TaxTMI 
TaxTMI 
2010 (7) TMI 1125
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....n of the additions on merits the Revenue has filed the appeal. It was the submission that as the issue of re-opening goes to the root of the assessment, the same may be heard. 4. In reply the learned DR did not raise any serious objection. In the circumstances the petition filed under Rule 27 of the ITAT Rules is admitted and the issue of reopening is also permitted to be raisedby the assessee. 5. It was submitted by the learned authorized representative that the assessee had originally filed its return of income for the assessment year 2000- 01 on 30.11.2000 admitting the total income as 'Nil'. The assessment had originally been completed u/s 143(3) of the Income-tax Act, 1961 on 18.3.2003 wherein the total income assessed at nearly Rs. 8 crores. It was the submission that certain additions in the form of non-compete fee received from London International Group Plc (LIG) had been disallowed. Similarly, deferred advertisement expenditure had been disallowed. Unpaid bonus had been disallowed. Disallowance was also made under section 14A in respect of the expenditure for generating the dividend income. It was the submission that subsequently on 29.3.2007, i.e. much after the 4 ....
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....submission that this was the figure which was adopted by the assessee as on 1.7.1999 and there was no error in the adoption of the opening stock of TTK Biomed Ltd. after amalgamation. He further drew our attention to page 4 of the assessment order dated 31.12.2007 to show that the AO had erroneously taken the figure of Rs. 6,91,58,608/- as on 1.4.1999 whereas the figure as on 30.6.1999 was Rs. 6,91,58,608/-. It was the submission that the learned CIT(A) had also considered the submissions and had deleted the addition in page 9, para 7.5 of his order. It was also the submission that all the particulars have also been disclosed in the return filed and as the AO had not shown that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, the reopening after the expiry of 4 years was bad in law. 7. In respect of the second reason which was the excess grant of depreciation, it was the submission that the AO had failed to appreciate that the depreciation had been calculated by applying the fifth proviso to section 32(1) and consequently as per the said proviso the depreciation relatable to TTK Biomed Ltd. for the 3 mon....
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....hisper in the reasons supplied to the assessee that income escaped assessment by reasons of the assessee's failure to make a full and true disclosure of all material facts necessary for assessment and consequently, the notice issued u/s. 148 beyond the 4 years from the end of the relevant assessment year was barred by limitation and hence without jurisdiction. Thus it was the submission that there was no mention in the reasons recorded for reopening that the assessee had not made a true and full disclosure the reopening was liable to be quashed. It was the further submission that in the original assessment passed on 18.03.2003 the issue of brought forward losses of amalgamating company TTK Biomed Ltd. had been considered and as the details of the brought forward losses were not available the same had been disallowed subject to verification. It was the further submission that the same had also been verified and an order u/s. 154 was passed on 13.08.2003 granting the assessee set off of unabsorbed depreciation and business loss of M/s. TTK Biomed Ltd., the amalgamating company. It was thus submitted that all necessary materials for completing the assessment had been placed before the....
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....f Rs. 6,91,58,608/- allegedly with M/s. TTK Biomed Ltd. as on 1.7.1999. 3.2 The learned CIT(A) erred in accepting existence of stock merely on the basis of account statement furnished by ITO, Mumbai without allowing the officer to examine the record of the amalgamating company. 3.3 The learned CIT(A) erred ought to have seen that the TTK Biomed Ltd. had before its merger sold the manufacture of medical devices to TTK Maersk Medical Ltd. to Rs. 21 crores by agreement dated 30.9.1996 and only part of the assets were taken over by the assessee. Subsequently the assessee also entered into agreement with London Internation Group for transfer of condom manufacturing business and received Rs. 3.44 crores as non compete fee. The learned CIT(A) ought to have come to a decision only on examination of those agreements. 4. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A)m may be set aside and that of the Assessing Officer restored." It was submitted by the learned DR that in respect of grounds No. 2.1 and 2.2. being against the order of the learned CIT(A) in directing the AO to allow the set ....
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....urth year and consequently the carried forward and set off of the unabsorbed depreciation and business loss in respect of the amalgamating company, TTK Biomed Ltd. was liable to be allowed. It was the alternate submission that if the unabsorbed depreciation and business loss was not allowable, then in view of the decision of the Hon'ble Madras High Court in the case of CIT v. Silical Metallurgic Ltd. (324 ITR 29 (Mad) the unabsorbed depreciation was liable to be added to the written down value and depreciation granted thereon. 14. In respect of grounds No. 3.1 and 3.2 the learned DR vehemently supported the order of the AO. It was the submission that the opening stock of TTK Biomed Ltd. as on 1.7.1999 should only be considered. 15. In reply the learned authorized representative submitted that the amount of Rs. 6,91,58,608/- was the value of the opening stock in the hands of TTK Biomed Ltd. as on 1.7.1999 as had been disclosed in the Balance Sheet. He vehemently supported the order of the learned CIT(A). 16. In respect of ground No.3.3 it was submitted that that M/s. TTK Biomed Ltd. had sold the business of manufacturing of medical devices to M/s. TTK Maersk Medical Ltd. be....
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....ch have been raised by the AO, the first being that the company has adopted the opening stock of TTK Biomed Ltd. as on 1.4.1999 instead of the stock as on 1.7.1999 resulting in under assessment of Rs. 6,91,58,608/-. A perusal of the Balance Sheet and Schedule 7 thereto of TTK Biomed Ltd. as on 30.6.1999 clearly shows that the closing balance shown is as on 30.6.1999 at Rs. 6,91,58,608/-. Thus the opening stock as on 1.7.1999 would be at Rs. 6,91,58,608/-. In the circumstances we are of the view that the assessee has adopted the opening stock of TTK Biomed Ltd. as on 1.7.1999 at Rs. 6,91,58,608/- and such figure is not the opening stock as on 1.4.1999. Therefore the issue as noted in the assessment order being the first issue is held against the Revenue. Consequently, grounds No. 3.1 and 3.2 of the Revenue's appeal stand dismissed. 20. Coming to the second issue being excess grant of depreciation on plant and machinery transferred by TTK Biomed Ltd. to the assessee company to the extent of Rs. 5,51,303/- it is noticed that the assessee has complied with the 5th proviso to section 32. It is also noticed that the learned CIT(A) has brought out the working of the depreciation in pag....
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....ering into an agreement for non-compete business is in the realm of knowledge of the assessee. The assessee very well knew that after amalgamation the assessee would not be continuing the business of TTK Biomed Ltd. that is being taken over. The intention of the assessee to discontinue the business of manufacture of rubber contraceptives which was being done by TTK Biomed is very clear from the agreement itself. Thus at the time of amalgamation itself the assessee knew that it would be violating the provisions of Rule 9C of the Income-tax Rules, 1962 which would disentitle the assessee for the carried forward and set off of the business loss in respect of TTKL Biomed Ltd. due to the applicability of section 72A. The assessee also very well knew that it has violated the provisions of Rule 9C of the I.T. Rules insofar as on 29-03-2005 the assessee has approached the CBDT with the request for waiver of the conditions under Rule 9C of the I.T.Rules/72A of the I.T.Act and this was also rejected by the CBDT. After the issue of notice u/s.148 on 29.3.2007 the assessee had requested that the return originally filed may be considered as the return in response to the 148 notice after knowing....
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....t off should be reversed, we feel that such a view is not possible insofar as the Act has not provided that the 50% production is to be attained within 5 years. It provides that it should have attained the 50% minimum production for every year for 5 years. In any case, this need not be looked at here in this case insofar as, as mentioned earlier, the assessee has expressed its intention to discontinue the business conducted by TTK Biomed Ltd. in the initial years itself by entering into the agreement with LIG. Further it is in any case noticed that in the first year the assessee has failed to attain the requisite 50% production and the assessee has failed to comply with the provisions of section 72A of the I.T.Act read with Rule 9C of the I.T. Rules and consequently the assessee would not be entitled to the carried forward and set off of the depreciation and business losses. In the circumstances, the finding of the learned CIT(A) on this issue stands reversed and that of the AO restored. Thus ground Nos. 2.1, 2.2 and 3.3 of the Revenue's appeal stand allowed. 23. In regard to the submission that the unabsorbed depreciation was liable to be added to the written down value and deprec....