Back
2016 Supreme(Guj) 127
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Akil Abdul Hamid Kureshi and Mohinder Pal, JJ.
Mastek Limited- Appellants
Vs.
Assistant Commissioner of Income Tax, Circle 2(1)- Respondent
Special Civil Application No. 14571 of 2015
Decided On: 11.01.2016
For Appellant/Petitioner/Plaintiff:B.S. Soparkar, Advocate
For Respondents/Defendant:Mauna M. Bhatt, Advocate
Headnote:
Companies Act,2013 - Income Tax Act, 1961 - Sections 10A, 10AA, 10B, 92C, 92C(4), 143(3), 147 - Petitioner is Company registered under Companies Act - Petitioner filed its return of income for Assessment Year declaring total income - Assessment was taken in scrutiny - Assessment was framed under section 143 (3) of the Income-tax Act, 1961 - Assessment which Assessing Officer seeks to reopen for which notice came to be issued - Held, No failure to disclose material facts necessary for assessment - Not only in original return filed assessee had made full disclosures, this issue was examined by Assessing Officer during original assessment for which assessee had given written explanation - Notice issued on ground that exemption under Section 10A had been wrongly calculated - Any permission now to Assessing Officer to re-examine the question would be allowing him to change opinion originally framed - Notice not valid - Petition is allowed - Petition Disposed
Akil Abdul Hamid Kureshi, J.
1. Petitioner has challenged the notice dated 18.11.2014 as at Annexure-A to the petition issued by the respondent-Assessing Officer seeking to reopen the assessment of the petitioner for the Assessment Year 2008-09. Brief facts are as under:
2. The petitioner is a Company registered under the Companies Act. The petitioner filed its return of income for the Assessment Year 2008-09 on 30.09.2008 declaring total income of Rs. 1.76 crore (rounded off). The assessment was taken in scrutiny. Assessment was framed under section 143(3) of the Income-tax Act, 1961 ("the Act" for short) on 02.02.2012. It is this assessment which the Assessing Officer seeks to reopen for which the impugned notice dated 18.11.2014 came to be issued. The petitioner was supplied with the reasons recorded by the Assessing Officer for issuing such notice, relevant portion of which reads as under:
"In this case, the return of income for the A.Y. 2008-09 declaring income of Rs. 1,76,295/- was filed on 30.09.2008. Assessment u/s. 143(3) of the Act was finalized determining the total income at Rs. 26,28,28,351/-.
In the assessment order, the assessee was allowed exemption u/s. 10A of the Act amounting to Rs. 92,48,60,352/- in respect of 100% E.O.U. units at Pune (Rs. 3,84,40,044/-) and Mahape (Rs. 92,64,20,308/-). On perusal of the records, it is noticed that in the computation of income, business income computed was to the tune of Rs. 92,71,84,309/- only and accordingly, the deduction u/s. 10A was to be restricted to Rs. 92,71,84,309/- but deduction of Rs. 96,48,60,351/- was allowed after adjusting the balance of Rs. 3,76,76,042/- from the amount computed in TP order u/s. 92C of the Act which resulted in excess deduction of Rs. 3,76,76,042/-. As per section 92C(4), where an arm's length price is determined by the A.O. u/s. 92C(3), no deduction shall be allowed u/s. 10A or section 10AA or section 10B.
It is also noticed in the assessment order that, the assessee was allowed exemption u/s. 10A of the Act amounting to Rs. 92,48,60,352/- in respect of 100% E.O.U. units: at Pune (Rs. 3,84,40,044/-) and Mahape (Rs. 92,64,20,308/-). As seen from the P & L account for the year ending on 31.03.2008 that the assessee has incurred an amount of Rs. 474.41 lakh towards communication charges and Rs. 64.67 lakh towards 'insurance' aggregating to Rs. 539.08 lakh. No details of 'freight charges' incurred are available from records. Unit-wise breakup of these expenses is also not available. However, based on the total turnover (Rs. 50977.42 lakh), the proportionate amount to be excluded from the 'export turnover' would be Rs. 515.14 lakh for Mahape Unit and Rs. 23.94 lakh for Pune Unit. As per the definition u/s. 10A, 'export turnover' does not include telecommunication charges, freight and insurance incurred for export of software. Accordingly, allowable deduction u/s. 10A would be Rs. 91.66 crore. Thus there was excess allowance of deduction u/s. 10A to the tune of Rs. 1,02,03,278/- (Rs. 96,48,60,352/- minus Rs. 95,46,57,074/-).
Thus as per the arm's length price is determined by the A.O. u/s. 92C(3), no deduction shall be allowed u/s. 10A or section 10AA or section 10B. Further, there is wrongly allowed the deduction u/s. 10A towards Rs. 474.41 communication charges, and Rs. 64.67 lakh towards 'insurance' aggregating to Rs. 539.08 lakh which resulted excess allowance of deduction u/s. 10A of Rs. 1,02,03,278/-.
In view of the above, I have reason to believe that the deduction allowed u/s.10A or section 10AA or section 10B on working of arm's length price u/s. 92C(3)to the extent of Rs. 3,76,76,042/- is income chargeable to tax and deduction allowed u/s. 10A on communication charges and insurance charges to the extent of Rs. 1,02,03,278/- is income chargeable to tax. These have been under assessed to tax on account of failure on the part of the assessee to disclose fully and truly all material facts pertaining to the A.Y. 2008-09 and no opinion was fo
