DCIT, Bangalore V. M/s Exa Thermometric India Pvt. Ltd., Bangalore

ITA 1395/BANG/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9245 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 20-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAMALADHAR HEARD ON P
• Assessee Lawyers: SRINIVASAN
• Section: 10B; 6

Judgement Text

ITA.1395/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'A', BENGALURU BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI. S. JAYARAMAN, ACCOUNTANT MEMBER I.T.A NO.1395/BANG/2015 (ASSESSMENT YEAR : 2008-09) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(2), BENGALURU .. APPELLANT V. M/S. EXA THERMOMETRIC INDIA P. LTD, PLOT NO.181, LAKE SHORE ROAD, BTM LAYOUT, 2 ND STAGE, BENGALURU 560 076 BENGALURU 560 095 .. RESPONDENT PAN : AABCB1778J ASSESSEE BY : SHRI. SRINIVASAN, CA REVENUE BY : SHRI. KAMALADHAR, STANDING COUNSEL HEARD ON : 27.09.2016 PRONOUNCED ON : 23.11.2016 O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT (A), BENGALURU -2, BENGALURU, DT.27.08.2015, FOR TH E ASSESSMENT YEAR 2008-09. 02. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE C IT (A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S.10B OF THE INCOME TAX ACT, 1961. ITA.1395/BANG/2015 PAGE - 2 03. FACTS IN BRIEF ARE THAT THE ASSESSEE, A PRIVATE LIMITED COMPANY ENGAGED IN THE MANUFACTURE AND SALE OF THERMOSTATS, FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DECLARING A TOTAL INCOME AT RS.1,63,10,133/-. WHILE DOING SO , IT HAD CLAIME D DEDUCTION U/S.10B AT RS.13,86,59,788/- VIZ RS.3,12,61,134/- & RS.10,73, 98,654/- FOR TWO EXPORT-ORIENTED UNDERTAKINGS VIZ.- EOU-I AND EO U-II, RESPECTIVELY. THE AO NOTED THAT THE ASSESSEE'S SHAR E-HOLDING PATTERN UNDERWENT A CHANGE IN AS MUCH AS M/S SPIREN T BV GROUP TO WHICH THE ASSESSEE BELONGED MADE AN EXIT. AS A RESULT OF WHICH THE BUSINESS OF MANUFACTURE AND SALE OF SENSORS CAME TO BE ACQUI RED BY THE GE GROUP WORLDWIDE AND THE ASSESSEE ACQUIRED 74% SH ARES HELD BY M/S SPIRENT BV GROUP IN THE ASSESSEE -COMPANY. THIS TOO K PLACE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04. IN T HE ASSESSMENTS MADE FOR THE ASSESSMENT YEARS 2003-04 TO 2007-08, THE RE SPECTIVE AOS HAVE HELD THAT THE CHANGE IN THE SHARE-HOLDING PATTERN W AS TANTAMOUNT TO RECONSTRUCTION OR REORGANISATION DUE TO TRANSFER O F BENEFICIAL INTEREST IN THE UNDERTAKING KNOWN AS M/S SPIRENT BV GROUP IN FAVOUR OF THE ASSESSEE - COMPANY AND ,THEREFORE, THE ASSESSEE WAS HIT BY TH E MISCHIEF CONTEMPLATED IN SECTION 10B(9) AND ACCORDINGLY, TH EY HAVE REJECTED THE ASSESSEE 'S CLAIM FOR DEDUCTION U/S 10B IN THOSE A SSESSMENT YEARS . ON THE SAME LINES, FOR THIS A Y ALSO, THE AO HAS DENIED TH E BENEFIT OF DEDUCTION AT RS.3,12,61,134/- U/S 10B IN RESPECT OF EOU-I, ALTHOUGH THE ASSESSEE BROUGHT TO HIS NOTICE THAT ITS CLAIM FOR DEDUCTIO N U/S 10B IN THE EARLIER YEARS HAD BEEN UPHELD BY THE HON'BLE ITAT, BANGALORE BENCH ITA.1395/BANG/2015 PAGE - 3 'B' IN ITA.NOS.157 & 258(BANG)/2008 DATED 30/5/2008 AND IN ITA.NO.151/BANG/2011 DATED 10/6/2011 FOR THE ASSESS MENT YEAR 2006-07. NEVERTHELESS, THE AO DID NOT ALLOW THE CLA IM ON THE GROUND THAT THE DEPARTMENT HAS CONTESTED , THE HON'BLE ITAT'S ORDER BEFORE THE HON'BLE HIGH COURT OF KARNATAKA, WHICH IS PENDING D ECISION. THUS, THE AO HELD THAT THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTION U/.10B AT RS.3,12,61,134/-. ON AN APPEAL, THE CIT(A) ALLOWED THE ASSESSEES APPEAL. AGGRIEVED, THE REVENUE FILED THIS APPEAL. 04. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT ORDERS. THE RELEVANT PORTION OF THE CIT (A) ORDER I S EXTRACTED AS UNDER : 3.4 THE GIST OF THE ELABORATE GROUNDS OF APPEAL IS THAT THE AO FAILED TO APPRECIATE THAT THE CHANGE IN SHAREHOL DING PATTERN WAS NECESSITATED BY THE WORLD-WIDE REORGANISATION OF THE BUSINESS IN SENSORS LEADING TO THE EXIT OF M/S SPIR ENT BV GROUP FROM THIS LINE OF BUSINESS AND THE APPELLANT CONSEQ UENTLY CAME TO ACQUIRE THE SAID BUSINESS; THAT OMISSION OF SUB- SECTION (9) OF SECTION 10B DID NOT DEPRIVE THE APPE LLANT OF ITS CLAIM FOR DEDUCTION U/S 10B IN AS MUCH AS OMISSION OF A SUB- SECTION MADE IT AS NON EST IN LAW RIGHT FROM THE TI ME IT WAS INTRODUCED IN THE STATUTE; AND THAT IT WAS ENTITLED TO THE CLAIM OF DEDUCTION U/S 10B IN RESPECT OF THE EOU-II IN THE L IGHT OF THE FAVOURABLE DECISIONS GIVEN BY THE HON'BLE ITAT, BAN GALORE BENCH 'B' FOR THE ASSESSMENT YEARS 2003-04; 2004-05 AND 2006-07. 3.5 I HAVE CAREFULLY CONSIDERED THE APPELLANT'S CONTENTIONS AND PERUSED THE ASSESSMENT ORDER. AT TH E TIME OF APPEAL HEARING, THE APPELLANT FURNISHED A COPY OF T HE ORDERS OF THE HON'BLE ITAT, BANGALORE BENCH IN THE APPELLANT'S OW N CASE FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 MENTIONED ABOVE. I FIND MERIT IN THE APPELLANT'S CONTENTIONS IN AS MUC H AS THE HON'BLE ITAT, BANGALORE BENCH 'B' IN ITS ORDERS MEN TIONED ABOVE ITA.1395/BANG/2015 PAGE - 4 HAS HELD THAT THE APPELLANT WAS ENTITLED TO THE DED UCTION U/S 10B OF THE ACT. THE RELEVANT PORTION OF THE HON'BLE ITAT'S ORDER IS REPRODUCED BELOW: '11. THEREFORE, EVEN THOUGH THE FINANCE ACT, 2003 MENTIONS THAT THE AFORESAID SUB-SECTION (9) IS OMITTED WITH EFFECT FROM 1-4-2004, IN VIEW OF THE F ACT THAT THE SAID OMISSION IS DIFFERENT FROM REPEAL, TH E SAVING CLAUSE PROVIDED IN SECTION 6 OF THE GENERAL CLAUSES ACT IS NOT APPLICABLE. THEREFORE, THE LEARN ED CIT(A) IS NOT JUSTIFIED IN NOT APPRECIATING THE FAC T THAT SECTION10B SHOULD BE READ AS THOUGH IT NEVER HAD TH E SAID SUBSECTION (9) IN IT IN ALL PROCEEDINGS UNDER THE A CT. AS THE APPELLATE PROCEEDINGS ARE THE CONTINUATION OF T HE ASSESSMENT PROCEEDINGS, AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF JUTE CORPORATION OF IN DIA LTD., (187 ITR 688), EVEN FOR THE ASSESSMENT YEAR 2003-04 THE AFORESAID SECTION 10B HAS TO BE READ WITHOUT THE IMPUGNED SUB-SECTION (9). THEREFORE, WE FIND MUCH FORCE IN THE STAND TAKEN BY THE ASSESSEE IN VIEW OF THE DECISION OF THE SUPREME COURT. EVEN ON THIS ISSUE, THE ASSESSEE IS BOUND TO SUCCEED...... 3.6 IN DECIDING THE APPEAL FOR THE ASSESSMENT YEAR 2006-07 IN FAVOUR OF THE APPELLANT, THE HON'BLE ITA T HAS FOLLOWED THE ABOVE-MENTIONED DECISION FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05. 3.7 RESPECTFULLY FOLLOWING THE DECISIONS OF THE HON 'BLE ITAT IN THIS REGARD IN FAVOUR OF THE APPELLANT, I H OLD THAT THE APPELLANT IS ENTITLED TO THE DEDUCTION OF RS.3,12,61,134/- U/S 10B OF THE ACT IN RESPECT OF E OU-I FOR THE ASSESSMENT YEAR 2008-09, WHICH IS THE TENTH AND LAST YEAR FOR WHICH THE CLAIM CAN BE MADE/ALLOWED. THE AO IS DIRECTED TO ALLOW THE CLAIM ACCORDINGLY. 05. THUS, THE CIT(A) FOLLOWED THE DECISION OF THI S TRIBUNAL IN THE ASSESSEES CASE IN ITA NOS.257& 258/ BNG/2008 DT 30 .5.2008 FOR AYS 2003-04 & 2004-05 AND ALSO FOR A Y 2006-07, SUPRA. ON REVENUES APPEAL, THE HONBLE JURISDICTIONAL HIGH COURT IN ITA NO 876 & 877 OF 2008 DT 25.12.2014, ANSWERED THE SUBSTANTIAL QUESTION OF LA W IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE FOR AYS 2003-04 & 2004-05. RESPECTFULLY ITA.1395/BANG/2015 PAGE - 5 APPLYING THE RATIO, THE REVENUES APPEAL IS DISMISS ED 06. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD NOVEMBER, 2016. SD/- SD/- (VIJAY PAL RAO) (S. JAYARAMAN) JUDICIAL MEMBER A CCOUNTANT MEMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME TAX 4. THE COMMISSIONER OF INCOME TAX (A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR