ACIT, Circe-2(1), Bhubaneswar, Bhubaneswar V. Enterprise System Solutions Pvt. Ltd, Bhubaneswar

ITA 161/CTK/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77534 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 11-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C MOHANDY
• Assessee Lawyers: B K MOHAPATRA
• Keywords: Assessment record
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 161 /CTK/2013 (ASSESSMENT YEAR - 2007 - 08) THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 2(1) BHUBANESWAR (APPELLANT) VS. ENTERPRISE SYSTEM SOLUTIONS PVT. LTD. KIIT CAMPUS, PATIA, BHUBANESWAR - 751031. PAN:AAACE8969R (RESPONDENT) APPELLANT BY : SHRI S.C . MOHANDY, DR RESPONDENT BY : SHRI B.K. MOHAPATRA, A R DATE OF HEARING : 01/05/2014 DATE OF PRONOUNCEMENT : 06 /06/201 4 O R D E R PER: D.T. GARASIA THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAIN ST THE ORDER OF CIT(A) - BHUBANESWAR , DATED 18.12.2012 FOR THE ASSESSMENT YEAR 2007 - 08. 2. THE FOLLOWING GROUNDS ARE RAISED IN THIS APPEAL AS UNDER. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN ALLOWING THE DEDUCTION CLAIMED U/S. 10A OF THE ACT IN RE SPECT OF THE AMOUNT OF RS. 15,83,529/ - WHICH WAS ONLY A BOOK ENTRY FOR AMOUNT WRITTEN BACK AND NOT A RECEIPT PERTAINING TO THE RELEVANT YEAR. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN ACCEPTING THE CONTENTIO N OF THE ASSESSEE WITHOUT GIVING THE AO A REASONABLE OPPORTUNITY IN VIOLATION OF RULE 46A. 2.1 THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY DERIVES INCOME MAINLY BY WAY OF EXPORT OF COMPUTER SOFTWARE. RETURN OF INCOME FOR A.Y. 2007 - 08 WAS FILED AND ASSESSMENT WAS PROCESSED UNDER 143(3) OF THE I.T. ACT. 2 . ITA NO.161/CTK/2013 (A.Y.2007 - 08) ACIT VS. ENTERPRISE SYSTEM SOLUTIONS PVT. LTD. DURING THE YEAR UNDER CONSIDERATION ASSESSEE COMPANY HAS SHOWN THE TOTA L TURN - OVER THE BUSINESS AT RS. 7,10,03,699.12 WHICH INCLUDES EXPORT TURNOVER OF RS. 6,81,61,199.12 AND AS AGAINST THE SAME IT HAS ARRIVED AT NET INCOME OF RS.1,98,193.10 AFTER CLAIMING THE DEDUCTION U/S 10A OF RS. 47,52,534.37. WHILE GOING THROUGH THE AUDITED PROFIT & LOSS A/C FOR THE F.Y. 2006 - 0 7 IT WAS SEEN THAT A SUM OF RS. 15,83,539.80 HAS BEEN CREDITED TO ITS PROFIT UNDER THE HEAD PROVISION FOR MANAGERIAL COMMISSION WRITTEN BACK. THE ASSESSEE WAS ASKED TO EXPLAIN SUCH CREDIT. IN REPLY, THE AR OF THE ASSESSEE STATED THAT A PROVISION FOR MANAGERIAL COMMISSION AMOUNT TO RS.22,62,183.80 WAS MADE DURING TH E F.Y. 2005 - 06 AND WAS DEBITED TO THE P&L A/C FOR THE SAID YEAR. AS IT WAS FAILED THAT SUCH CLAIM OF MANAGERIAL COMMISSION WAS IN EXCESS OF THE LIMIT AS PRESCRIBED UNDER THE INDIAN COMPANIES ACT, THE EXCESS CLAIM OUT OF THE TOTAL PROVISION MADE DURING THE F.Y. 2005 - 06 WAS WRITTEN BACK AND ADDED TO THE PROFIT OF THE CURRENT YEAR. AS THE SAID WRITTEN BACK AMOUNT IS NOT THE PROFIT OUT OF THE TOTAL TURNOVER OF THE CURRENT YEAR. THE ASSESSEE HAS AGREED AND THE DEDUCTION U/S. 10A WAS RECOMP UTED AND IT WAS COMPUT ED AT RS. 32,3 2,398/ - INSTEAD OF CLAIM OF RS. 47,52,534.37 IN THE RETURN. 2.2. THE MATTE R CARRIED TO CIT(A) AND C IT(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 3.1. I HAVE CALLED OR THE ASSESSMENT RECORDS AND I HAVE GONE THROUGH THE IMPUGNED LETTE R DTD. 10.11.2009, A COPY OF WHICH WAS TAKEN TO BE KEPT ON THE APPEAL RECORDS. CONTRARY TO THE OBSERVATION OF THE AO, I DID NOT FIND ANY CONCESSION OR ADMISSION FROM THE APPELLANT COMPANY AS ALLEGED BY THE AO IN HIS ORDER. 4. IN VIEW OF THE ABOVE, THE ISS UE IS TO BE DECIDED ON ITS OWN MERIT. IT IS NOT DISPUTED BY THE AO THAT THE WRITTEN BACK AMOUNT WAS DEBITED IN THE EARLIER YEAR AND WAS KEPT UNDISTURBED IN INCOME TAX ASSESSMENT. IN OTHER WORDS, HAD THE AMOUNT NOT BEEN DEBITED IN THE EARLIER YEAR, THE BUSI NESS PROFIT OF THE APPELLANT WOULD HAVE BEEN INCREASED BY THE AMOUNT O F RS.15,83,528! - . KEEPING THE PROPORTION OF EXPORT TURNOVER TO TOTAL TURNOVER TO TOTAL TURNOVER (AS IT STOOD FOR THE EARLIER YEAR) INTACT, A FURTHER SUM EQUIVALENT TO 95.99% OF RS.15,83,529/ - WOULD HAVE BEEN AVAILABLE AS BENEFIT U/S.10 A TO THE APPELLANT, WHICH THE APPELLANT HAS CLEARLY FORGONE FOR THE EARLIER YEAR BY DEBITING THE AMOUNT TO ITS P & L ACCOUNT. 3 . ITA NO.161/CTK/2013 (A.Y.2007 - 08) ACIT VS. ENTERPRISE SYSTEM SOLUTIONS PVT. LTD. 4.1. THE ACT OF WRITING BACK OF THE CLAIM MERELY MEANS REVERSAL OF AN ENTRY. THE NATURE OF INCOME OF THE APPELLANT REMAINS THE SAME AS IN THE EARLIER YEAR WITH A VERY MINOR VARIATION IN THE RATIO OF EXPERT TURNOVER TO TOTAL TURNOVER. THEREFORE, WRITING BACK OF THE AMOUNT MERELY MEANS THAT A CLAIM WHICH SHOULD HAVE BEEN LE GITIMATELY AVAILABLE TO THE APPELLANT IN THE EARLIER YEAR IS DEFERRED BY ONE YEAR AND IS CLAIMED IN THE NEXT Y EAR IN TERMS OF EXEMPTION U/S.10 A. INDIRECTLY, THIS IS IN FAVOUR OF THE REVENUE BECAUSE THE TAX BENEFIT HAS BEEN DEFERRED BY ONE YEAR. 5. CONSIDER ING THE OVERALL FACTS AND CIRCUMSTANCES, AM OF THE VIEW THAT THE APPELLANTS CLAIM REGARDING BENEFIT U/S.1OA, WITHOUT EXCLUDING WRITTEN BACK, AMOUNT IS ON SOUND GROUND AND SHOULD BE ALLOWED. THE AD IS DIRECTED ACCORDINGLY AND THE APPEAL IS TREATED AS ALLOW ED . 2.3. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACT S AND CIRCUMSTANCES OF THE CASE, W E FIND THAT THE ASSESSEE HAS TOTAL TURNOVER AT RS.7,10,03,699.12 AND EXPORT TURNOVER OF RS. 6,81,61,199.12 , THE BUSINESS PROFIT AFTER D EPRECIATION WAS WORKS OUT RS.49,50,727/ - WHICH ADMITTEDLY INCLUDES THE WRITTEN BACK AMOUNT OF RS. 15,83,529/ - . THE ASSESSEE IS ELIGIBLE FOR A PROPORTIONATE DEDUCTION FROM THE BUSINESS PROFIT IN THE SAME PROPORTIONATE OF THE EXPORT TURNOV ER. THE TOTAL TURNO VER WAS RS. 7,10,03,699/ - , EXPORT TURNOVER RS. 6,81,61,199/ - , AND PROPORTION COME TO 95.99%. THEREFORE, ASSESSEE S BUSINESS PROFIT COME TO RS. 47,52,204/ - AND THE ASSESSEE CLAIMED THE SAID MOUNT. THE ASSESSING OFFICER HAS C ONCLUDED BUSINESS PROFIT AT RS. 32,32,398/ - ON THE GROUND THAT THE WRITTEN BACK AMOUNT OF RS. 15,83,529/ - IS NOT ELIGIBLE FOR DEDUCTION IN SECTION 10A. THE CIT(A) HAS CALLED FOR THE REMAND REPORT AND C IT(A) HELD THAT IT IS NOT DISPUTED BY THE AO THAT THE WRITTEN BACK AMOUNT WAS DEBITED IN THE EARLIER YEAR AND WAS KEPT UNDISTURBED IN INCOME TAX ASSESSMENT. THE CIT(A) HAS HELD THAT IF THE AMOUNT OF RS. 15,83,529.80 WAS NOT DEBITED IN EARLIER YEAR THE BUSINESS PROFIT OF THE ASSESSEE SHOULD H AVE INCREASED THE AMOUNT OF RS. 15,83,529.80. KEE PING THE PORTION OF EXPORT TURNOVER TO THE TOTAL TURNOVER IN TACT THE ASSESSEE HAS AVAILED THE BENEFIT OF 10A TO THE APPELLANT, WHICH HAS CLEARLY FORGONE FOR THE EARLIER YEAR BY DEBITING THE AMOUNT OF ITS P&L ACCOUNT. THE ACT OF WRITTEN BACK OF THE CLAIM ME RELY MEANS REVERSAL OF AN ENTRY. THE 4 . ITA NO.161/CTK/2013 (A.Y.2007 - 08) ACIT VS. ENTERPRISE SYSTEM SOLUTIONS PVT. LTD. NATURE OF INCOME OF THE ASSESSEE REMAINS THE SAME AS IN THE EARLIER YEAR WITH THE VARY MINOR VARIATION IN THE RATIO OF EXPORT TURNOVER TO TOTAL INCOME. THE CIT (A) HAS HELD THAT THE ASSESSEE WRITTEN BACK THE AMOUNT MEREL Y MEANS THAT A CLAIM WHICH SHOULD HAVE BEEN LEGITIMATELY AVAILABLE TO THE ASSESSEE IN THE EARLIER YEAR IS DEFERRED BY ONE YEAR AND IS CLAIMED IN THE NEXT YEAR IN TERMS OF EXEMPTION U/S. 10A AND CIT(A) HAS ALLOWED THE CLAIM . WE ARE OF THE VIEW THAT THE CIT(A ) IS JUSTIFIED IN HIS ACTION AND OUR INTERFERENCE IS NOT REQUIRED. 2.6. IN THE RESULT, APPEAL FILED BY THE DEPARTMENT IS DISMISSED. 3. ORDER PRONOUNCED IN PURSUANCE OF RULE 34(4) OF ITAT RULES, 1963 BY PUTTING ON NOTICE BOARD OF THE BENCH AT CUTTAK IN THE OPEN COURT ON 6.6 .2014 SD/ - SD/ - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 6 .6.2014 P.S. - *PK* COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) ( 5 ) D.R ( 6 ) GUARD FILE TRUE COPY, BY ORDER