ASST CIT 15(1)(2), MUMBAI V. CREDIT SUSSE BUSINESS ANALYTICS (I) P.LTD, MUMBAI

ITA 1900/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8000 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-04-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 01-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 43B; 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI JASON P. BOAZ (AM) AND SHRI RAM LAL NEG I (JM) ITA NO. 1900/MUM/2015 ASSESSMENT YEAR: 2011-2012 THE ASST. COMMISSIONER OF INCOME TAX, 15 (1) (2), ROOM NO. 403, 4 TH FLOOR, AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI-400020. VS. M/S CREDIT SUISSE BUSINESS ANALYTICS (INDIA) PVT. LTD., THIRD AND FOURTH FLOOR, CITYPARK, CENTRAL AVENUE, HIRANANDANI BUSINESS PARK, POWAI, MUMBAI- 400076 PAN: AADCC5878L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. PREMCHAND J (DR) RESPONDENT BY : SHRI. FARROKH V. IRANI (AR) DATE OF HEARING: 17 /01 /201 7 DATE OF PRONOUNCEMENT: 28/02/20 17 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN PREFERRED BY THE REV ENUE AGAINST IMPUGNED ORDER DATED 29/01/2015 PASSED BY THE LD. CIT (APPEALS)-24 , MUMBAI, FOR THE ASSESSMENT YEAR 2011-2012, WHEREBY THE LD. CIT(A) P ARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER DATE D 21/03/2014 PASSED U/S 143(3) OF THE INCOME TAX ACT 1961 (IN SHORT THE AC T). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE EN GAGED IN THE BUSINESS OF PROVIDING VARIOUS BUSINESS SUPPORT AND INFORMATION TECHNOLOGY ENABLED SERVICES TO ITS GROUP COMPANIES LOCATED IN INDIA AN D OUTSIDE, FILED ITS RETURN OF INCOME FOR THE RELEVANT ASST. YEAR 2011-12 DECLARIN G THE TOTAL INCOME OF RS. 2 ITA NO. 1900/MUM/2015 ASSESSMENT YEAR: 2011-12 95,88,158/- UNDER THE NORMAL PROVISIONS OF THE ACT AND BOOKS PROFIT OF RS. 2,11,81,988/- UNDER THE PROVISIONS OF SECTION 115J B OF THE ACT. THE RETURN WAS PROCESSED U/S 143(1) AND AFTER SCRUTINY ASSESSM ENT ORDER U/S 143(3) OF THE ACT WAS PASSED DETERMINING THE TOTAL INCOME OF RS. 58,20,51,400/- (ROUNDED OFF ) UNDER THE NORMAL PROVISIONS OF THE A CT AND RS. 2,11,81,988/- U/S 115JB OF THE ACT, AFTER MAKING ADDITIONS INCLUD ING THE ADDITION OF RS. 1,14,63,246/-CLAIMED DISALLOWANCE OF DEDUCTION U/S 10A. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT( A) WHO AFTER HEARING THE ASSESSEE PARTLY ALLOWED THE APPEAL. THE DEDUCTION C LAIMED U/S 10A OF THE ACT AT ENHANCED INCOME. AGAINST THE SAID FINDINGS OF TH E LD. CIT(A) THE DEPARTMENT IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFFE CTIVE GROUND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT (A) ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S 10A ON THE ADDITIONS/DISALLOWANCES MA DE U/S 40(A) (IA) OF THE INCOME TAX ACT. 3. BEFORE US, THE LD. DR RELYING ON THE ASSESSMENT ORDER SUBMITTED THAT THE LD. CIT(A) WRONGLY ALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE, THEREFORE THE IMPUGNED ORDER IS LIABLE TO BE DISMISSED. 4. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ASSESSEES CASE IS COVERED BY THE DECISION OF HONB LE JURISDICTIONAL HIGH COURT PASSED IN CIT VS. GEM PLUS JEWELLERY INDIA LTD. (2011) 330 IT R 175(BOM) AND THE DECISION OF HYDERABAD BENCH OF THE ITAT RENDERE D IN ITA NO.1988/HYD/2011 FOR THE A.Y. 2007-08 AND CROSS APP EAL ITA NO. 2040/HYD/2011. THE LD. COUNSEL FURTHER SUBMITTED TH AT SINCE LD. CIT(A) HAS PASSED THE IMPUGNED ORDER IN ACCORDANCE WITH THE LA W LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. GEM PL US JEWELLERY LTD. (SUPRA), 3 ITA NO. 1900/MUM/2015 ASSESSMENT YEAR: 2011-12 THERE IS NO SCOPE TO INTERFERE WITH THE SAME AND HE NCE THE APPEAL FILED BY THE REVENUE IS LIABLE TO BE DISMISSED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE MATERIAL PLACED ON RECORD INCLUDING THE DECISIONS RELIED UPO N BY THE PARTIES. THE LD. CIT(A) HAS DECIDED THIS GROUND OF APPEAL HOLDING AS UNDER:- 3.5 IN VIEW OF THE ABOVE, I AM OF THE VIEW THAT THE APPELLANT IS ENTITLED TO CLAIM OF DEDUCTION U/S 10A ON AN ENHANC ED INCOME. THE APPELLANT HAD RELIED ON VARIOUS OTHER DECISIONS AND CONTENDED THAT DEDUCTION U/S 10A SHOULD BE ALLOWED ON THE INCOME W HICH WAS ASSESSED TO TAX BY THE A.O AFTER CONSIDERING THE ALLOWANCE/DISALLOWANCE MADE DURING THE COURSE OF AS SESSMENT PROCEEDINGS AS PER THE PROVISIONS OF THE I.T.ACT. I FIND THESE DECISIONS SUPPORT THE CASE OF THE APPELLANT. THEREF ORE, THE ACTION OF A.O IN NOT CONSIDERING THE DISALLOWANCE MADE U/S 40 A (IA) WHILE COMPUTING THE DEDUCTION U/S 10A IS NOT CORRECT AND HENCE, THE ADDITION MADE IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 6. WE NOTICE THAT IN CIT VS. GEM PLUS JEWELLERY INDIA LTD. (SUPRA) ONE OF THE ISSUES BEFORE THE HONBLE HIGH COURT WAS WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE TRIBUNAL WAS JUSTIFIE D IN DIRECTING THE A.O TO EXEMPT U/S 10A OF THE ACT, ON THE ASSESSED INCOME W HICH WAS ENHANCED DUE TO DISALLOWANCE OF THE EMPLOYERS AS WELL AS THE EMP LOYEES CONTRIBUTION TOWARDS PROVIDENT FUND/ESIC. THE HONBLE HIGH COURT DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING AS UNDER:- 11. FOR THE PURPOSES OF THE APPEAL IT IS NECESSAR Y TO REFER TO THE ADMITTED POSITION WHICH IS THAT THE ASSESSEE HAD DE POSITED BOTH THE EMPLOYER'S AND THE EMPLOYEES CONTRIBUTION TOWARDS P ROVIDENT FUND AND ESIC, THOUGH BEYOND THE DUE DATE INCLUDING THE GRACE PERIOD. THE ASSESSING OFFICER ADDED THESE PAYMENTS TO THE T OTAL INCOME OF THE ASSESSEE AND MADE AN ADDITION IN THE AMOUNT OF RS. 71.59 4 ITA NO. 1900/MUM/2015 ASSESSMENT YEAR: 2011-12 LAKHS, HOWEVER, FOR THE DEDUCTION UNDER SECTION 10A , THE ADDITION MADE ON ACCOUNT OF THE EMPLOYEES' CONTRIBUTION WAS IGNORED IN CALCULATING THE PROFITS ELIGIBLE FOR DEDUCTION ON T HE GROUND THAT THESE RECEIPTS WERE NOT GENERATED OUT OF THE MANUFACTURIN G ACTIVITY OF THE ASSESSEE-COMPANY. 12. BY REASON OF THE JUDGMENT OF THE SUPREME COURT IN CIT V. ALOM EXTRUSIONS LIMITED [2009] 319 ITR 306 THE EMPL OYER'S CONTRIBUTION WAS LIABLE TO BE ALLOWED, SINCE IT WAS DEPOSITED BY THE DUE DATE FOR THE FILING OF THE RETURN. THE PECULIAR POSITION, HOWEVER, AS IT OBTAINS IN THE PRESENT CASE ARISES OUT OF THE FACT THAT THE DISALLOWANCE WHICH WAS EFFECTED BY THE ASSESSING OF FICER HAS NOT, THE COURT IS INFORMED, BEEN CHALLENGED BY THE ASSES SEE. AS A MATTER OF FACT THE QUESTION OF LAW WHICH IS FORMULATED BY THE REVENUE PROCEEDS ON THE BASIS THAT THE ASSESSED INCOME WAS ENHANCED DUE TO THE DISALLOWANCE OF THE EMPLOYER'S AS WELL AS TH E EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND/ESIC AND THE ON LY QUESTION WHICH IS CAN-VASSED ON BEHALF OF THE REVENUE IS WHE THER ON THAT BASIS THE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE A SSESSING OFFICER TO GRANT THE EXEMPTION UNDER SECTION 10A. ON THIS POSI TION, IN THE PRESENT CASE IT CANNOT BE DISPUTED THAT THE NET CON SEQUENCE OF THE DISALLOWANCE OF THE EMPLOYER'S AND THE EMPLOYEES' C ONTRIBUTION IS THAT THE BUSINESS PROFITS HAVE TO THAT EXTENT BEEN ENHANCED. THERE WAS, AS WE HAVE ALREADY NOTED, AN ADD BACK BY THE A SSESSING OFFICER TO THE INCOME. ALL PROFITS OF THE UNIT OF T HE ASSESSEE HAVE BEEN DERIVED FROM MANUFACTURING ACTIVITY. THE SALARIES P AID BY THE ASSESSEE, IT HAS NOT BEEN DISPUTED, RELATE TO THE M ANUFACTURING ACTIVITY. THE DISALLOWANCE OF THE PROVIDENT FUND/ES IC PAYMENTS HAS BEEN MADE BECAUSE OF THE STATUTORY PROVISIONS-SECTI ON 43B IN THE CASE OF THE EMPLOYER'S CONTRIBUTION AND SECTION 36( V) READ WITH SECTION 2(24) (X) IN THE CASE OF THE EMPLOYEES' CON TRIBUTION WHICH HAS BEEN DEEMED TO BE THE INCOME OF THE ASSESSEE. THE P LAIN CONSEQUENCE OF THE DISALLOWANCE AND THE ADD BACK TH AT HAS BEEN MADE BY THE ASSESSING OFFICER IS AN INCREASE IN THE BUSINESS PROFITS OF THE ASSESSEE. THE CONTENTION OF THE REVENUE THAT IN COMPUTING THE DEDUCTION UNDER SECTION 10A THE ADDITION MADE ON AC COUNT OF THE DISALLOWANCE OF THE PROVIDENT FUND/ESIC PAYMENTS OU GHT TO BE IGNORED CANNOT BE ACCEPTED. NO STATUTORY PROVISION TO THAT EFFECT 5 ITA NO. 1900/MUM/2015 ASSESSMENT YEAR: 2011-12 HAVING BEEN MADE, THE PLAIN CONSEQUENCE OF THE DISA LLOWANCE MADE BY THE ASSESSING OFFICER MUST FOLLOW. THE SECOND QU ESTION SHALL ACCORDINGLY STAND ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 7. WE ALSO NOTICE THAT THE ITAT HYDERABAD BENCH HAS DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF ITA NO. 2040/HYD/2011 AND CROSS APPEAL (SUPRA). 2007-08. WE FIND THAT THE LD. CIT(A) HAS PASSED THE IMPUGNED ORDER IN ACCORDANCE WITH THE LAW LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. GEM PLUS JEWELLERY INDIA LTD. (SUPRA). HENCE, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) TO INTERFERE WITH THE SAME. WE THEREFORE, UP HOLD THE ORDER PASSED BY THE LD. CIT(A) AND DISMISS THE SOLE GROUND OF APPEAL OF THE REVENUE. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASSE SSMENT YEAR 2011-2012 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COUR T 28 TH FEBRUARY, 2017. SD/- SD/- (JASON P. BOAZ) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: 28/02/2017 6 ITA NO. 1900/MUM/2015 ASSESSMENT YEAR: 2011-12 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !' % , / DR, ITAT, MUMBAI 6. &' ( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI PRAMILA