TaxTMI 
TaxTMI 
2011 (3) TMI 525
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.... detailed facts regarding this issue are that the assessee-company filed its return of income for assessment year 2002-03 on 31.10.2002 declaring income of Rs. 69.07 crores. This income was revised on 30.3.2004 to Rs. 68.8093649. Subsequently, order u/s 143(3) was passed on 31.3.2005 in which total income was determined at Rs.84,54,56,900/-. Subsequently, re- assessment proceeding was initiated and in assessment made u/s 143(3) r.w.s 147 on 23.12.2009 total income was determined at Rs.85,72,83,140/-. This expenditure of Rs.1.59 crores is related to promotion of MRF Pace Foundation, but has been claimed as an advertisement expenditure allegedly for the promotion of the company's brand image. But this claim was not found to have been incurred towards business and has been treated by the Assessing Officer as expenditure incurred for the sake of charity. On the contrary, the ld. CIT(A) has deleted this addition on the reasoning that section 37(1) is a residuary provision in so far as the business expenditure is concerned. In case any expenditure is not covered under sections 30 to 36, but fulfills all the descriptions of section 37, it can be claimed and allowed u/s 37(1). Obviously, s....
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....y would object to such type of philanthropic action if it is done by the assessee instead of out of the payable tax which is in a sense a public money. If such expenses are allowed, this assessee or any other assessee can evade tax by such gimmicks. In such circumstances, no court or forum would like to be a party to such a subversion of the provisions of the law, which would amount to diversion of funds with judicial approval. The decision of ITAT, Calcutta, rendered in the case of JCIT vs ITC Limited, 112 ITD 57, and on which the ld.AR has placed reliance was rendered entirely on different facts. In that case, the expenditure was incurred for sponsorship of games and was correctly allowed as business expenditure. The sponsorship-mode was advertisement by way of erecting hoardings at the place of games. So this sponsorship event was found to be incidental to the business of the assessee in order to promote its products. We are not ready to accept that by providing training in the manner it does, MRF's name gets huge publicity by way of fulfilling the conditions laid down for allowbility of expenditure u/s 37(1) of the Act. The expenses in question are not for the sponsorship of cr....
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....In the result, the appeal relating to assessment year 2002-03 is partly allowed. 8. The appeal of the Revenue for assessment year 2004-05, in I.T.A. No.1677/Mds/2010, raises only one issue regarding deletion of addition of Rs. 2.48 crores incurred towards MRF Pace Foundation. 9. With the reasoning given in above paragraphs, for assessment year 2002-03, we allow this ground of Revenue's appeal by restoring the addition made by the Assessing Officer and setting aside the finding of the ld. CIT(A). Thus, appeal of the Revenue for assessment year 2004-05 stands allowed. 10. Again in I.T.A. No. 1678/Mds/2010 for assessment year 2006-07, only one issue relating to addition of Rs. 1.70 crores spent on MRS Pace Foundation is involved. With the similar reasoning, we allow this ground so also the appeal of the Revenue. 11. In the appeal of the Revenue in I.T.A. No.1679/Mds/2010, for assessment year 2007-08, only one issue relating to addition of Rs. 2.45 crores being expenditure incurred on MRF Pace Foundation is involved which was deleted by the ld. CIT(A). We have to allow this appeal as we have done in earlier years. I.T.A. Nos. 1374 to 13....
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....ion inasmuch as his inference on DEPB credit was wrong in law and without jurisdiction. 4.1 The Commissioner of Income Tax (Appeals) erred in holding that the product manufactured by the appellant is covered by item 27 of the Eleventh Schedule of the act and hence not eligible for deduction u/s.BOIA. 4.2 The Commissioner of Income tax (Appeals) ought to have appreciated that the restriction applies only to manufacture of crown corks or Pilfer proof caps for packaging or other fittings of cork, rubber, polyethylene or any other material and does not apply to automotive tyres, tubes and other allied products which the appellant produce. 4.3 The ld CIT failed to appreciate that tyres have a separate ITC classification under the Central Excise Act and assessed to excise duty under Chapter 40. Corks and articles of cork are assessed under Chapter 45. 4.4 The Commissioner of Income tax (Appeals) ought to have appreciated that the Appellant has been granted relief under Section 80lA for the undertaking right from AY 1996-97 onwards. Relief u/s.80IA granted in the earlier years and also in the regular assessment for the current year cannot be withdra....
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....any sum referred to in clause (iiid) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee, if the assessee has necessary and sufficient evidence to prove that,- (a) he had an option to choose either the duty drawback or the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme, and (b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the Duty Entitlement Pass Book Scheme being the Duty Remission Scheme." It has been observed that, during the current year the assessee has export turnover of Rs. 189,30,84,634/- and income by way of DEPB credit to the tune of Rs.32,07,04,678/-, but the assessee has not proved that, it had opted to chose either duty drawback or the DEPB being the duty remission scheme and the rate of the duty drawback was higher than the DEPB during that period. Hence, the above DEPB receipt of Rs. 32,07,04,678/-, should be excluded for the purpose of computation of 80HHC deduction being the export incentives as per the proviso to Section 80HHC(3) otherwise means that the deduction u/s. 80H....
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.... Act. Therefore, I have the reason to believe that the income has escaped the assessment with in the meaning of section 147 of the Income-tax Act." 15. The case of the assessee as put forth through its ld.AR is that the notice for re-assessment has been issued beyond four years from the end of the relevant assessment year and because the assessee had provided all material facts in the returns filed, the revision done only on the basis of some facts without the availability of fresh material would amount to change of opinion which cannot be made a ground for reopening. After arguing on the reasons recorded for the reopening, he has to substantiate his placed reliance on some decisions. On the other hand, the ld.DR has supported the appellate findings and has also placed reliance on some decisions in favour of the Revenue. 16. We have considered the submissions advanced by both the parties in the light of the relevant provisions and precedents. Recently, the Hon'ble Supreme Court has churned this issue in successive decisions. More recently, the Hon'ble Supreme Court in the case of ACIT vs Rajesh Jhaveri Stock Brokers Pvt. Ltd, 291 ITR 500, has held that....
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....ribunal has passed order dated 2.11.2007. Nothing has come on record as to whether the Tribunal has given a direction to redo the assessment or otherwise. But it is found mentioned that the Assessing Officer has initiated proceedings u/s 147 r.w.s 148 by issuance of notice dated 17.3.2009 proposing to re-assess the income and requiring the assessee to file a return within 30 days from the service of notice. Be that as it may, the Assessing Officer is required to see if the conditions laid in Explanation 2(c) because in this case the assessment was completed u/s 143(3) are satisfied or not. In case, (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low rate; or(iii) such income has been made the subjective of excess relief under this Act; or (iv)excessive loss or depreciation allowance or any other allowance under this Act has been computed, the Assessing Officer would have valid cognizance u/s 147 of the Act. The reasons recorded by the Assessing Officer clearly speak for the under assessment of tax hence, the conditions laid above stand fulfilled in so far as re-assessment proceedings are concerned. In so far as the reasons recorded....
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....aking a re-assessment if the changed law has resulted any escapement of income. The Hon'ble Gujarat High Court in the case of Denish Industries Ltd vs ITO, 271 ITR 340, has answered the question by holding that if the proceedings were pending on the date when the amendment was brought in effect either by way of appeal or revision or reference [Explanation 8 to section 43(1), the amended provision shall apply. In the given case, the Taxation Law Amendment, 2005, amended the provisions of section 80HHC with regard to deduction on DEPB receipt that in case the export turnover of the assessee exceed Rs. 10 crores, it would be given only on the fulfillment of conditions laid down in the amended section 80HHC(3) of the Act. Thus, the Hon'ble Gujarat High Court's decision comes directly into play as on the date when the amendment was brought on the statute book, the assessment proceedings were pending by way of appeal before either the ld. CIT(A) or the Tribunal as we have given the date of their order in earlier part of this order. Hence, the amended provision would amount to a 'material' in the hands of the Assessing Officer to make re- assessment in the given case. 18. Now th....
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.... with assessment year 2006-07 it was revealed that this expenditure solely related to promoting the MRF Pace Foundation which is entirely different from advertisement expenditure for promotion of company's brand image. Likewise, the Eleventh Schedule of the Act clearly debars the assessee from claiming deduction u/s 80IA of the Act which the assessee has claimed on the basis of incorrect facts, therefore, the assessee has not brought on record and has failed or omitted to bring the facts truly and fully before the Assessing Officer. The assessee has tried to take shelter under the exception provided by the above stated proviso where an assessment under sub-section (3) of section 143 has been completed, no action after the expiry of four years from the end of the assessment year can be taken. But as stated above, when the assessee has not disclosed fully and truly the facts necessary for the assessment, this proviso will not come to its rescue. Consequently, we hold that the entire re-assessment proceeding in this case is valid and therefore, the action of the Assessing Officer is upheld. The assessee fails on this legal issue. 20. The second issue taken vide Ground No.3 o....