TaxTMI 
TaxTMI 
2017 (8) TMI 1695
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....ilable on record, the learned Income Tax Appellate Tribunal was right in law in not allowing deduction u/s 80 HHC when the assessee is engaged in the business of exports out of India of advertisements, printed and published in books, magazines and supply of such books magazines earned foreign exchange and fall in the definition of 'goods' and its export and particularly when in the past years deduction has been allowed?" 3. On 31.7.2017, the matter was argued and counsel for the appellant has relied upon judgments and the matter was fixed for 2.8.2017. On 8.8.2017, counsel for the department requested for time. Even today, counsel for the respondent is not in a position to dispute the fact that the order which has been referred has not been challenged. 4. On issue No.1, counsel for the appellant has relied on the following decisions: (1) Diamond World v. CIT :: reported in (2003) 133 Taxman 772 (Rajasthan) wherein it has been held as under:- 4. On scrutiny of assessment orders for 1991-92 and 1992-93, CIT found that the order of the Assessing Officer is erroneous and prejudicial to the interest of revenue. He issued the notice to the assessee to show cause a....
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....ange of opinion - Held, yes - Whether, therefore, re-assessment proceedings were to be set aside - (4) Ganesh Housing Corporation Ltd. v. DCIT :: (2013) 31 taxmann.com 359 (Gujarat) wherein it has been held as under:- Section 147, read with section 80-IB, of the Incometax Act, 1961 - Income escaping assessment - Non-disclosure of primary facts [To disallow deduction under section 80-IB] - Assessing Officer reopened assessment on ground that assessee had been allowed excessive deduction under section 80-IB in original assessment as it claimed deduction by giving wrong particulars about its status by claiming as a 'developer' though it was only a 'works contractor' - Whether when in spite of full disclosure made by assessee, Assessing Officer gave benefit of provision by considering materials on record, it could not be said that any income escaped assessment in accordance with law - Held, yes - Whether fact that Assessing Officer in assessment proceedings under section 143(3) did not give any opinion regarding allowability or otherwise of deduction under section 80-IB(10) could be ground for invoking section 147 - (5) CIT v. Hindustan Zinc L....
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....ing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. Merely an audit report, would not authorize the Assessing Officer to reopen the assessment even within the period of 4 years from the end of the relevant assessment year, when the said material was already before him when the original assessment was made. Any such attempt on his part would be based on mere change of opinion. To reiterate when a claim was processed at length and after calling for detailed explanation from the assessee, the same was acc....
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....he reasons recorded themselves show that the Assessing Officer has changed his opinion only on the basis of subsequent judgment rendered by the apex court. Thus, this is a case of change of opinion by the Assessing Officer and not a case of any failure on the part of the assessee. (9) NDT Systems v. ITO ::(2014) 363 ITR 87 (Bombay) wherein it has been held as under:- 5. In view of the above, Mr. Pinto submits that the petition be dismissed. We have considered the submissions. We find that the notice dated March 20, 2012, under section 148 of the Act has been issued within a period of four years from the end of the relevant assessment year, i.e., 2007-08. In such circumstances, the proviso to section 147 of the Act is clearly not applicable. Therefore, it is not necessary for the Revenue to prima facie establish that there has been a failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment, while issuing a notice reopening a completed assessment. However, even in case of reopening of assessment within a period of four years from the end of the relevant assessment year the Assessing Officer has to have reason to b....
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....sideration of those facts in his order of assessment dated December 11, 2009, concluded that these payments on account of radiography charges and labour charges are tax deductible at source in terms of section 194C of the Act. Further, the obligation on the part of the assessee is only to make a full disclosure of primary facts and the inferences to be drawn therefrom and the application of law thereon is the job of the Assessing Officer. The petitioner has disclosed all primary facts and on consideration of those facts as reflected in the assessment order dated December 11, 2003, the amount of income has been computed after holding that IDS has to be deducted under section 194C of the Act. 8. Therefore, the impugned notice and the reasons in support thereof clearly indicates that it has been issued merely on the basis of change of opinion and would amount to a review of the assessment order dated December 11, 2003. Further, the reasons for reopening as communicated by the petitioner is not on the basis of any tangible material but merely on verification of the material and primary facts already on record that the Assessing Officer has duly considered while passing the ord....
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....s only power to reassess on fulfilment of certain preconditions, namely, he must have reason to believe that income has escaped assessment and that there must be tangible material to come to the conclusion that there is an escapement of income from assessment. Such reason to believe should not be on account of mere change of opinion. Therefore, where facts have been viewed during the original proceeding and an assessment order has been passed then in such cases, reopening of an assessment on the same facts without anything more would be a review and not permitted under the garb of reassessment. This would be a mere change of opinion in the absence of any tangible material and is not sufficient to assume jurisdiction to issue the impugned notice. In fact, the Bombay High Court in the case of Idea Cellular Ltd. v. Dy. CIT [2008] 301 ITR 407 has held that once all the material with regard to particular issue is before the Assessing Officer and he chooses not to deal with the same, it cannot be said that he had not applied his mind to all the material before him. [Para 7] Therefore, in the instant case one would have to examine the contention of the assessee that the impugned ....
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....fer of feature film rights for exploitation outside India, in the form of lease, is entitled to the benefit of section 80HHC deduction. The same is denied by the Department on the ground that there is no "sale". The other question is whether such "rights" are goods/merchandise. 9. The basic requirement of section 80HHC is earning in foreign exchange and retention of profits for export business. Profits are embedded in the "income" earned. Earning of income depends on sale of goods and services. Today the difference between the two is getting blurred with globalization and cross-border transaction. Today with technological advancement one has to change our thinking regarding concepts like goods, merchandise and articles. In the case of B. Suresh, the assessee had bought rights of various decoders and had recorded movies on beta-cam tapes which were transferred as telecasting rights to Star TV for five years (it has a limited life). Hence such "rights" would certainly fall in the category of articles of trade and commerce, hence, merchandise. (2) CIT v. Faqir Chand HUF :: (2013) 350 ITR 207 (SC) wherein it has been held as under:- Section 80HHC of the Incom....
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....capability of being bought and sold; and capability of being transmitted, transferred, delivered, stored and possessed. [Para 12] The above finding that the property involved is "goods" is fortified with the decision of Madras High Court in CIT v. Superstar Music [2007] 291 ITR 8. Accordingly, the assessee was entitled to deduction under section 80HHC. [Para 13] In view of the ratio laid down by the Apex Court in Tata Consultancy Services' case (supra ) and Bharat Sanchar Nigam Ltd.'s case (supra), it was to be opined that merely because section 80HHF came to be inserted with effect from 1-4-2000, that, by itself, does not mean that the benefit of section 80HHC, could be denied to the transactions which are governed under section 80HHC. Of course, it goes without saying that in view of the specific provision under section 80HHF for deductions in respect of profits and gains from export or transfer of any film software, television software, music software, television news software, including telecast rights, the assessee could very well in future claim such deductions and the same would be taken care of under section 80HHF(5) to prevent double benefits bein....
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.... turnover'. In order to arrive at the 'adjusted profits of the business', one has to go by the definition of 'profits of the business' contained in Explanation (baa) to sub-section 3(A). This provision was inserted by Finance (No.2) Act, 1991 with effect from 1-4-1992. In order to appreciate this provision, the legislative intent behind this provision is to be looked into. By reason of such amendment, the Parliament did intend that income derived by way of brokerage/commission interest, rent, charges, or any other receipt of a similar nature by the assessee should not be reckoned for the purpose of computing profit or loss earned by a person engaged in the business of export. The purport and reason for enacting section 80HHC indisputably was to provide incentive to export houses. The formula that existed prior to 1991 often used to provide a distorted figure of export profits when receipts like interest, commission, etc. which did not have an element of turnover were included in the profit and loss account. Therefore, it was clarified that 'profits of the business' for section 80HHC would not include receipts by way of brokerage, commission, interest or ....
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.... income derived from export, which is in the nature of brokerage, commission, interest, rent or charges and inclusion of that income to the profits of the business, results in distortion, then, such income should be excluded. [Para 12] In the instant case, it is not in dispute that the assessee is in the business of export of goods and merchandise. The assessee is earning foreign exchange out of that export. The disputed income is earned by the assessee as fees towards developmental work from a German company. The developmental work is intimately connected with the business of manufacturing and sale of goods by the assessee. There is immediate nexus between the activity of export and the developmental work. Admittedly, for the services rendered by way of these developmental work, the assessee has been given the benefit of deductions under section 80-O. The receipt of consideration from a foreign enterprise is not in dispute. From the very same business that the assessee is carrying on, it is having an income under two heads and, therefore, it is not a case of any independent income unrelated to or unconnected with the business carried on by the assessee which is sought to ....