2011 (2) TMI 1588 - AT - Income Tax

Appeal Dismissed, Reopening Upheld: Mixed Decisions on Expenses & Losses

The Revenue's appeal regarding product development expenses in foreign currency for Assessment Year 2001-02 was dismissed. The Assessing Officer's ... - Issues Involved:1. Product development expenses in foreign currency.2. Reopening of assessment u/s 147 r.w.s 148.3. Exclusion of expenses from export turnover.4. Foreign travel expenses.5. Disallowance of exchange fluctuation loss.6. Amortization expenses.Summary:Issue 1: Product Development Expenses in Foreign Currency (Assessment Year 2001-02)The Revenue's appeal concerning product development expenses incurred in foreign currency amounting to Rs. 8,64,51,871/- was dismissed. The CIT(A) ruled that these expenses should not be excluded from export turnover, a decision upheld by the ITAT, referencing the Special Bench decision in the assessee's own case for AY 2003-04.Issue 2: Reopening of Assessment u/s 147 r.w.s 148 (Assessment Years 2001-02 and 2002-03)For AY 2001-02, the reopening of assessment was upheld as the Assessing Officer had valid reasons to believe income had escaped assessment. Similarly, for AY 2002-03, the reopening was deemed valid based on objective material available to the Assessing Officer.Issue 3: Exclusion of Expenses from Export Turnover (Assessment Years 2001-02, 2002-03, 2004-05, and 2005-06)For AY 2001-02, the exclusion of Rs. 4,43,19,916/- from export turnover was upheld. However, for AY 2002-03, the exclusion of Rs. 32,34,01,504/- was dismissed as the Assessing Officer had already verified and allowed the claim. For AY 2004-05 and 2005-06, the exclusion of expenses incurred in foreign currency on onsite development was decided in favor of the assessee, following the Special Bench decision.Issue 4: Foreign Travel Expenses (Assessment Years 2001-02 and 2002-03)For AY 2001-02, the issue was remanded back to the Assessing Officer for fresh consideration. For AY 2002-03, the exclusion of Rs. 44,26,416/- was upheld as no evidence was produced to support the claim.Issue 5: Disallowance of Exchange Fluctuation Loss (Assessment Year 2004-05)The disallowance of exchange fluctuation loss was dismissed, with the ITAT following the Supreme Court decision in Sutlej Cotton Mills Ltd vs CIT and other Tribunal decisions favoring the assessee.Issue 6: Amortization Expenses (Assessment Years 2004-05 and 2005-06)For AY 2004-05, the issue of amortization expenses was remanded back to the Assessing Officer for further investigation. Similarly, for AY 2005-06, the issue was set aside to the Assessing Officer with similar directions.Conclusion:- AY 2001-02: Assessee's appeal partly allowed for statistical purposes; Revenue's appeal dismissed.- AY 2002-03: Assessee's appeal dismissed.- AY 2004-05: Assessee's appeal partly allowed; Revenue's appeal partly allowed for statistical purposes.- AY 2005-06: Assessee's appeal allowed; Revenue's appeal allowed for statistical purposes.Order pronounced in the open court on 28.2.2011.