Asst.C.I.T., Bangalore V. M/s Indian Products Ltd., Bangalore

ITA 145/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7510 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-07-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 08-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMESH B R
• Assessee Lawyers: T RAVINDRAN
• Keywords: Business income
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N.V VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.1 45/BANG/2016 (ASST. YEAR 2006-07) THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 3(1)(1), BENGALURU. . APPELLANT VS. M/S INDIAN PRODUCTS LTD., 604A, QUEENS CORNER APARTMENT 3, QUEENS ROAD, BENGALURU. . RESPONDENT PAN AAACI6463L APPELLANT BY : SHRI RAMESH B.R, JCIT RESPONDENT BY : SHRI T RAVINDRAN, C.A DATE OF HEARING : 19-10-2017 DATE OF PRONOUNCEMENT : 20-10-2017 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS) -3, BANGALORE DATED 24/11/2015 FOR ASST. YEAR 2006-07. ITA NO.145/B/16 2 2. BRIEFLY STATED, THE FACTS OF THE CASE RELEVANT F OR THESE APPEALS ARE AS UNDER:- 3.1 THE ASSESSEE, A COMPANY ENGAGED IN MANUFACTURE AND TRADING OF COFFEE, TEA AND SPICES FILED ITS RETURN OF INCOME F OR ASST. YEAR 2006-07 ON 31/11/2006 DECLARING INCOME OF RS.15,99,252/-. AFTER CLAIMING DEDUCTION U/S 10B OF THE INCOME-TAX ACT, 1961 (IN S HORT THE ACT). THE RETURNS WAS PROCESSED U/S 143(1) OF THE ACT AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 31/12/2008, DENYING THE ASSESSEES CLAIMS FOR DEDUCTION OF RS.3,54,74,166/- U/S 10B OF THE ACT. ON APPEALS BEFORE THE CIT(A) AND SUBSEQUENTLY ITAT, A CO- ORDINATE BENCH VIDE ORDER IN ITA NO.357/BANG/2010 D ATED 18/6/2010 SET ASIDE THE MATTER TO THE FILE OF THE AO FOR VERI FICATION OF FROM NO.56G FILED BY THE ASSESSEE COMPANY AND THEN COMPU TE THE INCOME ACCORDINGLY. IN PURSUANCE THEREOF, THE ASSESSING O FFICER (AO) VERIFIED THE FORM 56G AND COMPLETED THE ASSESSMENT U/S 143(3) R.W.S 254 OF THE ACT VIDE ORDER DATED 30/8/2011 WHEREIN T HE ASSESSEES INCOME WAS DETERMINED AT NIL AFTER ALLOWING DEDUCTI ON OF RS.2,87,08,216/- U/S 10B OF THE ACT, TO THE EXTENT OF PROFITS AVAILABLE; BUT ONLY AFTER SETTING OFF BROUGHT FORWARD BUSINESS LOSSES OF RS.97,86,535/- AGAINST BUSINESS PROFITS. 3.1 AGGRIEVED BY THE ORDER OF THE CIT-3, BANGALORE DATED 24/11/2015 FOR ASST. YEAR 2006-07, REVENUE HAS FILE D THIS APPEAL RAISING THE FOLLOWING GROUNDS:- ITA NO.145/B/16 3 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) ERRED IN FOLLOWING THE RATIO LAID DOWN B Y THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS M/S YOKOGAWA INDIA LTD., (341 ITR 385) 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) ERRED IN HOLDING THAT THE DEDUCTION U/S L0B WAS TO BE DEDUCTED FROM THE INCOME OF THE ELIGIBLE UNIT I.E. BEFORE COMPUTING THE GROSS TOTAL INCOME. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY B E RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND / OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 3.2 THE LD DR FOR REVENUE WAS HEARD IN SUPPORT OF T HE GROUNDS RAISED (SUPRA) AND PLACED STRONG RELIANCE ON THE FI NDING IN THE ORDERS OF THE AO ON THIS ISSUE. 3.3 PER CONTRA, THE LD AR FOR THE ASSESSEE SUBMITTE D THAT THE ASSESSEES CLAIM FOR BEING ALLOWED THE DEDUCTION CL AIMED U/S 10B OF THE ACT IS SQUARELY COVERED IN ITS FAVOUR BY THE DE CISION OF THE ITA NO.145/B/16 4 HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGOWA INDIA LTD. (341 ITR 385). IT IS SUBMITTED THAT THE LD CIT(A), FOLLOWING THE AFORESAID DECISION, HAS RIGHTLY DIREC TED THE AO TO COMPUTE THE DEDUCTION U/S 10B OF THE ACT BEFORE SET TING OFF THE BROUGHT FORWARD BUSINESS LOSSES AGAINST BUSINESS PR OFITS OF THE YEAR UNDER CONSIDERATION. 3.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. FROM A PERUSAL OF THE DETAILS ON RECORD IT IS SEEN THAT THE AO WAS OF THE VIEW THAT DEDUCTION U/S 10B OF THE ACT WAS TO BE ALLOWED ONLY ON THE INCOME COMPUT ED AFTER SETTING OFF THE BROUGHT FORWARD LOSSES. ACCORDINGLY, THE ASSESSEES INCOME WAS DETERMINED BY THE AO BY FIRST SETTING OFF THE B ROUGHT FORWARD LOSSES FROM THE BUSINESS INCOME FOR CALCULATING TH E DEDUCTION U/S 10B OF THE ACT. 3.4.2 WE FIND THAT THE ISSUE IN DISPUTE BEFORE US I S SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HO NBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LT D. (2012) 341 PRODUCTS LTD-ITR 385 (KAR). IN ITS DECISION THE HO NBLE HIGH COURT HAD HELD THAT THE INCOME OF SEC. 10A UNIT HAS TO BE EXCLUDED AT SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL INCOME/LO SS. AS THE DEDUCTION U/S 10A OF THE ACT HAS TO BE COMPUTED FROM THE TOTA L INCOME OF THE ASSESSEE, THE BROUGHT FORWARD BUSINESS LOSS AND DEP RECIATION BEING SET OFF AGAINST SUCH PROFIT AND GAINS OF THE UNDERTAKIN G AS A WHOLE WOULD NOT ARISE. SECTION 10A OF THE ACT BEING ANALOGOUS WITH SEC. 10B OF ITA NO.145/B/16 5 THE ACT, THE AFORESAID DECISION OF THE HONBLE HIGH COURT WOULD EQUALLY APPLY TO THE CASE ON HAND. IN THIS VIEW OF THE MATTER AND RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN YOKOGAWA INDIA LTD. (341 ITR 385), WHICH H AS SINCE BEEN APPROVED BY THE HONBLE APEX COURT IN CIT VS. YOKOG AWA INDIA LTD., (2017) 77 TAXMANN.COM 41(SC), WE UPHOLD THE I MPUGNED ORDER OF THE LD CIT(A) IN DIRECTING THE AO TO COMPUTE THE DEDUCTION U/S 10B OF THE ACT IN THE CASE ON HAND WITHOUT SETTING OFF THE BROUGHT FORWARD BUSINESS LOSSES FROM THE ASSESSEES INCOME. WE HOLD AND DIRECT ACCORDINGLY. CONSEQUENTLY, THE GROUNDS RAIS ED BY REVENUE ARE DISMISSED. 4. IN THE RESULT, THE REVENUES APPEAL FOR THE ASST . YEAR 2006-07 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH OCTOBER, 2017 . SD/- SD/- (N.V VASUDEVAN) (JASO N P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEM BER BANGALORE DATED : 20/10/2017 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVAT E SECRETARY, ITAT, BANGALORE