DCIT, Bangalore V. M/s Delixus Software India Pvt. Ltd., Tumkur

ITA 1167/BANG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8615 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 21-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SARAVANAN
• Assessee Lawyers: A C RAJU
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1167(B)/2015 (ASSESSMENT YEAR : 2007-08) THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2(1) (2), 4 TH FLOOR, RP BHANAVAN, BANGALORE APPELLANT VS M/S DELIXUS SOFTWARE INDIA PVT.LTD., HMS CAMPUS, NATIONAL HIGHWAY-4, KESARMANDU PO, KYATHSANDRA, TUMKUR-572 104 PAN NO.AABCD7604D RESPONDENT REVENUE BY : SHRI B. SARAVANAN, ADDL.CIT ASSESSEE BY : SHRI A.C.RAJU, CA DATE OF HEARING : 25-02-2016 DATE OF PRONOUNCEMENT : 29-02-2016 O R D E R PER SHRI VIJAY PAL RAO, JM: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 26-05- 2015 OF THE CIT(A)-2, BANGALORE FOR ASSESSMENT YEAR : 2007-08. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS; 1. THE ORDER OF THE CIT(A) IS CONTRARY TO THE FAC TS AND CIRCUMSTANCES OF THE CASE AND HENCE NOT SUSTAINABLE . ITA NO.1167(BANG)2015 2 2. WHETHER THE CIT(A) WAS RIGHT IN ALLOWING THE DEDUCTION U/S 10B FROM PRIOR TO SETTING OFF OF BROU GHT FORWARD LOSSES. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A)A INSOFARAS IT RELATES TO THE ABOVE GROUNDS MAY BE RE VERSED AND THAT OF THE AO MAY BE RESTORED. 4. THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR DELETE THE GROUNDS MENTIONED ABOVE. 2. THE ONLY ISSUE ARISES IN THIS REVENUES APPEAL IS REGARDING ALLOWING DEDUCTION U/S 10B OF THE IT ACT, 1961 PRIO R TO SETTING OFF OF BROUGHT FORWARD LOSSES. 3. WE HAVE HEARD LEARNED DR AS WELL AS THE LEARNED AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT THE LEARNED CIT(A) HAD DECIDED THE ISSUE BY FOLLOWING T HE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS M/S YOKOGAWA INDIA LTD (341 ITR 385) AT PARA 3.3 TO 3.4 OF HIS ORDER AS UNDER; 3.3. I HAVE CAREFULLY CONSIDERED THE ASS ESSEES SUBMISSIONS AND PERUSED THE ASSESSMENT ORDER. I FIND MERIT IN THE ASSESSEES SUBMISSIONS SINCE ITS CASE IS COVERED IN ITS FAVOUR BY THE DECISION OF THE HONBL E HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS YOKOGAWA I NDIA LTD. THE GIST IF THE SAID DECISION IS REPRODUCED BELOW; ITA NO.1167(BANG)2015 3 THE ASSESEE COMPANY CLAIMED EXEMPTION OF RS.3,95,99,100/- U/S10A FOR ITS STP UNIT. THE EX EMPTION HAD BEEN CLAIMED BEFORE SET OFF OF BROUGHT FORWARD LOSSES AND DEPRECIATION. ACCORDING TO THE ASSESSING AUTHO RITY THE DEDUCTION UNDER SECTION 10A HAS TO BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE. THE TOTAL INCOME OF THE ASSESSEE WAS ARRIVED AT AS PER SECTION 80B(5). THE REFORE, THE EXEMPTION UNDER SECTION 10A HAD TO BE GIVEN AFT ER SETTING OFF OF ALL BROUGHT FORWARD LOSSES WITHIN TH E CONTEXT OF SEC.32(1) R.W.S.72(2). ACCORDINGLY, SEC.10A BEN EFIT WAS RE-COMPUTED. AFTER SUCH RE-COMPUTATION THE ASSESS EE WAS HELD TO BE NOT ENTITLED FOR EXEMPTION U/S10A AND HE NCE A SUM OF RS.36,575/- WAS TREATED AS INCOME FROM THE SOURCES. HELD. AS THE INCOME OF 10A UNIT HAS TO BE EXCLUDED AT SOURCE ITSELF BEFORE ARRIVING AT THE GR OSS TOTAL INCOME THE LOSS OF NON-10A UNIT CANNOT BE SET OFF A GAINST THE INCOME OF 10A UNIT UNDER SECTION 72. THE LOSS INCURRED BY THE ASSESSEE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION HAS TO BE SET OFF AGAINST T HE PROFITS AND GAINS IF ANY OF ANY BUSINESS OR PROFESSION CARR IED ON BY SUCH ASSESSEE. THEREFORE, AS THE PROFITS AND GAI NS UNDER SECTION 10A IS NOT BE INCLUDED IN THE INCOME OF THE ASSESSEE AT ALL, THE QUESTION OF SETTING OFF OF THE LOSS OF THE ASSESEE IN RESPECT OF ANY BUSINESS AGAINST PROFITS AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. SIMILA RLY, AS PER SECTION 72(2); UNABSORBED BUSINESS LOSS IS T BE FIRST SET OFF AND THEREAFTER UNABSORBED DEPRECIATION TREATED AS CURRENT YEAR DEPRECIATION U/S 32(2) IS TO BE SET OF F. AS DEDUCTION UNDER SECTION 10A HA TO BE EXCLUDED FROM THE TOTAL INCOME OF THE ASSESSEE, THE QUESTION OF UNABS ORBED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFIT AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. 3.4 RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT REFERRED TO ABOVE, I HERE BY DIRECT THE AO TO ALLOW THE ASSESSEES CLAIM FOR DEDUCTION U/S 10B FROM THE TOTAL INCOME FIRST AND THEN DETERMINE THE TOTAL INCOME OR LOSS TO BE CARRIED FORWARD, AS THE CASE M AY BE. ITA NO.1167(BANG)2015 4 4. THE LEARNED AR OF THE ASSESSEE HAS POINTED OUT THAT THE IDENTICAL ISSUE WAS CONSIDERED AND DECIDED BY THIS TRIBUNAL I N CASE OF ITO VS M/S CLEAR WATER TECHNOLOGY SERVICES PVT.LTD (36 ITR(TRI B.)0528 WHEREIN THE TRIBUNAL HAS DECIDED THIS ISSUE AFTER CONSIDERING T HE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VBS M/S HIMATASINGIKE SEIDE LTD. 286 ITR 255(KAR.) AS WELL AS THE LATEST JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS M/S YOKOGAWA INDIA LTD (SUPRA) WE FIND THAT SUBSEQUENT JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S YOKOGAWA INDIA LTD (S UPRA) HAS BEEN DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT A FTER CONSIDERING THE AMENDED PROVISIONS OF SEC.10A/10B OF THE IT ACT, 19 61, WHEREAS THE JUDGMENT IN CASE OF CIT VS M/S HIMATSINGIKE SEIDE L TD. (SUPRA) WAS PRIOR TO THE AMENDMENT IN THE PROVISIONS OF SEC.10A/10B O F THE IT ACT, 1961. THEREFORE, IN VIEW OF THE LATEST JUDGMENT OF THE JU RISDICTIONAL HIGH COURT, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LEARNED CIT(A). 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 29 TH FEBRUARY, 2016. \ SD/- SD/- (INTURI RAMA RAO) (VIJAY PA L RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER D A T E D : 29-02-2016 PLACE: BANGALORE AM* ITA NO.1167(BANG)2015 5 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE