ELICO Ltd., Hyderabad V. DCIT, Circle -2(2), Hyderabad

ITA 1690/HYD/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6464 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 19-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M JAGADISH BABU
• Assessee Lawyers: S RAMA RAO
• Keywords: Wrong claim; Assessment record; Revised return
• Section: 10B; 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.169 0 /HYD/12 : ASSESSMENT YEAR 2007 - 08 M/S. EL I CO LIMITED, HYDERABAD ( PAN - AAACE 5140 L ) V/S. DY. COMMISSIONER OF INCOME - TAX CIRCLE 2(2), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.RAMA RAO RESPONDENT BY : SHRI M. JAGADISH BABU DR DATE OF HEARING 25 .0 6 .2014 DATE OF PRONOUNCEMENT 16.07.2014 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX II, HYDERABAD DATED 26.3.2012 PASSED UNDER S.263 OF THE INCOME TAX ACT, 1961. 2. BRIEF FACTS OF THE CA S E LEADING TO THE FILING O F THE PRESENT APPEAL ARE THAT THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE O F ANALYTICAL IN S TRUMENTS AND ALSO H A VING A BPO FILED ITS RETURN OF INCOME ON 24.10.2007, ADMITTING A LOSS OF R S .3,68,67,971 UNDER NORMAL PROVISIONS AND RS.41,18, 504 UNDER S.115JB OF THE ACT. ASSESSMENT WAS COMPLETED UNDER S.143(3)OF THE ACT, ASSESSING THE LOSS OF RS.2,60,81,092 UNDER NORMAL PROVISIONS AND AT R S .59,45,100 UN D ER S.115JB OF THE ACT. 3. THE COMMISSIONER OF INCOME - TAX, WHILE PERUSING THE ASSESSMENT RECORD, NOTICED IN THE CON T E X T OF ITS CLAIM FOR EXEMPTION UN D ER S.10B OF THE ACT, THAT THE ASSESSEE HAD NOT OBTAINED STATUTORY APPROVAL FROM THE BOARD ITA NO. 1 690 /HYD/201 2 M/S. ELICO LIMITED , HY DERABAD 2 APPOINTED IN THAT BEHALF BY THE CENTRAL GOVERNMENT AS REQUIRED UNDER S.14 OF THE INDUSTRIES (D EVELOPM E NT AND REGULATION) ACT, 1951 FOR CLAIMING STATUS OF AN 100% EXPO R T ORIENTED UN D ERTAKING. AS SUCH, THE COMMISSIONER OF INCOME - TAX WAS OF THE OPINION THAT THE EXEMPTION OF RS.1,26,598,167 ALLOWED TO IT UNDER S.10B IN THE ASSESSMENT, WAS WITHOUT EX AMINATION OF THE MATERIAL POINT AND WITHOUT APPLICATION OF MIND, AND CONSEQUENTLY THE ASSESSMENT THUS MADE WAS ERRONEOUS AND PREJUDICIAL TO THE IN TE RESTS OF REVENUE. HE ACCORDINGLY INVOKED THE PROVISIONS OF S.263. IN R E SPON S E TO THE SHOW CAUSE NOTICE I SSUED IN THAT BEHALF, AND IN TH E COU R SE OF PROCEEDIN G S BEFORE THE COMMISSIONER OF INCOME - TAX, ASSESSEE SUBMITT E D THAT THE EXPORT ORIENTED UNIT OF THE ASSESSEE COMPANY (CALLED BPO DIVISION) IS REGI S TER E D WITH TH E SOFTWARE TECHNOLOGY PARK OF I NDIA, VIDE APP ROVAL N O.STPH /MSC/98 - 99/108 - 6656 DATED 11 TH MARCH, 1999. THE BPO UNIT, IT WAS SUBMI T TED DERIVED PROFIT OUT OF ITS EXPORT ORIENTED ACTIVITY AND SUCH , PROFITS ARE ELIGIBLE FOR EXEMPTION UNDER S . 1 0A OF THE INCOM E - TAX ACT. THE COMPANY, HO WE VER, WRONGLY SUBMITTED ITS CLAIM UN D ER S.10B INSTEAD OF UNDER S.10A AND THE AUDIT REPORT OBTAINED WAS IN FORM 56 G FOR THE ASSESSMENT YEAR 2007 - 08. SUCH A WRONG CLAIM WAS STA T ED TO B E OUT O F INADVERTENCE AND WITH NO WILLFUL INTENT. THE MANNER OF DETERMINING THE ELIGIB LE AMOUNT O F DEDUCTION UNDER EITHER OF THE SECTIONS WAS THE SAME AND TH E R E FORE, THE QUANTUM OF DEDU C TION/EXEMPTION WOULD RE M AIN THE SAME. THE ASSESSEE ACCORDINGLY SUBMI T TED THE AU D I T REPO R T IN FORM 56F TO SATISFY THE CON D ITION S REQUIRED FOR THE EXEMPTION UNDER S.10A. IT WAS ALSO F U RTH E R SUBMITTED THAT THE ASSESSEE H A D TRULY DISCLOSED ALL THE M A TE R IAL FACTS CON C ER N ING THE CLAIM UNDER S.10B/10A AND DID NO T WITHHOLD ANY MATERIAL FACTS OR INFORMATION. AT THE TIM E O F ASSESSMENT PROC E EDIN G S, IT WAS CLAIMED THAT THE ASSESSEE WAS NOT AWARE THAT IT OUGHT TO HAVE FURNI S H E D FROM 56F AND NO T FORM 56G FOR THE PU R PO S E OF AVAILING THE EX E MPTION AGAINST THE EXPORT INCOME OF BPO DIVISION . IT WAS AS SUCH PLEADED THAT IT WAS A CASE WHERE THE EXEMPTION WAS CLAIMED UNDER AN INCORRECT SECTION, INSTEAD OF THE CORRECT SECTION UNDER WHICH THE ASSESSEE WAS ELIGIBLE. IT WAS TH E R E FORE, SUBMITTED THAT THE ERROR IN TH E ASSESSMENT ORDER PASSED WAS NO T PREJU D I C IAL TO THE ITA NO. 1 690 /HYD/201 2 M/S. ELICO LIMITED , HY DERABAD 3 INTERESTS OF THE REVENUE, AND HENCE THE SAME DID NO T WARRANT THE ASSESSMENT TO B E REVISED OR SET ASIDE. 4. THE COMMISSIONER OF INCOME - TAX WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE. HE BROUGHT OUT THE MATERIAL DIFFERENCE BETWEEN A 100% EOU UNDER STP AND A 100% EOU APPROVED BY THE BOARD UNDER S.14 O F THE I NDUSTRIES ( DEVELOPMENT AND REGULATION ) A CT, 1961, DULY EXTRACTING THE REL E VANT PO R TION OF THE DECISION O F THE TRIBUNAL IN TH E CA S E OF I INFOTECH ENTE R PRISES LIMITED AND THE CBDT INST R UCTION F.NO.178/19/2008 - ITA01 DATED 9.3.2009. THE COMMISSIONER OF INCOME - TAX FOUND NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT CLAIM FOR DEDUCTION UNDER S.10B WAS BY INADVERTENCE AND WITHOUT ANY WILLFUL INTENT, OBSERVING THAT EVEN FOR THE PRECEDING ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2006 - 07, ASSESSEE HAD MADE CLA IM FOR EXEMPTION UNDER S.10B OF THE ACT. THE COMMISSIONER OF INCOME - TAX ALSO DID NOT ACCEPT THE FRESH CLAIM O F THE ASSESSEE DURING THE R E VISIONAL PROCEEDINGS BEFORE HIM, FOR CLAIM UNDER ALTERNATE PROVISION I.E. S.10A, OBSERVING THAT AN ASSESSEE CANNOT M AKE SUCH A CLAIM OTHER THAN BY FILING A REVISED RETURN, AS HELD BY THE APEX COU R T IN TH E CA S E OF GOETZE(INDIA ) L TD. V/S. COMMISSIONER OF INCOME - TAX (284 ITR 323). THE COMMISSIONER OF INCOME - TAX ACCORDINGLY, CONCLU D IN G THE ASSESSMENT MADE EARLIER WAS ERR ONEOUS AND PREJUDICIAL TO THE IN T ER E STS OF THE REVENUE, DIRECTED THE ASSESSING OFFICER TO BRIN G TO TAX THE AMOUNT O F RS.1,26,58,167 AND DISALLOW THE EX E MPTION ALLOWED TO THE ASSESSEE UNDER S.10B OF THE ACT, VIDE O R DER DATED 26.3.2012 PASSED UNDER S.263 OF THE ACT. 5. AGGRIEVED BY THE ABOVE ORDER OF THE COMMISSIONER OF INCOME - TAX PASSED UNDER S.263 OF THE ACT, ASSESSEE IS IN SECOND APPEAL BEFORE US. 6. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE HAS CLAIMED EXEMPTION IN RESPECT OF ITS INCOME UNDER S.10B OF THE ACT, AND THE SAME HAS BEEN ALLOWED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT UNDER S.143(3) OF THE ACT. WHEN THE ITA NO. 1 690 /HYD/201 2 M/S. ELICO LIMITED , HY DERABAD 4 COMMISSIONER OF INCOME - TAX INITIATED THE PROCEEDINGS UNDER S.263 OF THE ACT, ASSESSEE PLEADED INADVERTENCE IN PREFERRING THE CLAIM FOR EXEMPTION UNDER S.10B INSTEAD OF UNDER S.10A, AND IT ACCORDINGLY SOUGHT TO A MEND ITS EARLIER CLAIM BY MAKING FRESH CLAIM OR AN EVEN A LTERNATE CLAIM, AND ALSO SUBMITTED THAT BUT FOR THE MENTIONING OF THE INCORRECT SECTION, QUANTUM OF RELIEF WOULD REMAIN THE SAME, AND THAT BEING SO, ALLOWANCE OF DEDUCTION BY THE ASSESSING OFFICER UNDER AN INCORRECT SECTION, AS CLAIMED BY THE ASSESSEE, MAY BE ERRONEOUS, BUT NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER OF INCOME - TAX WAS NOT CONVINCED WITH THE PLEAS OF THE ASSESSEE, AND PASSED THE IMPU G N E D ORDER DIRECTING THE ASSESSING OFFICER TO WITHDRAW THE RELIEF GRANTED UNDER S.10B O F THE ACT. IT IS THE CASE OF THE COMMISSIONER THAT THE PROVISIONS OF S.10A AND 10B OPERATE IN DIFFERENT FIELDS AND CANNOT BE EQUATED, AND SINCE ASSESSEE HAS CLAIMED RELIEF UNDER S.10B IN EARLIER YEAR AS WELL, THE MISTAKE CLAIMED BY THE ASSESSEE CANNOT BE ACCEPTED TO BE AN INADVERTENT ONE, AND THE ALTERNATE CLAIM OR FRESH CLAIM CANNOT BE ENTERTAINED, SINCE NO REVISED RETURN HAS BEEN FILED BY THE ASSESSEE. IT IS NOT THE CASE OF THE COMMISSIONER OF INCOME - TAX THAT THE ASSESSEE IS NOT ELIGIBLE FOR RELIEF UNDER S.10A OF THE ACT AS WELL . HOWEVER, WHEN THE ASSESSEE PLEADS THAT CLAIMING OF RELIEF UNDER S.10B INSTEAD OF UNDER S.10A WAS AN INADVERTENT ONE, THE COMMISSIONER OF INCOME - TAX, HAVING FOUND THE ASSESSMENT TO BE ERRONEOUS ON ACCOUNT OF CLAIMING RELIEF UNDER AN INCORRECT SECTION, IN ALL FAIRNESS, OUGHT TO HAVE EXAMINED THE ASSESSEES ELIGIBILITY FOR RELIEF UNDER S.10A, BEFORE CONCLUDING THAT THE ASSESSMENT MADE WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THIS WAS ALL THE MORE NECESSARY THAT THE QUANTUM O F RELIEF, IF GRANTED, WOULD REMAIN THE SAME, WHETHER IT WAS GRANTED UNDER S.10A OR UNDER S.10B OF THE ACT, AND AS SUCH WOULD HAVE NOT RESULTED IN ANY ENHANCEMENT IN THE INCOME ASSESSED. 7. IN THE CASE OF VISION 2K+INC. HYDERABAD (ITA NO.696/HYD/2010 FO R ASSESSMENT YEAR 2005 - 06), IN THE CONTEXT OF REVISIONARY POWERS EXERCISED UNDER S.263 OF THE ACT UNDER SIMILAR CIRCUMSTANCES, COORDINATE BENCH OF THIS ITA NO. 1 690 /HYD/201 2 M/S. ELICO LIMITED , HY DERABAD 5 TRIBUNAL, VIDE ITS ORDER DATED 21.1.2011, HAS DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE IN THE FOLLOW ING MANNER - 6. .WE FIND THAT IT IS ADMITTED FACT THAT THE ASSESSEE HAS OBTAIN E D THE APPROVAL FROM STPI, HYDERABAD AS 100% EOU. THE CIT S FIN D IN G IS THAT THE ASSESSEE I S NO T ELIGIBLE FOR RELIEF UNDER SECTION 10 B OF THE AC T ONLY ON THE GROUND THAT 100% EOU UN D ER STPI SCHEME CANNOT B E EQUATED WITH THE 100% EOU APPROVED BY TH E B OARD. SIN C E WE HAVE ALREADY H E L D IN TH E CA S E OF SUDHARANI (SUPRA) THAT THE APPROVAL OF 100% EOU BY THE B OARD AND STPI IS ONE AND THE SAME AND H E N C E THE ASSESSEE IS ELIGIBL E FOR EXEMPTION UNDER SECTION 10B OF THE ACT. IT IS TO BE NO T ED THAT THE V ALIDITY OF AN ORDER UNDER SECTION 263 OF THE AC T HAS TO BE TESTED WI T H REGARD TO THE PO S ITION OF L A W AS IT EXISTS ON THE DATE ON WHI C H AN ORDER IS PASSED BY THE CIT. I N THE CA S E UND ER CONSIDERATION, I T IS CL EA R THAT ON THE DATE, WHEN THE CIT PASSED HIS ORDER UNDER SECTION 263 OF THE A C T, THE VIEW TAKEN BY THE ASSESSING OFFICER WAS IN CONSONANCE WITH TH E VIEW TAKEN BY THE TRIBUNAL IN TH E C A S E OF SUDHARANI (SUPRA). IT IS SETTLED LAW TH AT WHEN TWO VIEWS ARE POSSIBLE ON THE DATE OF THE OR D ER PASSED BY THE COMMISSIONER , THE CIT SHOULD AGREE WITH THE VI E W TAKEN BY TH E ASSESSING OFFICER WHICH WAS IN CONSONANCE WITH VIEW TAKEN BY THI S T RIBUNAL, EVEN IF THERE HAS BEEN A LOSS OF REVENUE. HENCE , POWERS UNDER SECTION 263 OF THE ACT CANNOT B E EXERCISED BY THE CIT. OUR VIEW IS FORTIFIED BY THE JU D GM E N T OF DELHI HIGH COU R T IN TH E CA S E OF CIT VS. H O NDA SIEL P OWER PRODUCTS PRIVATE L IMITED IN I TA NOS. 1376/2009 AND 1382/2009 DATED 5 - 7 - 2010. 8. EVEN THOUGH THE COMMISSIONER OF INCOME - TAX HAS RELIED UPON THE ORDER OF THIS TRIBUNAL IN THE CASE OF INFOTECH ENTERPRISES (SUPRA), IN SUPPORT OF HIS CONCLUSION THAT 100% EOU UNDER STPI CANNOT BE EQUATED WITH 100% EOU APPROVED BY THE BOARD, TH E SAID DECISION IS DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE, INASMUCH AS IN THE FACTS OF THE PRESENT CASE, THE CLAIM OF THE ASSESSEE RIGHT FROM THE BEGINNING WAS THAT THE CLAIM MADE UNDER S.10B INSTEAD OF UNDER S.10A WAS DUE TO INADVERTENCE. IN THIS VIEW OF THE MATTER, THE ASSESSMENT MADE ALLOWING THE CLAIM UN D ER S.10B OF THE AC T MAY RENDER THE ASSESSMENT TO BE ERRONEOUS . HOWEVER, IN THE ABSENCE O F ANY FIN D ING BY THE COMMISSIONER OF INCOME - TAX THAT THE ASSESSEE IS NOT ELIGIBLE FOR RELIEF UNDER S .10A, UNDER WHICH THE ASSESSEE SHOULD HAVE MADE THE CLAIM, IT CANNOT BE SAID THAT THE ASSESSMENT IS ALSO PREJUDICIAL TO THE INTERESTS OF REVENUE. IT IS SETTLED POSITION OF LAW, AS LAID DOWN IN SEVERAL JUDICIAL PRONOUNCEMENTS, ITA NO. 1 690 /HYD/201 2 M/S. ELICO LIMITED , HY DERABAD 6 INCLUDING THE DECISION OF THE APEX COURT IN MALABAR INDUSTRIAL CO. LTD (243 ITR 83), THAT THE PRE - REQUISITE TO THE EXERCISE OF JURISDICTION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS O F THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT IF THE ORDER O F THE INCOME - TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO S. 263(1) OF THE A CT. IN THE FACTS OF THE PRESENT CASE, THE COMMISSIONER HAVING NOT ARRIVED AT THE CONCLUSION THAT THE ASSESSMENT WAS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE IMPUGNED ORDER OF THE COMMISSIONER OF INCOME - TAX CANNOT BE SUSTAINED. WE ACCORDINGLY SET ASIDE THE IMPUGNED ORDER OF THE COMMISSIONER O F INCOME - TAX, ALLOWING TH E GROUNDS OF THE ASSESSEE IN THIS APPEAL. 9. IN THE RESULT, APPEAL OF TH E ASSESSEE IS ALLOWED O RDER PRONOUNCED IN THE COURT ON THESE APPEAL ON 16 TH JULY, 2014 SD / - SD/ - ( B.RAMAKOTAIAH ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/ - 16 TH JU LY , 2014 COPY FORWARDED TO: 1. M/S. EL I CO LIMITED, C/O. SHRI S.RAMA RAO, FLAT NO.102, SHIRYA'S ELEGANCE, NO.3 - 6 - 643, STREET NO.9, HIMAYATNAGAR, HYDERABAD 500029 2 . DY. COMMISSIONER OF INCOME - TAX CIRCLE 2(2), HYDERABAD 3. COMMISSIONER OF INCOME - TAX II HYDERABAD 4. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S