Igate Global Solutions Ltd., Bangalore V. ACIT, Bangalore

ITA 1144/BANG/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5540 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 13-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G V GOPALA RAO CITI
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Transfer pricing
• Section: 45(2); 143(3)

Judgement Text

PAGE 1 OF 7 ITA NO.1144/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K, J.M. AND SHRI A MOHAN ALANKAMONY, A.M ITA NO.1144/BANG/2010 (ASSESSMENT YEAR 2004-05) M/S IGATE GLOBAL SOLUTIONS LTD., NO.158-162 (P) & 165 (P) 170 (P) EDIP PHASE II, WHITEFIELD, BANGALORE-66. - APPELLANT VS THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-11(4), BANGALORE. - RESPONDENT APPELLANT BY : SHRI PADAM CHAND KHINCHA, C .A. RESPONDENT BY : SHRI G V GOPALA RAO, CIT-I ORD ER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER OF THE CIT(A)-I, BANGALORE DATED 17/12/2009. THE ASST. YEAR CONCERNED IS 2005-06. 2. THE GROUNDS RAISED HEREIN RAISED READS AS FOLLO WS:- I) THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) IN AS MUCH AS IT DISMISSES THE APPEAL AS INFRUCTUOUS BE REVERSED AND THE APPEAL BE RESTORED TO CIT(A) FOR DISPOSAL ON MERITS. II) THE LETTER OF WITHDRAWAL OF APPEAL FILED BEFORE CIT(A) WHICH WAS SIGNED BY VICE PRESIDENT PAGE 2 OF 7 ITA NO.1144/BANG/2010 2 (FINANCE) BEING NOT FROM AN AUTHORIZED PERSON BE NOT GIVEN CREDENCE TO AND THE APPEAL MAY PLEASE BE RESTORED AS PRAYED FOR. III) IN ANY CASE A LETTER FILED UNDER A MISTAKEN NOTION SHOULD NOT HAVE BEEN ACTED UPON. IV) THE APPELLANT PRAYS THAT THE APPEAL MAY PLEASE BE RESTORED TO CIT(A) FOR DISPOSAL ON MERITS. 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF DEVELOPMENT AND EXPORT OF COMPUTER SOFTWARE. RETURN OF INCOME WAS FILED ON 30.10.2005 DECLARING A LOSS OF RS.12,2 7,61,960/- COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT. A SUM OF RS.26,22,46,040/- WAS CLAIMED AS EXEMPTION/DEDUCTIO N U/S 10A OF THE ACT. THE ASSESSMENT WAS COMPLETED U/S 143(3) O F THE ACT VIDE ORDER DATED 28/11/2008. IN THE SAID ASSESSMENT, EXEMPTION/DEDUCTION CLAIMED U/S 10A OF THE ACT WAS VARIED. 4. AGGRIEVED BY THE ASSESSMENT COMPLETED, THE ASSES SEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY PRAYING FOR THE FOLLOWING RELIEFS:- I) THE ASSESSMENT ORDER PASSED BY THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE- 11(4), BANGALORE BE QUASHED; OR IN ALTERNATIVE; II) (A) EXEMPTION/DEDUCTION U/S 10A BE ALLOWED IN RESPECT OF THE PROFITS OF THE ELIGIBLE UNITS WITHOUT SETTING OFF THE LOSS OF THE OTHER UNITS; (B) THE LOSS OF OTHER UNITS BE ALLOWED TO BE CARRIED FORWARD AND SET OFF FROM THE INCOME REMAINING AFTER ALLOWING DEDUCTION U/S 10A AND PAGE 3 OF 7 ITA NO.1144/BANG/2010 3 FROM OTHER INCOME IN ACCORDANCE WITH THE PROVISIONS OF THE LAW; III) EXPENDITURE ON LINK CHARGES BE NOT REDUCED FROM EXPORT TURNOVER OR IN THE ALTERNATIVE BE REDUCED FROM TOTAL TURNOVER ALSO; IV) EXPENDITURE INCURRED IN FOREIGN CURRENCY FOR PAYMENT TO EMPLOYEES AND TRAVELING BE NOT REDUCED FROM EXPORT TURNOVER OR IN THE ALTERNATIVE THE SAME BE REDUCED FROM TOTAL TURNOVER ALSO; V) DEDUCTION U/S 10A BE GRANTED IN RESPECT OF THE INCOME OFFERED TO TAX UNDER THE CAPTION TRANSFER PRICING ADJUSTMENT; VI) AMOUNTS RECOVERED FROM CUSTOMERS TOWARDS HARDWARE AND SOFTWARE BE NOT ADDED TO BOOK PROFITS U/S 115JB. 5. WHEN THE APPEAL WAS PENDING ADJUDICATION BEFORE THE FIRST APPELLATE AUTHORITY, THE CIT(A) RECEIVED A LET TER FROM THE VICE PRESIDENT (FINANCE) OF THE ASSESSEE COMPANY WHE REIN IT WAS STATED AS FOLLOWS:- THE ABOVE APPEAL FOR AY 2005-06 WAS FILED BY US ON 13.1.2009. HOWEVER, WE HAVE DECIDED NOT TO PURSUE THE APPEAL AND THE APPEAL IS HEREBY WITHDRAWN. 6. THE CIT(A), ON RECEIPT OF THE LETTER OF THE VIC E PRESIDENT (FINANCE), DISMISSED THE APPEAL OF THE AS SESSEE BY OBSERVING THUS:- THE APPELLANT HAS DECIDED NOT TO PURSUE THE APPEAL AND HAS WITHDRAWN THE APPEAL VIDE ITS LETTER DATED 16 TH DECEMBER, 2009, ENCLOSED AS ANNEXURE- PAGE 4 OF 7 ITA NO.1144/BANG/2010 4 1 HEREWITH. IN VIEW OF THE ABOVE, THE APPEAL HAS BECOME INFRUCTUOUS AND HENCE TREATED AS DISMISSED FOR STATISTICAL PURPOSE. 7. THEREAFTER, THE ASSESSEE FILED A PETITION BEFOR E THE CIT(A) FOR THE RESTORATION OF APPEAL. IT WAS MENTI ONED IN THE RESTORATION PETITION THAT THE VP (FINANCE) REFERRED TO ABOVE IS NOT AUTHORIZED TO WITHDRAW THE APPEAL, SINCE HE IS NOT THE COMPETENT PERSON UNDER THE ACT OR RULES TO FILE AN APPEAL BEF ORE THE CIT(A). HENCE, IT WAS PRAYED THAT THE MATTER MAY BE RESTORED AND DECIDED ON MERITS. 8. IN RESPONSE TO THE RESTORATION PETITION FILED B Y THE ASSESSEE COMPANY, THE CIT(A) VIDE HIS LETTER DATED 8 .12.2010 INFORMED THE COMPANY THAT HE IS NOT EMPOWERED UNDER THE I T ACT TO RESTORE THE APPEAL. 9. IN THE MEANWHILE, THE ASSESSEE COMPANY HAD ALREA DY FILED AN APPEAL BEFORE THE TRIBUNAL AGAINST THE ORD ER OF THE CIT(A) DATED 17.12.2009. IT WAS SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 140 READ WITH RULE 45(2) OF THE INCOME TAX RULES, 1962, IN THE CASE OF THE COMPANY, THE PERSON AUTHORIZED TO FI LE AN APPEAL IS THE MANAGING DIRECTOR OR IN HIS ABSENCE, ANY OF THE DIRECTOR OF THE COMPANY. IN THE INSTANT CASE, THE APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WAS FILED BY THE DIRECTOR AND IT IS ONLY TH E AUTHORIZED PERSON, WHO HAS FILED THE APPEAL, HAS GOT THE AUTHO RITY TO WITHDRAW THE APPEAL. HE ALSO RELIED ON THE ORDER OF THE TRI BUNAL IN THE CASE OF M/S KUMAR ENTERPRISES IN ITA NOS.397 & 398/BANG/ 2003 DATED PAGE 5 OF 7 ITA NO.1144/BANG/2010 5 27.2.2004. A COPY OF THE ORDER WAS PLACED ON RECORD . THE LEARNED AR ALSO RELIED ON THE COMMENTARY FROM CHATURVEDI & P ITHISARIA, 5 TH EDITION (PAGE 7654), WHEREIN IT WAS STATED THAT IT IS NOT POSSIBLE TO WITHDRAW APPEAL WHICH IS FILED BEFORE THE FIRST APP ELLATE AUTHORITY, SINCE THE POWER OF ENHANCEMENT IS ALSO GIVEN TO THE FIRST APPELLATE AUTHORITY. THE PORTION RELIED ON BY THE LEARNED AR R EADS AS FOLLOWS:- WITHDRAWAL NOT POSSIBLE:- THE INTENTION OF THE LEGISLATURE IS TO MAKE THE APPELLATE AUTHORITY IN TAX MATTERS A WATCH-DOG IN THE GENERAL PUBLIC INTEREST AND PARTICULARLY ON BEHALF OF THE PUBLIC REVENUES. THE APPEAL ONCE FILED BY AN ASSESSEE HAS TO BE DISPOSED OF ONLY ON ITS MERITS BECAUSE A DUTY IS CASE ON THE APPELLATE AUTHORITY TO CONSIDER NOT ONLY THE QUESTION IN THE INTEREST OF THE ASSESSEE BUT ALSO IN THE LARGER INTEREST TO SEE WHETHER THE ASSESSEE HAS BEEN UNDER-ASSESSED; AND IN THE LATTER EVENT TO ENHANCE THE ASSESSMENT. THE POWER OF WITHDRAWAL IS LINKED WITH THE POWER OF ENHANCEMENT WITH THE RESULT THAT NEITHER WITHDRAWAL BY THE APPELLANT NOR EX PARTE DISMISSAL FOR DEFAULT IS AVAILABLE TO AN APPEAL FILED [CIT V RAI BAHADUR HARDUTROY MOTILAL CHAMARIA (1967) 66 ITR 443, 450 (SC); HINDUSTHAN METAL WORKS V STO (1964) 15 STC 116 (ALL); CIT V NAWAB SHAH NAWAZ KHAN (1938) 6 ITR 370 (LAH.); CST V MOHANLAL HARPRASAD (1966) 17 STC 1 (MP); REX V SPECIAL COMMISSIONER OF IT (1937) 20TAX CAS 381, 384 (KBD); DHANIRAM GUPTA & CO. V UNION OF INDIA (1973) 89 ITR 288 (CAL.)] 10. THE LEARNED DR ON THE OTHER HAND STRONGLY OPPOS ED THE CONTENTIONS RAISED BY THE AUTHORIZED REPRESENTAT IVE. PAGE 6 OF 7 ITA NO.1144/BANG/2010 6 11. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. BY VIRTUE OF SECTION 140 OF THE I T ACT READ WITH RULE 45(2) OF INCOME TAX RULES, 1962, THE PERS ON AUTHORIZED TO FILE AN APPEAL BEFORE THE FIRST APPELLATE AUTHOR ITY OR BEFORE ANY AUTHORITY IN THE CASE OF THE COMPANY IS EITHER THE MA NAGING DIRECTOR OR IN ABSENCE OF THE MANAGING DIRECTOR, TH E DIRECTOR OF THE COMPANY. THE PERSON AUTHORISED TO FILE THE APPE AL ALONE CAN WITHDRAW THE SAME. IN THE INSTANT CASE, THE LETTER OF WITHDRAWAL OF APPEAL IS BY THE VP (FINANCE), WHO IS NOT THE PER SON AUTHORIZED TO FILE AN APPEAL ON BEHALF OF THE COMPANY. HENCE, HIS LETTER TO WITHDRAW THE APPEAL BEFORE THE FIRST APPELLATE AUTH ORITY IS WITHOUT ANY VALIDITY. HENCE, THE CIT(A) CANNOT TAKE COGNIZAN CE OF THE SAME. THEREFORE, THE MATTER IS RESTORED TO THE FIL E OF THE CIT(A) FOR DISPOSAL OF THE APPEAL ON MERITS. HOWEVER, WE STRONGLY DEPRECATE THE CASUAL WAY IN WHICH THE LETTER FOR WIT HDRAWING THE APPEAL WAS FILED BEFORE THE FIRST APPELLATE AUTHORI TY. WE DO NOT WANT TO STATE ANYTHING MORE ON THIS. 12. IN THE LIGHT OF THE ABOVE, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED ON FRIDAY, THE 17 TH DAY OF JUNE, 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER PAGE 7 OF 7 ITA NO.1144/BANG/2010 7 COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/16/6. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.