2019 (7) TMI 1323 - HC - Income Tax

Deduction u/s 80IA in respect of AMC charges other income and in erroneously adding back interest income - HELD THAT - As decided in M/S. DIEBOLD SYSTEMS P. LTD. VERSUS THE ACIT 2019 (7) TMI 543 - MADRAS HIGH COURT assessee was not able to establish before the AO by producing records. AO after examining the facts of the case found that the income earned from AMC (Annual Maintenance Charges of ATM) installation and technical charges consultation charges and licence fee of software do not constitute income from the industrial undertaking since this was not derived from the industrial undertaking as the men material and machinery of the Pondicherry industrial undertaking were not used to earn income and therefore correctly denied deduction u/s 80IA - Decided against assessee. Reopening of assessment u/s 147 - HELD THAT - On a perusal of the re-assessment order dated 16.03.2006 and the reason for reopening is based on the information which came to the notice of the AO during the course of the assessment proceedings for the assessment year 2001-02 during which the AO came to know that the assessee does not carry out any maintenance work from its industrial unit at Pondicherry. Thus the reason for reopening in the instant case was based upon the tangible material which came to the notice of the Assessing Officer subsequent to the intimation u/s 143(1). Therefore the re-assessment initiated u/s 143(3) r.w.s 147 is perfectly legal and valid. We hold that the decision in Tanmac India 2017 (1) TMI 122 - MADRAS HIGH COURT and Orient Craft Ltd. 2013 (1) TMI 177 - DELHI HIGH COURT cannot be applied to the assessee s case and the decisions of the Hon ble Supreme Court in Rajesh Jhaveri Stock Brokers Pvt. Ltd. 2007 (5) TMI 197 - SUPREME COURT and Zuari Estate Development and Investment Co Ltd. 2015 (8) TMI 480 - SUPREME COURT are a clear answer to the case of the assessee. Decided against the assessee.

Summary

Issues:
1. Validity of reopening the assessment under Section 147 of the Income-tax Act, 1961.
2. Entitlement to relief under Section 80 IA of the Act in respect of AMC charges, other income, and interest income.

Issue 1: Validity of Reopening Assessment under Section 147:

The appellant argued that the assessment for the year 1999-2000 was completed under Section 143(1) of the Act, and the reopening under Section 147 was based on a change of opinion. The appellant relied on the case of M/s.Tanmac India vs. Deputy Commissioner of Income Tax. The respondent contended that the issue was settled by the Supreme Court in various cases, emphasizing the effect of an intimation under Section 143(1). The appellant's case was largely based on the Tanmac India decision. The court analyzed both Tanmac India and Orient Craft Ltd. cases, highlighting the need for tangible material to justify reopening. In this case, the reason for reopening was based on information discovered during the assessment for the year 2001-02, indicating a valid cause for reassessment. The court concluded that the reassessment was legal and dismissed the appeal.

Issue 2: Entitlement to Relief under Section 80 IA of the Act:

The court referenced a previous decision against the appellant regarding the deduction under Section 80IA of the Act on AMC charges. The appellant's arguments on the integral nature of maintenance services to their business were not accepted as they were not raised earlier and lacked substantiation. The court found no grounds to interfere with the Tribunal's order, dismissing the appeal. The appellant's alternate claim to exclude maintenance work expenditure was also rejected. The court held that without positive income from the relevant unit, the claim could not be allowed under Section 80IA of the Act.

In conclusion, the High Court of Madras upheld the validity of the reassessment under Section 147 and denied the appellant's entitlement to relief under Section 80 IA of the Act. The appeal was dismissed, and the substantial questions of law were answered against the appellant.