TaxTMI 
TaxTMI 
2023 (1) TMI 1034
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....es 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-operative expenditure subsequent to commencement of ....
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.... 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 to establish that no full and true disclosure was made by the petitioner at the first instance. 12. The r....
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....osition 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 Assistant Commissioner of Income Tax, Non Corporate Circle-3, Room No.623-A, 6th Floor, Wanaparthy Block, 121, MG Road, Nungambakkam, Chennai-600 034 (WP.Nos.1589 of 2017 and batc....
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....espect 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") on March 30, 2010 pursuant to a Business Transfer Agreement dated December 15, 2009 between the parties. The Company is executing plans to expand its manu- facturing capacity at Irungattukottai and is also engaged in setting up a new injectables manufacturing facility at Vizag utiliz....
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....up. 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. * Vizag is a third party segment since during FY 2011-12, no international transactions arose from Vizag segment and all costs incurred pertain to pre-commencement costs (third party costs). * These costs are recovered from Hospira Group up on commercialization of operations in FY 2015-16 and aggregating would amount to double charge....
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....e 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 been provided before the officer and in my view, the assessee has made a full disclosure of primary as well as secondary materials before both the Assessing and the Transfer Pricing Officers. 33. There are instances where re-assessments are initiated based on information obtained from different units/sources with the Income Tax Department including the Criminal Investigation Department or All India Information. Queries may ha....