Deputy Commissioner of Income-tax, V. Cummins Research & Technology India Pvt. Ltd., Pune

ITA 2073/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5308 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 08-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 115JB; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 2073/PUN/2016 / ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), PUNE ....... / APPELLANT / V/S. M/S.CUMMINS RESEARCH AND TECHNOLOGY INDIA PVT. LTD. 4 TH FLOOR, TOWER-B, CUMMINS INDIA OFFICE CAMPUS, SURVEY NO.21, BALEWADI, PUNE-411 045. PAN : AACCC1998C / RESPONDENT REVENUE BY : DR. VIVEK AGGARWAL ASSESSEE BY : SHRI NIKHIL PATHAK / DATE OF HEARING : 16.07.2018 / DATE OF PRONOUNCEMENT : 20.07.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-1, PUNE-1 DATED 02.06.2016 FOR THE A.Y. 2009-10. 2. GROUNDS RAISED BY THE REVENUE ARE EXTRACTED BELOW : 1. THE LD. COMMISSIONER OF INCOME-TAX(APPEAL) HAS E RRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN ALLOWING THE DEDU CTION U/S.10A OF THE ACT WITHOUT SETTING OF BROUGHT FORWARD BUSINESS LOS S AND UNABSORBED DEPRECIATION OF EARLIER YEARS IN TOTAL DISREGARD TO THE CBDT CIRCULAR NO. 7 /DV /2013 DATED 16/07/2013. 2. THE LD. COMMISSIONER OF INCOME-TAX(APPEAL) HAS ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, BY NOT FOLLOWING THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF 'HIMATASINGIKE SEIDE LTD. VS CIT (286 ITR 255)' WHEREIN IT HAS BEEN HELD THAT THE BR OUGHT FORWARD LOSSES 2 ITA NO.2073/PUN/2016 M/S. CUMMINS RESEARCH & TECHNOLOGY INDIA PVT. LTD., AND UNABSORBED DEPRECIATION HAVE TO BE ADJUSTED BEF ORE ALLOWING THE DEDUCTION UNDER SECTION 10A AND THE SAME HAS BEEN U PHELD BY HON'BLE SUPREME COURT IN THE CASE OF VIDE CIVIL APPEAL NO.1 501 OF 2008 [2013- TIOL-53-SC-IT-LB] AND DISMISSED THE APPEAL OF THE A SSESSEE . 3. BRIEFLY STATED RELEVANT FACTS INCLUDES THAT THE ASSESS EE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING INFORMATION TECHNOLOGY ENABLED ENGINEERING SERVICES AND FILED ITS RETURN OF INCOME ON 25.09.2 009 DECLARING TOTAL INCOME OF RS.18,62,082/-. ASSESSEE MADE PAY MENT OF TAXES UNDER THE PROVISIONS OF SECTION 115JB OF THE INCOME TAX ACT, 1961 PAYABLE ON THE TOTAL INCOME WHICH IS LESS THAN 15% OF ITS B OOK PROFIT. DURING ASSESSMENT PROCEEDINGS, THE AO DETERMINED TOTAL IN COME OF ASSESSEE AT RS.1,17,45,852/- AND MADE ADDITION OF RS.98,83,77 0/- BY HOLDING THAT THE UNABSORBED DEPRECIATION AND BROUGHT FOR WARD BUSINESS LOSS SHALL BE FIRST SET OFF AND THEREAFTER, THE ALLOWABLE DED UCTION U/S.10A SHOULD BE WORKED OUT. 4. AGGRIEVED WITH THE ORDER OF ASSESSING OFFICER DATED 27.1 2.2012, THE ASSESSEE FILED APPEAL BEFORE CIT(A). THE CIT(A) DELETED THE ADDITION O F RS.98,83,770/- BY PLACING RELIANCE ON THE DECISION OF PUNE BE NCH OF TRIBUNAL IN THE CASE OF M/S. KPIT CUMMINS INFOSYSTEMS LTD. VS. ITO IN ITA NO.1736/PN/2012 FOR THE A.Y. 2007-08 VIDE ORDER DAT ED 30.11.2015. CIT(A) DISCUSSED THE ISSUE VIDE PARA 7 OF HIS ORDER. 5. AGGRIEVED WITH THE ORDER OF CIT(A), THE REVENUE IS IN A PPEAL BEFORE US RAISING THE GROUNDS AS EXTRACTED ABOVE. 6. LD. DR FOR THE REVENUE PLACED RELIANCE HEAVILY ON THE ORDER OF AO. HE FURTHER SUBMITTED THAT IN THE INSTANT CASE, ALLOWING DE DUCTION U/S. 10A OF THE ACT WITHOUT SETTING OF BROUGHT FORWARD BUSINES S LOSS AND 3 ITA NO.2073/PUN/2016 M/S. CUMMINS RESEARCH & TECHNOLOGY INDIA PVT. LTD., UNABSORBED DEPRECIATION OF EARLIER YEARS IN TOTAL DISREGARD TO THE CBDT CIRCULAR NO.7/DV/2013 DATED 16.07.2013 AND PLACED RELIANCE ON THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF HIMATASINGIKE SEIDE LTD. VS. CIT REPORTED IN 286 ITR 255. 7. ON THE OTHER HAND, LD. AR FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A). HE SUBMITTED THAT THE DEDUCTION ALLOWABLE U/S.10A IS REQUIRED TO BE WORKED OUT ON A STANDALONE BASIS I.E. ON AN UNDER TAKING BASIS INDEPENDENTLY BEFORE SET OFF OF ANY BROUGHT FORWARD LOSSES /DEPRECIATION. LD. AR FOR THE ASSESSEE HAS PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) TRIZETTO SERVICES INDIA PVT. LTD. VS. DCIT,ITA N O.2537/PUN/2016, A.Y.2010-11, DECIDED ON 28.03.2018. II) CIT VS. YOKOGAWA INDIA LTD, 77 TAXMANN.COM 41 ( SC) III) M/S. KPIT CUMMINS INFOSYSTEMS LTD. ( KPIT CUMMIN S GLOBAL BUSINESS SOLUTIONS LTD. SINCE MERGED) VS. ITO, ITA NO. 1736/PN/2012, A.Y. 2007-08, DECIDED ON 30.11.2015. IV) PRECISION CAMSHAFTS LTD. VS. ACIT, ITA NOS.70 & 72/PN/2012, A.Y. 2007-08, DECIDED ON 10 TH NOVEMBER, 2015. 8. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF AUTHORITIES BELOW. THE CORE ISSUE IN THE PRESENT APPEAL, WHICH IS TO BE ADJUDICATED, IS IF THE CIT(A) IS JUSTIFIED IN ALLOWING THE DEDUCTION U/S.10A O F THE ACT WITHOUT SETTING OF BROUGHT FORWARD BUSINESS LOSS AND UNAB SORBED DEPRECIATION OF EARLIER YEARS. THE CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE VIDE THE DISCUSSION GIVEN IN PARA 7 OF HIS O RDER BY PLACING RELIANCE ON THE DECISION IN THE CASE OF M/S. KPIT CUMMINS INFOSYSTEMS LTD. VS. ITO (SUPRA). FOR THE SAKE OF COMPLETENESS, THE RELEVANT FINDING OF CIT(A)S ORDER IS EXTRACTED AS UNDER: 4 ITA NO.2073/PUN/2016 M/S. CUMMINS RESEARCH & TECHNOLOGY INDIA PVT. LTD., 7. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CAS E AS WELL AS REPLY OF THE APPELLANT. IN THIS CASE, IT IS SEEN THAT THE ISSUE IS COVERED IN FAVOUR OF THE APPELLANT BY THE DECISION OF HON'BLE PUNE TR IBUNAL IN THE CASE OF M/S. KPIT CUMMINS INFOSYSTEMS LTD., ITA NO. 1736/PN/2012 FOR A.Y.2007-08 IN ITS ORDER DATED 30.11.2015. FOR THE SAKE OF CLARITY, RELEVANT PORTION OF THE ORDER IS REPRODUCE D AS UNDER : 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE COMPUTATION OF DEDUCTION UNDER ITA NO.1736/PN/2012 KPIT CUMMINS INFOSYSTEMS LTD SECTION 10A OF THE ACT, WHETHER THE SAME IS TO BE COMPUTED BEFORE SET OFF OF BROUGHT FORWARD LOSSES A ND UNABSORBED DEPRECIATION RELATING TO EARLIER YEARS. THE ASSESSE E HAD CLAIMED 100% DEDUCTION UNDER SECTION 10A OF THE ACT FOR THE YEAR UNDER CONSIDERATION BEFORE SETTING OFF OF THE AFORESAID B ROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION. THE ASSESSEE HA D DECLARED BUSINESS INCOME AT RS.7.35 CRORES, AGAINST WHICH IT HAD CLAIMED DEDUCTION UNDER SECTION 10A OF THE ACT AT RS.7.09 C RORES AND AGAINST BALANCE INCOME OF RS.26,40,767/-, BROUGHT F ORWARD LOSSES WERE ADJUSTED AND THE INCOME WAS DECLARED AT RS.NIL . THE ASSESSING OFFICER WAS OF THE VIEW THAT THE DEDUCTIO N UNDER SECTION 10A OF THE ACT WAS PERMISSIBLE OUT OF TOTAL INCOME WHICH COULD BE COMPUTED ONLY AFTER APPLYING ALL THE PROVISIONS OF THE ACT, INCLUDING SET OFF OF BROUGHT FORWARD LOSSES. IN VIEW THEREOF, THE DEDUCTION CLAIMED BY THE ASSESSEE ONLY OUT OF PROFITS AND GAI NS OF THE BUSINESS WITHOUT FIRST SETTING OFF OF BROUGHT FORWA RD LOSSES, WAS HELD TO BE NOT ALLOWABLE AND THE TOTAL INCOME OF TH E ASSESSEE WAS THUS, RE-COMPUTED. THE CIT(A) VIDE PARA 3.3 ONWARDS CONSIDERED THE ISSUE AT LENGTH AND OBSERVED THAT THE ASSESSEE ADMITTEDLY, WAS HAVING ONLY ONE UNIT / UNDERTAKING, ON WHICH DE DUCTION UNDER SECTION 10A OF THE ACT WAS ALLOWABLE AND BROU GHT FORWARD LOSSES AND UNABSORBED DEPRECIATION ALSO RELATED TO THE SAME UNDERTAKING. THE CIT(A) WAS OF THE VIEW THAT BEFORE COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT, BROUGHT FOR WARD LOSSES AND UNABSORBED DEPRECIATION HAD TO BE SET OFF AND O NLY ON THE BALANCE INCOME, IF ANY, THE DEDUCTION UNDER SECTION 10A OF THE ACT WAS TO BE COMPUTED. 5. WE FIND THAT IDENTICAL ISSUE OF SEQUENCES OF ALL OWING THE BENEFIT OF DEDUCTION UNDER SECTION 10B OF THE ACT AND THE A DJUSTMENT OF BROUGHT FORWARD LOSSES / UNABSORBED DEPRECIATION, A ROSE BEFORE PUNE BENCH OF TRIBUNAL IN M/S. VISHAY COMPONENTS IN DIA PVT. LTD. VS. ADDL.CIT & ANR. (SUPRA). THE TRIBUNAL ITA NO.17 36/PN/2012 KPIT CUMMINS INFOSYSTEMS LTD AFTER CONSIDERING THE FACTS OF THE CASE, WHICH ARE IDENTICAL TO THE FACTS BEFORE US, O BSERVED AS UNDER:- '27. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ISSUE ARISING VIDE GROUND OF APPEAL NO. 3 IS IN RELATION TO THE COMPUTATION OF DEDUCTION UNDER SECT ION 10B OF THE ACT AFTER THE AMENDMENT TO SECTION W.E.F. 01 .04.2001. THE PERSONS INVOKING THE SAID PROVISIONS ARE ENTITL ED TO A DEDUCTION UNDER THE ACT, AS COMPARED TO THE PRE-AME NDED PROVISIONS OF THE SECTION, UNDER WHICH THE INCOME C OMPRISING UNDER THE SAID SECTION WAS EXEMPT FROM THE TOTAL IN COME. THE ISSUE ARISING BEFORE US IS WHETHER WHILE COMPUT ING DEDUCTION UNDER SECTION 10B OF THE ACT, IN CASES WH ERE THE ASSESSEE HAS UNABSORBED LOSSES OR DEPRECIATION, BRO UGHT FORWARD FROM EARLIER YEARS, THEN WHETHER THE SAID 5 ITA NO.2073/PUN/2016 M/S. CUMMINS RESEARCH & TECHNOLOGY INDIA PVT. LTD., UNABSORBED BUSINESS LOSSES / DEPRECIATION ARE TO BE ADJUSTED FROM THE GROSS TOTAL INCOME BEFORE ALLOWIN G THE DEDUCTION UNDER SECTION 10B OF THE ACT OR THE SAID LOSSES OR THE DEDUCTION UNDER SECTION 10B OF THE ACT IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE WITHOUT CONSIDERING TH E BROUGHT FORWARD UNABSORBED LOSSES / DEPRECIATION, W HICH CAN BE SET OFF AGAINST THE OTHER INCOME OF ASSESSEE . BOTH THE AUTHORITIES BELOW HAD DENIED THE CLAIM TO THE ASSES SEE, IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN HIMASINGKA SEIDE LTD. VS. CIT (SUPRA). THE PERUSAL OF THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT IN THE SAI D CASE REFLECTS THAT THE YEARS UNDER APPEAL RELATED TO ASS ESSMENT YEARS 1988-89 TO 1990-91 I.E. THE YEARS WHERE THE B ENEFIT UNDER SECTION 10B OF THE ACT WAS FOR BEING EXEMPT F ROM TOTAL INCOME. HOWEVER, THE YEAR UNDER APPEAL BEFORE US IS ASSESSMENT YEAR 2005-06, WHEREIN THE SAID SECTION H AS BEEN AMENDED AND THE DEDUCTION NOW IS ALLOWABLE TO THE ASSESSEE AS AGAINST THE SAID INCOME BEING EXEMPT IN THE EARLIER YEARS. THE ISSUE IS SETTLED BY THE HON'BLE BOMBAY HIGH COURT IN CIT VS. BLACK & VEATCH CONSULTING PVT . LTD. (2012) 348 ITR 72 (BOM), WHEREIN IT WAS HELD AS UND ER:- 'THE DEDUCTION UNDER S. 10A, HAS TO BE GIVEN EFFECT TO AT THE STAGE OF COMPUTING THE PROFITS AND GAINS OF BUSINES S. THIS IS ANTERIOR TO THE APPLICATION OF THE PROVISIONS OF S. 72 WHICH DEALS WITH THE CARRY FORWARD AND SET OFF OF BUSINES S LOSSES. A DISTINCTION HAS BEEN MADE BY THE LEGISLATURE WHIL E INCORPORATING THE PROVISIONS OF CHAPTER VI-A. SECTI ON 80A(1) STIPULATES THAT IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE, THERE SHALL BE ALLOWED FROM HIS GROSS TOTAL INCOME, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH E CHAPTER, THE DEDUCTIONS SPECIFIED IN SS.80C TO 80U. S.80B(5) DEFINES FOR THE PURPOSE OF CHAPTER VI-A 'GROSS TOTA L INCOME' TO MEAN THE TOTAL INCOME COMPUTED IN ACCORDANCE WIT H THE PROVISIONS OF THE ACT, BEFORE MAKING ANY DEDUCTION UNDER THE CHAPTER. WHAT THE REVENUE IN ESSENCE SEEKS TO A TTAIN IS TO TELESCOPE THE PROVISIONS OF CHAPTER VI-A IN THE CONTENT OF THE DEDUCTION WHICH IS ALLOWABLE UNDER S.10A, WHICH WOULD NOT BE PERMISSIBLE UNLESS A SPECIFIC STATUTORY PROV ISION TO THAT EFFECT WERE TO BE MADE. IN THE ABSENCE THEREOF , SUCH AN APPROACH CANNOT BE ACCEPTED. THUS ITAT WAS CORRECT IN HOLDING THAT THE BROUGHT FORWARD UNABSORBED DEPRECI ATION AND LOSSES OF THE UNIT THE INCOME WHICH IS NOT ELIG IBLE FOR DEDUCTION UNDER S.10A OF THE ACT CANNOT BE SET OFF AGAINST THE CURRENT PROFIT OF THE ELIGIBLE UNIT FOR COMPUTI NG THE DEDUCTION UNDER S.10A OF THE IT ACT.' SINCE THE FACTS OF THE CASE ARE IDENTICAL, RELYING UPON THE ABOVE DECISION OF PUNE TRIBUNAL, THE AO IS DIRECTED TO ALLOW DEDUCTION U/S. 10A OF THE I.T. ACT, 1961 WITHOUT SETTING OFF UNABSORBED DEPRECIATION AND BROUGHT FORWARD BUSINESS LOSSES OF EARLIER YEARS. ACCORDINGLY, HE IS DIRECTED TO DELETE THE AD DITION OF RS.98,83,770/-. THUS, GROUND NO. 1 TO 5 ARE ALLOWED. 9. FURTHER, WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF TRIZETTO SERVICES INDIA PVT. LTD. VS. DCIT ITA NO.2537/ PUN/2016, 6 ITA NO.2073/PUN/2016 M/S. CUMMINS RESEARCH & TECHNOLOGY INDIA PVT. LTD., ORDER DATED 28-03-2018 FOR THE A.Y. 2010-11 HAD AN OC CASION TO DECIDE AN IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. THE SAID FINDIN G OF THE TRIBUNAL IS ALSO EXTRACTED HERE AS UNDER : 8. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDER S OF THE REVENUE AS WELL AS THE APEX COURT JUDGMENT IN THE CASE OF CIT VS. YOKOGAWA INDIA PRIVATE LTD. (SUPRA). IT IS A SETTLED LEGAL PROPOSITION ON THE ISSUE RAISED IN GROUND NO.1, I.E. SET OFF OF BROUGHT FORW ARD LOSSES BEFORE CONSIDERING DEDUCTION U/S.10A OF THE ACT. THE LEGA L PROPOSITION LAID DOWN BY THE HONBLE APEX COURT (SUPRA) READS AS UNDER : CONCLUSION : AFTER AMENDMENT OF SECTION 10A BY FI NANCE ACT 2000 WITH EFFECT FROM 1-4-2001, SAID SECTION HAS BE COME A PROVISION FOR DEDUCTION BUT STAGE OF DEDUCTION WOUL D BE WHILE COMPUTING GROSS TOTAL INCOME OF ELIGIBLE UNDERTAKIN G UNDER CHAPTER IV OF ACT AND NOT AT STAGE OF COMPUTATION OF TOTAL INCOME UNDER CHAPTER VI OF ACT. THE SAID APEX COURT JUDGMENT IS CATEGORICAL IN STAT ING THAT THE DEDUCTION U/S.10A SHOULD BE FIRST COMPUTED AND ALLO WED BEFORE SETTING OFF BROUGHT FORWARD LOSSES. THE STAGE OF G RANTING THE SAID DEDUCTION IS CATEGORICALLY SPECIFIED AND THE SAME I S TO BE ALLOWED AT THE STAGE WHILE COMPUTING THE GROSS TOTAL INCOME OF ELIGIBLE UNDERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF TOTAL INCOME UNDER CHAPTER VI OF THE ACT. CONSIDERING THE BINDING NATURE OF THE APEX COURT JU DGMENT, WE ARE OF THE VIEW THAT GROUND NO.1 IN THE APPEAL IS REQUIRED TO BE DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUND NO.1 IS ALLOWED. FROM THE ORDER OF THE AO, IT IS EVIDENT THAT THE JUDGME NT IN THE CASE OF HIMATASINGIKE SEIDE LTD. VS CIT (SUPRA) WAS FOLLOWED W ITHOUT APPRECIATING THE FACT THAT THE SAID JUDGMENT WAS DELIVERE D IN THE CONTEXT OF PRE-AMENDED PROVISIONS OF SECTION 10A OF THE ACT. PRES ENTLY, THE APEX COURT JUDGMENT IN THE CASE OF CIT VS. YOKOGAWA INDIA P RIVATE LTD. IS APPLICABLE TO THE FACTS OF THIS CASE. CONSIDERING THE SETTLED NATURE OF THE ISSUE, WE ARE OF THE OPINION THAT THE ISSUE NOW STANDS CO VERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. THUS, WE UPH OLD THE ORDER OF CIT(A). ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7 ITA NO.2073/PUN/2016 M/S. CUMMINS RESEARCH & TECHNOLOGY INDIA PVT. LTD., 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 20 TH DAY OF JULY, 2018. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 20 TH JULY, 2018. SATISH # # # # / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (A), PUNE-1. 4. THE PR. CIT-1, PUNE. 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE