RR Donnelley India Outsource Private Limited, CHENNAI V. ACIT, CHENNAI

ITA 2222/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2482 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-06-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 11-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R B NAIK
• Assessee Lawyers: DR ANITA SUMANTH
• Keywords: Depreciation; Scheme of amalgamation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 2222/MDS/2012 (ASSESSMENT YEAR : 2008-09) M/S RR DONNELLEY INDIA OUTSOURCE PVT. LTD. (FORMERLY ASTRON DOCUMENT MANAGEMENT PVT. LTD.), 43A, 1 ST MAIN ROAD, RA PURAM, CHENNAI - 600 028. PAN : AABCH 1990 A (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE V(4), CHENNAI - 600 034. (RESPONDENT) APPELLANT BY : DR. ANITA SUMANTH, ADVOCATE RESPONDENT BY : SHRI R.B. NAIK, CIT-DR DATE OF HEARING : 17.06.2013 DATE OF PRONOUNCEMENT : 20.06.2013 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, IT HAS RAIS ED THREE EFFECTIVE GROUNDS. FIRST TWO GROUNDS RELATE TO ITS CLAIM FOR DEDUCTION UNDER SECTION 10A OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). GRIEVANCE RAISED BY THE ASSESSEE THROUGH THESE GROU NDS IS THAT SUCH DEDUCTION WAS ALLOWED BY THE ASSESSING OFFICER ONLY AFTER SETTING OFF LOSSES SUFFERED BY OTHER UNITS. FURTHER, AS PER AS SESSEE, LOSS I.T.A. NO. 2222/MDS/12 2 PERTAINING TO EARLIER YEARS SHOULD HAVE BEEN ALLOWE D FOR SET OFF AGAINST THE BALANCE INCOME REMAINING AFTER CLAIMING DEDUCTION UNDER SECTION 10A OF THE ACT. 2. ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 10A OF THE ACT IN RESPECT OF ITS UNIT CALLED OFFICE TIGER (CHENNAI ). ITS OTHER UNITS, ASTRON (CHENNAI) AND ASTRON (TRIVANDRUM), WERE RUNN ING ON LOSS. AGAINST PROFIT OF ` 38,39,10,432/- IN OFFICE TIGER (CHENNAI), DEDUCTIO N CLAIMED BY THE ASSESSEE UNDER SECTION 10A WAS ` 37,93,13,860/-. SET-OFF OF LOSS FROM OTHER UNITS WAS CLAIMED ON THE BALANCE. ASSESSING OFFICER RECOMPUTED THE PROFITS OF OFFICE TIGER (CHENNAI) AND ARRIVED AT A FIGURE OF ` 43,12,19,013/-. FROM SUCH AMOUNT, HE DEDUCTED THE LOSSES SUFFERED BY THE ASSESSEE ON ITS ASTRON (CHENNAI) AND ASTRON (TRIVANDRUM) UNITS. ONLY FROM THE NET A MOUNT, DEDUCTION CLAIMED UNDER SECTION 10A WAS ALLOWED. 3. THOUGH AGAINST A DRAFT PROPOSAL ON THE LINES MEN TIONED ABOVE, ASSESSEE MOVED DRP, IT WAS NOT SUCCESSFUL. 4. BEFORE US, LEARNED A.R. SUBMITTED THAT THE ISSUE STOOD COVERED BY THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUN AL IN ASSESSEE'S OWN CASE IN I.T.A. NOS.1489 & 1490/MDS/2010 FOR ASS ESSMENT YEARS 2005-06 AND 2006-07. RELIANCE WAS ALSO PLACED ON T HE DECISION OF I.T.A. NO. 2222/MDS/12 3 SPECIAL BENCH IN THE CASE OF SCIENTIFIC ATLANTA IND IA TECHNOLOGY (P) LTD. VS. ACIT, 129 TTJ 273 AND THAT OF HONBLE KARN ATAKA HIGH COURT IN THE CASE OF CIT V. YOKOGAWA INDIA LTD. AND OTHER S (2011) 246 CTR 226. 5. PER CONTRA, LEARNED D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IT WAS HELD BY THE CO-ORDINATE BENCH OF THIS TRIBUN AL, ON A SIMILAR ISSUE RAISED BY THE REVENUE, IN ITS ORDER DATED 26 TH JULY, 2012, FOR ASSESSMENT YEARS 2005-06 AND 2006-07, AS UNDER:- 4. IN THE APPEALS FILED BY THE REVENUE, THE FIRST G ROUND IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED I N ALLOWING DEDUCTION UNDER SEC.10A BEFORE SETTING OFF OF BROUG HT FORWARD DEPRECIATION AND LOSSES. THIS ISSUE WAS CONSIDERED AND DECIDED BY THE INCOME-TAX APPELLATE TRIBUNAL, CHENNAI BENCH IN FAVOUR OF THE ASSESSEE, IN THE CASE OF M/S. SCIENTIFIC ATLANTA IN DIA TECHNOLOGY PVT. LTD. (129 TTJ 273). 5. THE REVENUE HAS REFERRED TO A DECISION OF THE K ARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT V. HIMATASINGIKE SEIDE LTD. (286 ITR 255). 6. BUT IN A RECENT DECISION, THE HONBLE KARNATAKA HIGH COURT HAS CONSIDERED THIS ISSUE AND DECIDED IN FAVOUR OF THE ASSESSEE IN THE CASE OF CIT & ANR. VS. YOKOGAWA INDIA LTD. AND OTHE RS, (2012) 246 CTR (KAR) 226. THE SPECIFIC QUESTION CONSIDERED BY THE HIGH COURT IS, WHETHER OR NOT ON THE FACTS AND IN THE CI RCUMSTANCES, CLAIM UNDER SEC.10A IS TO BE ALLOWED ON THE PROFITS OF THE EOU I.T.A. NO. 2222/MDS/12 4 WITHOUT SETTING OFF OF BROUGHT FORWARD LOSSES OF EA RLIER YEARS OF THE NON EOU? THE HONBLE KARNATAKA HIGH COURT AGAIN HAS CONSIDERED SIMILAR ISSUE AND ARRIVED AT THE SAME CO NCLUSION IN THE CASE OF CIT & ANR. VS. TATA ELXSI LTD. & OTHERS (24 7 CTR 334). 7. THEREFORE, IN VIEW OF THE DECISION OF THE ITAT, CHENNAI BENCH AND THE DECISIONS OF THE HONBLE KARNATAKA HIGH COU RT, WE HOLD THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS AR RIVED AT A RIGHT CONCLUSION. THIS ISSUE IS DECIDED AGAINST THE REVENUE. THUS, IN OUR OPINION, ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 10A WITHOUT SETTING OF LOSSES SUFFERED BY O THER UNITS AND THERE IS NOTHING THAT STOPS THE ASSESSEE FROM CLAIM ING SET OFF ON THE BALANCE PROFITS WHICH REMAINED AFTER THE CLAIM OF D EDUCTION. FINALLY, WHAT CAN BE ASSESSED IS ONLY THE TOTAL INCOME. 7. GROUND NOS.2 AND 3 OF THE ASSESSEE STAND ALLOWED . 8. VIDE ITS GROUND NO.4, GRIEVANCE RAISED BY THE AS SESSEE IS THAT CREDIT FOR DEDUCTION OF TAX AT SOURCE, AVAILABLE TO THE AMALGAMATING COMPANY, WAS NOT GIVEN TO IT. 9. FACTS APROPOS ARE THAT ONE M/S OFFICE TIGER DATA BASE SYSTEMS INDIA PRIVATE LIMITED AMALGAMATED WITH ASSESSEE-COM PANY, EARLIER KNOWN AS ASTRON DOCUMENT MANAGEMENT PRIVATE LIMITED , THROUGH A SCHEME OF AMALGAMATION APPROVED BY HON'BLE JURISDIC TIONAL HIGH COURT, ON 23 RD JULY, 2007 IN COMP. PETN. NOS. 84 AND 85 OF 2007. IN I.T.A. NO. 2222/MDS/12 5 THE RETURN OF INCOME FILED BY THE ASSESSEE, IT HAD CLAIMED TDS CREDIT OF ` 63,32,269/- WHICH, INTER ALIA, INCLUDED A SUM OF ` 22,52,570/- PERTAINING TO THE AMALGAMATING COMPANY, VIZ. M/S OF FICE TIGER DATABASE SYSTEMS INDIA PRIVATE LIMITED. ASSESSING OFFICER WAS OF THE OPINION THAT SUCH CLAIM OF ` 22,52,570/- AS TAX CREDIT, COULD NOT BE ALLOWED. ON A PROPOSAL MADE ON THESE LINES, ASSESS EE MOVED DRP. DRP GAVE A DIRECTION TO THE ASSESSING OFFICER TO VE RIFY TDS CREDIT AND ALLOW TAX TO THE EXTENT THE TDS CREDITS WERE UP LOADED BY THE RESPECTIVE DEDUCTORS. THE DRP ALSO DIRECTED THE A SSESSEE TO PURSUE WITH ALL THE DEDUCTORS SO THAT THE TDS DETAI LS WERE FULLY UPLOADED. ASSESSING OFFICER THEREAFTER CONDUCTED A FRESH VERIFICATION AND NOTED THAT THE TDS SHOWN IN THE SYSTEM WAS ONLY ` 40,79,699/-. IN OTHER WORDS, HE DID NOT ALLOW CREDIT FOR ` 22,52,570/-. 10. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDERS OF AUTHORITIES BELOW, SUBMITTED THAT THE TDS CREDIT OF M/S OFFICE TIGER DATABASE SYSTEMS INDIA PRIVATE LIMITED COULD NOT BE DENIED, SINCE THE MERGER OF THE SAID COMPANY WITH ASSESSEE-COMPAN Y WAS APPROVED BY HON'BLE JURISDICTIONAL HIGH COURT. AS PER LEARNED A.R., ASSESSEE HAD NO CONTROL OVER THE DEDUCTORS TO FORCE THEM UPLOAD THE I.T.A. NO. 2222/MDS/12 6 TDS CREDIT IN THE SYSTEM. LEARNED A.R., THEREFORE, SUBMITTED THAT CREDIT FOR WHOLE OF THE SUM OF ` 63,32,269/- HAD TO BE GIVEN. 11. PER CONTRA, LEARNED D.R., STRONGLY SUPPORTING T HE ORDERS OF AUTHORITIES BELOW, SUBMITTED THAT UNLESS AND UNTIL THE TDS DEDUCTED WAS UPLOADED IN THE DEPARTMENTS SERVER BY THE CONC ERNED DEDUCTORS, CREDIT THEREOF COULD NOT BE GIVEN TO THE ASSESSEE. 12. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IT IS NOT DISPUTED THAT ASSESSEE HAD CLAIMED TDS CR EDIT OF ` 63,32,269/-, OUT OF WHICH, ` 22,52,570/- PERTAINED TO M/S OFFICE TIGER DATABASE SYSTEMS INDIA PRIVATE LIMITED, WHICH MERGE D WITH ASSESSEE-COMPANY. IT IS ALSO NOT DISPUTED THAT SUC H SCHEME OF AMALGAMATION HAD THE APPROVAL OF HON'BLE JURISDICTI ONAL HIGH COURT VIDE ITS ORDER DATED 23 RD JULY, 2007 IN COMP. PETN. NOS. 84 AND 85 OF 2007. AT PAGE NO.4 OF THE ORDER, THEIR LORDSHIP HA VE OBSERVED AS UNDER:- THIS COURT DOTH HEREBY SANCTION THE SCHEME OF AMALGAMATION ANNEXED HEREUNDER WITH EFFECT FROM 01. 4.2007 AND DECLARE THE SAME TO BE BINDING ON ALL THE MEMBE RS OF THE SAID COMPANIES AND ON THE SAID COMPANIES. NEVERTHELESS, THEIR LORDSHIP HAD ALSO GIVEN FREEDOM TO THE PARTIES TO THE SCHEME AS WELL AS ANY INTERESTED PERSON TO MOVE THE COURT FOR I.T.A. NO. 2222/MDS/12 7 ANY DIRECTION THAT MAY BE NECESSARY TO CARRY OUT TH E SCHEME OF AMALGAMATION. RELEVANT PARA (2) OF JUDGMENT OF HON 'BLE JURISDICTIONAL HIGH COURT, READS AS UNDER:- (2) THAT THE PARTIES TO THE SCHEME OF AMALGAMATION OR ANY OTHER PERSON INTERESTED SHALL BE AT LIBERTY TO APPLY TO THIS COURT FOR ANY DIRECTIONS THAT MAY BE NECESSARY IN REGARD TO CARRYING OUT THIS SCHEME OF AMALGAMATION ANNEXED HEREUNDER. THUS, WITHOUT DOUBT, THE SCHEME OF AMALGAMATION HAD EFFECT FROM 1.4.2007. IN OTHER WORDS, IT WAS EFFECTIVE FOR WHO LE OF THE RELEVANT PREVIOUS YEAR. AT THE SAME TIME, IT IS TO BE NOTED THAT UNLESS AND UNTIL THE TAX DEDUCTED AT SOURCE WAS UPLOADED BY THE DEDU CTORS, IT MAY NOT BE POSSIBLE TO GIVE CREDIT TO THE ASSESSEE. ASSESS ING OFFICER HAS NO WAY TO VERIFY WHETHER THE TAX CREDIT CLAIMED HAS BE EN PROPERLY MADE AND PAID. ASSESSING OFFICER HAS ALSO NO WAY TO VER IFY WHETHER THE AMALGAMATING COMPANY HAD CLAIMED CREDIT FOR SUCH AM OUNT AFTER FILING A TAX RETURN. IN SUCH CIRCUMSTANCES, WE ARE OF THE OPINION THAT ASSESSEE OUGHT HAVE MOVED HON'BLE JURISDICTIONAL HI GH COURT FOR EFFECTIVE DIRECTIONS IN THIS REGARD FOR CARRYING OU T THE SCHEME OF AMALGAMATION, TO THE LOGICAL CONCLUSION. ASSESSEE HAVING NOT DONE THAT, CANNOT REQUIRE THE ASSESSING OFFICER TO GIVE CREDIT FOR A SUM WHICH HAS NOT BEEN PROVED BY IT AS REMITTED TO THE TREASURY BY THE I.T.A. NO. 2222/MDS/12 8 DEDUCTORS. NEVERTHELESS, IN THE INTEREST OF JUSTIC E, WE ARE OF THE OPINION THAT THE MATTER REQUIRES A FRESH LOOK BY TH E ASSESSING OFFICER. ASSESSEE SHALL MOVE THE APPROPRIATE AUTHORITIES AND GET DIRECTIONS IN THIS REGARD AND ALSO PRODUCE EVIDENCE BEFORE THE AS SESSING OFFICER THAT TAX DEDUCTED BY THE AMALGAMATING COMPANY STOOD DULY REMITTED TO THE TREASURY. ASSESSING OFFICER SHALL PROCEED I N ACCORDANCE WITH LAW. 13. GROUND NO.4 IS ALLOWED FOR STATISTICAL PURPOSES . 14. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED PRO TANTO . ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 20 TH OF JUNE, 2013, AT CHENNAI. SD/- SD/- (V.DURGA RAO) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 20 TH JUNE, 2013. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) SECRETARY, DRP, CHENNAI (4) CIT-III, CHENNAI (5) DIT, TP, CHENNAI. (6) D.R. (7) GUARD FILE