TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 1298
X X X X Extracts X X X X
X X X X Extracts X X X X
.... but also in respect of claim of depreciation. Hence, the criterion of "reason to believe" that income has escaped assessment which is the essential precondition for reopening of assessment under Section 147 of the Act is not satisfied. It was also argued by ld. AR that there was complete disclosure of deduction claimed u/s 36(1)(viii), of Special Reserve created and withdrawn in each year Financial Statements, of the Special Reserve held, of the withdrawal of Rs. 76 cr. in the respective year and of the depreciation claim and hence action taken by AO is nothing more than mere change of opinion. Reliance was placed on CIT vs Kelvinator India Ltd. (256 ITR 1) which has since been approved by Supreme Court Larger Bench (20-10 TIOL 06), IPCA Laboratories Ltd. Vs. Gajanand Meena (251 ITR 416). 4. With regard to deprecation ld. AR has placed reliance on the decision of Kolkata High Court in the case of Pressman Advertising & Marketing Ltd. reported in 142 Taxman 17 (Kol),Allahabad Bank v CIT (1992) 108 CTR (Cal) 186 : (1993) 199 ITR 664 (Cal) and submitted that reopening was not justified. 5. After considering the assessee's contention, the CIT(A) upheld the reopening against which asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eliberated on the judicial pronouncements referred by lower authorities in their respective order and cited by ld. AR before us in the context of factual matrix of the case. From the record we found that the notice u/s 148 has been issued within four years from the end of the relevant assessment year. From the facts of the case, it can be concluded that there was prima facie case of escapement of income on account excess claim of deductions u/s 36(1)(viii) and there was also excess claim of depreciation allowance. As per the deeming provisions of clause (c) of Explanation 2 to section 147 the Assessing Officer was justified in reopening of earlier assessment. Hon'ble Bombay High Court in IPGA Laboratories vs DGIT(2001) 251 ITR 420(Bom) held that mistake gone unnoticed by the AO in the original order, is covered by the Explanation 2(iii) of section 147. 10. With regard to the merit of disallowance u/s.36(1)(viii) of the Act, ld. AR contended that the AO has restricted the claim to Rs. 71,27,29,633/- as against Rs. 91,00,00,000/- claimed by assessee. As per ld. AR amendment to section 36(1)(viii) by the addition of the word maintained was prospective in operation and applied to Speci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....duction works out u/s.36(1)(viii). The amount carried must necessarily mean amount carried and standing to the credit of Special Reserve Account. The amount carried to Reserve did not mean the credit balance in Reserve Account which is evident from the plain reading of the proviso to clause (viii) of sub-section I of section 36 which reads as under :- "Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid-up share capital and of and of the general reserves of the corporation or, as the case may be, the company, no allowance under this clause shall be made in respect of such excess." 12. Thus, we found that the Assessing Officer has correctly worked out the actual deduction allowable as per proviso to section 36(1)(viii) which has been remained un-amended even after the amendment in the main section. The proviso provides for the modalities for working out the quantum of deduction according to which lower of 40% of the profit derived from eligible business carried to the reserve a/c and the aggregate of the amount carried to reserve account does not exceed twice of the amount of share capital and of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eding forty per cent of the profits derived from such business of providing long-term finance (computed under the head "Profits and gains of business or profession" [before making any deduction under this clause)) carried to such reserve account.] Provided that the corporation [or, as the case may be, the company) is for the time being approved by the Central Government for the purposes of this clause :) Provided (further) that where the aggregate of the amounts carried to such reserve account from time to time exceeds [twice the amount of] the paid-up share capital 45 [and of the general reserves) of the corporation or, as the case may be, the company), no allowance under this clause shall be made in respect of such excess. 15. It may be noted that the second provision of section contains the method of aggregation of amounts carried to such reserve both pre amendment and post amendment period. 16. Following sub section (4A) was simultaneously inserted in section in section 41 of Income Tax Act,1961 by Finance Act,1997 w.e.f. 1.04.2008. 4A) Where a deduction has been allowed in respect of any special reserve created and maintained under clause (viii) of sub-section (1) of se....