M/S.diebold Systems Private Limited,28/3, (Old v. The Income Tax Officer (Osd),Company Circle I (4)

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 11.07.2019 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case (Appeal) No.2153 of 2008 M/s.Diebold Systems Private Limited,28/3, (Old No.54/3), Ground and 3[rd] Floor,Montieth Road, Egmore,Chennai-600 008. .. Appellant/Appellant -vs- The Income Tax Officer (OSD),Company Circle I (4),121, Nungambakkam High Road,Chennai-600 034... Respondent/Respondent Appeal under Section 260A of the Income-tax Act, 1961against the order dated 30.04.2008 on the file of the Income TaxAppellateTribunal,Chennai'A'Bench,Chennai inI.T.A.No.883/Mds/2007 for the assessment year 1999-2000. Appeal against the order dated 31/01/2007 made inITA.No.136/2006-07/A-111 on the file of the Commissioner ofIncome Tax(Appeals)-III, Chennai for the assessment year1999-2000. Appeal against the order dated 16/03/2006 made in GINO/PANNO AACD3206C on the file of the Income Tax Officer(OSD) CompanyCircle 1(4) Chennai for it assessment year 1999-2000. For Appellant:Mr.M.P.Senthil KumarFor Respondent :Ms.R.Hemalatha,Senior Standing Counsel JUDGMENT This appeal filed by the appellant/assessee, under Section260A of the Income-tax Act, 1961 (hereinafter referred to as“the Act”), is directed against the order dated 30.04.2008,passed by the Income Tax Appellate Tribunal, Chennai 'A' Bench(for brevity, “the Tribunal”), in I.T.A.No.883/Mds/2007 for theassessment year 1999-2000. 2.The above appeal is admitted on the following substantialquestions of law:- “i. Whether, on the facts and in thecircumstances of the case, the Tribunal is right in law in holding that reopening of the assessmentfor the Assessment Year 1999-2000 under Section 147 of the Act is valid in law?ii. Whether, on the facts and in thecircumstances of the case, the Tribunal is rightin law in holding that the appellant is notentitled to relief under Section 80 IA of the Actin respect of AMC charges, other income and inerroneously adding back interest income?” 3.Heard Mr.M.P.Senthil Kumar, learned counsel for theappellant/assessee; and Ms.R.Hemalatha, learned Senior StandingCounsel for the respondent/Revenue. 4.So far as the second substantial question of law isconcerned, the same has been decided against the assessee in theassessee's own case for the assessment year 2001-02 (M/s.DieboldSystems P. Ltd., vs. The Assistant Commissioner of Income Tax)in T.C.(A) No.596 of 2008, dated 24.06.2019, and the operativeportion of the judgment read as follows:- “12.This leaves us with the first issue, viz.,deduction under Section 80IA of the Act on AMC(Annual Maintenance Charges of ATM) in respect ofATM machines sold. 13.As rightly pointed out by T.Ravi Kumar, theassessee was not able to establish before theAssessing Officer by producing records. TheAssessing Officer after examining the facts of thecase, found that the income earned from AMC(Annual Maintenance Charges of ATM), installationand technical charges, consultation charges andlicence fee of software do not constitute incomefrom the industrial undertaking which wasestablished in Pondicherry, since this was notderived from the industrial undertaking, as themen, material and machinery of the Pondicherryindustrial undertaking were not used to earnincome and therefore, denied deduction underSection 80IA of the Act. 13.As rightly pointed out by T.Ravi Kumar, theassessee was not able to establish before theAssessing Officer by producing records. TheAssessing Officer after examining the facts of thecase, found that the income earned from AMC(Annual Maintenance Charges of ATM), installationand technical charges, consultation charges andlicence fee of software do not constitute incomefrom the industrial undertaking which wasestablished in Pondicherry, since this was notderived from the industrial undertaking, as themen, material and machinery of the Pondicherryindustrial undertaking were not used to earnincome and therefore, denied deduction underSection 80IA of the Act. 14.Mr.M.P.Senthil Kumar, learned counselappearing for the appellant/assessee strenuouslycontended that the assessee cannot sell the ATMsunless they offer annual maintenance of the same.Further, it is contended that the assessee'sbusiness of production, sale, installation andmaintenance of ATMs by providing necessarysoftware is a very high security risk, as theydispense large amounts of cash. Further, it issubmitted that in view of special type of machine,provision of maintenance service is an integralpart of manufacturing and selling activity. Theabove submissions made by Mr.M.P.Senthil Kumarwere never pleaded either before the AssessingOfficer, or before the CIT(A) or before theTribunal either in the same tenor or in adifferent manner. Therefore, such a plea cannot be raised at this juncture. Even assuming theywere raised earlier, when the assessee hasmiserably failed to establish the same before thefact finding authority, they cannot be permittedto raise such a contention before this Court forthe first time. Therefore, the assessee has notmade out any ground to interfere with the firstissue as well. With regard to the first issue,there was an alternate claim made by the assesseestating that the expenditure incurred in carryingout annual maintenance work should be excludedwhile computing profit under Section 80IA of theAct. This issue was considered by the CIT(A) inparagraph 4.6 of the order dated 28.02.2005 andwas rejected on the ground that there was nopositive income from the Pondicherry unit. 15.Thus, for the above reasons, we are of theclear view that the assessee has not made out anyground to interfere with the impugned order passedby the Tribunal and the appeal is liable to bedismissed, as there is no substantial question oflaw arising for consideration. No costs.” 5.Following the above decision, the second substantialquestion of law is answered against the assessee. 6.The first substantial question of law is regarding thevalidity of reopening the assessment. 7.The learned counsel appearing for the appellant arguedthat the assessment for the year under consideration, 1999-2000,was completed under Section 143(1) of the Act on 10.10.2000accepting the income admitted in the revised return of incomefiled by the assessee. Having done so, the question ofreopening the assessment by invoking the power under Section 147of the Act does not arise, as what has been done by theAssessing Officer is clearly based on change of opinion. 8.The learned counsel placed reliance on the decision in thecase of M/s.Tanmac India vs. Deputy Commissioner of Income Tax,[2016] 97 CCH 0189 ChenHC. 6.The first substantial question of law is regarding thevalidity of reopening the assessment. 7.The learned counsel appearing for the appellant arguedthat the assessment for the year under consideration, 1999-2000,was completed under Section 143(1) of the Act on 10.10.2000accepting the income admitted in the revised return of incomefiled by the assessee. Having done so, the question ofreopening the assessment by invoking the power under Section 147of the Act does not arise, as what has been done by theAssessing Officer is clearly based on change of opinion. 8.The learned counsel placed reliance on the decision in thecase of M/s.Tanmac India vs. Deputy Commissioner of Income Tax,[2016] 97 CCH 0189 ChenHC. 9.Ms.R.Hemalatha, learned Senior Standing Counsel for therespondent/Revenue submitted that this issue has been settled bythe Hon'ble Supreme Court in DCIT vs. Rajesh Jhaveri StockBrokers Pvt. Ltd., reported in 295 ITR 499, the decision in thecase of DCIT vs. Zuari Estate Development and Investment CoLtd., [Civil Appeal No(s).6758 of 2004, dated 17.04.2015] andthe decision in the case of Commissioner of Income-tax v.Kelvinator of India Ltd. reported in [2010] 320 ITR 561(SC).There can be no dispute to the proposition as to the effect ofan intimation given under Section 143(1) and the law has beenwell settled in the decision in Assistant Commissioner of IncomeTax vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., reported in(2008) 14 SCC 208 followed in Zuari Estate Development andInvestment Co Ltd. 10.The case of the appellant/assessee largely rests upon thedecision in Tanmac India (supra). 11.We have carefully perused the said decision and we findthat the Court had followed the decision of the Delhi High Courtin the case of CIT vs. Orient Craft Ltd. reported in (2013) 354ITR 536. 12.In Tanmac India (supra), it was held that though noticeunder Section 143(1) of the Act was issued and the matter wasallowed to rest at that stage, the Assessing Officer sought toreopen the assessment under Section 147 solely on the basis ofreturn of income and enclosures thereto. Therefore, the Courtheld that unless there was a tangible material, based on whichthe Assessing Officer has reason to belief that any incomechargeable to tax has escaped assessment, reopening could nothave been done. 13.In Orient Craft Ltd. (supra), the facts were alsoidentical to that of Tanmac India (supra) where, the intimationunder Section 143(1) was issued and thereafter, the AssessingOfficer did not proceed further, but the assessment was soughtto be reopened under Section 147 of the Act based on thematerial available in the return and therefore, the Court heldthat it is nothing but a review of the earlier proceedings andabuse of power by the Assessing Officer which has beendeprecated by the Hon'ble Supreme Court in Kelvinator of IndiaLtd. (supra). 13.In Orient Craft Ltd. (supra), the facts were alsoidentical to that of Tanmac India (supra) where, the intimationunder Section 143(1) was issued and thereafter, the AssessingOfficer did not proceed further, but the assessment was soughtto be reopened under Section 147 of the Act based on thematerial available in the return and therefore, the Court heldthat it is nothing but a review of the earlier proceedings andabuse of power by the Assessing Officer which has beendeprecated by the Hon'ble Supreme Court in Kelvinator of IndiaLtd. (supra). 14.In the instant case, the facts are entirely different andit is vividly clear on a perusal of the re-assessment orderdated 16.03.2006 and the reason for reopening is based on theinformation which came to the notice of the Assessing Officerduring the course of the assessment proceedings for theassessment year 2001-02 during which the Assessing Officer cameto know that the assessee does not carry out any maintenancework from its industrial unit at Pondicherry. Thus, the reasonfor reopening in the instant case was based upon the tangiblematerial which came to the notice of the Assessing Officersubsequent to the intimation under Section 143(1) of the Act.Therefore, the re-assessment initiated under Section 143(3) readwith Section 147 is perfectly legal and valid. Consequently, wehold that the decision in Tanmac India (supra) and Orient CraftLtd. (supra) cannot be applied to the assessee's case and thedecisions of the Hon'ble Supreme Court in Rajesh Jhaveri StockBrokers Pvt. Ltd. (2008) 14 SCC 208 and Zuari Estate Developmentand Investment Co Ltd., are a clear answer to the case of theassessee. 15.For the above reasons, the second substantial question oflaw is decided against the assessee. 16.In the result, the appeal is dismissed and thesubstantial questions of law are answered against the assessee.No costs. Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar To 1.The Income-tax Officer (OSD), Company Circle I(4), Chennai. 121, Nungambakkam High Road, Chennai -34 2.The Commissioner of Income Tax (Appeals)-III, 121, Mahatma Gandhi Road, Chennai-600 034. 3.The Income Tax Appellate Tribunal, Chennai 'A' Bench. +1cc to M/s.R.Hemalatha, Advocate SR.No.58793+1cc to Mr.N.Muthukumar, Advocate Sr.No.59420 RSV(C.O.)/ AKM/26.08.19/5P-6C/ T.C. (A) No.2153 of 2008