal. 2. Treatment of Exchange Difference Gains for Deduction under Section 80HHC: The second issue involves whether gains from exchange differences can be considered business profits for Section 80HHC deductions. The Assessing Officer excluded 90% of the exchange difference from business profits. The Commissioner of Income Tax(A) allowed the appeal, citing that the exchange difference arose from fluctuations between the sale accounting date and the actual realization date, thus forming part of the business profits. The Tribunal agreed, referencing the Gujarat High Court's decision in C.I.T. Vs. Amba Impex, confirming the Commissioner of Income Tax(A)'s order and dismissing the Revenue's appeal. 3. Disallowance of Entry Tax on Raw Materials and Other Inputs: The third issue is the disallowance of entry tax paid on raw materials. The Assessing Officer disallowed this, arguing it was adjustable against sales tax. The Commissioner of Income Tax(A) allowed the deduction, referencing the Tribunal's decision in TVS Motors Ltd., which held that entry tax paid is deductible under Section 43B even if set-off is available against sales tax. The Tribunal upheld this view, noting no evidence was provided to overturn the Commissioner of Income Tax(A)'s decision, and dismissed the Revenue's appeal. 4. Validity of Reassessment Proceedings under Section 147: The fourth issue concerns the validity of reassessment proceedings. The original assessment was completed under Section 143(3), and the reassessment was initiated after more than four years, citing non-deduction of TDS on certain payments and the need to verify depreciation on brand equity. The Commissioner of Income Tax(A) found the reassessment invalid, stating that the reasons for reopening were already addressed in the original assessment and constituted a change of opinion, which is not permissible. The Tribunal agreed, emphasizing that there was no failure on the assessee's part to disclose material facts fully and truly, and upheld the Commissioner of Income Tax(A)'s order, dismissing the Revenue's appeal. Conclusion: The Tribunal dismissed all the appeals of the Revenue, confirming the orders of the Commissioner of Income Tax(A) on all issues, including disallowance under Section 14A, treatment of exchange difference gains under Section 80HHC, disallowance of entry tax, and the validity of reassessment proceedings under Section 147.
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