M/s.US Technology International P. Ltd, Trivandrum V. The ACIT, Trivandrum

ITA 153/COCH/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3875 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 07-09-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 05-03-2015
• Court: TRIBUNAL
• Department Lawyers: SHANTAM BOSE
• Assessee Lawyers: S RAGHUNATHAN S
• Keywords: Rule of consistency; Non compliance; Revised return; Reassessment proceedings
• Section: 43B; 143(3); 10B; 147; 148

Judgement Text

ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 1 , IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN . . , ., ! ! ! ! BEFORE S/SHRI B. P. JAIN, AM & GEORGE GEORGE K., JM ' ' ' ' ./ I.TA NO.153/COCH/2015 ( #$ % /ASSESSMENT YEAR : 2007-08) US TECHNOLOGY INTERNATIONAL PRIVATE LIMITED, 721, NILA, TECHNOPARK CAMPUS, KARIYAVATTOM, TRIVANDRUM-695 581. VS THE ASSISTANT COMMISSIONER OF INCOME TAX, SPECIAL RANGE, TRIVANDRUM. ( &' &' &' &' /ASSESSEE APPELLANT) ( ( (( ( ) ) ) ) &' &'&' &' /REVENUE -RESPONDENT) ' ' ' ' ./ I.TA NO.154/COCH/2015 ( #$ % /ASSESSMENT YEAR : 2007-08) THE ASSISTANT COMMISSIONER OF INCOME TAX, SPECIAL RANGE, TRIVANDRUM. VS US TECHNOLOGY INTERNATIONAL PRIVATE LIMITED, 721, NILA, TECHNOPARK CAMPUS, KARIYAVATTOM, TRIVANDRUM-695 581. ( &' &' &' &' /REVENUE APPELLANT) ( () () () () &' &'&' &' /ASSESSEE -RESPONDENT) C.O. NO. 01 0101 01/ // / COCH / // /201 201 201 2016 66 6 ' ' ' ' ./ I.TA NO.154/COCH/2015 ( #$ % /ASSESSMENT YEAR : 2007-08) US TECHNOLOGY INTERNATIONAL PRIVATE LIMITED, 721, NILA, TECHNOPARK CAMPUS, KARIYAVATTOM, TRIVANDRUM-695 581. VS THE ASSISTANT COMMISSIONER OF INCOME TAX, SPECIAL RANGE, TRIVANDRUM. ( &' &' &' &' /ASSESSEE APPELLANT) ( () () () () &' &'&' &' /REVENUE -RESPONDENT) ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 2 & . . ' ./PAN NO. AAACU 5628B &' / 0 /ASSESSEE BY SHRI S. RAGHUNATHAN S., ADV. () &' / 0 /REVENUE BY SHRI SHANTAM BOSE, CIT(DR) 12 / 34 / DATE OF HEARING 07/09/2016 5 % / 34 /DATE OF PRONOUNCEMENT 26/09/2016 6 66 6 /ORDER PER B.P. JAIN, AM: THE PRESENT APPEALS OF ASSESSEE AND REVENUE ARISE OUT OF THE ORDER PASSED BY THE LD. CIT(A), TRIVANDRUM DATED 02/01/2015 FOR AY 2007-08. THE ASSESSEE HAS RAISED CROSS OBJECTION IN C.O. NO.01/COCH/2016 AGAI NST THE REVENUES APPEAL FOR THE A.Y. 2007-08. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASS ESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE DEVEL OPMENT SERVICES TO VARIOUS AFFILIATE COMPANIES. THE ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2007-08 ON 31/10/2007 DECLARING AN INCOME OF RS.49,62,070/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTICE U/S. 14 3(2) OF THE ACT AND VIDE ORDER DATED 10/11/2009, THE ASSESSMENT WAS MADE BY MAKING AN ADDITION OF RS.4,87,707/-. PURSUANT THEREOF, VIDE NOTICE DATED 29/05/2012 U/S. 148 OF THE ACT, REASSESSMENT PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE. THE ASSESSEE CHALLENGED THE SAID NOTICE BY FILING OBJECTIONS BEF ORE THE ASSESSING OFFICER. HOWEVER, THE SAME WERE DISPOSED OF AND THE PROCEEDI NGS WERE CONTINUED. THE ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 3 SAID PROCEEDINGS WERE COMPLETED BY AN ORDER DATED 3 1/03/2013 AND THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS TO T HE INCOME ALREADY ASSESSED VIDE ORDER DATED 10/11/2009:- 1. UNBILLED REVENUE : RS.7,93,47,506 2. PENALTY FOR NON COMPLIANCE OF CERTAIN FOREIGN TAX LAWS : RS. 29,59,969 3. DISALLOWANCE OUT OF BONUS : RS.1,17,47,167 PAYMENT 4. INCOME FROM OTHER SOURCES : RS. 4,63,590 5.DEDUCTION UNDER SECTION 10B OF T HE I.T. ACT : RS.26,94,61,666 3. AGGRIEVED BY THE ORDER DATED 31/03/2013, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) VI DE IMPUGNED ORDER DATED 02/01/2015 PARTLY ALLOWED THE APPEAL OF THE ASSESSE E. THE ADDITION PERTAINING TO UNBILLED REVENUE OF RS.7,93,47,506/- WAS CONFIRM ED. THE ADDITIONS WITH RESPECT TO FOREIGN TAX RELATED PENALTY, DISALLOWANCE OUT OF BONUS PAYMENT AND INCOME FROM OTHER SOURCES WERE DELETED. AS REGARDS THE DE DUCTION CLAIMED BY THE ASSESSEE U/S. 10B OF THE ACT WAS CONCERNED, THE GRO UND RAISED BY THE ASSESSEE WAS DISMISSED. HOWEVER, INSTEAD OF GRANTING DEDUCTI ON U/S. 10B OF THE ACT, THE ALTERNATE GROUND OF THE ASSESSEE OF CLAIMING DEDUCT ION U/S. 10A OF THE ACT WAS ALLOWED. ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 4 4. THE ASSESSEE IS IN APPEAL BEFORE US AND HAS R AISED THE FOLLOWING GROUNDS OF APPEAL PERTAINING TO THE CONFIRMATION OF ADDITION O F UNBILLED REVENUE AND NON- GRANT OF DEDUCTION U/S. 10B OF THE ACT:- 1. ERRONEOUS ADDITION OF UNBILLED REVENUE TO THE T AXABLE INCOME 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)(CIT(A) ERRED IN ADDING UNBILLED REVENUE OF RS.7,934,750/- TO THE TAXABLE I NCOME OF THE APPELLANT FOR THE AY 2007-08, AS THE SAME WAS ALREADY OFFERED TO TAX BY THE APPELLANT. THE FACT THAT SUCH INCOME HAS BEEN OFFERED TO TAX I S EVIDENT FROM THE DISCLOSURES IN PARAGRAPH 1.7 TO AUDITED FINANCIAL S TATEMENTS RELEVANT TO AY 2007-08, WHEREIN IT HAS BEEN CLEARLY SPELT THAT THE UNBILLED REVENUE OF THE COMPANY REPRESENTS REVENUE RECOGNIZED IN EXCESS O F THE AMOUNTS BILLED FOR THE YEAR AS DISCLOSED. THE LD. CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT SUCH REVENUE WAS ALREADY CONSIDERED WHILE ARRIVING AT THE TAXABLE INCOME OF THE AY 2007-08. 1.2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN PASSING THE IMPUGNED OR DER BY NOT ACCEPTING THE DISCLOSURES IN PARAGRAPH 1.7 TO AUDITED FINANCI AL STATEMENTS RELEVANT TO AY 2007-08 AND SUBMISSIONS MADE BY THE ASSESSEE IN CONNECTION WITH THE UNBILLED REVENUE. 1.3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN PASSING THE IMPUGNED OR DER BY NOT PASSING A REASONED ORDER SPECIFYING THE GROUNDS ON WHICH THE CIT(A) REFUSED TO ACCEPT THE DETAILED SUBMISSIONS TABLED BY THE COMPA NY WITH RESPECT TO THE UNBILLED REVENUE DISCLOSED IN THE FINANCIALS RELEVA NT TO AY 2007-08. 2. CONSEQUENTIAL RELIEFS 2.1 THE LEARNED ACIT HAS ERRED IN INITIATING PENAL TY PROCEEDING U/S. 271(1)(C) OF THE ACT ON ACCOUNT OF THE ADJUSTMENTS PROPOSED I N THE IMPUGNED ASSESSMENT ORDER U/S. 143(3) READ WITH SECTION 147 OF THE ACT. ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 5 3. OTHERS 3.1 THE APPELLANT CRAVES LEAVE TO ADD TO OR ALTER , BY DELETION, SUBSTITUTION OR OTHERWISE, THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR DURING THE HEARING OF THE APPEAL. 4.1 THE ASSESSEE HAS ALSO RAISED ADDITIONAL GRO UNDS OF APPEAL: 4. ERRONEOUS DISALLOWANCE OF THE ENTIRE DEDUCTION CLAIMED U/S. 10B OF THE ACT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (CIT(A)) HAS ERRED IN UPHOLDING THE ORDER OF THE ASSISTANT COMMISSIONER OF INCOME T AX (ACIT) IN DISALLOWING RS.26,94,61,666/- CLAIMED BY THE APPELL ANT AS DEDUCTION U/S. 10B OF THE ACT. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS WRONGLY ADOPTED A POSITION THAT, APPROVA L FROM INTER MINISTERIAL STANDING COMMITTEE (IMSC) CONSTITUTED U/S. 14 OF INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 (IRDA) IS NOT VALID FOR THE PURPOSE OF SECTION 10B OF THE ACT DISREGARDING THE FACT THAT IMSC IS CONSTITUTED U/S. 14 OF THE IRDA, AS STIPULATED FOR THE PURPOSE OF SECTION 10B OF THE ACT. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF THE ACIT , BY DISREGARDING THE FACT THAT ONCE STPI APPROVES THE UNIT AS A 100% EXP ORT ORIENTED UNDERTAKING, THE APPELLANT SHOULD BE ALLOWED THE BO NAFIDE CLAIMS OF INCOME TAX BENEFITS U/S. 10B OF THE ACT AS THE DOCT RINE OF INDOOR MANAGEMENT IS EQUALLY APPLICABLE TO PUBLIC LAW. ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 6 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) BY UPHOLDING THE ORDER OF THE ACIT HAS VIOLA TED THE SETTLED POSITION OF LAW THAT TAX HOLIDAY CONTEMPLATED FOR A BLOCK PE RIOD, WHICH CONSISTENTLY ALLOWED IN THE EARLIER YEARS, CANNOT B E DISALLOWED IN SUBSEQUENT YEARS IN THE ABSENCE OF CHANGE IN THE RE LATED FACTS. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF THE ACIT, THEREBY VIOLATING THE PRINCI PLES OF LIBERAL INTERPRETATION OF BENEFICIAL PROVISIONS OF THE ACT AS WELL AS THE PRINCIPLES OF RATIONAL INTERPRETATION OF STATUTES WHILE CONSID ERING THE ALLOWABILITY OF THE DEDUCTION U/S. 10B OF THE ACT. 5. GROUND NO. 1 RELATES TO THE ADDITION OF UNBIL LED REVENUE OF RS.79,34,750/-, IT IS THE CASE OF THE ASSESSEE THAT THE UNBILLED REVEN UE WAS RS.10,49,51,798/- AS AT 31/03/2007 AS AGAINST RS.2,56,04,292/- AS AT 31/03/ 2006. THE SAID REVENUE ACCORDING TO THE LD. AR REPRESENTS THE REVENUE RECO GNIZED BY THE COMPANY IN EXCESS OF THE AMOUNTS BILLED FOR THE YEAR AND THE S AME IS A PART OF THE TOTAL REVENUE OFFERED TO TAX BY THE ASSESSEE OF RS.1,97,4 9,30,133/- FOR AY 2007-08. IT IS ASSERTED BY THE LD. AR THAT THE DIFFERENCE IN THE O PENING AND CLOSING OF UNBILLED REVENUE I.E. RS.7,93,47,506/- ADDED TO THE TOTAL IN COME OF THE ASSESSEE WOULD RESULT IN TAXING THE UNBILLED REVENUE TWICE AND THE REFORE, THE SAID ADDITION IS LIABLE TO BE DELETED. 6. THE LD. DR ON THE OTHER HAND HAS RELIED UPON TH E ORDERS PASSED BY THE ASSESSING OFFICER AND LD. CIT(A) ON THIS ISSUE. ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 7 7. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSIN G OFFICER REJECTED THE EXPLANATION GIVEN BY THE ASSESSEE IN VIEW OF THE FA CT THAT THE UNBILLED REVENUE WAS NOT SHOWN AS SUNDRY DEBTORS IN THE BALANCE SHEE T. THE LD. CIT(A) DISMISSED THE GROUND RAISED BY THE ASSESSEE AS THERE WAS NO E VIDENCE IN SUPPORT OF THE CONTENTION THAT THE UNBILLED REVENUE AMOUNT WAS INC LUDED IN THE TOTAL REVENUE OF THE COMPANY. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE FACTS OF THE CASE. WE ARE NOT IN AGREEMENT WITH THE CONTENTIONS RAISED BY THE ASSESSEE. THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE DURING THE ASSES SMENT STAGE AND AT THE APPELLATE STAGE TO SUBSTANTIATE THE FACT THAT THE U NBILLED REVENUE HAS BEEN INCLUDED IN THE REVENUE EARNED DURING THE YEAR UNDE R CONSIDERATION. THE SOURCE OF THE SAID REVENUE, TOO, IS UNEXPLAINED IN AS MUCH AS THERE ARE NO BILLS, VOUCHERS FROM THE PERSONS TO WHOM THE SERVICES PERT AINING TO THE UNBILLED REVENUE WERE RENDERED BY THE ASSESSEE COMPANY. THE ASSESSEE HAS FAILED TO SUBSTANTIATE AS TO WHY THE SAID AMOUNT WAS NOT INCL UDED IN THE RECEIVABLE ACCOUNT OR IN THE SUNDRY DEBTORS ACCOUNT. IN VIEW THEREOF, THE GROUND NO. 1 RAISED BY THE ASSESSEE IS DISMISSED. 9. GROUND NO. 4 PERTAINS TO THE DEDUCTION CLAIME D BY THE ASSESSEE U/S. 10B OF THE ACT. THE ASSESSEE HAS CLAIMED A DEDUCTION OF RS .26,94,61,666/- IN THE ORIGINAL RETURN OF INCOME. THE ASSESSEE HAS OBTAINED APPROV AL AS A 100% EXPORT ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 8 ORIENTED UNIT FROM THE DIRECTOR, SOFTWARE TECHNOLOG Y PARKS OF INDIA (STPI) AND HAD BEEN CLAIMING DEDUCTION U/S. 10B OF THE ACT FRO M THE YEAR 2001. THE ASSESSING OFFICER RELIED UPON THE JUDGMENT PASSED B Y THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. REGENCY CREATIONS LTD. , 255 CTR 63 AND PROCEEDED TO DISALLOW THE ENTIRE CLAIM OF DEDUCTION MADE BY T HE ASSESSEE BY HOLDING THAT FOR CLAIMING SUCH DEDUCTION, THE APPROVAL OUGHT TO HAVE BEEN TAKEN FROM THE CENTRAL GOVERNMENT THROUGH THE APPROPRIATE AUTHORIT Y CONSTITUTED U/S. 14 OF THE INDUSTRIES (DEVELOPMENT AND REGULATIONS) ACT, 1951 AS AGAINST THE DIRECTOR, STPI. THE LD. CIT(A) DISMISSED THE GROUND RAISED BY THE A SSESSEE IN THIS REGARD. 10. THE LD. AR HAS CONTENDED BEFORE US THAT THE ASSESSEE HAD BEEN CLAIMING DEDUCTION U/S. 10B OF THE ACT FROM THE YEAR 2001 AN D PRINCIPLE OF CONSISTENCY OUGHT TO HAVE BEEN FOLLOWED IN THE PRESENT CASE. H E FURTHER SUBMITTED THAT THERE IS NO FINALITY IN THE AFORESAID JUDGMENT PASS ED BY THE HONBLE DELHI HIGH COURT IN REGENCY CASE AS SLP AGAINST THE SAME IS PE NDING BEFORE THE HONBLE SUPREME COURT. 11. THE RELEVANT PORTION OF THE JUDGMENT PASSED B Y THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. REGENCY CREATIONS LTD. RELIED UPON BY THE DEPARTMENT IS EXTRACTED HEREINBELOW: 13. THERE IS NO DISPUTE ABOUT THE ESSENTIAL FACTS. BOTH ASSESSEES HAD RECEIVED APPROVAL TO START 100 PER CENT EOU UNDER S JP SCHEME. THE ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 9 QUESTION IS WHETHER THIS APPROVAL CAN BE DEEMED ONE UNDER SECTION10-B OF THE ACT. FOR THAT PURPOSE A 100 PER CENT EOU IS ONLY THAT WHICH IS SO APPROVED BY THE BOARD APPOINTED BY THE CENTRAL GOVE RNMENT IN EXERCISE OF POWERS CONFERRED U/S. 14 OF IDAR ACT, 1951. THE PRE-CONDITIONS THAT GOVERN UNITS SET UP UNDER STP SCHEME ARE DIFFERENT FROM THOSE THAT GOVERN THE UNITS SET UP AS 100 PER CENT EOUS AND SO APPROV ED BY THE BOARD. SOME CONDITIONS MAY UNDOUBTEDLY OVERLAP YET, CRITER IA, SUCH AS FULFILLMENT OF THE EMPLOYMENT CRITERIA, FOREIGN EXCHANGE, ETC. ARE NOT COMMON. 14. THE INTER-MINISTERIAL STANDING COMMITTEE SET UP FOR GRANTING LICENCES UNDER STP SCHEME IS ALSO APPOINTED BY THE CENTRAL G OVERNMENT IN EXERCISE OF POWERS CONFERRED U/S. 14 OF IDAR ACT. H OWEVER, THE QUESTION IS WHETHER THAT PART OF THE BOARDS FUNCTION (U/S. 14 IDR ACT) TO GRANT APPROVAL UNDER U/S. 10-B ALSO STANDS DELEGATED. THE ASSESSEES SUBMIT THAT THE INTER-MINISTERIAL STANDING COMMITTEE HAS BEEN R EPLACED BY THE BOARD ON THE BASIS OF THE CONTENTS OF PARA 2 OF THE NOTIF ICATION OF THE MINISTRY OF COMMERCE DT. 22 ND MARCH, 1994, IS UNPERSUASIVE. THAT NOTIFICATION ST ATES THAT FOR THE PURPOSE OF PARAS 111 TO 117 OF CHAPTER IX OF THE EXPORT AND IMPORT POLICY (1992-97), BOARD OF APPROVAL SHALL B E SUBSTITUTED BY THE INTER-MINISTERIAL STANDING COMMITTEE. PARAS 111 TO 117 OF CHAPTER-DC OF IMPORT AND EXPORT POLICY (1992-97) DO NOT DEAL WITH THAT ASPECT, BUT OTHER QUESTIONS SUCH AS SUBCONTRACTING BY EOU/EPZ. SALE OF IMPORTED MATERIALS, DISPOSAL OF SCRAP, PRIVATE BONDED WAREHOUSES, PERIO D OF BONDING, AND DE-BONDING. THE NOTIFICATION THEREFORE EXTENDED IN CENTIVES TO EOUS TO SET UP UNITS UNDER THE STP SCHEME. HOWEVER, FOR THE CO URT TO CONCLUDE THAT THE INTERMINISTERIAL COMMITTEE WAS AUTHORIZED TO IS SUE APPROVAL U/S. 10-B AND THAT ITS IMPRIMATUR OR APPROVAL U/S. 10-A, OUGH T TO BE DEEMED AS AN APPROVAL U/S. 10-B, THERE OUGHT TO BE MORE DIRECT, OR EXPRESS AUTHORIZATION. 15. SECTION 10A EXTENDS THE EXEMPTION TO THE UNIT S SET UP UNDER STP SCHEME WHICH START PRODUCTION OF GOODS DURING THE P REVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER 1 ST APRIL, 1994. THE ASSESSEES PLEA ABOUT ELIGIBILITY OF A 100% EOU STP ELIGIBLE FOR EXEMPTION WOULD RENDER THE AMENDMENT BROUGHT ABOUT BY THE FIN ANCE ACT, 1993 (EXTENDING THE BENEFIT U/S. 10A OF THE ACT TO THE S TPS FROM 1 ST APRIL, 1994) SUPERFLUOUS. THERE IS NO REASON FOR PARLIAMENT TO A MEND THE LAW, AND EXTEND BENEFITS OF SECTION 10A TO UNITS UNDER STP S CHEME AND, RESTRICT THE BENEFITS TO THOSE COMMENCING THEIR OPERATIONS IN TH E YEAR OF ACCOUNT RELEVANT TO THE ASSESSMENT YEAR 1994-95, IF A STP U NIT IS OTHERWISE ELIGIBLE FOR EXEMPTION U/S. 10B OF THE ACT ON THE GROUND OF ITS BEING 100 PER CENT EOU. 16. IT IS A SETTLED PRINCIPLE OF LAW THAT UNLESS TH ERE IS EXPRESS AUTHORIZATION, IN TERMS OF A STATUTE, AND AN ACTUAL DELEGATION OF POWER, A STATUTORY ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 10 AUTHORITY IN WHOM JURISDICTION OR POWER IS REPOSED, IS ALONE VESTED WITH IT, TO THE EXCLUSION OF OTHERS (REF HARI CHAND AGGRWAL V BATALA ENGINEERING CO. LTD. AIR 1969 SC 483 AND AJAB SINGH V. STATE OF PUNJAB AIR 1965 SC 1619). IN THE ABSENCE OF A STATUTORY POWER TO DELE GATE, AND FURTHER TO THAT POWER, AN ACTUAL DELEGATION IN ACCORDANCE WITH LAW, SUCH FUNCTIONS CANNOT BE PERFORMED OR DEEMED TO HAVE BEEN PERFORME D BY A THIRD AGENCY OR AUTHORITY. ANOTHER CARDINAL RULE WHICH BI NDS THE COURT TO INTERPRET STATUTES IS THAT WHERE POWER IS GIVEN TO DO A CERTAIN THING IN A CERTAIN WAY, THE THING MUST BE DONE IN THAT WAY OR NOT AT ALL, AND OTHER METHODS OF PERFORMANCE ARE NECESSARILY FORBIDDEN. (SEE NASIR AHMED V KING EMPEROR (1936) I.T.R. 17 LAH 629). 17. IN THE PRESENT CASE, THERE IS NO NOTIFICATION OR OFFICIAL DOCUMENT SUGGESTING THAT EITHER THE INTER MINISTERIAL COMMIT TEE, OR ANY OTHER OFFICER OR AGENCY WAS NOMINATED TO PERFORM THE DUTIES OF TH E BOARD (CONSTITUTED U/S. 14 OF THE IDR ACT), FOR PURPOSE OF APPROVALS U /S. 10-B. THOUGH THE CONSIDERATIONS WHICH APPLY FOR GRANTING APPROVAL U/ S. 10-A AND 10-B MAY TO AN EXTENT, OVERLAP, YET THE DELIBERATE SEGREGATI ON OF THESE TWO BENEFITS BY THE STATUTE REFLECTS PARLIAMENTARY INTENTION THA T TO QUALIFY FOR BENEFIT UNDER EITHER, THE SPECIFIC PROCEDURE ENACTED FOR TH AT PURPOSE HAS TO BE FOLLOWED. THERE IS NOTHING IN ANY OF THE CIRCULARS OR INSTRUCTIONS RELIED ON BY THE TRIBUNAL IN ALL THE ORDERS, IMPLYING THAT APPRO VAL FOR PURPOSES OF AN STP ALSO ENTITLED THE UNIT TO A BENEFIT U/S. 10-B. THE ORDERS OF THE TRIBUNAL ARE CONSEQUENTLY ERRONEOUS, AND ITS REASONING, UNSUPPOR TABLE. 18. IN THE LIGHT OF THE ABOVE DISCUSSION, THE QUEST ION OF LAW FRAMED IS ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE A SSESSEE; THE APPEALS ARE THEREFORE ALLOWED. 12. THE ISSUE IS SQUARELY COVERED AGAINST THE ASS ESSEE IN THE AFORESAID CASE. THE CONTENTION OF THE ASSESSEE THAT PRINCIPLE OF CONSIS TENCY OUGHT TO HAVE BEEN FOLLOWED IS NOT ACCEPTABLE TO US IN THE PRESENT FAC TS. WE CANNOT LOSE SIGHT OF THE FACT THAT THE CORRECT INCOME OF EVERY YEAR HAS TO B E ASSESSED AND EACH YEAR IS AN INDEPENDENT ASSESSMENT YEAR. THE MISTAKE, IF AN Y, COMMITTED BY THE DEPARTMENT IN PREVIOUS YEARS WOULD NOT PRECLUDE THE DEPARTMENT TO DETERMINE ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 11 THE TRUE INCOME IN THE RELEVANT AY. ACCORDINGLY, G ROUND NO. 4 RAISED BY THE ASSESSEE IS DISMISSED. 13. GROUND NOS. 2 & 3 ARE GENERAL GROUNDS AND ARE DISPOSED OF IN VIEW OF OUR FINDINGS ABOVE. THE APPEAL OF THE ASSESSEE IN I.T. A. NO. 153/COCH/2015 IS DISMISSED. I.T.A. NO. 154/COCH/2015 14. THE FACTS IN THE PRESENT APPEAL ARE SIMILAR TO THOSE IN I.T.A. NO. 153/COCH/2015 AND THE SAME ARE NOT REPEATED. 15. THE DEPARTMENT IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX, TRIVANDRUM IS SO FAR AS ON THE POINTS MENTIONED BELOW ARE CONCERNED IS O PPOSED TO LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE NOTED THAT SECTION 10A(5) OF THE INCOME TAX ACT STIPULATE S THAT THE DEDUCTION U/S. 10A SHALL NOT BE ADMISSIBLE UNLESS THE ASSESSEE FUR NISHES FORM NO. 56F ALONG WITH THE RETURN OF INCOME AND THE REPORT OF AN ACCO UNTANT AS SPECIFIED. NO SUCH CLAIM WAS MADE BY THE ASSESSEE IN THE RETURN O F INCOME FILED AND THIS WAS NOT RAISED AS AN ADDITIONAL GROUND/CLAIM BUT AS AN ALTERNATIVE CLAIM BEFORE THE APPELLATE AUTHORITY WHEREAS A CLAIM FOR DEDUCTION U/S. 10B WAS ALREADY MADE IN THE RETURN OF INCOME. 3. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF GOETZE (INDIA) LTD. (284 ITR 323) WHEREIN IT WAS HELD THAT AN ADDITIONAL CLAIM FOR DEDUCTION NOT MADE IN THE RETURN OF INCOME CANNOT B E ENTERTAINED OTHERWISE THAN BY FILING A VALID REVISED RETURN. ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 12 4. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS ) HAD ERRED IN ALLOWING THE DEDUCTION OF BONUS PAYMENT U/S. 43B OF THE ACT ON PROBABILITY OF PAYMENT OF BONUS AS PER THE STATEMENTS WHILE THE AS SESSING OFFICER HAS DISALLOWED THE CLAIM FOR WANT OF MATERIAL EVIDENCE OF ACTUAL PAYMENT. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADVAN CED AT THE TIME OF HEARING THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS), TRIVANDRUM ON THE ABOVE POINTS MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 16. THE ASSESSEE HAS FILED THE FOLLOWING CROSS OBJ ECTIONS TO THE GROUNDS OF APPEAL RAISED BY THE DEPARTMENT. 1. DEDUCTION OF BONUS PAID TO EMPLOYEES U/S. 43B OF THE ACT. 1.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, AS UPHELD BY THE LEARNED CIT(A), TRIVANDRUM, THE RESPONDENT IS ELIGIBLE FOR DEDUCTION OF RS.1,17,47,167. 1.2. WITHOUT PREJUDICE TO THE ABOVE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, IN CASE OF DISALLOWANCE OF SUC H BONUS U/S. 43B OF THE ACT, ANY CASCADING EFFECT TO THE PROFITS OF THE COM PANY, WILL BE ELIGIBLE FOR TAX HOLIDAY BENEFIT AVAILABLE TO THE RESPONDENT U/S . 10A OR 10B, AS THE CASE MAY BE UNDER THE NORMAL PROVISIONS OF THE ACT. 2. OTHERS 2.1 THE RESPONDENT CRAVES LEAVE TO ADD TO OR ATLER, BY DELETION, SUBSTITUTION OR OTHERWISE, THE ABOVE GROUND OF CROSS-OBJECTIONS, AT ANY TIME BEFORE OR DURING THE HEARING OF THE APPEAL. ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 13 17. THE FACTS OF THE CASE WOULD REVEAL THAT THE A SSESSEE HAD CLAIMED DEDUCTION U/S. 10B OF THE ACT. THE SAID DEDUCTION WAS DISALLOWED BY THE ASSESSING OFFICER AND THE ORDER WAS CONFIRMED BY TH E LD. CIT(A). THE ASSESSEE, AS AN ALTERNATIVE, CLAIMED A DEDUCTION U/S. 10A INS TEAD OF SECTION 10B BEFORE THE LD. CIT(A). THE SAID CLAIM OF THE ASSESSEE U/S . 10A WAS ALLOWED BY THE LD. CIT(A). THE DEPARTMENT CONTENDS THAT THE CLAIM OF THE ASSESSEE U/S. 10A IS NOT ADMISSIBLE AS AT THE TIME OF FURNISHING THE ORIGINA L RETURN, THE ASSESSEE DID NOT FURNISH FORM NO. 56F ALONGWITH THE REPORT OF AN ACC OUNTANT AS PROVIDED IN THE PROVISION AND THEREFORE MAKING OF AN ALTERNATE CLAI M U/S. 10A OF THE ACT BEFORE THE LD. CIT(A) BY NOT FILING THE VALID REVISED INCO ME IS NOT PERMISSIBLE. THE LD. AR ON THE OTHER HAND ARGUES THAT THE ALTERNATE CLAIM U /S. 10A IS MAINTAINABLE AS THE ASSESSEE HAD FILED THE REVISED RETURN OF INCOME ALONGWITH FORM 56F IN THE APPELLATE PROCEEDINGS AND THE REQUIREMENTS THEREIN ARE FULFILLED BY THE ASSESSEE. 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. THE DEPARTMENT HAS RELIED UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. (284 ITR 323). THE FACTS OF THE AFORESAID CASE ARE DIFFERENT WITH THE PRESENT CASE IN AS MUCH AS THE A SSESSEE THEREIN HAD MADE AN ALTERNATE CLAIM BY FILING A LETTER BEFORE THE ASSES SING OFFICER WITHOUT FILING A REVISED RETURN. IN THE PRESENT CASE, THE ASSESSEE HAS FILED A REVISED RETURN OF INCOME ALONGWITH FORM 56F BEFORE THE LD. CIT(A). I N AN IDENTICAL CASE BEFORE US ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 14 IN ACIT VS. M/S. Q BURST TECHNOLOGIES P LTD. IN I.T .A. NO. 172 & 173/COCH/2015, WE HAD DISMISSED THE APPEAL OF THE REVENUE ON THIS ISS UE. THE RELEVANT PORTION OF THE JUDGMENT IS EXTRACTED HEREINBELOW:- 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE RETURN OF INCOME, THE ASSESSEE HAD CLAIMED D EDUCTION U/S. 10B OF THE ACT. THE CLAIM OF DEDUCTION U/S. 10B OF THE ACT WA S WITHDRAWN IN THE ASSESSMENT ORDER PASSED FOR BOTH THE ASSESSMENT YEA RS BY FOLLOWING THE DICTUM LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF REGENCY CREATIONS LTD. (SUPRA). THE FIRST APPELLATE AUTHORI TY HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN MAKING THE DISALLOWANCE OF DEDUCTION U/S. 10B OF THE ACT BASED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT, CITED SUPRA. HOWEVER, THE FIRST APPELLATE AUTHORITY HAS ALLOWED THE ALTERNATIVE CLAIM FOR DEDUCTION U/S. 10A OF THE ACT BASED ON THE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF CWP TAYLOR IN I.T.A. NO .695/COCH/2008 (ORDER DATED 28.7.2009). THE CIT(A) HAS ALSO VERIFIED THE FACTS RELATING TO THE COMPLIANCE OF ALL THE CONDITIONS PRESCRIBED U/S. 10A OF THE ACT ( IN PARA 3,6,8 FOR A.Y. 2008-09 AND IN PARA 3,5,8 FOR A.Y. 2010-11). BASED ON THE VERIFICATION OF FACTS, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW DEDU CTION U/S. 10A OF THE ACT. THE FOLLOWING JUDGMENT OF THE HONBLE DELHI HIGH CO URT AND ORDERS OF THE ITAT HAVE HELD THAT WHEN DEDUCTION U/S. 10B IS DENIED, I T IS THE DUTY OF THE REVENUE TO EXAMINE WHETHER THE ALTERNATIVE CLAIM OF DEDUCTI ON U/S. 10A CAN BE GRANTED ON FACTS AND CIRCUMSTANCES OF THE CASE: I) FAST BOOKING (I) PVT. LTD. VS. DCIT IN I.T.A. 33 4/2013 (JUDGMENT DATED 2.9.2015)(DELHI HIGH COURT JUDGMENT) II) M/S. DEVICE DRIVEN (INDIA) P. LTD. (I.T.A. NO. 282/COCH/2013 (ORDER DT. 29.11.2013) III) CRONOS CONSULTING INDIA P LTD. VS. ACIT (I.T.A . NO. 105/COCH/2014 (ORDER DT. 6.6.2014). 9. FURTHER WE NOTICE THAT THE ASSESSING OFFICER, IN THE REMAND REPORT HAS NOT STATED THAT THE ASSESSEE HAS NOT SATISFIED THE COND ITIONS PRECEDENT TO CLAIM DEDUCTION U/S. 10A OF THE ACT. THE ASSESSING OFFIC ER HAS ONLY RAISED A TECHNICAL OBJECTION NAMELY, THE ASSESSEE IS NOT ENT ITLED DEDUCTION U/S. 10A OF THE ACT, SINCE, THE CLAIM WAS NOT MADE IN THE RETUR N OF INCOME FILED. HOWEVER, WE NOTICE THAT THE CLAIM OF DEDUCTION U/S. 10B OF T HE ACT WAS MADE IN THE RETURN OF INCOME AND THE REVENUE WAS GRANTING THE D EDUCTION U/S. 10B OF THE ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 15 ACT IN THE PREVIOUS ASSESSMENT YEARS. ONLY WHEN THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF REGENCY CREATIONS L TD., CITED SUPRA, WAS PRONOUNCED, THE CLAIM OF DEDUCTION U/S. 10B WAS DEN IED IN THE ASSESSMENT CONCLUDED. WHEN THE CLAIM OF DEDUCTION U/S. 10B WA S DENIED, THE ASSESSING OFFICER OUGHT TO HAVE EXAMINED WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 10A OF THE ACT. THE CBDT CIRCULAR NO. 14 (XL- 35) DATED 11.4.1955 HAS CLARIFIED THAT THE REVENUE SHALL NOT TAKE ADVANTAGE OF IGNORANCE OF THE ASSESSEE AS TO HIS RIGHTS AND THE OFFICERS ARE DUTY BOUND TO GRANT DEDUCTION LEGALLY AVAILABLE TO THE ASSESSEE. THE CIT(A) ALSO RELIED THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. TEC HNOVATE E SOLUTION P. LTD. REPORTED IN 354 ITR110 WHEREIN IT WAS HELD THAT REG ISTRATION WITH SOFTWARE TECHNOLOGY PARKS OF INDIA IS SUFFICIENT TO ALLOW DE DUCTION U/S. 10A OF THE ACT. THE COPIES OF THE CERTIFICATE OF REGISTRATION ISSUE D BY STPI AND THE CERTIFICATE OF THE CHARTERED ACCOUNTANT IN FORM 56F ARE ALSO ENCLO SED IN THE PAPER BOOK FILED BY THE ASSESSEE FOR THE RESPECTIVE ASSESSMENT YEARS. ON EXAMINATION OF THE CERTIFICATES OF REGISTRATION UNDER STPI AND THE CERTIFICATE OF THE CHARTERED ACCOUNTANT IN FORM 56F, WE ARE OF THE VIEW THAT THE CIT(A) IS JUSTIFIED IN ALLOWING THE ALTERNATIVE CLAIM OF DEDUCTION U/S. 10 A OF THE ACT. IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT, THE APPEALS FILED BY THE REVEN UE ARE DISMISSED. 19. IN VIEW OF THE AFORESAID DECISION OF BONUS PA YMENT U/S. 43B OF THE ACT, GROUND NOS. 2 & 3 RAISED BY THE DEPARTMENT ARE DISM ISSED. 20. GROUND NO. 4 RELATES TO THE DEDUCTION OF BONU S PAYMENT U/S. 43B OF THE ACT. THE LD. DR ARGUES THAT THE ADDITION MADE BY THE ASSESSING OFFICER SHOULD BE CONFIRMED AS THE ASSESSEE HAD FAILED TO PRODUCE THE MATERIAL EVIDENCE TO SUPPORT HIS CLAIM OF BONUS PAYMENTS. 21. THE LD. AR ON THE OTHER HAND, RELIED UPON THE ORDER PASSED BY THE LD. CIT(A) IN THIS REGARD. ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 16 22. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PA RTIES AND PERUSED THE FACTS OF THE CASE. WE ARE IN AGREEMENT WITH THE LD. CIT( A) ON THIS ISSUE. THE SAID ADDITION CANNOT BE SUSTAINED AS THE PROVISION FOR B ONUS IS ALREADY DEBITED IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY AND THE SAME WAS FIRST ADDED TO THE TOTAL INCOME OF THE ASSESSEE AND THEN REDUCE D TO THE BONUS ACTUALLY PAID DURING THE YEAR. WE FIND NO INFIRMITY WITH TH E ORDER PASSED BY THE LD. CIT(A) THUS GROUND NO. 4 RAISED BY THE DEPARTMENT IS DISMI SSED. 23. GROUND NO. 1 AND 5 ARE GENERAL IN NATURE AND ARE DISPOSED OF IN VIEW OF OUR FINDINGS ABOVE. THUS ALL THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED . 24. SINCE BOTH THE APPEALS OF THE ASSESSEE AS WELL AS OF THE REVENUE HAVE BEEN DISMISSED, THE CROSS OBJECTION FILED BY THE AS SESSEE IN C.O. NO. 01/COCH/2016 BECOMES INFRUCTUOUS AND HENCE THE SAME IS DISMISSED AS INFRUCTUOUS. 25. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I .T.A. NO. 153/COCH/2016 IS DISMISSED, THE APPEAL OF THE REVENUE IN I.T.A. NO. 154/COCH/2015 IS DISMISSED ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 17 AND THE CROSS OBJECTION FILED BY THE ASSESSEE IN C. O. NO. 01/COCH/2016 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN C OURT ON 26-09-2016. SD/- SD/- ( . ) (GEORGE GEORGE K.) ( . . ) (B. P. JAIN) /JUDICIAL MEMBER /ACCOUNTANT MEMBER ' & /PLACE: /COCHIN 7 /DATED: 26 TH SEPTEMBER, /2016 GJ/ 6 / (38 98%3 /COPY TO: 1. &' /US TECHNOLOGY INTERNATIONAL PRIVATE LIMITED, 721, NILA, TECHNOPARK CAMPUS, KARIYAVATTOM, TRIVANDRUM-695 581. 2. () &' /THE ASSISTANT COMMISSIONER OF INCOME-TAX, SPECIAL RANGE, TRIVANDRUM 3. 1: 3 ( )/THE COMMISSIONER OF INCOME-TAX(APPEALS), TRIVANDR UM 4. 1: 3 /THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. 8;< (3 , /THE DR/ITAT, COCHIN BENCH. 6. <> ?2 /GUARD FILE. 61 /BY ORDER @ /ASSISTANT REGISTRAR 2 . A4 . B . A4 ., /I.T.A.T., COCHIN ITA NO.153&154/COCH/2015 & C.O. NO.01/COCH/2016 18