Income Tax Appellate Tribunal - Mumbai
Technimont Icb P. Ltd, Mumbai vs Assessee on 31 May, 2012
ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai
IN THE INCOME TAX APPELLATE TRIBUNAL
"J" Bench, Mumbai
Before Shri B. Ramakotaiah, Accountant Member and
Shri S.S. Godara, Judicial Member
ITA No.3873/Mum/2010
(Assessment year: 2002-03)
TECHNIMONT ICB (P) Ltd., ACIT Circle 9(3)
504, Link Road, Chincholik MUMBAI
Vs
Bunder, Malad (West)
Mumbai - 400 064
PAN - AAACI 2628 B
(Appellant) (Respondent)
ITA No.3570/Mum/2010
(Assessment year: 2002-03)
ACIT Circle 9(3) TECHNIMONT ICB (P) Ltd.,
MUMBAI 504, Link Road, Chincholik
Vs
Bunder, Malad (West)
Mumbai - 400 064
PAN - AAACI 2628 B
(Appellant) (Respondent)
Assessee by: Shri Mr. Nitesh Joshi
Department by: Ms. Rupinder Brar, DR
Date of Hearing: 31/05/2012
Date of Pronouncement: 08/06/2012
ORDER
Per B. Ramakotaiah, A.M.
These are cross appeals by assessee and Revenue against the orders of the CIT (A)-20 Mumbai dated 23-02-2010. In assessee's appeal, assessee is contesting the reopening of assessment under section 147 in Ground No.1 and from Ground Nos.3 to 5 pertain to the issue on merits. The Revenue appeal is against the directions of CIT (A) in allowing the deduction under section 10B which was restricted by AO in the reassessment proceedings. Since the cross Page 1 of 16 ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai appeals are interconnected, these are considered together in this order.
2. Briefly stated assessee filed return of income declaring a loss of `3,78,26,882/- and AO completed the assessment under section 143(3) on 17-03-2005 determining the loss at `.2,90,86,830/-. AO issued a notice under section 148 on 25-05-2007 (wrongly stated by the CIT (A) in Para 1 of the order as 25/03/07) and completed the assessment under section 147 vide order dated 30.10.2007 determining the total income at Nil after restricting the exemption under section 10B to the extent of total income available. Apparently the assessment was reopened after the end of four years from the assessment year and the satisfaction recorded by AO while reopening the assessment is as under:
"In this case return of income was filed on 30.10.2012 declaring loss of `.3,78,26,882/- and was process under section 143(1) of the I.T. Act, 1961. The scrutiny assessment was completed under section 143(3) on 17.3.2005 at loss of `.2,90,86,830/-. The assessee company is engaged in the business of engineering design and construction.
1st issue:
On perusal of the records, it is noticed that assessee has claimed excess claim of deduction under section 10B s per the normal provisions of the Income Tax for computing the total income as well as under section 115JB of the I.T. Act. On going through the return of income, it is seen that the total income has been computed after first reducing the deduction under section 10B of `.5,15,91,458/- i.e. the depreciation allowable under the I.T. Act of `.4,38,34,564/- (which was assessed in the assessment order under section 143(3) at `.3,50,94,513/-) as well as the unabsorbed depreciation has been reduced afterwards. On plain reading of section 10B, it is seen that the deduction on export profit under section 10B is to be allowed from the total income of assessee. The total income means aggregate income of assessee under all heads of income i.e. that the total income should firstly be computed and thereafter the deduction under section 10B be allowed. By so doing, deduction under section 10B would be Page 2 of 16 ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai substantially reduced and correspondingly the deduction allowable while computing book profit under section 115JB would also be correspondingly reduced. 2nd issue:
Under assessment on account of excess claim of depreciation in computation of statement. On going through the computation of statement filed along with the return of income for A.Y 2002-03, it is seen that assessee has added depreciation excluding EOU division of `.2,69,85,598/- instead of entire book depreciation claimed in the profit and loss account of `.3,58,24,854/- while computing income under normal provisions. Entire book depreciation should be added and thereafter, depreciation allowable as per I.T. Act is to be reduced. This has resulted to escapement of income chargeable to tax amounting to `.88,39,256/-. 3rd issue:
Change of written down value from A.Y. 2001-02 onwards:
It is noticed from the assessment order for A.Y. 2001-02 dated 15.3.2004 that assessee had been compulsorily allowed depreciation and the W.D.V. as on 31.3.2001 was changed. On account of the change in opening W.D.V. for the subsequent years, depreciation allowable under Income Tax Act under normal provisions had also reduced considerably. It is now known whether consequent changes were brought in the claim of depreciation for A.Y. 2002-03. If the opening W.D.V is correctly adopted each year, the carry forward loss and unabsorbed depreciation will be reduced considerably. Thus there is under assessment for the year under consideration and escapement of income to that extent. 4th issue:
It is also noticed that the assessee company has claimed depreciation on motor cars @ 50% (25% in respect of the additions made after 30.9.2001). However, the depreciation at the rate of 50% is available only on the commercial vehicles used for business and profession. In this case, the vehicles are used for assessee's own business and not for commercial purpose. As assessee's business is not from running the vehicles on hire, assessee is entitled to depreciation @ 20% only. There is excess depreciation amounting to `.2306093/- has been wrongly allowed to assessee.Page 3 of 16
ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai Considering the above issues, I have therefore, reason to believe that the income chargeable to tax above `.1 lac as mentioned above has escaped assessment by reason of failure on the part of the assessee company to disclose fully and truly all material facts for its assessment within the meaning of provisions of section 147(c) of the I.T. Act".
3. While completing the assessment on the basis of interpretation given by AO on issue (1) i.e. section 10B, the total income was determined after adjusting the carry forward losses and disallowance under section 10B was `1,87,27,762/- as against `.5,15,91,458/- claimed by assessee. With reference to issue No.2, AO made adjustment of `88,39,256/- which was not upheld by the CIT (A) and relief was given by the CIT (A) on this issue and Revenue is not in appeal. On the 3rd issue as assessee submitted that the depreciation was worked on the revised WDV submitted during the assessment, AO did not make any adjustment. On the 4th issue there was no discussion whatsoever in the assessment order about the restriction of depreciation on Motor Vehicle, but the amount of `23,06,093/- was added back in the computation of income by AO. Since this amount was added back without any discussion in the assessment order, assessee contested the issue before the CIT (A) as pertaining to the disallowances of depreciation on motor car which, however, the CIT (A) confirmed as such. With reference to the issue of section 10B, while directing CIT(A) took the total turnover at `12,31,61,599/- as against `12,45,90,619/- shown by assessee and restricted the disallowance to `5,09,99,718/- proportionately. This reduction of claim by the CIT (A) was contested by assessee in Ground No. 3(a).
4. The learned Counsel's arguments in assessee's appeal are two fold. As far as reopening under section 147 is concerned, it was the submission that AO did not record any satisfaction that there is a failure on the part of assessee in disclosing the full and complete material facts necessary for assessment. It was the submission that Page 4 of 16 ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai the assessment was reopened after 4 years, the assessment was completed under section 143(3) after due examination and there is no failure on the part of assessee in furnishing necessary details and it was only a change of opinion by AO with reference to the claim of deduction under section 10B and depreciation on motor vehicles and on other two issues which have been contested. AO himself has not made out the revision of depreciation as an issue and on the write back of the depreciation claim in Profit & Loss A/c the CIT (A) deleted the same and Revenue is not in appeal. It shows that the two material issues the issues were considered by AO in the regular assessment and it is mere change of opinion or wrong appreciation of facts. It was further submitted that on the issue of depreciation on motor vehicles, AO consequent to an audit objection issued a notice under section 154 and subsequently the same amount was considered and restricted in section 147 proceedings. It was his submission that AO has no reason to record that there is failure on the part of assessee and following the principles laid down by the Hon'ble Bombay High Court in the case of Hindustan Lever 268 ITR 322, the reopening is bad in law.
5. Coming to the merits of the issue, it was his submission that AO even though reopened on four issues, he himself has not considered the issue on written down value. With reference to the other issues of claiming section 10B, the CIT (A) has allowed the benefit to assessee and relied on the principles laid down by the Hon'ble Karnataka High Court decision in the case of CIT vs. Yokogawa India Ltd, 341 ITR 385 for the proposition that depreciation of export unit and non export units are to be separately allowed and the action of AO in setting off the depreciation before allowing deduction under section 10B is not correct. With reference to the claim of depreciation on motor vehicles, it was his submission that the claim was originally examined and allowed and the claim is in accordance with the provisions of the law supported by the Page 5 of 16 ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai decision of Hon'ble ITAT in the case of Daleep S. Chandnani v. ACIT, 14 SOT 233 and also LM Glasfiber (India) Pvt. Ltd vs. ACIT 2008-TIOL-524-ITAT Bang. It was his submission that on merits also, all the issues are in favour of assessee and so reopening is bad in law.
6. The learned DR however, referred to the orders of AO and the CIT (A) and supported that there is escapement of income by way of excess claim of depreciation and AO invoked section 147(c) for the proposition that there is escapement of income and so the orders are to be upheld. The DR also submitted that the issue of Section 10B is the ground raised by the Revenue in its cross appeal and he submitted that the CIT (A) erred in deleting the adjustment so made by AO. He supported the order of AO to that extent.
7. We have considered the issue. Briefly stated above, assessee is contesting the reopening both on technical grounds and also on merits. The Revenue is aggrieved on reworking of the deduction made by the CIT (A). Before coming to the issue of reopening on technical reasons, it is necessary to examine the issue on merits as well. As stated earlier, AO considered four issues for reopening, out of which he himself has not acted upon the claim of excess depreciation on the basis of WDV of earlier years. With reference to the issue of adjustment of claim under section 10B the learned CIT (A) even though has not directly given any finding on the contention raised by assessee with reference to set off of the losses/unabsorbed depreciation of non SEZ to the SEZ undertakings, he however, relied on the provisions of section 10B(4) and directed AO to allow deduction of `56,99,718/- as against `5,15,91,458/- claimed. This indicates that on merits assessee's contention is correct. The difference arose due to taking the export turnover exclusive of foreign exchange realization and other amounts which assessee is Page 6 of 16 ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai contesting in Ground No.3 (a). This issue will be dealt with separately later.
8. As far as assessee's claim of set off of section 10B profits are concerned, the CIT (A) agreed with assessee's contention that the unabsorbed depreciation and losses cannot be set off to the income of the undertaking claimed deduction under section 10B. This issue is now crystallized by the decision of the Hon'ble Karnataka High Court in the case of CIT vs. Yokogawa India Ltd, 341 ITR 385 wherein it was held "the benefit of tax holiday was originally enacted as an absolute exemption under Chapter III of the Income-tax Act, 1961. It remained as exemption for almost two decades. The heading of Chapter III under which the relevant provisions were placed is titled as "Incomes which do not form part of the total income". The second heading read as "Special conditions in respect of newly established industrial undertakings in free trade zones". Section 10 begins as "In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not he included", whereas section 10A as originally enacted provided that the profits and gains of the eligible undertaking shall not be included in the total income of the assessee. The Finance Act, 2000, recast section 10A. It came into effect from April 1, 2001. The second heading continues with a marginal change by way of addition of the word "etc." to read as "Special provisions in respect of newly established undertakings in a free trade zone, etc". The new section provides for deduction of profits and gains of eligible undertaking from the total income of assessee. Total income in its strict sense requires computation for the purpose of levy of tax. The computation of total income begins only with Chapter IV and as section 10A is covered in Chapter III, the phrase "total income" used in section 10A cannot be understood in the same sense as in section 2(45). The phrase "total income" has been used in the Income-tax Act in several places with different connotations and shades. The phrase "total Page 7 of 16 ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai income" used in section 10A is one such variant. The phrase need not necessarily mean the total income as computed in accordance with the provisions of the Act. When section 10A was recast by the Finance Act, 2001, Parliament was aware of the character of relief given in Chapter III. The Act of Parliament in consciously retaining this section in Chapter III indicates its intention that the nature of relief continues to be an exemption. The income of a section 10A unit has to be excluded before arriving at the gross total income of assessee. The income of a section 10A unit has to be deducted in the beginning itself and not after computing the gross total income. The total income used in the provisions of section 10A in this context means the global income of assessee and not the total income as defined in section 2(45).
Prior to the introduction of sub-section (6) of sections 10A and 10B of the Finance Act, 2000, which came into effect from April 1, 2001, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year, relevant to any subsequent assessment year, sub-section (2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of sub-section (2) of section 33 and sub-section (4) of section 35 of the Act or the second proviso to clause (ix) of sub-section (1) of section 36 was not be applicable in relation to any such allowance or deduction. Similarly, no loss as referred to in sub-section (1) or in section 72 or sub-section (1) or sub-section (3) of section 74 in so far as such loss relates to the business of the undertaking was permitted to be carried forward or set off where such loss relates to any of the relevant assessment years. The amendment by the Finance Act, 2003, with retrospective effect from April 1, 2001, indicates the legislative intention of providing the benefit of carry forward of depreciation and business loss relating to any year of the tax holiday period to be set off against income of any year post-tax holiday. The amendment read with the Page 8 of 16 ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai Board circulars does not militate against the proposition that the benefit of relief under this section is in the nature of exemption with reference to the commercial profits. However, in order to give effect to the legislative intention of allowing the carry forward of depreciation and loss suffered in respect of any year during the tax holiday for being set off against income post tax holiday, it is necessary that the notional computation of business income and the depreciation as per the provisions of the Act should be made for each year of the tax holiday period. While so computing, attention will have to be given to the provisions of sections 70, 71, 72 and section 32(2). The amount of depreciation and business loss remaining unabsorbed at the end of the tax holiday period should be determined so that the same may be set off against the income of the post tax holiday period.
The expression "deduction of such profits and gains as derived by an undertaking shall be allowed from the total income of assessee" has to be understood in the context in which the said provision is inserted in Chapter III of the Act. Sub-section (4) of the section 10A clarifies this position. It provides that the profits derived from export of articles or things from computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking. Therefore, it is clear that though assessee may have more than one undertaking for the purpose of section 10A, it is the profit derived from export of articles or things or computer software from the business of the undertaking alone that has to be taken into consideration and such profit is not to be included in the total income of assessee. The provisions of this sub-section will apply even in a case where an assessee has opted out of section 10A by exercising his option under sub-section (8). It is permissible for an assessee to opt in and out of section 10A. In the year when assessee has opted out, the normal provisions of the Act Page 9 of 16 ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai would apply. The profits derived by him from the undertaking would suffer tax in the normal course subject to various provisions of the Act including those of Chapter VI-A. If in such a year, assessee has suffered losses, such losses would be subject to inter source and inter head set off. The balance, if any, thereafter can be carried forward for being set off against profits of the subsequent assessment years in the normal course. Unabsorbed depreciation also merits in a similar treatment.
Assessee was in the business of manufacture and trading of process control instruments. Assessee filed returned of income on October 31, 2002 declaring a total loss of `5,07,03,098/-. Assessee claimed exemption of `3,95,99,100/- under section 10A for its STP Unit. The exemption had been claimed before set off of brought forward losses and depreciation. According to the assessing authority, the deduction under section 10A had to be allowed from the total income of assessee. The total income of assessee was arrived at as per section 80B(5). Therefore, the exemption under section 10A had to be given after setting off all brought forward losses within the context of section 32(1) read with section 72(2) of the Act. Accordingly, the section 10A benefit was recomputed. After such recomputation and, after adjusting assessee was held to be not entitled for exemption under section 10A and hence a sum of `36,575/- was treated as income from other sources. The Commissioner of Income-tax (Appeals) and the Tribunal held that the income of the section 10A unit had to be excluded before arriving at the gross total income. On appeal to the High Court:
Held, that as the profits and gains under section 10A were not to be included in the income of assessee at all, the question of setting off the loss of assessee from any business against such profits and gains of the undertaking would not arise. Similarly, as per section 72(2), unabsorbed business loss is to be first set off and thereafter Page 10 of 16 ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai unabsorbed depreciation treated as current year's depreciation under section 32(2) is to be set off. As the deduction under section 10A has to be excluded from the total income of assessee, the question of unabsorbed business loss being set off against such profit and gains of the undertaking would not arise.
9. This view was reiterated by the Hon'ble Karnataka High Court in the case of CIT vs. Hindustan Electronic Tool India Pvt. Ltd in ITA No.430 & 431 of 2010 dated 12.12.11 wherein it was reiterated that profit for the purpose of deduction under section 10A should be allowed without setting off of unabsorbed loss and depreciation. The Hon'ble Bombay High Court in the case of CIT vs. Black & Beach Consulting (P) Ltd in ITA No.1237 of 2011 dated 9.4.2012 held that section 10A (which is pari material with section 10B) is a provision which is in nature of deduction and not an exemption. It was held that the deduction has to be given effect at the stage of computing the profits and gains of business which is anterior to the application of provisions of section 72 which deals with carry forward and set off business losses. It was further held that the provisions of section 80B(5) applicable to Chapter VIA cannot be invoked for the purpose of section 10A which comes in Chapter-III. Since provisions of section 10A & 10B are similar in nature, this judgment of the Hon'ble Bombay High Court is also equally applicable to the facts of the case. Coupled with the specific provisions of section 10A(4) which the CIT (A) relied, it has to be held that assessee's claim of excluding the profits of the undertaking and was accepted by AO in the original assessment is correct. Any other opinion has to be considered as a change of opinion not supported by law.
10. With reference to the 2nd issue considered by AO with reference to the addition on depreciation claimed in P&L account, assessee excluded the same entirely including the profits of SEZ unit while working out the profits in IT computation. The CIT (A) Page 11 of 16 ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai considered that there is no need for making any adjustment and allowed the ground. Inspite of that AO in consequential order further made the adjustment and the CIT (A) in further appeal has directed AO to delete it. Therefore, on this issue also there is no merit in AO's observation that assessee has claimed excess deduction.
11. That leaves us with the 4th issue (in satisfaction note) of claim of depreciation on motor car at 50% as against 20% claimed and allowed by AO. This claim of assessee is supported by the depreciation schedule and Note 3(a) which defines commercial vehicle. This issue was also considered by the ITAT in the case of Daleep S. Chandnani v. ACIT, 14 SOT 233 (Mum), dated October 12, 2006, wherein this issue was considered and held as under:
"Further, the Explanation to the third proviso to section 32 defines that the expression 'commercial vehicle' would mean 'light motor vehicle' and the 'light motor vehicle' as defined in the Motor Vehicles Act, 1988, means any transport vehicle or omini bus, the gross physical weight of either of which or a motor car or a tractor or road roller the unladen weight of which does not exceed 7,500 kgs. Thus, a motor car not exceeding the specified weight is covered under the definition of 'light motor vehicle'. It is further provided that commercial vehicle would not include 'maxi-cab' and 'motor cab'. The 'maxi-cab' as per provision of the Motor Vehicles Act means any motor vehicle constructed or adopted to carry more than six passengers but not more than twelve passengers excluding the driver for hire or reward. Similarly, the term 'motor cab' also excludes any motor vehicle for hire or reward. If the provisions of Explanation to third proviso to section 32 and the definition of maxi-cab and motor cab as given in the Motor Vehicles Act are read together then motor vehicles used for hire or reward would not be covered under the third proviso to section 32 and such motor vehicles would be covered under entry (2)(ii) of Item III of Part A of Appendix I (applicable for the assessment years 1988-89 to 2002-03) of the Rules. This conclusion further leads to an inference that the Legislature has given benefit of higher depreciation to the assessees not engaged in the business of motor buses, motor lorries and Page 12 of 16 ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai motor taxies on hire and defining such light motor vehicles as commercial vehicle, though intentionally excluding vehicles commercially exploited for yielding income from the definition of commercial vehicle further supports the case of the assessee. Different entries exist in Appendix I for different categories of motor vehicles for providing depreciation at a specified rate, depending upon the period of acquisition and the purpose for which they are deployed. Therefore, nomenclature of commercial vehicles should not be so construed as to deprive the assessee of higher depreciation when all the conditions specified in the Act and the Rules had been met by the assessee. Till such car was used by the assessee for its business purpose, the assessee would get the depreciation at the rate of 40 per cent as per the third proviso to section 32. [Para 8]".
Similar view is also taken in the case of LM Glasfiber (India) Pvt. Ltd in ITA No.50/Bang/2008, 2008-TIOL-574-ITAT Bang., wherein it was held that the vehicles acquired by assessee eventhough had not been used in the business of running them on hire but for that reason depreciation @ 50% cannot be denied as entry in Dep Schedule covers the case of commercial vehicles acquired between the period 1.4.2001 to 31.3.2002 and put to use in this period for the purposes of any business or profession. There is no condition in this entry that the commercial vehicle shall be used in the business of running it on hire. Admittedly the vehicles are registered as commercial vehicles and falls within the entry for claim of depreciation at 50%. AO at the time of original assessment has considered these aspects and allowed the depreciation accordingly. Therefore, on merits there is no need for reopening the assessment on any of the issue considered by AO.
12. Now coming to the issue of reopening under section 147, admittedly the reopening was made after four years from the end of relevant Assessment year. As per the provisions of section 147, first proviso to section 147 is applicable. The provision of section 147 is as under:
Page 13 of 16ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai "Section 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess, such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) :
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:
Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment".
As can be seen from the 1st proviso to section 147, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year. As seen from the reasons recorded by AO, there is no finding that there is a failure on the part of assessee in disclosing fully and truly all material facts. Therefore, provisions of section 147 cannot be invoked in this case year as the assessment Page 14 of 16 ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai was completed under section 143(3) after due enquiry. Our opinion is fortified by the following decisions:
i) Cartini India Ltd v. ACIT (291 ITR 355)(Bom)
ii) German Remedies Ltd v. DCIT (285 ITR 26)(Bom)
iii) Hindustan Lever Ltd v. ACIT 268 ITR 33(Bom)
iv) IPCA Laboratories Ltd (251 ITR 416)(Bom)
v) Hindustan Unilever Ltd v. DCIT (325 ITR 102) (Bom).
We accordingly hold that reopening per se is bad in law as there is no failure on the part of assessee in furnishing necessary details at the time of filing the return or completion of the assessment originally under section 143(3). Therefore, it has to be considered as mere change of opinion on existing facts available on record by AO which cannot be upheld in view of the judgment of the Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd 187 Taxman 312(SC)/320 ITR 561. For these reasons the reopening of assessment is held as bad in law. Therefore, we uphold Ground No.1 of assessee with reference to the jurisdiction for reopening the assessment.
13. For the sake of record, it is also to be considered that the CIT (A) erred in restricting the claim under section 10B while giving his decision in Para 5.3. Assessee has claimed total turnover at `12,45,90,619/- which include the exchange rate difference of `14,21,482/-. The CIT (A) excluded the amount and took the income from export realization at `12,31,61,599/- and restricted the claim. It was the submission that the foreign exchange realization is on the export proceeds which are to be included in the 'total turnover' and also in 'export turnover' which assessee had done. We have noticed the computation and also the annexure to the 10B report. Assessee's contentions are correct. The foreign exchange realization being part of export proceeds are to be Page 15 of 16 ITA Nos.3873 and 3570 Technomont ICB Pvt Ltd Mumbai included in the export turnover. Therefore, the CIT (A) to that extent is not correct. However, this became an academic issue as assessee contention for reopening are accepted in Ground No.1. Therefore, assessee's grounds are considered allowed and the Revenue ground, as it has no merit is dismissed.
14. In the result, appeal filed by the assessee is considered allowed and Revenue appeal is dismissed.
Order pronounced in the open court on 8th June, 2012.
Sd/- Sd/-
(S.S.Godara) (B. Ramakotaiah)
Judicial Member Accountant Member
Mumbai, dated 8th June, 2012.
Vnodan/sps
Copy to:
1. The Appellant
2. The Respondent
3. The concerned CIT(A)
4. The concerned CIT
5. The DR, "J" Bench, ITAT, Mumbai
By Order
Assistant Registrar
Income Tax Appellate Tribunal,
Mumbai Benches, MUMBAI
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