Appeal details
Counselvise Citation
[2021] 107 COUNSELVISE.COM (IT) 9074 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
5 year(s) 4 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
06-08-2021
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
H
Assessment Year
2010-2011
Appeal Filed On
11-03-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DLEHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO. 1372/DEL/2016 ASSESSMENT YEAR: 2010-11 M/S. TCS E-SERVE INTERNATIONAL LTD., VS. ACIT, CIRC LE 1(1), 9 TH FLOOR, NIRMAL BUILDING, NARIMAN GURGAON. POINT, MUMBAI. PAN : AADCC1577A (APPELLANT) (RESPONDENT) APPELLANT BY : SH. S.P. SINGH, CA & SH. SHARAD GOEL, CA RESPONDENT BY: MS. ANIMA, SR. DR DATE OF HEARING: 20/07/2021 DATE OF ORDER : 06/08/2021 ORDER PER K. NARASIMHA CHARY, J.M. AGGRIEVED BY THE ORDER DATED 26/11/2015 PASSED BY T HE COMMISSIONER OF INCOME TAX (APPEALS)-2, GURGAON ('L D. CIT(A)') FOR THE ASSESSMENT YEAR 2010-11, M/S. TCS E-SERVE INTERNATI ONAL LTD., (THE ASSESSEE) PREFERRED THIS APPEAL. 2. BRIEF FACTS OF THE CASE, RELEVANT FOR THE DISPOS AL OF THIS APPEAL, ARE THAT THE ASSESSEE FILED THEIR RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 20.04.2010 CLAIMING A LOSS OF RS.67,39,7 31/- BY SHOWING A SUM OF RS.43,50,946/- AS OTHER INCOME ON ACCOUNT OF UNCLAIMED 2 BALANCES WRITTEN BACK AND TREATING THE SAME AS EXEM PT U/S. 10AA OF THE INCOME-TAX ACT, 1961 (THE ACT). ACCORDING TO THE ASSESSEE, THIS AMOUNT WAS CLAIMED AS EXPENSES IN THE PRECEDING YEAR FOR T HE PURPOSE OF CALCULATION OF DEDUCTION U/S. 10AA OF THE ACT, NAME LY, THE QUANTUM OF DEDUCTION U/S. 10AA WAS REDUCED TO THE EXTENT OF EX PENDITURE TO THE TUNE OF RS. 43,50,946/- IN THE YEAR WHEN SUCH EXPEN SES WERE DEBITED IN THE PROFIT AND LOSS ACCOUNT. LEARNED ASSESSING OFFI CER OBSERVED THAT THE ASSESSEE DID NOT HAVE PROFITS TO CLAIM THE DEDUCTIO N U/S. 10AA OF THE ACT IN THE YEAR WHEN SUBJECT EXPENSES WERE REDUCED FROM THE PROFIT TO CALCULATE THE QUANTUM AND THE WRITE BACK OF EXPENSE S DOES NOT FALL UNDER THE DEFINITION OF EXPORT TURNOVER GIVEN IN EX PLANATION TO SECTION 10AA OF THE ACT. ON THIS PREMISE, LEARNED ASSESSING OFFICER REDUCED THE EXEMPTION U/S. 10AA BY THIS AMOUNT OF RS.43,50,946/ -. 3. WHEN THE ASSESSEE PREFERRED APPEAL, LEARNED CIT( A) OBSERVED THAT THESE AMOUNTS DO NOT IN ANY WAY REPRESENT THE BUSINESS INCOME OF THE ASSESSEE; THAT THEY ARE ON ACCOUNT OF NON-AVAIL ABILITY OF PERSONS TO WHOM SALARY INCOME/OTHER EXPENSES WERE PAYABLE RESU LTING IN RESULTANT BENEFITS TO THE ASSESSEE; AND THAT SUCH BENEFITS DO NOT ARISE OUT OF ANY BUSINESS OPERATION. LEARNED CIT(A) DECLINED TO ACCE PT THE CONTENTION OF THE ASSESSEE THAT PROFITS DERIVED FROM EXPORT OF AR TICLES IS BASED ON THE PROFITS OF THE UNDERTAKING AND OBSERVED THAT AS PER PROVISIONS OF SECTION 10AA OF THE ACT, THE FORMULA FOR DETERMINING THE PR OFITS DERIVED FROM EXPORT OF ARTICLES COMPRISES PROFITS OF BUSINESS OF THE UNDERTAKING AND NOT THE PROFITS OF THE UNDERTAKING. LEARNED CIT(A), THEREFORE, DECLINED TO GRANT ANY RELIEF TO THE ASSESSEE ON THIS SCORE AND CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 3 4. APART FROM THIS, LEARNED CIT(A) OBSERVED THAT TH E LEARNED ASSESSING OFFICER COMMITTED THREE MISTAKES IN COMPU TATION OF TOTAL INCOME, NAMELY, (I) LEARNED ASSESSING OFFICER WRONG LY TOOK THE RETURNED LOSS AT RS.67,39,731/-; (II) THE COMPUTATION OF DED UCTION CLAIMED BY ASSESSEE U/S. 10AA WAS NOT CORRECT, INASMUCH AS THE BROUGHT FORWARD LOSS OF ELIGIBLE BUSINESS FOR PRECEDING YEARS WAS R EQUIRED TO BE REDUCED FROM THE PROFITS OF BUSINESS FROM CURRENT YEAR BEFO RE ALLOWING DEDUCTION U/D. 10AA WHICH WAS NOT DONE BY LD. ASSESSING OFFIC ER; AND (III) THE CLAIM OF ASSESSEE FOR SET OFF OF UNABSORBED DEPRECIATION AGAINST OTHER INCOME OF RS.35,25,367/- WAS NOT IN ACCORDANCE WITH THE LA W. HE, THEREFORE, BY ADDING THE ADDITION OF RS.43,50,946/-, MADE BY THE LD. ASSESSING OFFICER TO THE TOTAL INCOME OF THE ASSESSEE, COMPUTED THE S AME AT RS.80,57,251/-. 5. LEARNED CIT(A) FURTHER HELD THAT THE ASSESSEES CLAIM FOR GRANT OF CREDIT OF TAX DEDUCTED AT SOURCE TO THE TUNE OF RS. 8957/- DID NOT ARISE FROM THE ORDER UNDER APPEAL. 6. CHALLENGING THIS ACTION OF THE LD. CIT(A), THE A SSESSEE FILED THIS APPEAL STATING THAT THE EXPENSES WRITTEN BACK TO TH E PROFIT AND LOSS ACCOUNT SHOULD HAVE BEEN TREATED AS INCOME ELIGIBLE FOR DEDUCTION U/S. 10AA OF THE ACT DESPITE THE FACT THAT THE SAID EXPE NSES HAVE NOT BEEN REDUCED FROM THE INCOME ELIGIBLE FOR DEDUCTION U/S. 10AA IN EARLIER YEARS; THAT THE BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION OF THE ELIGIBLE UNIT SHOULD NOT HAVE B EEN SET OFF AGAINST THE PROFITS OF THE BUSINESS OF ELIGIBLE UNIT BEFORE ALL OWING DEDUCTION U/S. 10AA OF THE ACT AND IN ALL FAIRNESS, LEARNED CIT(A) SHOULD HAVE ALLOWED THE CARRY FORWARD OF BROUGHT FORWARD BUSINESS LOSSE S AND UNABSORBED 4 DEPRECIATION OF THE ELIGIBLE UNIT FOR SET OFF IN SU BSEQUENT YEARS. ASSESSEE ALSO PRAYED TO ALLOW THE CLAIM FOR GRANT OF CREDIT OF TAX DEDUCTED AT SOURCE OF RS.8957/-. 7. IN RESPECT OF GROUND NO. 1, 2 & 3, LD. AR SUBMIT TED THAT THE AMOUNT OF RS.43,50,946/- SHOWN AS OTHER INCOME ON A CCOUNT OF UNCLAIMED BALANCES WRITTEN BACK, WAS TREATED TO BE A PART OF EXPORT TURNOVER FOR THE PURPOSE OF CALCULATION OF DEDUCTIO N U/S. 10AA OF THE ACT SINCE THESE WERE CLAIMED AS EXPENSES IN THE PRECEDI NG YEAR FOR THE PURPOSE OF CALCULATION OF DEDUCTION U/S. 10AA OF TH E ACT. LEARNED AR SUBMITTED THAT THE QUANTUM OF DEDUCTION U/S. 10AA W AS REDUCED TO THE EXTENT OF EXPENDITURE TO THE TUNE OF RS. 43,50,946/ - IN THE YEAR WHEN SUCH EXPENSES WERE DEBITED IN THE PROFIT AND LOSS A CCOUNT. HE, THEREFORE, SUBMITS THAT WHILE GIVING THE SAME TREAT MENT, THE WRITE BACK OF SUCH EXPENSES SHOULD BE TREATED AS INCOME ELIGIB LE FOR DEDUCTION U/S. 10AA OF THE ACT. HE ALSO SUBMITTED THAT THE ASSESSE E HAS BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION AMOUNTING TO RS.11,73,61,104/- AND RS.5,90,17,382/- RESPECTIVELY PERTAINING TO F.Y. 2008-09 AND DURING THE F.Y. 2009-10, THE ASSESSEE D ID NOT SET OFF THE AFORESAID BROUGHT FORWARD BUSINESS LOSSES AND UNABS ORBED DEPRECIATION FROM THE TOTAL INCOME OF ASSESSEE FOR THE PURPOSE O F COMPUTING DEDUCTION U/S. 10AA OF THE ACT. HE FURTHER SUBMITT ED THAT THE DEDUCTION PROVIDED IN CHAPTER VIA IS GIVEN AT THE STAGE OF CO MPUTING THE TOTAL INCOME ONCE GROSS TOTAL INCOME IS ARRIVED AT, WHERE AS UNDER CHAPTER-III, THE INCOME OF A UNIT HAS TO BE EXCLUDED BEFORE ARRI VING OR COMPUTING THE GROSS TOTAL INCOME OF THE ASSESSEE. IN SUPPORT OF T HIS PROPOSITION, HE PLACES RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN CIT VS. 5 YOKOGAWA INDIA LTD. (2017) 391 ITR 274(SC) AND PROC EEDED TO SUBMIT THAT DEDUCTION U/S. 10AA OF THE ACT SHOULD BE TREAT ED AS EXEMPT AND CANNOT BE BROUGHT TO FORM PART OF THE TAX COMPUTATI ON AND CONSEQUENTLY, BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION CANNOT BE SET OFF AGAINST THE INCOME WHICH CANNOT F ORM PART OF TOTAL INCOME. 8. IN RESPECT OF ASSESSEES CLAIM FOR GRANT OF CRED IT OF THE TAX DEDUCTED AT SOURCE, HE PRAYED THAT THE ASSESSING OF FICER MAY BE DIRECTED TO VERIFY AND ALLOW THE SAME. 9. LEARNED DR PLACES RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT INASMUCH AS LD. CIT(A) RELIED UP ON THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF T ECHNOVATE ESOLUTION P. LTD. VS. ITO (2015) 59 TAXMANN.COM 77 AND THE DECIS ION OF HONBLE SUPREME COURT IN HIMATSINGHKA SEIDE LTD. VS. CIT (2 014) 48 TAXMANN.COM 357, THE FINDINGS RECORDED BY LEARNED C IT(A) MAY NOT BE FAULTED WITH. SHE PRAYED TO DISMISS THE APPEAL. 10. WE HAVE GONE THROUGH THE RECORDS IN THE LIGHT O F SUBMISSIONS MADE ON EITHER SIDE. THE ASSESSEE CLAIMED CERTAIN E XPENSES IN THE YEAR RELEVANT TO ASSESSMENT YEAR 2009-10 FOR THE PURPOSE OF CALCULATION OF DEDUCTION U/S. 10AA OF THE ACT AND THE QUANTUM OF D EDUCTION U/S. 10AA WAS REDUCED TO THE EXTENT OF EXPENDITURE TO THE TUN E OF RS. 43,50,946/- IN THE YEAR WHEN SUCH EXPENSES WERE DEBITED IN THE PROFIT AND LOSS ACCOUNT. LEARNED ASSESSING OFFICER REDUCED THE DEDU CTION U/S. 10AA OF THE ACT BY SUCH AMOUNT OF RS.43,50,946/- ON THE GRO UND THAT THE ASSESSEE HAD NOT CLAIMED ANY DEDUCTION U/S. 10AA OF THE ACT IN THE IMMEDIATELY PRECEDING YEAR AND THE WRITE BACK OF SU CH EXPENSES DOES 6 NOT FALL UNDER THE DEFINITION OF EXPORT TURNOVER GI VEN IN EXPLANATION TO SECTION 10AA OF THE ACT. IT REMAINS AN ADMITTED FAC T THAT IN THE IMMEDIATELY PRECEDING YEAR, THE ASSESSEE SUFFERED L OSSES AND THERE IS NO REASON NOT TO BELIEVE THE EXPLANATION ON BEHALF OF THE ASSESSEE THAT DUE TO SUCH LOSSES, THE ASSESSEE DID NOT CLAIM ANY DEDU CTION U/S. 10AA OF THE ACT IN THE IMMEDIATELY PRECEDING YEAR, I.E., F.Y. 2 008-09. IT IS, THEREFORE, CLEAR THAT IN COMPUTING THE DEDUCTION U/S. 10AA FOR THE CURRENT YEAR, THE WRITE BACK OF THE EXPENSES HAVE TO BE CONSIDERED AS A PART OF INCOME, INASMUCH AS, THE INCOME ON ACCOUNT OF WRITE BACK OF UNCLAIMED EXPENSES IS ACCRUED TO THE ASSESSEE ONLY DUE TO THE EXPORT BUSINESS AND THERE IS DIRECT NEXUS OF EXPORT BUSINESS OF ASSESSE E AND THE ACCRUAL OF INCOME, IN RESPECT OF WHICH, THE EXPENSES WERE SHOW N IN THE PRECEDING YEAR AND SUCH UNCLAIMED EXPENSES WERE WRITTEN BACK FOR THIS YEAR. IT IS NOT THE CASE OF THE REVENUE THAT THE EXPENSES OF RS .43,50,946/- HAD NO RELATION TO EXPORT BUSINESS OF THE ASSESSEE IN THE EARLIER YEAR. WE, THEREFORE, CONCLUDE THAT THE AUTHORITIES BELOW ARE NOT CORRECT IN REDUCING THE DEDUCTION U/S. 10AA OF THE ACT BY SUCH AN AMOUNT WHICH WAS WRITTEN BACK BY THE ASSESSEE ON ACCOUNT OF UNCL AIMED BALANCES WRITTEN BACK. 11. SO FAR AS THE SET OFF OF THE BROUGHT FORWARD BU SINESS LOSSES AND UNABSORBED DEPRECIATION OF THE ELIGIBLE UNIT AGAINS T PROFIT OF THE BUSINESS OF ELIGIBLE UNIT BEFORE ALLOWING DEDUCTION U/S. 10AA OF THE ACT AS WAS DONE BY LD. CIT(A), IS CONCERNED, THE LAW IS SETTLED AND IT IS NO LONGER RES INTEGRA. IN YOKOGAWA INDIA LTD. (SUPRA), HONBLE SUPREME COURT OBSERVED THAT 7 17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [FIRST PROVISO TO SECTIONS 10A(1); 10A (1A) AND 10A (4)] THAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDER TAKING AND THAT IS ALSO HOW THE CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT (NO.794 DATED 09.08.2000)UNDERSTOOD THE SITUATION, IT IS ONLY LOG ICAL AND NATURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY A ND, THEREFORE, IMMEDIATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS. AT THAT STAGE THE AGGREGATE OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SET OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATION. T HE DEDUCTIONS UNDER SECTION10A THEREFORE WOULD BE PRIOR TO THE COMMENCE MENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE A CT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL I NCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION TOTAL IN COME OF THE ASSESSEE IN SECTION 10A HAS ALREADY BEEN DEALT WIT H EARLIER AND IN THE OVERALL SCENARIO UNFOLDED BY THE PROVISIONS OF SECT ION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPR ESSION TOTAL INCOME OF THE ASSESSEE IN SECTION 10A AS TOTAL IN COME OF THE UNDERTAKING. 12. THE PROVISIONS OF SECTION 10A ARE PARI MATERIA WITH THE PROVISIONS OF SECTION 10AA AND THEREFORE, THE CLAIM OF THE ASS ESSEE FOR NOT REDUCING THE BROUGHT FORWARD LOSSES FROM THE PROFIT OF BUSINESS OF CURRENT YEAR BEFORE ALLOWING DEDUCTION U/S. 10AA IS PROPER AND HAS TO BE CONSIDERED IN FAVOUR OF THE ASSESSEE. FOR THESE REASONS, WE ALLOW GROUND NO. 1 TO 3 OF APPEAL. 13. NOW COMING TO GROUND NO. 4 IN RESPECT OF CLAIM FOR GRANT OF CREDIT OF TAX DEDUCTED AT SOURCE TO THE TUNE OF RS. 8,957/-, WHETHER OR NOT IT ARISES FROM THE ASSESSMENT ORDER, WHEN ONCE THE ASSESSEE RAISED THE ISSUE, IT CANNOT BE BRUSHED UNDER THE CARPET. L D. DR FAIRLY CONCEDED THE REQUEST OF THE ASSESSEE TO ALLOW THE ASSESSING OFFICER TO VERIFY THIS 8 FACT PLEADED BY THE ASSESSEE AND, IF IT IS TRUE, TO ALLOW THE CLAIM OF ASSESSEE. WE, THEREFORE, DIRECT THE ASSESSING OFFIC ER TO VERIFY THE TAX CREDIT AND ALLOW THE SAME TO THE ASSESSEE. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 6 TH DAY OF AUGUST, 2021. SD/- SD/- (N.K. BILLAIYA) (K. NARSIMHA C HARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 06/08/2021 AKS
