2020 (4) TMI 810 - HC - Income Tax

Court upholds Commissioner's order on Section 10B deduction despite Section 40(a)(ia) disallowance

The Principal Officer, M/s. RR Donnelley India Outsource Private Limited, (Formerly known as Astron Document Management Private Limited), Versus Deputy Commissioner of Income Tax, Corporate Circle – 5 (2), Chennai

The Court dismissed the Writ Petitions challenging notices under Section 148 of the Income Tax Act for reopening assessments. It upheld the Commissioner's ... Reopening the Assessment u/s 147 - period of limitation - limitation under sub-Section 2 to Section 150 - whether the reopening of the assessment for the three Assessment Years would get time-barred in view of the order of the Income Tax Appellate Tribunal - Computation of deduction u/s 10B - HELD THAT:- Limitation under sub-Section 2 to Section 150 will apply only when the limitation had already expired by the time before the assessment order for the Assessment Year 2006-07 was made. If not, there is a saving of limitation u/s 150(1) - It is for this reason, the Income Tax Appellate Tribunal [2015 (8) TMI 1500 - ITAT CHENNAI] held that such recomputation will be subject to limitation. No merits in the present Writ Petitions. The petitioner is directed to participate in the proceedings before the respondent. Since the dispute pertains to the AY 2003-04 to 2005-06, the petitioner is directed to file objections/ representations, if any, within a period of thirty days from the date of receipt of a copy of this order. Issues:Challenge to impugned notices under Section 148 of the Income Tax Act, 1961 for reopening assessments for the Assessment Years 2003-04, 2004-05, and 2005-06; Disallowance of expenditure claimed under Section 40(a)(ia) of the Income Tax Act, 1961; Invocation of Section 148 in light of Section 150(2) of the Income Tax Act, 1961; Time-barred reopening of assessments; Interpretation of Section 150 of the Income Tax Act, 1961.Analysis:The petitioner challenged the impugned notices issued under Section 148 of the Income Tax Act, 1961, seeking to reopen assessments for the years 2003-04, 2004-05, and 2005-06. The petitioner had voluntarily added TDS to taxable turnover and claimed deduction under Section 10B applicable to newly established 100% Export Oriented undertakings. In 2006-07, the petitioner paid TDS and claimed deduction under Section 40(a)(ia), which was disallowed by the Assessing Officer. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to recompute the profit eligible for deduction under Section 10B, without increasing it due to the disallowance under Section 40(a)(ia).The petitioner appealed before the Income Tax Appellate Tribunal, which upheld the Commissioner's order. However, the Tribunal stated that the computation of deduction under Section 10B would be subject to limitations provided by the Income Tax Act, 1961. The petitioner argued that the Commissioner's order had merged with the Tribunal's order, making it impermissible to invoke Section 148 under Section 150(2) of the Income Tax Act, 1961. The petitioner cited various legal precedents to support this contention.The issue revolved around the time-barred reopening of assessments. The petitioner claimed that the last dates for reopening assessments had passed within the normal period of limitation for the respective years. The respondent contended that the limitation was protected under Section 153 of the Income Tax Act, 1961, to give effect to the Tribunal and Commissioner's orders. The Court considered both parties' arguments and the impact of the Tribunal's order on the limitation for reopening assessments.The Court analyzed Section 150 of the Income Tax Act, 1961, which allows notices under Section 148 for assessment or reassessment based on findings or directions in previous orders. The Court clarified that the limitation under Section 150(2) would only apply if the time for assessment had already expired before the previous order. The Tribunal's order on recomputation was subject to limitations, as highlighted in their decision. Ultimately, the Court dismissed the Writ Petitions, directing the petitioner to participate in the proceedings before the respondent and file objections within a specified timeframe.