M/s Rockwell Collins (INDIA) Enterprises Private Limited, Hyderabad V. Commissioner of Income Tax - III, Hyderabad

ITA 1065/HYD/2014

• Counselvise Citation: 106522514 RSA 2014
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 28-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: ABHIROOP; DHANESH BAFNA AMIT MISHRA
• Keywords: Assessment record
• Section: 44AD; 143(3); 10AA; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 1065/HYD/2014 ASSESSMENT YEAR 2009-10 M/S. ROCKWELL COLLINS (I) ENTERPRISES PVT. LTD. HYDERABAD PAN: AADCR7773H VS THE COMMISSIONER OF INCOME-TAX III HYDERABAD APPELLANT RESPONDENT APPELLANT BY: S/SRI DHANESH BAFNA, AMIT MISHRA & ABHIROOP RESPONDENT BY: SRI P. SOMA SEKHAR REDDY DATE OF HEARING: 25 .0 9 .2014 DATE OF PRONOUNCEMENT: 30 .0 9 .2014 ORDER PER P. MADHAVI DEVI, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER PASSED U/S. 263 OF INCOME-TAX ACT, 1961 BY TH E CIT-III, HYDERABAD DATED 27.3.2014 FOR ASSESSMENT Y EAR 2009-10. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE- COMPANY WHICH IS ENGAGED IN THE BUSINESS OF IT ENAB LED RESEARCH AND DEVELOPMENT SERVICES, HAD FILED ITS RE TURN OF INCOME FOR A.Y. 2009-10 ON 30.9.2009 DECLARING INCO ME AT 'NIL' AFTER CLAIMING AN AMOUNT OF RS. 76,78,133 AS DEDUCTION U/S. 10AA OF THE IT ACT. THE CASE WAS TA KEN UP FOR SCRUTINY U/S. 143(3) OF THE ACT AND DURING THE ASSESSMENT PROCEEDINGS, VARIOUS DETAILS RELATING TO 2 ITA NO. 1065/HYD/2014 M/S. ROCKWELL COLLINS (INDIA) ENTERPRISES PVT. LTD. ====================== ASSESSEE'S CLAIM WERE CALLED FOR AND AFTER CONSIDER ING THE SAME, THE ASSESSING OFFICER ACCEPTED THE RETURNED I NCOME OF THE ASSESSEE. 3. SUBSEQUENTLY, THE CIT PERUSED THE ASSESSMENT RECORD OF ASSESSEE-COMPANY AND AFTER EXAMINING THE SAME, HE OBSERVED THAT THE DISALLOWANCE U/S. 40(A)( IA) OF RS. 1,60,49,054 AND ALSO ANOTHER DISALLOWANCE U/S. 36(1)(VA) OF AN AMOUNT OF RS. 8,73,839 HAVE BEEN MA DE AND CONSEQUENTIAL ADDITIONS WERE MADE TO THE INCOME OF THE ASSESSEE AND THE EXEMPTION U/S. 10AA HAS BEEN GRANTED ON THE ENHANCED INCOME. THE CIT WAS OF THE OPINION THAT THE ASSESSING OFFICER HAS COMPLETED TH E ASSESSMENT WITHOUT ANY ENQUIRY AS REGARDS THE ALLOWABILITY OF DEDUCTION U/S. 10AA OF THE ACT, AND , THEREFORE, ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERE STS OF THE REVENUE. THEREFORE, HE INITIATED THE PROCEEDIN GS U/S. 263 OF THE ACT BY ISSUING NOTICE DATED 18.2.2014. 4. THE ASSESSEE FILED ITS OBJECTIONS TO THE REVISION PROCEEDINGS. AFTER CONSIDERING THE OBJECTIONS OF TH E ASSESSEE, THE CIT CONCLUDED THAT THE ORDER OF THE ASSESSING OFFICER WAS BOTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. HE, T HEREFORE, SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE ASS ESSING OFFICER TO CONSIDER THE SUBMISSIONS OF THE ASSESSEE REGARDING THE ALLOWABILITY OF DEDUCTION U/S. 10AA O F THE ACT AND DECIDE THE ISSUE THEREAFTER. HE FURTHER DI RECTED THE ASSESSING OFFICER TO EXAMINE IF THE DISALLOWANC E MADE OUT OF THE EMPLOYEES' PROVIDENT FUND U/S. 36(1)(VA) IS TO 3 ITA NO. 1065/HYD/2014 M/S. ROCKWELL COLLINS (INDIA) ENTERPRISES PVT. LTD. ====================== BE BROUGHT TO TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. 5. AGGRIEVED BY THE ORDER OF THE CIT U/S. 263 OF THE ACT, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS WITH REG ARD TO ITS COMPUTATION OF INCOME BEFORE THE ASSESSING OFFI CER DURING THE ASSESSMENT PROCEEDINGS U/S. 143(3) OF TH E ACT AND THE ASSESSING OFFICER HAD ALLOWED THE CLAIM OF THE ASSESSEE ONLY AFTER BEING SATISFIED WITH THE JUSTIF IABILITY OF THE ASSESSEE'S CLAIM. THEREFORE, ACCORDING TO HIM, THE ASSESSING OFFICER HAS APPLIED HIS MIND TO THE FACTS OF THE CASE AND HAS TAKEN ONE OF THE POSSIBLE VIEWS AND, THEREFORE, THE ASSESSMENT ORDER CANNOT BE TREATED A S ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. IN SUPPORT OF HIS CONTENTION THAT THE ASSESSING OFF ICER HAS CONSIDERED ALL THE RELEVANT MATERIAL, THE LEARNED C OUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO THE REP LY OF THE ASSESSEE TO THE NOTICE ISSUED U/S. 143(2) OF TH E ACT WHICH IS PLACED AT PAGES 93 TO 102 OF THE PAPER BOO K. HE HAS ALSO DRAWN OUR ATTENTION TO THE NOTICE OF THE ASSESSING OFFICER DATED 3 RD NOVEMBER, 2011 WHEREIN THE ASSESSING OFFICER HAD CALLED FOR VARIOUS DETAILS RE GARDING ALLOWABILITY OF ASSESSEE'S CLAIM U/S. 10AA OF THE A CT AND THE ASSESSEE'S REPLY THERETO, WHEREIN IT WAS STATED THAT FOR COMPUTING PROFITS AND GAINS, EFFECT SHOULD BE GIVEN TO THE PROVISIONS OF SS. 28 TO 44AD OF THE ACT AND DEDUCTI ON U/S. 10AA SHOULD BE CALCULATED ON THE PROFITS EARNED THE REON AND NOT AFTER THE PROFIT AND LOSS A/C. AS REGARDS THE MERIT OF DISALLOWANCES MADE U/S. 40(A)(IA) AS WELL AS U/S. 4 ITA NO. 1065/HYD/2014 M/S. ROCKWELL COLLINS (INDIA) ENTERPRISES PVT. LTD. ====================== 36(1)(VA) IS CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON VARIOUS DECISIONS , COPIES OF WHICH HAD BEEN FILED IN THE FORM OF PAPER BOOK. 7. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE CIT PASSED U/S. 263 OF THE ACT. 8. HAVING REGARD TO THE RIVAL CONTENTIONS AND HAVING CONSIDERED THE MATERIAL ON RECORD, WE FIND THE CIT EXERCISED HIS JURISDICTION U/S. 263 OF THE ACT ON T HE GROUND THAT EXEMPTION U/S. 10AA WAS GRANTED TO THE ASSESSEE ON THE ENHANCED INCOME FINALLY COMPUTED AF TER GIVING EFFECT TO THE DISALLOWANCE U/S. 40(A)(IA) AN D U/S. 36(1)(VA) OF THE ACT. UNDER S. 263 OF THE ACT, THE CIT CAN ASSUME JURISDICTION PROVIDED THE TWIN CONDITIONS OF THE ASSESSMENT ORDER BEING ERRONEOUS AS WELL AS PREJUDI CIAL TO THE INTERESTS OF REVENUE ARE SATISFIED. AN ASSESSM ENT ORDER CAN BE CONSIDERED TO BE ERRONEOUS, IF THE ASS ESSING OFFICER HAS NOT VERIFIED THE CLAIM OF THE ASSESSEE AND HAS ALLOWED THE ASSESSEE'S CLAIM WITHOUT PROPER EXAMINA TION OR IF A CLAIM OF THE ASSESSEE IS ALLOWED AGAINST TH E PROVISIONS OF LAW. IN THE CASE BEFORE US, THE ASSE SSEE HAS ESTABLISHED THAT THE ASSESSING OFFICER HAD CONSIDER ED ALL THE MATERIAL NECESSARY FOR ALLOWING THE CLAIM U/S. 10AA OF THE ACT AND THE ASSESSEE HAD SPECIFICALLY BROUGHT T O THE NOTICE OF THE ASSESSING OFFICER THAT INCOME COMPUTE D IN ACCORDANCE WITH LAW HAS TO BE ALLOWED AS EXEMPTION U/S. 10AA OF THE ACT AND NOT THE INCOME COMPUTED AS PER PROFIT AND LOSS A/C. IN SUCH A SCENARIO, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER, THOUGH HAS NOT DISCUSSED THE ISSUE AT LENGTH IN THE ASSESSMENT ORD ER, IT HAS TO BE PRESUMED THAT HE HAS CONSIDERED THE MATER IAL 5 ITA NO. 1065/HYD/2014 M/S. ROCKWELL COLLINS (INDIA) ENTERPRISES PVT. LTD. ====================== ON RECORD AS WELL AS THE SUBMISSIONS OF THE ASSESSE E BEFORE COMPLETING THE ASSESSMENT. THEREFORE, WE AR E SATISFIED THAT THE ASSESSING OFFICER AFTER CONSIDER ING THE ASSESSEE'S CONTENTIONS HAS TAKEN ONE OF THE POSSIBL E VIEWS AND HENCE IT CANNOT BE SAID THAT THERE IS LACK OF E NQUIRY BY THE ASSESSING OFFICER AS REGARDS THE ASSESSEE'S CLAIM U/S. 10AA OF THE ACT. 9. FURTHER, WE ALSO FIND THAT THE ISSUE OF AS TO WHETH ER THE AMOUNT OF STATUTORY DISALLOWANCE U/S. 40(A)(IA) HAS TO BE CONSIDERED AS BUSINESS PROFIT ELIGIBLE FOR DEDUC TION U/S. 10A HAS BEEN CONSIDERED BY THE 'B' BENCH OF TH E TRIBUNAL AT HYDERABAD IN THE CASE OF VIRTUSA INDIA PVT. LTD. VS. DCIT REPORTED IN (2014) 41 TAXMANN.COM 244 (HYD) (TRIB) WHEREIN IT HAS BEEN HELD THAT SUCH DISALLOWANCE HAS TO BE CONSIDERED AS BUSINESS PROFI T ELIGIBLE FOR DEDUCTION U/S. 10A OF THE ACT. 10. SIMILARLY, THE ISSUE OF DISALLOWANCE OF PF PAYMENT OF EMPLOYEES' CONTRIBUTION U/S. 36(1)(VA) R.W.S. 2( 24) AND TREATING THE SAME AS INCOME FROM BUSINESS, HAS ALSO BEEN CONSIDERED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD. REPORTED I N (2011) 330 ITR 175 AND SUCH DISALLOWANCE HAS HELD TO BE EL IGIBLE FOR EXEMPTION U/S. 10A OF THE ACT WITH REFERENCE TO SUCH ENHANCED INCOME. 11. THUS, THE JUDICIAL PRECEDENTS ON THE ISSUE ALSO SUPPORT THE VIEW TAKEN BY THE ASSESSING OFFICER AND , THEREFORE, IT CANNOT BE SAID THAT THE ASSESSMENT OR DER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTER ESTS OF REVENUE. IN VIEW OF THE SAME, WE ARE INCLINED TO A GREE 6 ITA NO. 1065/HYD/2014 M/S. ROCKWELL COLLINS (INDIA) ENTERPRISES PVT. LTD. ====================== WITH THE CONTENTIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSMENT ORDER WAS NOT ERRONEOU S AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND THE CIT'S ORDER U/S. 263 OF IT ACT, 1961 ACCORDINGLY SE T ASIDE. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2014 SD/ - (P.M. JAGTAP) ACCOUNTANT MEMBER SD/ - (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED THE 30 TH SEPTEMBER, 2014 TPRAO COPY TO: 1. M/S. ROCKWELL COLLINS (INDIA) ENTERPRISES PVT. LTD. , PHASE-II, 7 TH FLOOR, BLOCK-III, DLF COMMERCIAL DEVELOPERS (SEZ) PLOT NOS. 129 TO 132, APHB COLONY, GACHIBOWLI, HYDERABAD-500 019. 2. THE COMMISSIONER OF INCOME - TAX III, 7 TH FLOOR, 'A' BLOCK, I.T. TOWERS, AC GUARDS, HYDERABAD-500 004. 3. THE ITO, WARD - 3(2), HYDERABAD. 4. THE ADDL. CIT, RANGE - 3, HYDERABAD. 5 . THE DR, A - BENCH, ITAT, HYDERABAD.