KANSAI NEROLAC PAINTS LIMITED Vs. DEPUTY COMMISSIONER OF INCOME TAX
LAWS(IT)-2014-5-85
INCOME TAX APPELLATE TRIBUNAL
Decided on May 25,2014

Kansai Nerolac Paints Limited Appellant
VERSUS
DEPUTY COMMISSIONER OF INCOME TAX Respondents

JUDGEMENT

P.M.JAGTAP,AM. - (1.) THIS appealfiled by the assessee is directed against theorder of ld. CIT(A) -xxvi, Mumbai dated 8.12.2006.
(2.) THE relevant facts of the case giving rise to this appeal are as follows. The assessee in the present case is a company which is engaged in the business of manufacturing of paints and varnishes. The return of income for the year under consideration was originally filed by it on 31.10.2012 declaring total income of Rs.29,83,85,660/ - after claiming deduction of Rs.9,89,72,231/ - u/s 80IA of the Income Tax Act, 1961 (the Act) in respect of the profit of its industrial undertaking at Kanpur. During the course of assessment proceedings, the AO noticed that the profit of its Kanpur Unit eligible for deduction u/s 80IA of the Act was worked out by the assesseecompany after apportioning overheads of head office and sales depots on the basis of method prescribed by the decision of Delhi Bench of ITAT in the case of Food Speciality Ltd V/s ACIT reported in 54 ITD 352. In this regard, he noted that the deduction u/s 80IA was allowed to the assessee -company in AYs. 1999 -2000, 2000 -01 and 2001 -02 on the profit of Kanpur unit as worked out after apportioning the overheads of head office and sales depots on the basis of turnover and not on the basis of method adopted by the assessee. He therefore recomputed the profit of the Kanpur unit of the assessee at Rs. 28,45,81,658/ - after apportioning the overheads of head office and sales depots on the basis of turnover and restricted the claim of the assessee for deduction u/s 80IA to Rs.8,53,74,497/ - in the assessment originally completed u/s 143(3) vide order dated 7.3.2005 .
(3.) SUBSEQUENTLY , on perusal of the assessment record, it was noticed by the AO that while computing the profit of Kanpur Unit of the assessee company for the purposes of allowing deduction u/s 80IA, the overheads of head office and sales depots were not apportioned on the basis of sales turnover correctly. He, therefore, reopened the assessment u/s 147 of the Act and issued notice to the assessee u/s 148 of the Act on 30.1.2006. After considering the submissions made on behalf of the assessee during the course of re -assessment proceedings, the order u/s 143(3) r.w. section 147 was passed by the AO on 20.2.2006 wherein the mistake committed in the original assessment in apportioning the overheads of head office and sales depots to compute the profit of the Kanpur Unit of the assessee company was corrected by the AO and the claim of the assessee for deduction u/s 80IA was further restricted by him to Rs.7,95,68,898/ - . Against the order passed by the AO u/s 143(3) r.w. section 147 of the Act, an appeal was preferred by the assessee before the ld. CIT(A) challenging the action of the AO in restricting the deduction u/s 80IA of the Act allowable in respect of profit of Kanpur Unit.Although no ground was specifically raised by the assessee in the appealfiled before the ld. CIT(A) challenging the validity of the assessment made by AOunder section 143(3) r.w.s. 147 of the Act, submissions were made on behalf of theassessee on this issue.. It was submitted in this regard on behalf of the assesseebefore the ld. CIT(A) that the original assessment was completed u/s 143(3) by the AOafter due examination of the relevant facts available on record and after making all thenecessary inquiries. It was pointed out that specific query had been raised by the AOpertaining to the apportionment of overhead while examining the claim of the assesseefor deduction u/s 80IA of the Act and even the basis of apportionment adopted by theassessee was changed by the AO thereby restricting the claim of the assessee fordeduction of Rs.9,89,72,231/ - to Rs.8,53,74,497/ -. It was contented that the issuerelating to assessee's claim for deduction u/s 80IA thus was decided by the AO in theoriginal assessment after application of mind and the re -opening of the said assessmenton re -appraisal of the same facts and material, which were available with the AO andconsidered by him at the time of original assessment, was based on a mere change of opinion. Relying interalia on the decisions of Hon'ble Supreme Court in the caseof Forammer (264 ITR 566) (SC), Delhi High Court in the case of CIT vs. Kelvinator of India Ltd., 256 ITR 1(Del.Full Bench) and Hon'ble Bombay High Court in the case of German Remedies Ltd V/s DCIT,201 CTR 193 (Bom), in was contended on behalf of the assessee before the ld. CIT(A) that the reopening of the assessment by the AO merely on the basis of change of opinion was not permissible in law and the assessment completed in pursuance thereof u/s 143 r.w. 147 of the Act was liable to be quashed being invalid.;


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