M/s Technico Overseas, Kolkata V. ITO, Ward-43(3), Kolkata, Kolkata

ITA 1646/KOL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4133 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 17-08-2016
• Court: TRIBUNAL
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA [BEFORE SHRI M. BALAGANESH, AM & SHRI S.S.VISWANET HRA RAVI, JM] I.T.A NO.1646/KOL/2016 ASSESSMENT YEAR: 2008-09 M/S. TECHNICO OVERSEAS (PAN:AADFT2896A) VS. INCOME -TAX OFFICER, WD-43(3), KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 25.11.2016 DATE OF PRONOUNCEMENT: 02.12.2016 FOR THE APPELLANT: SHRI SUNIL SURANA, ADVOCATE FOR THE RESPONDENT: SHRI SALLONG YADEN, ADDL. CI T ORDER PER SHRI M BALAGANESH AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-13, KOLKATA VIDE APPEAL NO. 331/CIT(A)-13/KOL/CIR-45/2014-15 DATED 21.01.20 16. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-40, KOLKATA U/S. 143(3) OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2008-09 VIDE HIS ORD ER DATED 31.12.2010. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD. CIT(A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF REMUNERATION PAID TO PARTNERS U/S. 40(B)(V) OF THE ACT FROM THE PROFITS BEFORE CONSIDERING DEDUCTION U/S. 10B OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF EXPORT OF COMPUTER ENGINEERING DRAWINGS . THE ASSESSEE CLAIMED DEDUCTION U/S. 10B OF THE ACT FOR AY 2008-09 IN THE SUM OF RS.20,6 4,670/-, BEING 100% OF THE PROFITS DERIVED FROM THE SAID UNDERTAKING. THE ASSESSEE FI LED THE AUDIT REPORT IN FORM NO. 56G ALONG WITH THE RETURN OF INCOME WHEREIN THE TAX AUD ITOR HAD COMPUTED THE DEDUCTION U/S. 10B OF THE ACT ONLY AT 90% OF PROFITS AT RS.18,58,2 04/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FILED ANOTHER AUDIT REPORT FROM THE TAX AUDITOR CLAIMING DEDUCTION TO THE TUNE OF RS.20,64,670/- BEING 100% OF PROFITS OF THE SAID UNDERTAKING. THE LD AO, HOWEVER, RESTRICTED THE SAID DEDUCTION TO 90% OF TH E PROFITS OF THE EXPORT UNDERTAKING ON THE PRETEXT THAT THE AMENDMENT BROUGHT IN ASSESSMENT YE AR 2003-04 IS ALSO APPLICABLE FOR SUBSEQUENT YEARS AND ACCORDINGLY, DISALLOWED THE RE MUNERATION PAID TO PARTNERS IN THE SUM OF RS.1,53,922/- AND COMPLETED THE ASSESSMENT. THI S ACTION OF THE LD AO WAS UPHELD BY THE LD. CIT(A). AGGRIEVED, THE ASSESSEE IS IN APPE AL BEFORE US. 2 ITA NO.1646/KOL/2016 M/S. TECHNICO OVERSEAS. AY 2008-09 2 4. THE LD. AR ARGUED THAT DEDUCTION U/S. 10B OF TH E ACT WAS RESTRICTED TO 90% OF THE EXPORT PROFITS ONLY FOR THE AY 2003-04 AND NOT THER EAFTER. ACCORDINGLY, HE ARGUED THAT THE ASSESSEE IS ENTITLED FOR 100% OF PROFITS ELIGIBLE F OR DEDUCTION U/S. 10B OF THE ACT AND ONCE THAT IS DONE THERE WOULD BE NO DISALLOWANCE TOWARDS REMUNERATION PAID TO PARTNERS IN THE SUM OF RS.1,53,922/-. HE ALSO PLACED RELIANCE ON T HE COORDINATE BENCH DECISION OF DELHI TRIBUNAL IN THE CASE OF UNIVERSAL PRECISION SCREWS VS. ADDL. CIT, ITA NO. 4936(DEL)/2011, AY 2007-08 DATED 10.01.2012 WHICH CLEARLY CONSIDERE D THE CBDT CIRCULAR NO. 8 OF 2002 DATED 27.08.2002, EXPLANATORY NOTES ON PROVISION RE LATING TO DIRECT TAXES REPORTED IN (2002) 258 ITR 13 (ST.) AND HELD THAT DEDUCTION U/S. 10B O F THE ACT @ 90% OF EXPORT PROFIT WAS APPLICABLE ONLY FOR AY 2003-04 AND NOT FOR SUBSEQUE NT ASSESSMENT YEARS. IN RESPONSE TO THIS, THE LD. DR ARGUED THAT THE ASSESSEE HAD NOT R AISED ANY SPECIFIC GROUND FOR THE DIFFERENCE IN PROFITS OF 10% I.E. (100%-90%) IN IT S GROUND OF APPEAL AND THE GROUND RELATED ONLY THE DISALLOWANCE OF REMUNERATION PAID TO PARTN ERS. ACCORDINGLY, HE PRAYED FOR DISMISSAL OF THE ASSESSEES GROUND OF APPEAL IN THI S REGARD. 5. IN DEFENCE, THE LD. AR ARGUED THAT ASSESSEE HAD CLEARLY RAISED THE GROUND VIDE GROUND NO. 3 THAT DISALLOWANCE U/S. 40(B)(V) SHOULD NOT HAVE BEEN DONE AS PER THE LAW AND SPIRIT OF THE INSTRUCTION ISSUED BY CBDT. HENCE, A RGUMENTS ADVANCED NOW ARE WELL WITHIN THE GROUNDS RAISED BY THE ASSESSEE. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND LOT OF FORCE IN THE ARGUMENTS ADVANC ED BY THE LD. AR THAT THE ARGUMENTS ADVANCED BY HIM ON THE CLAIM OF DEDUCTION U/S. 10B OF THE ACT @ 100% EXPORT PROFITS AS AGAINST 90% THEREOF IS APPLICABLE ONLY FOR AY 2003- 04 AND NOT FOR SUBSEQUENT YEARS AND WE ALSO FIND THAT THE ASSESSEE HAD RAISED THE GROUND I N THIS REGARD BASED ON THE SPIRIT OF THE LANGUAGE USED IN THE GROUNDS OF APPEAL. WE FIND TH AT THE ISSUE UNDER APPEAL IS SQUARELY COVERED BY THE DECISION OF THE DELHI ITAT IN THE CA SE OF UNIVERSAL PRECISION SCREWS, SUPRA RELIED ON BY THE LD. AR WHEREIN IT WAS HELD AS UNDE R: 2.2 RELIANCE HAS ALSO BEEN PLACED ON CIRCULAR NO. 8 OF 2002, DATED 27.08.2002, REGARDING FINANCE ACT, 2002 AND EXPLANATORY NOTES ON PROVISIO NS RELATING TO DIRECT TAXES, (2002) 258 ITR 13 (ST.). IN PARAGRAPH NO. 19.4 OF THE CIRCULAR , IT IS MENTIONED THAT IN VIEW OF THE NEED FOR RESOURCE MOBILIZATION FOR THE SHORT TERM, FINANCE A CT, 2002 SEEKS TO RESTRICT THE 100% DEDUCTION U/S 10A AND 10B, FOR ONE ASSESSMENT YEAR 2003-04 TO 90% OF SUCH PROFITS AND GAINS 3 ITA NO.1646/KOL/2016 M/S. TECHNICO OVERSEAS. AY 2008-09 3 AS ARE DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE. 2.3 IN REPLY, THE LD. SENIOR DR RELIED ON THE ORDER S OF THE AUTHORITIES BELOW. 3. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUB MISSIONS MADE BEFORE US. THE CASE INVOLVE INTERPRETATION OF THE PROVISIONS CONTAINED IN THE S ECOND PROVISO TO SECTION 10B AND SUB- SECTION (1) OF SECTION 10B. THE GENERAL RULE FOR DE DUCTION IS THAT THE WHOLE OF THE PROFIT OF ELIGIBLE UNDERTAKING IS DEDUCTIBLE UNDER SUB-SECTIO N (1). THE SECOND PROVISO CARVED OUT AN EXCEPTION FOR GRANT OF THE DEDUCTION @ 90% OF SUCH PROFIT FOR THE ASSESSMENT YEAR BEGINNING ON 01.04.2003, I.E., ASSESSMENT YEAR 2003-04. THIS EXCEPTION IS CARVED OUT ONLY FOR ONE YEAR AND IT DOES NOT APPLY TO ANY SUBSEQUENT YEAR. IN SU BSEQUENT YEARS, THE PROVISION CONTAINED IN SUB-SECTION (1) IS APPLICABLE. THEREFORE, ON THE FA CE OF IT, THE EXCEPTION IS NOT APPLICABLE TO ASSESSMENT YEAR 2007-08, WHICH IS THE YEAR BEFORE U S. THIS VIEW IS STRENGTHENED BY THE MEMORANDUM AND THE CIRCULAR MENTIONED ABOVE. ACCORD INGLY, WE ARE OF THE VIEW THAT THE ID. CIT(APPEALS) ERRED IN RESTRICTING THE DEDUCTION TO 90% OF THE PROFITS. 4. IN THE RESULT, THE APPEAL IS ALLOWED. 7. RESPECTFULLY FOLLOWING THE SAID DECISION WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 10B OF THE ACT AT 100% OF EXPORT PRO FITS FOR THE AY 2008-09 AND HENCE, IN VIEW OF THIS DECISION, ADJUDICATION OF OTHER GROUN DS IN RESPECT OF DISALLOWANCE OF REMUNERATION PAID TO PARTNERS WOULD BECOME INFRUCTU OUS AND NEEDS NO ADJUDICATION. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.12.2016. SD/- SD/- (S.S.VISWANETHRA RAVI) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 2ND DECEMBER, 2016 JD. SR. P.S COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. TECHNICO OVERSEAS, C/O, S. M. SURA NA, ADVOCATE, P-38, INDIA EXCHANGE PLACE, ARUN CHAMBER, 3 RD FLOOR, KOLKATA-700001. 2. RESPONDENT ITO, WARD-43(3), KOLKATA. 3. CIT(A), KOLKATA 4. CIT, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .