Wp/7693/2018 Of Hsbc Software Development (India) Pvt. Ltd v. The Deputy Commissioner Of Income Tax Circle-11, Pune And Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYAPPELLATE SIDE CIVIL JURISDICTION WRIT PETITION NO.7693 OF 2018 HSBC Software Development (India) Pvt. Ltd., ..Petitioner.v/s.The Deputy Commissioner of Income TaxCircle-11, Pune & Others ..Respondents. Mr. Nitesh Joshi i/b. Mr. A.K. Jasani, for the Petitioner.Mr. Charanjeet Chanderpal with Ms. Pragya Chandra, for theRespondents. CORAM: AKIL KURESHI & M.S.SANKLECHA, JJ.DATE : 14[th] FEBRUARY, 2019. P.C:- Petition. Heard learned Counsel for the parties for final disposal of this 2Petitioner has challenged the notice of re-opening of anassessment dated 16[th] March, 2018, seeking to re-open the assessment forthe Assessment Year 2012-13. This notice was issued beyond a period offour years from the end of the relevant Assessment Year. In order to do so,Assessing Officer had recorded the detailed reasons to which referencemay be given at a later stage. Petitioner raised objections which came tobe dismissed by the Assessing Officer by an order dated 31[st] May, 2018. 3In Writ Petition No.7699 of 2018, we had considered various issues which overlap in this Petition. Paragraphs 2 and 3 of the reasonsrecorded in the present case, were same as in the Writ Petition No.7699 of2018. We had set aside the notice of re-opening of an assessment, makingfollowing observations:- We fail to see how the Assessing Officer can sustainhis contention of lack of true and full disclosure by assessee.Plain facts of the case are that, the assessee had, even asadmitted by the Assessing Officer, filed full details, particulars,and audited accounts along with the return, in which, thepayments in question, were duly reflected. The onus of theassessee to make disclosure would end upon such disclosure ofprimary facts. It is well settled, through series of judgments,starting from the Apex Court decision in Calcutta Discountv/s. ITO 41 ITR 191, the responsibility of the assessee is todisclose primary facts. What further enquiring, inference and inlaw is to be drawn from said facts, is fully within the realm ofthe Assessing Officer's jurisdiction. In paragraph 3 of the reasons, in order to supportlack of true and full disclosure, the Assessing Officer referred tothe fact that, the assessee had not on its own disallowedexpenditure in terms of Section 40(a)(i) of the Act. Thus,Assessing Officer expects the assessee to make the disallowanceinvoluntarily to be able to claim full and true disclosure. To reiterate the entire reasons recorded by theAssessing Officer proceeded on material already on record. It isnot the case of the Assessing Officer that after completion of theoriginal scrutiny assessment, he came upon some additional oralien material which had an effect on taxability of theexpenditure in question. The Assessing Officer in his reply has admitted thatthe assessee had filed Form 3 CEB, in which, the expenditure inquestion was duly reflected. In fact, as pointed out by theCounsel for the Petitioner, such expenditure also came up forscrutiny during the enquiry in relation to the transfer pricing. In absence of lack of full and true disclosure on thepart of the assessee, the Assessing Officer could not have re-opened the assessment by issuing impugned notice, which wasdone after four years from the end of the relevant AssessmentYear. In view of this conclusion, it is not necessary toexamine the Petitioner's second contention of no incomechargeable to tax, having escaped assessment, which wouldrequire us to take into account various contentions such as -whether the order of Commissioner (Appeals) has achievedfinality and whether after notionally adding the expenditurereferred to in the reasons recorded, the Petitioner-Companywould still continue to be governed by the MAT provisions. 4In the present Petition, in the reasons recorded, the AssessingOfficer has raised additional element of income chargeable to tax havingescaped assessment, which reads as under:- In view of this conclusion, it is not necessary toexamine the Petitioner's second contention of no incomechargeable to tax, having escaped assessment, which wouldrequire us to take into account various contentions such as -whether the order of Commissioner (Appeals) has achievedfinality and whether after notionally adding the expenditurereferred to in the reasons recorded, the Petitioner-Companywould still continue to be governed by the MAT provisions. 4In the present Petition, in the reasons recorded, the AssessingOfficer has raised additional element of income chargeable to tax havingescaped assessment, which reads as under:- “Further, on examination of case records, it is gatheredthat in the instant case scrutiny assessment was completed on10/03/2016 determining total income at Rs.37,97,95,46,60/-under normal provisions of the Act and book profit wascomputed at Rs.3,82,81,87,718/- u/s. 115JB of the Act. It isfurther noted that the assessee company had claimed MATcredit of Rs.46,55,35,703/- out of the total brought forwardMAT credit of Rs.139,82,00,851/- and the balance MAT Creditof Rs.93,26,65,148/- had been carried forward in subsequentyears as per return of income. In this regard, on examinationof computation of income filed along with return filed for A.Y.2012-13, it is seen that the assessee company had claimeddeduction of Rs.103.71 lakh on account of state taxes paid inUSA under both the provisions. Under the provisions of theIncome Tax Act, 1961 and also in view of some judicialpronouncements, the state taxes paid in USA being in nature ofincome tax were not allowed to be reduced while computing total income either under normal provisions or u/s. 115JB ofthe Act. As per section 115JB of the I.T. Act, in case of acompany, where the tax payable under the normal provisions ofthe Act is lower than the tax payable at the prescribed rate onbook profit, such book shall be deemed to be the total income ofthe assessee company. Further, Explanation 1 below sub-section2 of Section 115JB prescribed the certain adjustment to becarried out for computing book profit. The specified adjustmentstipulates that income tax paid or payable shall be added tobook profit. Further, Authority of Advance Rulings in the caseof Bank of India (AAR No. 732 of 2006) has held that the term'income tax' includes any taxes paid in foreign countries. Also,ITAT Mumbai in the case of Tata Sons Lt., v/s. DCIT 2(3) (inITA No.4978/Mum/04) held that state income taxes paid in USare not allowable as deduction as they are in nature of taxes onincome. However, as per the Tribunal, assessee can claim taxcredit u/s. 91 of the Act restricted to actual income tax liabilityin India in respect of income on which taxes have been so paidabroad. The above view has been reaffirmed recently in theorder of Hon'ble ITAT, Mumbai Bench in the case of DeputyCommissioner of Income Tax & Anr. V/s. Tata ConsultancyServices Ltd. & Anr. (2016) 46 ITR (Trib.) 0394 (Mumbai)pronounced in November, 2015. Further, as per section115JAA (5) of the I.T. Act, set off in respect of brought forwardtax credit shall be allowed for any assessment year to the extentof the difference between the tax on the total income and thetax which would have been payable under the provisions of sub-section (1) of Section 115JA or section 115JB, as the case maybe for that assessment year. Here, in the instant case, theassessee company while determining book profit u/s. 115JB ofthe Act had not added back the amount of Rs.103.71 lakhsdebited by it in the profit and loss account towards statesincome taxes paid in USA and had also not disallowed theamount of state taxes paid in USA, being an disallowableexpenditure in the computation of normal income on its ownwhile filing return of income for A.Y. 2012-13. Further, in theregular assessment, above issues were not considered at all. I,therefore, have reasons to believe that income to the tune ofRs.103.71 lakhs has escaped assessment on account of failureon the part of the assessee company within the meaning of Explanation 1 to Section 147 of the Act since it had notdisclosed fully and truly all material facts necessary for theassessment for A.Y. 2012-13 as noted herein above.” 5In this Petition, all we find that the assessee had made fulland true disclosure. The Assessing Officer himself records that "further,on examination of case records, it is gathered that ... ... ...." Thus, in clearterms, the Assessing Officer is proceeding on the basis of materials alreadyon record. 6In the result, Petition is allowed. Impugned notice is setaside. (M.S.SANKLECHA,J.) (AKIL KURESHI,J.)