ACIT, Circle-5(1)(2), Bangalore V. M/s. Personality Ltd., Bangalore

ITA 1504/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5321 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 18-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS
• Section: 143(3); 10B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI VIJAYPAL RAO, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.1504 /BANG/2016 (ASST. YEAR 2003-04) THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 5(1)(2), BANGALORE. . APPELLANT VS. M/S PERSONALITY LTD., NO.123, CHORD ROAD, RAJAJINAGAR, BANGALORE-560 010. APPELLANT BY : SMT. SWAPNA DAS, JCIT RESPONDENT BY : NONE DATE OF HEARING : 1-6-2017 DATE OF PRONOUNCEMENT : 2-6-2017 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS) -12, BANGALORE DATED 16/6/2016 FOR ASST. YEAR 2003-04. ITA NO.1504/B/16 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UND ER:- 2.1 THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE, TRADING AND EXPORT OF READYMADE GARMEN TS, FILED ITS RETURN FOR ASST. YEAR 2003-04 ON 21/10/2003 DECLARI NG LOSS OF (-) RS.52,34,136/-. THE RETURN WAS PROCESSED U/S 143(1 ) OF THE INCOME- TAX ACT, 1961 (IN SHORT 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 23/1/2006 WHEREIN THE NET LOSS OF THE ASSESSEE WAS DETERMINED AT RS.2,65,186/-, IN VIEW OF, INTER ALIA , THE DISALLOWANCE OF THE ASSESSEES CLAIM FOR DEDUCTION OF RS.49,68,580/ - U/S 10B OF THE ACT BY THE ASSESSING OFFICER (AO) FOR THE STATED REASONS THAT THERE WAS NO POSITIVE PROFIT FOR ALLOWING THE SAID DEDUCT ION AFTER COMPUTING ASSESSEES GROSS TOTAL INCOME. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASST. YEAR 2003-04 DATED 23/1/2006, THE ASSESSEE PREFERRED AN APPEAL B EFORE THE CIT(A) CHALLENGING THE AOS ACTION IN HOLDING THAT THE GR OSS TOTAL INCOME SHOULD BE ARRIVED AT FIRST , BEFORE THE DEDUCTION U /S 10B OF THE ACT CAN BE ALLOWED SINCE THE SAME FALLS UNDER CHAPTER III O F THE ACT AND NOT ITA NO.1504/B/16 3 CHAPTER VIA OF THE ACT. THE LD CIT(A)-12, BANGALOR E VIDE THE IMPUGNED ORDER DATED 16/6/2016 ALLOWED THE ASSESSEE S CLAIM FOR DEDUCTION U/S 10B OF THE ACT BY FOLLOWING THE DECIS ION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAW A INDIA LTD. (2012) 341 ITR 385 (KAR). 3. REVENUE, BEING AGGRIEVED BY THE ORDER OF THE CIT (A)-12, BANGALORE DATED 16/6/2016 FOR ASST. YEAR 2003-04 HA S PREFERRED THIS APPEAL, RAISING THE FOLLOWING GROUNDS:- ITA NO.1504/B/16 4 3.1 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 ORDER OF THE AO ON THIS ISSUE. 3.2 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 HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGOWA INDIA LTD. (SUPRA). IT IS SUBMITTED THAT THE LD CI T(A), FOLLOWING THE AFORESAID DECISION, HAS RIGHTLY DIRECTED THE AO TO COMPUTE THE DEDUCTION U/S 10B OF THE ACT WITHOUT SETTING OFF TH E BUSINESS LOSSES OF THE NON SECTION 10B UNIT AND TO CONSIDER CARRY FORW ARD OF NON-10B UNIT LOSSES AS PER THE PROVISION OF SEC. 72 OF THE ACT SEPARATELY. 3.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED 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 AFTER COMPUTING THE ASSESSEES GROSS TOTAL INCOME AND ACCORDINGLY, SINCE AFTER AGGREGATI NG THE INCOME OF ITA NO.1504/B/16 5 THE 100% EOU (SECTION 10B UNIT) WITH THE LOSSES OF NON 10B UNITS ARRIVED AT A LOSS OF RS.2,65,186/-, DENIED THE ASSE SSEES CLAIM FOR DEDUCTION U/S 10B OF THE ACT. 3.3.1 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 ITR 385 (KAR). IN ITS DECISION THE HONBLE HIGH CO URT HAD HELD THAT AS THE INCOME OF SEC. 10A UNIT HAS TO BE EXCLUDED A T SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL INCOME, LOSS UND ER NON-SECTION 10A UNIT CANNOT BE SET OFF AGAINST SEC. 10A UNIT U/S 72 OF THE ACT. AS THE DEDUCTION U/S 10A OF THE ACT HAS TO BE INCLUDED FRO M THE TOTAL INCOME OF THE ASSESSEE, THE REIMBURSED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFIT AND GAINS OF THE UNDERTAKING AND A WHOL E COULD NOT ARISE. SECTION 10A OF THE ACT BEING ANALOGOUS WITH SEC. 10 B OF 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 RE SPECTFULLY FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN YOKOGAWA INDIA LTD. (341 ITR 385). WE UPHOLD THE IMPUGNED ORDER O F THE LD CIT(A) ITA NO.1504/B/16 6 IN DIRECTING THE AO TO COMPUTE THE DEDUCTION U/S 10 B OF THE ACT IN THE CASE ON HAND WITHOUT SETTING OFF THE BUSINESS L OSSES FROM NON SECTION 10B UNITS WE HOLD AND DIRECT ACCORDINGLY. CONSEQUENTLY, THE GROUNDS RAISED BY REVENUE ARE DISMISSED. 4. IN THE RESULT, THE REVENUES APPEAL FOR THE ASST . YEAR 2003-04 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND JUNE, 2017 . SD/- SD/- (VIJAYPAL RAO) (JAS ON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEM BER BANGALORE DATED : 2/6/2017 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REG ISTRAR, ITAT, BANGALORE.