2017 (5) TMI 911 - AT - Income Tax

Appellate tribunal upholds CIT(A)'s decision on assessment reopening and expense apportionment.

The appellate tribunal upheld the decision of the CIT(A) in a case involving the validity of reopening the assessment under Section 147 and the ... Reopening the assessment u/s.147 - apportioning the expenses @75.705% instead of 67.58% - whether no income was attributable to assessee in India and there is also no PE? - Held that:- As relying on assessee's own case giving effect to the ITAT order [2016 (8) TMI 504 - ITAT MUMBAI] no income is attributable to the assessee in India, losses would not been available for set off and therefore, total income was computed as Nil. As the AO himself has accepted that no income is attributable to assessee in India, the appeal filed by Revenue has no legs to stand. We further found that finding recorded by CIT(A) for setting off the reopening as well as for deleting the addition made by the AO was not controverted by learned DR by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the order of CIT(A). - Decided against revenue Issues Involved:1. Validity of reopening the assessment under Section 147.2. Correctness of the apportionment of expenses at 75.70% instead of 67.58%.Issue-wise Detailed Analysis:1. Validity of Reopening the Assessment under Section 147:The Revenue was aggrieved by the CIT(A)'s decision that reopening the assessment under Section 147 was not valid. The original return of income was filed by the assessee on 31-10-2005, declaring a total income of Rs. Nil, which was assessed by the AO determining the total business income at Rs. 8,79,55,593/- on 27-12-2007. Subsequently, the AO reopened the case by issuing a notice under Section 148 on 29-3-2010. The AO observed discrepancies in the apportionment of expenses between Indian operations and global revenue, leading to the reopening.The CIT(A) held that the reopening was invalid because all the details leading to the reopening were already filed with the original return and were considered by the AO during the original assessment. The CIT(A) noted that the financial statements and submissions were accepted in the original assessment, and the transfer pricing authority had accepted the international transactions at arm's length price. The CIT(A) concluded that the assessee consistently disclosed its income in a manner accepted by the department in preceding years. Therefore, the reopening of the assessment was deemed unjustified and incorrect, making the reassessment proceedings invalid.2. Correctness of Apportionment of Expenses at 75.70% Instead of 67.58%:The Revenue also contested the CIT(A)'s decision to allow the apportionment of expenses at 75.70% as claimed by the assessee, instead of 67.58% as determined by the AO. The AO restricted the expenses to 67.58%, resulting in a disallowance of Rs. 98,52,745/-. The assessee argued that the AO's comparison was incorrect because the global revenue used for apportionment included items not related to Indian operations, such as operating income, sale of decoders, and receipt from syndication of broadcast rights.The CIT(A) agreed with the assessee, noting that the financial statements and allocation methods were consistent and accepted by tax authorities in previous years. The CIT(A) found that the AO did not consider the reduction of non-Indian operating income from the global revenue, leading to an incorrect apportionment ratio. The CIT(A) concluded that the AO's action was unjustified and incorrect, and the addition made by the AO was deleted.Conclusion:The appellate tribunal upheld the CIT(A)'s decision on both issues. It found that the reopening of the assessment was invalid as all relevant details were already available during the original assessment. Additionally, the tribunal agreed with the CIT(A) that the apportionment of expenses at 75.70% was correct and justified. The Revenue's appeal was dismissed, and the CIT(A)'s order was affirmed.Order Pronounced:The appeal of the Revenue is dismissed as of 17/05/2017.