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TMI Blog2018 (11) TMI 1971X X X X Extracts X X X X X X X X Extracts X X X X ..... on of deduction u/s 80IA and in turn, for the purposes of the completion of assessment proceedings. No infirmity in AO s exercising his jurisdiction under section 147 of the Act by issuance of notice u/s 148 - Ground of appeal is dismissed. Eligible profits for the purposes of section 80IA - first contention of the ld AR that none of the expenses at the Corporate office pertain to the 80IA undertakings in as much as the entire operation and maintenance of the plant has been given to Suzlon Energies Ltd. - The fact remains that the assessee activities are still guided towards overall supervision and management of these activities at the strategic and managerial level and to safeguard the interest of the shareholders and the assessee still remains responsible for the activities of these eligible undertakings to the outside world even though at the operational level, the whole of its activities have been outsourced to Suzlon Energies Ltd. Therefore, the contention of the AR cannot be accepted that no expenses in furtherance and support of what we have stated above has been incurred by the assessee and which has no nexus with the eligible undertakings. To our mind, these activities at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iming deduction of Rs. 14,96,10,989/- u/s 80IA of the Act. The return of income was subsequently revised on 23.03.2012 declaring income of Rs. 77,61,60,827/-. It was submitted that in course of assessment proceedings, the assessee vide letter dated 11.05.2012 filed the copy of audit report in Form No. 10CCB as required u/s 80IA(7). Thereafter, the the Assessing officer vide letter dated 25.09.2012 required the assessee to furnish the justification for claiming deduction u/s 80IA. The assessee filed the reply dated 08.10.2012 justifying the claim of deduction u/s 80IA. Thereafter, vide letter dated 05.02.2013, the assessee explained as to why deduction u/s 80IA should be allowed to it with reference to the liquidated damages received from M/s Suzlon Energy Limited and sale of CERs. 3. It was further submitted by the ld AR that the Assessing officer completed the assessment u/s 143(3) on 27.02.2013 at income of Rs. 85,17,09,380/- where he examined the claim of deduction u/s 80IA and allowed the same at Rs. 11,15,66,435/- by not allowing the deduction with reference to the liquidated damages and sales of CERs. Against this, the assessee filed an appeal before the Ld. CIT(A) who vide o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of assessee to disclose fully and truly all material facts necessary for assessment for that assessment year. It may be noted that in course of original assessment proceedings, assessee filed detailed working of claim of deduction u/s 80IA along with audit report in Form No. 10CCB as required u/s 80IA(7). After considering the same, the AO disallowed the claim of deduction to the extent of Rs. 3,80,44,554/- in respect of liquidated damages received from M/s Suzlon energy Limited and sale of CERs. Thus, all the material facts necessary for claim of deduction u/s 80IA was disclosed fully and truly by the assessee. Therefore, it is incorrect on part of the lower authorities to hold that assessee has not disclosed fully and truly all material facts necessary for its assessment on the issue of allowance of deduction u/s 80IA of the Act. Hence, reopening of assessment after the expiry of four years, only on change of opinion is illegal and bad in law. 8. In support of his contentions, the ld AR referred to the decision of the Hon ble Supreme Court in case of ITO vs. Techspan India Pvt. Ltd. ANR. (2018) 404 ITR 10 (SC), the decision of the Hon ble Gujarat High Court in case of Ajant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore needs to be examined whether the income which is sought to be brought to tax by the Assessing officer and which has thus escaped assessment is on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of assessment. 12. In this regard, firstly, we refer to the reasons recorded by the AO before issuance of notice u/s 148 which reads as under: The assessee filed its return of income for AY 2010-11 on 14.10.2010 declaring total income of Rs. 81,41,70,667/- which was assessed u/s 143(3) at the total income of Rs. 85,17,09,380/- on 27.02.2013. On going through the records, it was noticed that assessee had not charged proportionate head office expenses on account of establishment financial expenses on wind mills for the purpose of computation of deduction u/s 80IA. As per provisions of section 80IA of the Act, the expenses relatable to eligible business either directly or indirectly have to be considered for computation of profit and gains of an eligible business. But the assessee had considered only direct operation and maintenance head office expenses on turnover ratio. In view of the above facts, I have reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vities the activities which are eligible for tax holiday and those which are not eligible for tax holiday. At the same time, it could be position of the assessee that certain expenses though incurred at the head office level are not incurred in relation to or have no nexus with tax holiday units therefore, there was no necessity to allocate these expenses at the first place. Alternatively, the assessee may plead that all expenses incurred in relation to tax holiday units have already been accounted for separately and there is thus no necessity for any allocation of head office expenses. The question is whether such a position of the assessee and the related facts are manifest clearly on the face of the financial statements, the documentation in forms of tax audit report, the tax computation or other documentation/submissions filed either as part of the return of income or during the course of assessment proceedings. If the answer to the same is in affirmative, then clearly, it can be said that there is no failure on part of the assessee to disclose truly and fully all material facts and the reassessment proceedings would then be vitiated and can be held bad in law. However, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. The decision of the Hon ble Gujarat High Court in case of Ajanta Pvt. Ltd. (supra) rather supports the case of the Revenue. 17. In light of above discussions and in the entirety of facts and circumstances of the case, we doesn t see any infirmity in AO s exercising his jurisdiction under section 147 of the Act by issuance of notice u/s 148 of the Act. In the result, the ground of appeal is dismissed. 18. In ground No. 2, the assessee has challenged the confirmation of the action of the AO of reducing the claim of deduction u/s 80IA of Rs. 1,47,82,535/- by apportioning establishment and financial expenses at Rs. 36,83,29,248/- to wind power generation undertakings eligible for deduction u/s 80IA ignoring that the entire operation and maintenance of wind plants has been given to Suzlon Energies Ltd. and therefore, the said expenditure has no relation to the undertakings eligible for deduction u/s 80IA. 19. In this regard, the ld. AR submitted that the AO observed that in working out the claim of deduction u/s 80IA, assessee has not apportioned the head office expenses other day-to-day management and supervision charges amongst the units eligible for deduction u/s 80IA. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenses pertain to the 80IA undertakings in as much as the entire operation and maintenance of the plant has been given to Suzlon Energies Ltd. Therefore, assessee has not to incur any expenditure on salary/ employees benefit, travelling, conveyance and other expenses debited under the various heads of expenses in Corporate Office/ head office. No strategic planning, day to day management and supervision, financial management, marketing management, tendering, work allocation, contract awarding, control etc. is required for operating these power plants by the Corporate Office/ head Office. Therefore, no part of these expenses more particularly expenses on repairs, rates and taxes, land tax, insurance, travelling, conveyance, financial expenses, consultancy charges, etc. can be allocated to the income derived from these power generating units. Hence, withdrawal of deduction u/s 80IA to the extent of Rs. 1,47,82,535/- on this account is grossly unjustified. 23. It was further submitted by the ld AR that similar disallowance was made in AY 2006-07 to 2009-10 2011-12 to 2013-14 wherein the Co-ordinate Bench of the Tribunal vide order dated 30.05.2017 set aside the order to the files ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erance and support of what we have stated above has been incurred by the assessee and which has no nexus with the eligible undertakings. To our mind, these activities at the strategic, managerial, regulatory and overall oversight level definitely have a nexus with the eligible undertakings and the expenses incurred in relation thereto needs to be allocated to the eligible undertakings. 25. Now, coming to the specifics of the expenditure incurred at the corporate level, on perusal of the details available at the APB 15-16, we find that the establishment expenses at the Corporate office has been shown as Rs 23,47,12,627. The AO has however wrongly took the total establishment expenditure at the entity level at Rs. 46,57,18,479/- which includes establishment expenditure incurred in relating to various mining activities. What therefore has to be considered is the establishment expenditure at the corporate office level which comes to Rs 23,47,12,627. Further, on perusal of the said expenditure, we find that expenditure on rates and taxes, land tax, insurance, interest on debentures, business promotion expenses and advertisement expenses cannot be said to have any nexus with the eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X
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