DCIT CIR11(2)(2), MUMBAI V. STATE STREET SYNTEL SERVICES PVT. LTD, MUMBAI

ITA 2179/MUM/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 5937 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 27-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA KUMAR LD
• Assessee Lawyers: MEERA PATIL LD
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 10AA

Judgement Text

ITA NOS. 2115 & 2179/MUM/2017 STATE STREET SYNTEL SERVICES PVT.LTD. ASSESSMENT YEARS-2011-12 & 2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI , BEFORE SHRI JOGINDER SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. NO.2179/MUM/2017 ( ASSESSMENT YEAR: 2011-12) DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-11(2)(2) 421, 4 TH FLOOR, AAYKAR BHAVAN M.K.ROAD, MUMBAI 400 020 VS. STATE STREET SYNTEL SERVICES PRIVATE LIMITED B-101 TO 104, DELPHI HIRANANDANI BUSINESS PARK POWAI,MUMBAI-400 076 PAN/GIR NO. AAICS-0964-Q ( APPELLANT ) : ( !' RESPONDENT ) & I.T.A. NO.2115/MUM/2017 ( ASSESSMENT YEAR: 2012-13) DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-11(2)(2) 421, 4 TH FLOOR, AAYKAR BHAVAN M.K. ROAD,MUMBAI 400 020 VS. STATE STREET SYNTEL SERVICES PRIVATE LIMITED B-101, TO 104, DELPH, HIRANANDANI BUSINESS PARK POWAI,MUMBAI-400 076 PAN/GIR NO. AAICS-0964-Q ( APPELLANT ) : ( !' RESPONDENT ) ASSESSEE BY : MEERA PATIL, LD. AR REVENUE BY : RAJENDRA KUMAR, LD. DR #$ DATE OF HEARING : 20/08/2018 %&' $ / DATE OF PRONOUNCEMENT : 03/10/2018 ITA NOS. 2115 & 2179/MUM/2017 STATE STREET SYNTEL SERVICES PVT.LTD. ASSESSMENT YEARS-2011-12 & 2012-13 2 O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEALS BY REVENUE FOR ASSESSMENT YEAR S [AY] 2011-12 & 2012-13 CONTEST SEPARATE ORDERS OF LD. FIRST APPE LLATE AUTHORITY. SINCE COMMON ISSUES ARE INVOLVED, WE DISPOSE-OFF THE SAME BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVIT Y. FIRST WE TAKE UP ITA NO. 2179/MUM/2017 FOR AY 2011-12 WHEREIN THE GR OUNDS RAISED BY THE REVENUE READS AS UNDER: - I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S.10A OF THE I.T.INCOME -TAX ACT, 1961 IGNORING THE FACT THAT THE ASSESSEE HAD NOT CLAIMED THE SAME IN THE VALIDLY FILED RETURN OF INCOME AND AS SUCH, SCRUTINY ASSESSMENT PROCEEDINGS ARE NOT MEANT FOR THE ADMISSION OF FRESH CLAIM BENEFITTING THE ASSESSEE. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) HAS ERRED IN ALLOWING INTEREST INCOME OF RS.28,84,58,703/- AS PROFITS ELIGIBLE FOR DEDUCTION U/S.10A & 10AA OF THE ACT WITHOUT APPRECI ATING THE FACT THAT THE SAID INCOME WAS NOT DERIVED FROM EXPORT OF COMPUTER SOFTWARE AND HENCE WAS NOT ELIGIBLE FOR DEDUCTION UNDER THE SAID SECTI ONS. III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN NOT APPRECIATING THE RATIO OF THE JUDGMENT OF TH E HONBLE APEX COURT IN THE CASE OF LIBERTY INDIA LTD. VS. CIT (317 ITR 218) WH EREIN IT IS HELD THAT THOUGH CERTAIN INCOME MAY CONSTITUTE PROFIT FROM BUSINESS U/S.28, YET THE SAME CANNOT BE CONSTRUED AS PROFITS DERIVED FROM AN INDU STRIAL UNDERTAKING AND HENCE WOULD NOT BE ELIGIBLE FOR DEDUCTION U/S 10A/1 0AA OF THE ACT. IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) HAS ERRED IN ALLOWING INTEREST INCOME EARNED FROM EEFC ACCOUN T AS PROFITS ELIGIBLE FOR DEDUCTION U/S 10A & 10AA OF THE ACT RELYING UPON TH E DECISION OF ITAT IN ASSESSEES OWN CASE WITHOUT APPRECIATING THAT HONB LE BOMBAY HIGH COURT IN THE CASE OF CIT VS SHAH ORIGINALS (327 ITR 19 (2010 ) HAD CATEGORICALLY HELD THAT THE INTEREST ACCRUED TO THE ASSESSEE ON THE DE POSITS HELD IN EEFC ACCOUNT FALLS FOR CLASSIFICATION AS INCOME FROM OTH ER SOURCES AND CANNOT BE TREATED AS BUSINESS INCOME. V) ON THE FACTS AND CIRCUMSTANCES OF THE CAE AND I N LAW, WHETHER THE CIT(A) WAS CORRECT IN RELYING UPON HONBLE ITAT IN THE ASS ESSEES OWN CASE FOR ASSESSMENT YEARS 2008-09 TO 2010-11 WHICH HAS NOT B EEN ACCEPTED BY THE DEPARTMENT ON MERITS WHICH WAS PENDING BEFORE HIGH COURT FOR ADJUDICATION. VI) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN HOLDING THAT THE LOSS INCURRED BY ONE OF THE SEZ UNITS WAS NOT ELIGIBLE FOR SET OFF AGAINST ELIGIBLE PROFITS OF SEZ UNITS FOR T HE PURPOSE OF COMPUTATION OF DEDUCTION U/S.10A OF THE ACT. ITA NOS. 2115 & 2179/MUM/2017 STATE STREET SYNTEL SERVICES PVT.LTD. ASSESSMENT YEARS-2011-12 & 2012-13 3 VII) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT THE DEDUCTION U/S 10A IS T O BE ALLOWED AFTER COMPUTING THE OVERALL PROFITS AND GAINS OF BUSINESS OF SEZ UNITS AND AS SUCH, THE AO WAS JUSTIFIED IN SETTING OFF THE UNABSORBED DEPRECIATION PERTAINING TO RENTAL BUSINESS OF SEZ UNITS. VIII) THE APPELLANT PRAYS THAT THE ORDER OF THE C IT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. IX) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER A NY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DE PUTY COMMISSIONER OF INCOME TAX-11(2)(2), MUMBAI U/S 143 (3) ON 26/02/2015 WHEREIN THE INCOME OF THE ASSESSEE HAS B EEN DETERMINED AT RS.24.16 CRORES UNDER NORMAL PROVISIONS AFTER CERTA IN ADJUSTMENTS AS AGAINST RETURNED INCOME OF RS.23.67 CRORES E-FILED BY THE ASSESSEE ON 29/11/2011. DURING IMPUGNED AY, THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE WAS ENGAGED IN THE PROVIDING INFORMATION TECHNOLOGY ENABLED SERVICES [ITES] & BUSINESS PROCESS OUTSOURCING SERV ICES . THE MATERIAL ON RECORD REVEAL THAT THE ASSESSEE WAS ELIGIBLE TO CLAIM DEDUCTION U/S 10A/10AA. 2.1 DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THA T THE ASSESSEE CREDITED INTEREST INCOME OF RS.22.31 CRORES WHICH W AS CREDITED TO PROFIT & LOSS ACCOUNT UNDER THE HEAD O THER INCOME . IN THE STATEMENT OF COMPUTATION OF INCOME, THE ASSESSEE PLACED A NOTE T O THE EFFECT THAT INTEREST INCOME WAS IN THE NATURE OF BUSINESS INCOM E AND THEREFORE, QUALIFY FOR DEDUCTION U/S 10A / 10AA, HOWEVER, OUT OF ABUNDANT CAUTION THE SAID DEDUCTION IS NOT BEING CLAIMED. THE ASSESS EE RAISED THE SAME PLEA DURING ASSESSMENT PROCEEDINGS. HOWEVER LD. AO OPINED THAT DEDUCTION U/S 10A / 10AA WAS ALLOWABLE ONLY IN RESP ECT OF PROFITS OF THE UNDERTAKING FROM EXPORT OF ARTICLE OR THING OR COMP UTER SOFTWARE ITA NOS. 2115 & 2179/MUM/2017 STATE STREET SYNTEL SERVICES PVT.LTD. ASSESSMENT YEARS-2011-12 & 2012-13 4 MANUFACTURED OR PRODUCED IN SPECIFIED ZONE AND THER EFORE, INTEREST INCOME NOT BEING DERIVED OUT OF EXPORT WAS NOT ELIG IBLE FOR THE SAID DEDUCTION. 2.2 THE SECOND ISSUE UNDER THE APPEAL ARISES OUT OF THE FACT THAT THE ASSESSEE CLAIMED EXEMPTION U/S 10A / 10AA FOR RS.16 1.98 CRORES WHICH WAS BEFORE SETTING-OFF OF UNABSORBED LOSSES OF OTHE R BUSINESS UNITS. THE ASSESSEE CONTENDED THAT THE UNABSORBED LOSSES OF OT HER UNITS WAS AVAILABLE FOR SET-OFF AGAINST OTHER TAXABLE INCOME. HOWEVER, NOT CONVINCED, LD. AO RELYING UPON CBDT CIRCULAR FILE NO. 279/MISC./ /M- 116/2012-ITJ DATED 16/07/2013 RESTRICTED THE DEDUCTION TO BUSINESS INCOME OF RS.161.49 CRORES AS AGAINST RS.161.98 CRO RES AS CLAIMED BY THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 30/12/2016 WHE REIN THE DEDUCTION AGAINST INTEREST INCOME WAS ALLOWED TO THE ASSESSEE BY RELYING ON THE DECISION OF THIS TRIBUNAL RENDERED IN ASSESSEES OW N CASE FOR AYS 2008- 09 TO 2010-11. THE HIGHER DEDUCTION U/S 10A / 10AA WAS ALLOWED BY PLACING RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN ASSESSEES SISTER CONCERN CASE TITLED AS CIT VS. SYNTEL LTD. FOR AY 2005-06. AGGRIEVED, THE REVENUE IS IN FURTHER APPEA L BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR], SUPPO RTED THE STAND TAKEN BY LD. AO BUT COULD NOT SUBSTANTIATE THE SAME WITH ANY CONTRARY JUDGMENT TO CONTROVERT THE STAND OF THE ASSESSEE. P ER CONTRA, THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [AR], MS. MEERA PATIL, SUBMITTED THAT THE ISSUES WERE SQUARELY COVERED IN ASSESSEES FAVOR BY EARLIER JUDICIAL PRONOUNCEMENTS. ITA NOS. 2115 & 2179/MUM/2017 STATE STREET SYNTEL SERVICES PVT.LTD. ASSESSMENT YEARS-2011-12 & 2012-13 5 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING JUDICIAL PRONOUNCEMENT S AS CITED BEFORE US. SO FAR AS THE ISSUE OF DEDUCTION U/S 10A / 10AA AGA INST INTEREST INCOME IS CONCERNED, WE FIND THAT THE ISSUE STOOD SQUARELY COVERED IN ASSESSEES FAVOR BY THE ORDER OF THIS TRIBUNAL FOR AY 2008-09, ITA NO. 3743/MUM/2013 DATED 29/02/2016 , A COPY OF WHICH HAS BEEN PLACED ON RECORD. SIMILAR VIEW HAS BEEN TAKEN FOR AY 2009-10 VIDE ITA NO. 6026/MUM/2013 DATED 09/03/2016 AND ALSO FOR AY 2010 -11 VIDE ITA N.6912/MUM/2014 DATED 24/06/2016. THE LD. FIRST APP ELLATE AUTHORITY, FOLLOWING THE SAME, HAS PROVIDED THE RELIEF TO THE ASSESSEE. THERE BEING NO MATERIAL DIFFERENCE IN FACTS BROUGHT OUT TO OUR NOTICE BY THE LD. DEPARTMENTAL REPRESENTATIVE, RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DISMISS GRO UND NUMBERS 1 TO 5 AS RAISED UNDER THE APPEAL. 6. THE SECOND ISSUE PERTAINS TO THE ISSUE OF SET-OF F OF LOSSES BEFORE COMPUTING DEDUCTION UNDER SECTION 10A / 10AA. THE L D. CIT(A) HAS PROVIDED RELIEF TO THE ASSESSEE BY RELYING ON THE D ECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF ASSESSEE S SISTER CONCERN FOR AY 2005-06. THE LD. AR HAS SUBMITTED THAT REVEN UE CONTESTED THE AFORESAID MATTER BEFORE HONBLE SUPREME COURT IN BU NCH OF APPEALS TITLED AS CIT VS. YOKOGAWA INDIA LIMITED [77 TAXMANN.COM 41] WHEREIN THE ISSUE HAS BEEN DECIDED IN FAVOR OF THE ASSESSEE . THE COPY OF THE JUDGMENTS HAS BEEN PLACED ON RECORD. UPON PERUSAL, WE FIND THAT THE MATTER HAS BEEN CONCLUDED BY HONBLE COURT AS FOLLO WS:- 17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [FIR ST PROVISO TO SECTIONS 10A(1); 10A (1A) AND 10A (4)] THAT THE UNIT THAT IS CONTEMPLATE D FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDERTAKING AND THAT IS ALSO HOW TH E CONTEMPORANEOUS CIRCULAR OF THE ITA NOS. 2115 & 2179/MUM/2017 STATE STREET SYNTEL SERVICES PVT.LTD. ASSESSMENT YEARS-2011-12 & 2012-13 6 DEPARTMENT (NO. 794 DATED 09.08.2000) UNDERSTOOD TH E SITUATION, IT IS ONLY LOGICAL AND NATURAL THAT THE STAGE OF DEDUCTION OF THE PROF ITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY A ND, THEREFORE, IMMEDIATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS . AT THAT STAGE THE AGGREGATE OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SE T OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOUL D BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION 10A THEREFORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI O F THE ACT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION 'TOTAL INCOME OF THE ASSESSEE' IN SECTION 10A HAS ALREADY BEEN DEALT WITH EARLIER AND IN THE OVERALL SCENARIO UNFO LDED BY THE PROVISIONS OF SECTION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDE RSTANDING THE EXPRESSION 'TOTAL INCOME OF THE ASSESSEE' IN SECTION 10A AS 'TOTAL IN COME OF THE UNDERTAKING'. 18. FOR THE AFORESAID REASONS WE ANSWER THE APPEALS AN D THE QUESTIONS ARISING THEREIN, AS FORMULATED AT THE OUTSET OF THIS ORDER, BY HOLDING THAT THOUGH SECTION 10A, AS AMENDED, IS A PROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UN DERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTA L INCOME UNDER CHAPTER VI. ALL THE APPEALS SHALL STAND DISPOSED OF ACCORDINGLY. IN VIEW OF THE STATED POSITION OF LAW, WE FIND NO I NFIRMITY IN THE ORDER OF LD. FIRST APPELLATE AUTHORITY. GROUND NUMBERS 6 & 7 STAND DISMISSED. THE OTHER GROUNDS ARE GENERAL IN NATURE. 7. RESULTANTLY, THE REVENUES APPEAL STAND DISMISSE D. ITA NO. 2115/MUM/2017, AY 2012-13 8. THE ASSESSEE HAS SIMILARLY BEEN ASSESSED IN AY 2 012-13 WHEREIN DEDUCTION U/S 10A / 10AA AGAINST INTEREST INCOME OF RS.13.66 CRORES HAVE BEEN DENIED TO THE ASSESSEE BUT ALLOWED BY LD. CIT(A) ON SIMILAR REASONING. THE REVENUE IS IN APPEAL AGAINST THE SAM E WITH SIMILAR GROUNDS OF APPEAL. THERE BEING NO CHANGE IN FACTS O R CIRCUMSTANCES, WE CONFIRM THE STAND OF LD. CIT(A) AND DISMISS GROUND NUMBERS 1 TO 5 AS RAISED BEFORE US. 9. AN ANOTHER ISSUE WHICH HAS CROPPED UP IN THIS YE AR PERTAINS TO AN ADDITION OF RS.19.66 LACS U/S 36(1)(VA) READ WITH SECTION 2(24)(X) DURING ITA NOS. 2115 & 2179/MUM/2017 STATE STREET SYNTEL SERVICES PVT.LTD. ASSESSMENT YEARS-2011-12 & 2012-13 7 ASSESSMENT PROCEEDINGS, IT WAS NOTED THAT THE ASSES SEE DELAYED THE DEPOSIT OF EMPLOYEES CONTRIBUTION [ESIC] FOR RS.19.66 LACS WHICH RESULTED INTO IMPUGNED ADDITION WITHIN THE MEANING OF SECTION 36(1)(VA) READ WITH SECTION 2(24)(X). THE LD. CIT(A) HAS DELETED THE SAME BY OBSERVING THAT THE SAID AMOUNTS WERE DEPOSITED BEFO RE DUE DATE OF FILING OF RETURN OF INCOME AND THEREFORE, ALLOWABLE TO ASS ESSEE IN TERMS OF JUDGMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN CIT VS. HINDUSTAN ORGANICS CHEMICALS LIMITED [48 TAXMANN.COM 421] AND ALSO IN CIT VS. GHATGE PATIL TRANSPORTERS LTD. [368 ITR 749]. BEFORE US, ALTHOUGH LD. DR PLACED RELIANCE ON THE STAND OF LD. AO BUT COULD NOT PLACE ANY CONTRARY JUDGMENT TO CONTROVERT THE SAME. THIS BEIN G THE CASE, WE FIND NO REASON TO INTERFERE WITH THE STAND OF LD. CIT(A) , IN THIS REGARD. GROUND NUMBERS 6 & 7 STAND DISMISSED. THE OTHER GROUNDS AR E GENERAL IN NATURE. THE APPEAL STAND DISMISSED. CONCLUSION 10. BOTH THE APPEALS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD OCTOBER, 2018. SD/- SD/- (JOGINDER SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER (# MUMBAI; DATED :03.10.2018 SR.PS:-THIRUMALESH ITA NOS. 2115 & 2179/MUM/2017 STATE STREET SYNTEL SERVICES PVT.LTD. ASSESSMENT YEARS-2011-12 & 2012-13 8 ! COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. ) / THE CIT(A) 4. ) / CIT CONCERNED 5. * !$+ +' (# / DR, ITAT, MUMBAI 6. ,-. # GUARD FILE ' / BY ORDER, # '$% (DY./ASSTT.REGISTRAR) (# / ITAT, MUMBAI