ITO 9(2)(2), MUMBAI V. CENVO PUBLISHER SERVICES LTD, MUMBAI

ITA 1476/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1883 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 11-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Question of law; Unabsorbed depreciation
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C ,MUMBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.1476/MUM/2015 FOR (ASSESSMENT YEAR : 2010-11 ) ITO-9(2)(2) ROOM NO. 601A, 6 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 VS. M/S CENVO PUBLISHER SERVICES LTD. (FORMERLY KNOWN AS KNOWLEDGE WORKS GLOBAL LIMITED) 5 TH FLOOR, MARWAH CENTRE, KRISHANLAL MARWAH MARG, ANDHERI (EAST) MUMBAI-400072. PAN: AACCK0612M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI C.W. ANGOLKA R (DR) ASSESSEE BY : SHRI VIJAY MEHTA (AR) DATE OF HE ARING : 09.11.2016 DATE OF PRONOUNCEMENT : 18.11.2016 O R D E R PER PAWAN SINGH, JM: 1. THIS APPEAL U/S 253 OF THE INCOME-TAX ACT (ACT) I S DIRECTED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (AP PEALS) (FOR SHORT THE CIT(A)- 16, MUMBAI DATED 11.11.2014 FOR ASSESSMENT YEAR (AY ) 2010-11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN ALLOWING DEDUCTION U/S 10A BEFORE COMPUTIN G THE BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION WITHOUT APPRECIATING THAT AFTER THE AMENDMENT, SEC 10A/10B HAS BECOME 'DEDUCTION' AND N OT 'EXEMPTION' AND THE INCOME OF THE ASSESSEE HAS TO BE COMPUTED AS PER TH E COMPUTATION OF INCOME AS DEFINED IN SEC 2(45) OF THE ACT.' 2. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN ALLOWING DEDUCTION U/SL0A BEFORE COMPUTING THE BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION IGNORING THAT THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS HIMATASINGIKE SEIDE LTD REPORTED IN 286 ITR 255(200 6) HAS CLARIFIED THAT LOSS OF 10-A UNIT HAS TO BE FIRST SET OFF AGAINST 10-A PROF IT AND ONLY ON BALANCE AMOUNT DEDUCTION IS AVAILABLE AND IGNORING THE FACT THAT D ECISION OF KARNATAKA HIGH 2 ITA NO. 1476/M/2015 M/S CENVO PUBL ISHER SERVICES LTD. COURT WAS UPHELD BY HON'BLE SUPREME COURT IN CA 150 1 OF 2008 HOLDING THAT APPEAL IS DEVOID OF ANY MERIT ?' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN ALLOWING DEDUCTION U/S 10A BEFORE COMPUTIN G THE BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION IGNORIN G THAT THE CBDT VIDE ITS CIRCULAR NO. 7 OF THE 2013 DATED 16.07.2013 HAS CAT EGORICALLY CLARIFIED AS UNDER: ... 'FIRST THE INCOME/LOSS FROM VARIOUS SOURCES I.E . ELIGIBLE AND INELIGIBLE UNITS, UNDER THE SAME HEAD ARE AGGREGATED IN ACCORD ANCE WITH THE PROVISIONS OF SECTION 70 OF THE ACT. THEREAFTER, TH E INCOME FROM ONE AHEAD IS AGGREGATED WITH THE INCOME OR LOSS OF THE OTHER HEAD IN ACCORDANCE WITH THE PROVISIONS OF SECTION 71 OF THE ACT. IF AFTER G IVING EFFECT TO THE PROVISIONS OF SECTIONS 70 AND 71 OF THE ACT THERE I S ANY INCOME (WHERE THERE IS NO BROUGHT FORWARD LOSS TO BE SET OFF IN A CCORDANCE WITH THE PROVISIONS OF SECTION 72 OF THE ACT) AND THE SAME I S ELIGIBLE FOR DEDUCTION IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER VI-A O R SECTIONS 10A, 10B ETC. OF THE ACT, THE SAME SHALL BE ALLOWED IN COMPU TING THE TOTAL INCOME OF THE ASSESSEE. ' 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION U/S 10A BEFORE COMPUTIN G THE BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION BY PLAC ING RELIANCE UPON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT V/ S BLACK & VEATCH CONSULTING P LTD 20 TAXMAN.COM 727(BOM) IGNORING THE FACT THAT THE DEPARTMENT HAS NOT ACCEPTED THE RATIO LAID DOWN IN THE SAID CASE.' 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS OF INFORMATION TECHNOLOGY ENABLED CONTENT PROCESSING & DATA MANAGEMENT SERVICES, FILED ITS RETURN OF INCOME FOR RELEVANT A Y ON 28.09.2010. THE ASSESSEE CLAIMED EXEMPTION U/S 10A IN RESPECT OF MUMBAI UNI T OF RS.9,16,57,358/- AND CHENNAI UNIT AT RS. 11,34,68,460/- WITHOUT SETTING OFF OF BROUGHT FORWARD BUSINESS LOSSES OF RS.16035036/- FOR AY 2005-06 AND UNABSORB ED DEPRECIATION AT RS.18,04,004/- FOR AY-2006-07. THE ASSESSING OFFICE R (AO) SET OFF AND UNABSORBED DEPRECIATION AGAINST THE PROFIT OF ASS ESSEE AND ACCORDINGLY ALLOWED DEDUCTION U/S 10A. ON APPEAL BY ASSESSEE THE LD. CI T (A) ALLOWED THE RELIEF. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTIES. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR REVENUE HONESTLY SUPPORTED THE ORDER OF AO. LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE ARGU ED THAT THE GROUNDS OF APPEAL RAISED IN THE PRESENT APPEAL ARE COVERED IN HIS FAV OUR BY THE DECISION OF JURISDICTIONAL HIGH COURT IN CIT VS. TECHNO TARP AN D POLYMERS PVT. LTD. IN ITA NO. 2134 OF 2013 DATED 05.12.2015 WHEREIN THE IDENT ICAL ISSUE WAS EXAMINED BY 3 ITA NO. 1476/M/2015 M/S CENVO PUBL ISHER SERVICES LTD. THE HONBLE JURISDICTIONAL HIGH COURT AND THE APPEA L OF THE REVENUE WAS DISMISSED. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PAR TIES AND GONE THROUGH THE DECISION OF AUTHORITIES BELOW. WE FIND THAT IDENTIC AL GROUNDS OF APPEAL WAS CONSIDERED BY THE HONBLE BOMBAY HIGH COURT IN TECH NO TARP AND POLYMERS PVT. LTD.(SUPRA), WHEREIN THE FOLLOWING ORDER WAS PASSED . 2. ALTHOUGH NUMEROUS QUESTIONS OF LAW HAVE BEEN FOR MULATED IN THE MEMO OF APPEAL, MR.SURESH KUMAR, LEARNED COUNSEL FOR THE RE VENUE URGES ONLY THE FOLLOWING RE-FRAMED QUESTION OF LAW FOR OUR CONSIDE RATION AS UNDER:- '(I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE BROUGHT FORWARD UNABSORBED LOSS/ DEPRECIATION OF THE ASSESSEE'S 10B UNIT WAS NOT LIA BLE FOR SET OFF AGAINST THE CURRENT YEAR'S PROFIT OF THE SAME 10B UNIT ? 2, WE FIND THAT THE IMPUGNED ORDER OF THE TRIBUNAL HAS ALLOWED THE RESPONDENT- ASSESSEE'S APPEAL BY FOLLOWING THE DECISION OF THIS COURT IN CIT VS. BLACK & VEATCH CONSULTING (P) LTD., ((2012) 208 TAXMAN 144) '. FURTHER THE IMPUGNED ORDER ALSO PLACED RELIANCE UPON ITS OWN DECISION IN THE CASE OF 'GANESH POLYCHEM LTD. VS. ITO' DECIDED IN ITA NO.8515/MUM/2 010 ON 10 AUGUST 2012 FOR THE ASSESSMENT YEAR 2006-07 FOLLOWING THE DECIS ION OF THIS COURT IN BLACK & VEATCH CONSULTING(P) LTD. (SUPRA). 3. THE REVENUE HAD CARRIED THE DECISION OF THE TRIB UNAL IN 'GANESH POLYCHEM LTD. VS. ITO' (SUPRA) TO THIS COURT BEING INCOME TA X APPEAL (LODG) NO.2083 OF 2012 RAISING THE FOLLOWING QUESTION OF LAW:- 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE BROUGHT FORW ARD UNABSORBED DEPRECIATION AND LOSSES OF THE UNIT, THE INCOME OF WHICH IS NOT ELIGIBLE FOR DEDUCTION U/S. 10 OF THE ACT CANNOT BE SET OFF AGAI NST THE CURRENT PROFIT OF THE ELIGIBLE UNIT FOR COMPUTING THE DEDUCTION U/S. 10B OF THE ACT ?' THIS COURT BY ORDER DATED 25 FEBRUARY 2013 DISMISSE D THE REVENUE'S ABOVE APPEAL AS IT WAS AGREED THAT THE ISSUE RAISED THERE IN STANDS CONCLUDED AGAINST THE REVENUE BY THE DECISION OF THIS COURT IN BLACK & VE ATCH CONSULTING (P) LTD. (SUPRA). 4. MR. SURESH KUMAR, LEARNED COUNSEL FOR THE REVENU E DOES NOT DISPUTE THAT THE QUESTION AS FRAMED IS COVERED BY THE DECISION OF T HIS COURT IN BLACK & VEATCH CONSULTING(P) LTD. (SUPRA) & 'GANESH POLYCHEM LTD. VS. ITO' (SUPRA). HOWEVER, HE SUBMITS THAT THE QUESTION AS FRAMED WOULD REQUIR E CONSIDERATION AS THE CONTRARY VIEW TAKEN BY KARNATAKA HIGH COURT IN 'CIT VS. HIMATASINGIKE SEIDE LTD., ((2006) 156 TAXMAN 151 (KAR.))' HAS NOW BEEN UPHELD BY THE APEX COURT IN ITS ORDER DATED 19 SEPTEMBER 2013 AS UNDER:- '1. WE HAVE HEARD THE LEARNED COUNSEL FOR THE PARTI ES TO THE LIS. 2. HAVING PERUSED THE RECORDS AND IN VIEW OF THE FA CTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE CIVIL APPE AL BEING DEVOID OF ANY MERIT DESERVES TO BE DISMISSED AND IS DISMISSED ACCORDING LY. ORDERED ACCORDINGLY. 5. WE FIND THAT THE DECISION OF KARNATAKA HIGH COUR T IN HIMATASINGIKE SEIDE LTD. (SUPRA) WHICH WAS UNDISTURBED BY THE APEX COURT WAS IN RESPECT OF ASSESSMENT YEAR 1994-95. THUS IT DEALT WITH THE PROVISIONS OF SECTION 10B OF THE ACT AS 4 ITA NO. 1476/M/2015 M/S CENVO PUBL ISHER SERVICES LTD. EXISTING PRIOR TO 1 APRIL 2001 WHICH WAS ADMITTEDLY DIFFERENT FROM SECTION 10B AS IN FORCE DURING ASSESSMENT YEAR 2009-10 INVOLVED IN THIS APPEAL. SECTION 10B OFF THE ACT AS EXISTING PRIOR TO 1 APRIL 2001 PROVIDED FOR AN EXEMPTION IN RESPECT OF PROFITS AND GAINS DERIVED FROM EXPORT BY 100% EXPOR T ORIENTED UNDERTAKINGS AND NOW IT PROVIDES FOR DEDUCTION OF PROFITS AND GA INS DERIVED FROM A 100% EXPORTED ORIENTED UNITS .. 6. IN ANY VIEW OF THE MATTER, THE DECISION OF THE K ARNATAKA HIGH COURT IN HIMATASINGIKE SEIDE LTD. (SUPRA) WHICH WAS UNDISTUR BED BY THE APEX COURT DEALT WITH THE PROVISION OF LAW DIFFERENT FROM THAT WHICH WAS DEALT WITH IN THE IMPUGNED ORDER. A DECISION HAS TO BE CONSIDERED IN THE CONTEXT OF THE LAW AS ARISING FOR CONSIDERATION AND A CHANGE IN LAW WOULD RENDER THE DECISION UNDER THE OLD LAW INAPPLICABLE WHILE CONSIDERING THE AMEN DED LAW. 7. THE ISSUE AS RAISED STANDS CONCLUDED BY THE DEC ISION OF THIS COURT IN BLACK & VEATCH CONSULTING (P) LTD. (SUPRA) AND 'GANESH POLY CHEM LTD. VS. ITO AGAINST THE REVENUE. THEREFORE, THE QUESTION OF LAW AS PROP OSED FOR OUR CONSIDERATION DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF L AW. 5. CONSIDERING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT, WE DO NOT FIND ANY REASON TO DISTURB THE ORDER OF LD. CIT(A). HENCE, T HE APPEAL FILED BY THE REVENUE IS DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH NOVEMBER, 2016. SD/ - SD/- (B.R.BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 18/11/2016 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/ 5 ITA NO. 1476/M/2015 M/S CENVO PUBL ISHER SERVICES LTD. S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON (COPY ENCLOSED) 09/11/2016 JM/AM 2 DRAFT PLACED BEFORE AUTHOR 10/11/2016 JM/AM 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER 10. DRAFT DICTATION ENCLOSED IN FILE