TaxTMI 
TaxTMI 
2023 (1) TMI 1034
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....ce (ALP) of such transactions. 3. Notices were issued by the TOP calling for various particulars in regard to the international transactions and the petitioner duly responded to the same. The petitioner had set up a new injectable manufacturing facility in Vishakhapatnam (in short 'Vizag unit') that had commenced production during the financial year 2015-16. 4. Till the commencement of production, the direct expenses incurred on assets under construction had been capitalized by the petitioner. Indirect expenditure was being claimed as revenue expenditure, including for the two years in issue in these writ petitions. 5. In the course of the hearing before the TPO, the petitioner, apart from producing various other material that had been sought, submitted a note on its business activities, making specific reference to the Vizag unit. Segmental financial statements that provided a break up of pre-operative expenditure relating to Vizag unit were also provided. 6. Upon receiving the primary information, the TPO had raised a query in respect to the allocation of expenses in response to which the petitioner had tendered explanation along with proof of recovery of the pre-oper....
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....- Further the officer mentioned that the assessee in the application filed for APA, included vizag unit from FY 2014-15 and did not include IKKT segment. This proved that the two units were different and that the new vizag unit started functioning only in FY 2015-16. Accordingly, the expenditure which have been incurred by the assessee prior to setting up the vizag unit are pre-operative expenses and capital in nature and cannot be allowed as revenue expenditure. The above information is fresh information brought to the notice of the undersigned, and there is reason to believe that income of above Rs. 1 Lakh has escaped assessment and should be brought to fax. In view of the above, I have reason to believe that income chargeable to tax has escaped assessment for the asst. year 2012-13 and the case may be re-opened u/s 147." You are requested to file objection, if any, to the reopening proceedings latest by 24/10/2018. 11. Since the notices had been issued beyond a period of four years, the petitioner relies on the proviso to Section 147, which sets out a limitation of four year for re-assessment extendable to six years, if the revenue is able ....
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....laged leading to a disclosure which is neither full nor true. 17. The petitioner relies on the following citations for the proposition that there can be no re-assessment in the face of a full and true discloser by an assessee and, touching on the merits of the matter, to the effect that there should be no disallowance of expenditure, in a case, where the expenses incurred have been recovered in the subsequent periods, as in the present case. The decisions are: (i)Commissioner of Income-tax, Coimbatore v. Elgi Finance Ltd. [(2006) 286 ITR 674] (ii)Fenner (India) Ltd. v. Deputy Commissioner of Income-tax [241 ITR 672 (Madras)] (iii)Commissioner of Income-tax v. Foramer France [(2003) 264 ITR 566 (SC)] (iv)Foramer v. Commissioner of Income-tax [(2001) 247 ITR 436 (Allahabad)] (v)Commissioner of Income-tax v. Kelvinator of India Ltd. [(2002) 256 ITR 1 (Delhi)] (vi)Commissioner of Income-tax, Delhi v. Kelvinator of India Ltd. [320 ITR 561] (vii)PVP Ventures Ltd. v. Assistant Commissioner of Income-tax, Corporate Circle 5(2), Chennai (W.A.Nos.1171 & 1172 of 2015, dated 27.10.2015) (viii)Karti P.Chidambaram v. The ....
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.... and the pleadings have been studied carefully. 20. The two issues that arise in this matter are assumption of jurisdiction as well as characterization of the expenses to determine whether there has been a claim of ineligible pre-operative capital expenditures in respect of the years prior to 2015-16, when the Vizag unit of the petitioner commenced commercial production. 21. The documentation placed before this Court makes it very evident that neither the Assessing Officer nor the TPO had lost sight of the issues arising from returns of the income filed by the assessee and specific queries had been raised on the allocation of expenses to the Vizag unit. 22. The financials of the company accompanying the return of income, included inter alia, a note on the Vizag unit at note 1, reading as follows: A.Background: "Hospira Healthcare India Private Limited ("the Company" or "HHIPL"), a wholly owned subsidiary of Hospira Inc., USA was incorporated in India on November 17, 2009. HHIPL acquired the generic injectable pharmaceuticals business (including certain manufacturing and R&D assets and drug pipeline) of Orchid Chemicals & Pharmaceuticals Limited ("Orchid")....
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....commencement cost was recovered upon commencement of commercial production as a policy decision and this aspect of the matter has also been placed for the consideration of the TPO in the following terms: "As mentioned during the course of our hearing, the Vizag segment is being set up as a contract manufacturer of Hospira Group. Under the proposed APA Application, the Assessee has proposed to recover the pre-commencement cost upon commencement of commercial production. We confirm that the above mentioned pre-commencement revenue costs and depreciation have been recovered from Hospira Group upon commencement of operations in FY 2015-16. The invoice in relation to the recovery or recoupment of pre-commencement costs is attached in Annexure 3 to the submission dated January 21, 2016. Accordingly, the Assessee summarizes its contention that the Vizag segment cannot be aggregated with the IKKT manufacturing segment as follows: * IKKT manufacturing and Vizag segment have different characterizations and should not be looked together. Further, the drugs proposed to be manufactured from Vizag segment have no linkage to the operations of IKKT manufacturing and R&D segments.....
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....2015 and the amount is mentioned as US $ 8,86,77,715. 5.13 Taking this claim to be correct, the apportionment done by the assessee calls for no interference." 29. The TPO, before whom aforesaid material has, admittedly, been placed has accepted the submissions of the petitioner and the assessment has been completed by the officer in conformity with the view taken by the TPO, in line with the statutory mandate of Section 92CA(4) of the Act. 30. While this is so, the petitioner approached the authorities for determination of pricing by way of APA and such materials came to be attention of the Joint Commissioner of Income Tax Transfer Pricing, who writes in turn to the Assessing Officer, based on which the impugned, reassessment order has been initiated. 31. The question that begs consideration is as to whether there has been a full disclosure of all relevant issues before the Officer at the original instance and, in view of the materials noticed above, I am of the categoric view that the answer should be in the affirmative. 32. Details in regard to the expenditures incurred in connection with the Vizag segment and the manner of characterization of the same have b....