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TMI Blog2012 (7) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant Assessment year – Held that:- Reopening per se is bad in law as there is no failure on the part of assessee in furnishing necessary details at the time of filing the return or completion of the assessment originally under section 143(3) - mere change of opinion on existing facts available on record by AO which cannot be upheld Foreign exchange realization - Assessee has claimed total turnover which include the exchange rate difference - CIT (A) excluded the amount and took the income from export realization and restricted the claim – Held that:- Foreign exchange realization is on the export proceeds which are to be included in the ‘total turnover’ and also in ‘export turnover’ which assessee had done - foreign exchange realization being part of export proceeds are to be included in the export turnover. Therefore, the CIT (A) to that extent is not correct - Revenue appeal is dismissed. - ITA No.3873/Mum/2010, ITA No.3570/Mum/2010 - - - Dated:- 8-6-2012 - B. Ramakotaiah And S. S. Godara, JJ. For Appellant: Nitesh Joshi For Respondent: Rupinder Brar, DR ORDER Per: B. Ramakotaiah : These are cross appeals by assessee and Revenue against the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me should firstly be computed and thereafter the deduction under section 10B be allowed. By so doing, deduction under section 10B would be substantially reduced and correspondingly the deduction allowable while computing book profit under section 115JB would also be correspondingly reduced. 2nd issue: Under assessment on account of excess claim of depreciation in computation of statement. On going through the computation of statement filed along with the return of income for A.Y 2002-03, it is seen that assessee has added depreciation excluding EOU division of Rs..2,69,85,598/- instead of entire book depreciation claimed in the profit and loss account of Rs..3,58,24,854/- while computing income under normal provisions. Entire book depreciation should be added and thereafter, depreciation allowable as per I.T. Act is to be reduced. This has resulted to escapement of income chargeable to tax amounting to Rs..88,39,256/-. 3rd issue: Change of written down value from A.Y. 2001-02 onwards: It is noticed from the assessment order for A.Y. 2001-02 dated 15.3.2004 that assessee had been compulsorily allowed depreciation and the W.D.V. as on 31.3.2001 was chang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , assessee contested the issue before the CIT (A) as pertaining to the disallowances of depreciation on motor car which, however, the CIT (A) confirmed as such. With reference to the issue of section 10B, while directing CIT(A) took the total turnover at ₹ 12,31,61,599/- as against ₹ 12,45,90,619/- shown by assessee and restricted the disallowance to ₹ 5,09,99,718/- proportionately. This reduction of claim by the CIT (A) was contested by assessee in Ground No. 3(a). 4. The learned Counsel s arguments in assessee s appeal are two fold. As far as reopening under section 147 is concerned, it was the submission that AO did not record any satisfaction that there is a failure on the part of assessee in disclosing the full and complete material facts necessary for assessment. It was the submission that the assessment was reopened after 4 years, the assessment was completed under section 143(3) after due examination and there is no failure on the part of assessee in furnishing necessary details and it was only a change of opinion by AO with reference to the claim of deduction under section 10B and depreciation on motor vehicles and on other two issues which have been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n deleting the adjustment so made by AO. He supported the order of AO to that extent. 7. We have considered the issue. Briefly stated above, assessee is contesting the reopening both on technical grounds and also on merits. The Revenue is aggrieved on reworking of the deduction made by the CIT (A). Before coming to the issue of reopening on technical reasons, it is necessary to examine the issue on merits as well. As stated earlier, AO considered four issues for reopening, out of which he himself has not acted upon the claim of excess depreciation on the basis of WDV of earlier years. With reference to the issue of adjustment of claim under section 10B the learned CIT (A) even though has not directly given any finding on the contention raised by assessee with reference to set off of the losses/unabsorbed depreciation of non SEZ to the SEZ undertakings, he however, relied on the provisions of section 10B(4) and directed AO to allow deduction of ₹ 56,99,718/- as against ₹ 5,15,91,458/- claimed. This indicates that on merits assessee s contention is correct. The difference arose due to taking the export turnover exclusive of foreign exchange realization and other amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter III. The Act of Parliament in consciously retaining this section in Chapter III indicates its intention that the nature of relief continues to be an exemption. The income of a section 10A unit has to be excluded before arriving at the gross total income of assessee. The income of a section 10A unit has to be deducted in the beginning itself and not after computing the gross total income. The total income used in the provisions of section 10A in this context means the global income of assessee and not the total income as defined in section 2(45). Prior to the introduction of sub-section (6) of sections 10A and 10B of the Finance Act, 2000, which came into effect from April 1, 2001, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year, relevant to any subsequent assessment year, sub-section (2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of sub-section (2) of section 33 and sub-section (4) of section 35 of the Act or the second proviso to clause (ix) of sub-section (1) of section 36 was not be applicable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputer software from the business of the undertaking alone that has to be taken into consideration and such profit is not to be included in the total income of assessee. The provisions of this sub-section will apply even in a case where an assessee has opted out of section 10A by exercising his option under sub-section (8). It is permissible for an assessee to opt in and out of section 10A. In the year when assessee has opted out, the normal provisions of the Act would apply. The profits derived by him from the undertaking would suffer tax in the normal course subject to various provisions of the Act including those of Chapter VI-A. If in such a year, assessee has suffered losses, such losses would be subject to inter source and inter head set off. The balance, if any, thereafter can be carried forward for being set off against profits of the subsequent assessment years in the normal course. Unabsorbed depreciation also merits in a similar treatment. Assessee was in the business of manufacture and trading of process control instruments. Assessee filed returned of income on October 31, 2002 declaring a total loss of ₹ 5,07,03,098/-. Assessee claimed exemption of ₹ 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th carry forward and set off business losses. It was further held that the provisions of section 80B(5) applicable to Chapter VIA cannot be invoked for the purpose of section 10A which comes in Chapter-III. Since provisions of section 10A 10B are similar in nature, this judgment of the Hon'ble Bombay High Court is also equally applicable to the facts of the case. Coupled with the specific provisions of section 10A(4) which the CIT (A) relied, it has to be held that assessee s claim of excluding the profits of the undertaking and was accepted by AO in the original assessment is correct. Any other opinion has to be considered as a change of opinion not supported by law. 10. With reference to the 2nd issue considered by AO with reference to the addition on depreciation claimed in P L account, assessee excluded the same entirely including the profits of SEZ unit while working out the profits in IT computation. The CIT (A) considered that there is no need for making any adjustment and allowed the ground. Inspite of that AO in consequential order further made the adjustment and the CIT (A) in further appeal has directed AO to delete it. Therefore, on this issue also there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation at a specified rate, depending upon the period of acquisition and the purpose for which they are deployed. Therefore, nomenclature of commercial vehicles should not be so construed as to deprive the assessee of higher depreciation when all the conditions specified in the Act and the Rules had been met by the assessee. Till such car was used by the assessee for its business purpose, the assessee would get the depreciation at the rate of 40 per cent as per the third proviso to section 32. [Para 8] . Similar view is also taken in the case of LM Glasfiber (India) Pvt. Ltd in ITA No.50/Bang/2008, wherein it was held that the vehicles acquired by assessee eventhough had not been used in the business of running them on hire but for that reason depreciation @ 50% cannot be denied as entry in Dep Schedule covers the case of commercial vehicles acquired between the period 1.4.2001 to 31.3.2002 and put to use in this period for the purposes of any business or profession. There is no condition in this entry that the commercial vehicle shall be used in the business of running it on hire. Admittedly the vehicles are registered as commercial vehicles and falls within the entry for cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expiry of four years from the end of the relevant assessment year. As seen from the reasons recorded by AO, there is no finding that there is a failure on the part of assessee in disclosing fully and truly all material facts. Therefore, provisions of section 147 cannot be invoked in this case year as the assessment was completed under section 143(3) after due enquiry. Our opinion is fortified by the following decisions: i) Cartini India Ltd v. ACIT (291 ITR 355)(Bom) ii) German Remedies Ltd v. DCIT (285 ITR 26)(Bom) iii) Hindustan Lever Ltd v. ACIT 268 ITR 332(Bom) iv) IPCA Laboratories Ltd (251 ITR 416)(Bom) v) Hindustan Unilever Ltd v. DCIT (325 ITR 102) (Bom) . We accordingly hold that reopening per se is bad in law as there is no failure on the part of assessee in furnishing necessary details at the time of filing the return or completion of the assessment originally under section 143(3). Therefore, it has to be considered as mere change of opinion on existing facts available on record by AO which cannot be upheld in view of the judgment of the Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd 187 Taxman 312(SC)/320 ITR 561 . ..... X X X X Extracts X X X X X X X X Extracts X X X X
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