SITEL INDIA LTD, MUMBAI V. DCIT RG 8(3), MUMBAI

CO 54/MUM/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0573 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 2 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 13-05-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 06-05-2015
• Assessment Year: misc
• Appeal Filed On: 11-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: MOHIT JOLLY
• Keywords: Business income
• Section: 10B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE S/SHRI VIJAY PAL RAO ( JM ) AND D. KARUNAKAR RAO, (AM) , . , ./ I.T.A. NO 646 / MUM/20 1 3 ( / ASSESSMENT YE A R : 20 0 8 - 09 ) DY.COMMISSIONER OF INCOME TAX - 8(3), ROOM NO.217, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 / VS. M/S SITEL INDIA LIMITED, BOOMERANG, UNIT NO.501, WING - A, AND B1, 5 TH FLOOR , CHANDIVALI FARM ROAD, NEAR CHANDIVALI STUDIO, ANDHERI(E), MUMBAI - 400072 ( / APPELLANT ) .. ( / RESPONDENT ) CROSS - OBJECTION NO.54/MUM/2014 ARISING OUT OF I.T.A. NO646/MUM/2013 ( / ASSESSMENT YEAR :2008 - 09) M/S SITEL INDIA LIMITED, BOOMERANG, UNIT NO.501, WING - A, AND B1, 5 TH FLOOR, CHANDIVALI FARM ROAD, NEAR CHANDIVALI STUDIO, ANDHERI(E), MUMBAI - 400072 / VS. DY.COMMISSIONER OF INCOME TAX - 8(3), ROOM NO.217, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAFCS1297M / REVENUE BY SHRI NEIL PHILIP / ASSESSEE BY S HRI MOHIT JOLLY / DATE OF HEARING : 6 .5.2015 / DATE OF PRONOUNCEMENT : 13 .5. 2015 646 /MUM/201 3 AND CO NO.54/M/2014 2 / O R D E R PER VIJAY PAL RAO ( JM ) THIS APPEAL BY THE REVENUE AND CROSS - OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 26.11.2012 OF LD.CIT(A) FO R THE ASSESSMENT YEAR 2008 - 09. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) E RRED IN DIRECTING THE ASSESSING OFFICER NOT TO SET - OFF THE LOSSES OF THE ASSESSE S GURGAON 1 OA UNIT AGAINST THE PROFITS OF ITS OTHER 1 OA UNIT BEFORE COMP UTING DEDUCTION U / S.10A WITHOUT A PPRECIATING THAT DEDUCTION U / S.10A IS ALLOWABLE OUT OF TOTAL INCOME OF THE ASSESSEE, WHICH IS TO BE COMPUTED AFTER SET - OFF OF LOSSES AS PER CH APTER VI OF THE I.T.ACT. ' 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW CARRY FORWARD OF THE LOSSES OF THE ASSESSE'S GURGAON 1OA UNIT WITH OUT APPRECIATING THAT UNDER SECTION 10ADEDUCTION IS TO BE ALLOWED FROM THE TOTAL INCOME AND THEREFORE THE LOSSES LIABLE TO BE SET - OFF AGAINST PROFITS OF THE YEAR AND ONLY UNABSORBED LOSSES REMAINING THEREAFTER ARE ELIGIBLE FOR CARRY FORWARD. ' 2. DURING THE YEAR UNDER CONSIDERATION, THE ASS ESSEE EARNED PROFIT FROM 100% EXPORT ORIENTED UNIT ELIGIBLE FOR DEDUCTION U/S 10A. THE ASSESSEE HAS SUFFERED LOSSES WITH RESPECT TO THE GURGAON UNDERTAKING WHICH IS NOT 10A UNDERTAKING. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 10A IN RESPECT OF P ROFITS OF THE ELIGIBLE UNITS. THE AO RECOMPUTED THE DEDUCTION U/S 10A BY SETTING OFF OF THE LOSS SUFFERED BY THE ASSESSEE IN THE NON - 10A UNIT. 3. ON APPEAL, THE LD.CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE JUDGMENT OF THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF HINDUSTAN UNILEVER LTD V/S DCIT 325 ITR 102 (BOM) AND CIT V/S PATNI COMPUTER SYSTEM LTD ORDER DATED 1.7.2011. 4. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONSIDERED THE RELEVANT MATERIAL AVAILABLE ON RE CORD. AT THE OUTSET, WE NOTICE THAT THE ISSUE IS COVERED BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HINDUSTAN UNILEVER LTD (SUPRA) . IN PARA 28 AND 29, THE HONBLE JURISDICTIONAL HIGH COURT 646 /MUM/201 3 AND CO NO.54/M/2014 3 HAS OBSERVED AND HELD AS UNDER ( PGS.117 AND 118): (IV) THE LOSS INCURRED BY THE ELIGIBLE UNIT UNDER SECTION 10B : 28. THE FOURTH AND FINAL GROUND WHICH HAS WEIGHED WITH THE ASSESSING OFFICER IN REOPENING THE ASSESSMENT IS THAT THE ASSESSEE CLAIMED A DEDUCTION OF RS. 14.53 CRORES UNDER SECTION 10B. THE DEDUCTION WAS RESTRICTED TO RS. 11.11 CRORES IN THE ORDER. WHILE REOPENING THE ASSESSMENT, THE ASSESSING OFFICER HAS PROCEEDED ON THE BASIS THAT SECTION 10B PROVIDES AN EXEMPTION AND THAT IN RESPECT OF THE CRAB STICK UNIT THE ASSESSEE HAD SUFFERED A LOSS OF RS. 1.33 CRORES. THE ASSESSING OFFICER HAS OBSERVED THAT SINCE THE INCOME OF THE UNIT WAS EXEMPT FROM TAXATION, THE LOSS OF THE UNIT COULD NOT HAVE BEEN SET OFF AGAINST THE NORMAL BUSINESS INCOME. HOWEVER, THIS WAS ALLOWED BY THE ASSESSM ENT ORDER AND IT IS OPINED THAT THE ASSESSEE'S INCOME TO THE EXTENT OF RS. 1.33 CRORES HAS ESCAPED ASSESSMENT. 29. THERE IS MERIT IN THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS WHILE REOPENING THE ASSESSMENT EX FACIE PROCEEDED ON THE ERRONEOUS PREMISE THAT SECTION 10B IS A PROVISION IN THE NATURE OF AN EXEMPTION. PLAINLY, SECTION 10B AS IT STANDS IS NOT A PROVISION IN THE NATURE OF AN EXEMPTION BUT PROVIDES FOR A DEDUCTION. SECTION 10B WAS SUBSTITUTED BY THE FINANCE ACT OF 2000 WITH EFFECT FROM APRIL 1, 2001. PRIOR TO THE SUBSTITUTION OF THE PROVISION, THE EARLIER PROVISION STIPULATED THAT ANY PROFITS AND GAINS DERIVED BY AN ASSESSEE FROM A 100 PER CENT. EXPORT ORIENTED UNDERTAKING, TO WHICH THE SECTION APPLIE S 'SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE'. THE PROVISION, THEREFORE, AS IT EARLIER STOOD WAS IN THE NATURE OF AN EXEMPTION. AFTER THE SUBSTITUTION OF SECTION 10B BY THE FINANCE ACT OF 2000, THE PROVISION AS IT NOW STANDS PROVIDES FOR A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY A 100 PER CENT. EXPORT ORIENTED UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE FOR TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YE AR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE. CONSEQUENTLY, IT IS EVIDENT THAT THE BASIS ON WHICH THE ASSESSMENT HAS SOUGHT TO BE REOPENED IS BELIED BY A PLAIN READING OF THE PROVISION. THE ASSESSING OFFICER WAS PLAINLY IN ERROR IN PROCEEDI NG ON THE BASIS THAT BECAUSE THE INCOME IS EXEMPTED, THE LOSS WAS NOT ALLOWABLE. ALL THE FOUR UNITS OF THE ASSESSEE WERE ELIGIBLE UNDER SECTION 10B. THREE UNITS HAD RETURNED A PROFIT DURING THE COURSE OF THE ASSESSMENT YEAR, WHILE THE CRAB STICK UNIT HAD R ETURNED A LOSS. THE ASSESSEE WAS ENTITLED TO A DEDUCTION IN RESPECT OF THE PROFITS OF THE THREE ELIGIBLE UNITS WHILE THE LOSS SUSTAINED BY THE FOURTH UNIT COULD BE SET OFF AGAINST THE NORMAL BUSINESS INCOME. IN THESE CIRCUMSTANCES, THE BASIS ON WHICH THE A SSESSMENT IS SOUGHT TO BE REOPENED IS CONTRARY TO THE PLAIN LANGUAGE OF SECTION 10B. WE FURTHER NOTE THAT THE HONBLE KARNATAKA HIGH COURT HAS ALSO TAKEN THE SIMILAR 646 /MUM/201 3 AND CO NO.54/M/2014 4 VIEW IN THE CASE OF CIT V/S YOKIGAWA INDIA LTD (2012)341 ITR 385 (KARN). ACCORDINGLY, IN VIEW OF THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF HINDUSTAN UNILEVER LTD (SUPRA), WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LD. CIT(A) AND HENCE DISMISS THE GROUNDS TAKEN BY THE REVENUE. CROSS - OBJECTION NO.54/M UM/2014 5. IN THE CROSS - OBJECTION, THE ASSESSEE HAS NOT RAISED ANY NEW ISSUE BUT SUPPORTED THE ORDER OF THE LD. CIT(A). IN VIEW OF OUR FINDINGS ON THE ISSUE INVOLVED IN THE REVENUES APPEAL, THE CROSS OBJECTION FILED BY THE ASSESSEE BECOME INFRUCTU OS . 6 . IN THE RESULT , THE APPEAL OF THE REVENUE AS WELL AS CROSS - OBJECTION FILED BY THE ASSESSEE STAND DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 13TH MAY , 201 5 . 13TH MAY , 2015 SD SD ( . / D. KARUNAKAR RAO) ( / VIJAY PAL RAO ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI: 13TH MAY , 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT (A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI