DCIT, CHENNAI V. AVT Infotech Pvt. Limited, CHENNAI

ITA 143/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96336 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 21-09-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 19-01-2015
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: T BANUSEKAR
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 10B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , ! ' , # $% BEFORE SHRI N.R.S.GANESAN, JUDICIAL MMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ./ ITA NO. 143/MDS/2015 / ASSESSMENT YEAR : 2005-06 THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-I(1), CHENNAI-34. ( /APPELLANT) VS M/S. AVT INFOTECH PVT. LTD., NO.64, RUKMANI LAKSHMIPATHY SALAI, EGMORE, CHENNAI- 600 008. PAN AAACA8938J ( /RESPONDENT) / APPELLANT BY : DR. B. NISCHAL, JCIT / RESPONDENT BY : SHRI T. BANUSEKAR, FCA / DATE OF HEARING : 23.09.2015 ! / DATE OF PRONOUNCEMENT: 06.11.2015 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 23 .9.2014. - - ITA 143 /15 2 2. THE GRIEVANCE OF THE REVENUE IN THIS APPEAL IS W ITH REGARD TO THE DIRECTION OF THE CIT(APPEALS) TO THE AO TO ALLOW DEDUCTION U/S.10B OF THE ACT BEFORE SETTING OFF OF BROUGHT FORWARD BUSINESS LOSSES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ISSUE T O BE DECIDED IN THIS APPEAL IS AGAINST THE DENIAL OF DED UCTION U/S.10B OF THE ACT AMOUNTING TO ` 65,30,557/- BY ADJUSTING THE BROUGHT FORWARD LOSS OF SOFTWARE AND BPO DIVISIONS, THEREBY RESTRICTING THE CARRY FORWARD BY ` 65,30,557/-. THE AO REFERRED TO THE PROVISIONS OF SEC.10(B)(6) OF THE ACT, WHICH PROHIB ITS SET OFF OF BROUGHT FORWARD BUSINESS LOSSES RELATING TO ASSESSM ENT YEARS PRIOR TO 2001-02 HOLDING THAT SINCE IN THE ASSESSEE S CASE, CARRY FORWARD OF LOSSES RELATES TO ASSESSMENT YEAR 2004-0 5 AND EARLIER YEARS, THEY REQUIRE TO BE SET OFF TO ARRIVE AT THE TOTAL INCOME FROM WHICH DEDUCTIONS U/S.10B OF THE ACT CAN BE GRANTED. REFERRING TO PROVISIONS OF SEC.10B, THE AO HELD THAT THE EXP RESS PROVISION OF SEC.10B PROHIBITS SET OFF OF LOSS U/S.72(1) AND 74(3) ONLY IF THE BROUGHT FORWARD LOSSES RELATE TO ANY YEAR PRIOR TO ASSESSMENT YEAR 2001-02. ACCORDING TO THE AO, IT MEANS THAT F ROM THE ASSESSMENT YEAR 2001-02, THE BROUGHT FORWARD LOSSES ARE TO BE - - ITA 143 /15 3 SET OFF FROM THE CURRENT YEARS PROFIT BEFORE THEY A RE ALLOWED TO BE CARRIED FORWARD TO THE SUBSEQUENT ASSESSMENT YEARS. THEREFORE, THE AO HELD THAT SINCE THE BROUGHT FORWARD LOSSES I N THE ASSESSEES CASE RELATE TO ASSESSMENT YEARS 2001-02 AND 2004- 05, THEY ARE REQUIRED TO BE SET OFF TO ARRIVE AT TH E TOTAL INCOME FROM WHICH DEDUCTION U/S.10B OF THE ACT CAN BE GRAN TED AND HE RELIED ON THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT V. HIMATASINGKE SEIDE LTD. (2006) 286 UITR 255, TO SUPPORT HIS VIEW. AGAINST THIS, THE ASSESSEE WENT IN APPEA L BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS), WHO ALLOWED TH E APPEAL OF THE ASSESSEE. AGGRIEVED BY THIS ORDER, THE REVE NUE IS IN APPEAL BEFORE US. 4. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OP INION THAT THIS ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF T HE KARNATAKA HIGH COURT IN THE CASE OF CIT V. YOKOGOWA INDIA LTD . (341 ITR 385). FURTHER, SIMILAR ISSUE WAS CONSIDERED BY TH E CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF S.R.A.SYSTEM S LTD. VS. ACIT IN ITA NO.1547/MDS/2012 DATED 21.02.2014, WHER EIN IT WAS HELD AS UNDER: 7. THE THIRD ISSUE IN APPEAL RELATES TO THE M ETHOD OF COMPUTATION OF DEDUCTION U/S.10A OF THE ACT. THE - - ITA 143 /15 4 ASSESSEE HAS CLAIMED DEDUCTION U/S.10A BEFORE SETTING OFF OF UNABSORBED DEPRECIATION AND BROUGHT FORWARD LOSSES. THE LD. AR OF THE ASSESSEE IN ORDER TO FORTIFY THE STAND OF ASSESSEE HAS PLACED RELIANCE O N THE DECISION OF THE TRIBUNAL IN ASSESSEES APPEAL F OR THE AY.2005-06 AND AY.2007-08 (SUPRA). THE LD.AR HAS ALSO DRAWN SUPPORT FROM THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD.(SUPRA). ON THE OTHER HAND, THE LD. DR HAS RELIED ON THE LATEST DECISION OF THE HONBLE APEX COURT IN THE CASE OF M/S.HIMATSINGKA SEIDE LTD ., VS.CIT (SUPRA). THE HONBLE SUPREME COURT OF INDIA DISMISSED THE APPEAL OF THE ASSESSEE AND HAS UPHELD THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT. THE HONBLE HIGH COURT HAS HELD THAT THE BROUGHT FORWARD DEPRECIATION HAS TO BE ADJUSTED AGAINST THE PROFITS OF THE EOU BEFORE COMPUTING THE EXEMPTION ALLOWABLE U/S.10B. THE PROVISIONS OF SECTION 10A AR E PARI MATERIA WITH THE PROVISIONS OF SECTION 10B OF THE ACT. WE FIND THAT AS FAR AS UNABSORBED DEPRECIAT ION IS CONCERNED, THE HONBLE SUPREME COURT OF INDIA IN TH E CASE OF M/S.HIMATSINGKA SEIDE LTD., VS. CIT (SUPRA ), HAS UP-HELD THE FINDINGS OF THE HONBLE KARNATAKA H IGH COURT AND AS SUCH, UN-ABSORBED DEPRECIATION HAS TO BE SET-OFF BEFORE COMPUTING THE EXEMPTION ALLOWABLE U/S.10A. IN RESPECT OF SETTING-OFF OF THE BROUGHT F ORWARD LOSSES, THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD.(SUPRA) STILL HOLDS GOOD. ACCORDINGLY, THE ASSE SSEE CAN CLAIM DEDUCTION U/S.10A BEFORE SETTING OFF OF BROUGHT FORWARD LOSSES. IN VIEW OF THE ABOVE, THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. BEING SO, IN OUR OPINION, THE COMMISSIONER OF INCOM E- TAX(APPEALS) IS JUSTIFIED IN FOLLOWING THE ABOVE OR DERS WHILE - - ITA 143 /15 5 DECIDING THE ISSUE. AS THE ISSUE IS DECIDED BY THE TRIBUNAL, WE ARE INCLINED TO REJECT THE APPEAL OF THE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON FRIDAY, THE 6 TH OF NOV., 2015 AT CHENNAI. SD/- SD/- ( ' . . ' . #$ ) ( % & ' ( ) ) N.R.S.GANESAN * )+,-./0-1223-04* 5 67 /JUDICIAL MEMBER 6789::2;.<-.<=>?@>0 %5 /CHENNAI, A6 /DATED, THE 6 TH NOV., 2015. MPO* 6$ BCDC /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. E)* /CIT(A) 4. E /CIT 5. CF# G /DR 6. #HI /GF.