Cognizant Technology Solutions India Private Ltd(Erstwhile Excellence Data Research Private Limited), Chennai V. Asst. Commissioner of Income Tax, Circle-17(1), Hyderabad

ITA 2227/Hyd/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0102 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-11-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 26-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Keywords: Transfer pricing; Opportunity of being heard
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 22 2 7 /HYD/201 7 ASSESSMENT YEAR: 20 09 - 10 COGNIZANT TECHNOLOGY SOLUTIONS INDIA PVT. LTD., (ERSTWHILE EXCELLENCE DATA RESEARCH PVT. LTD.), CHENNAI PAN A ABCE 4933C VS. ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 17(1), HYDERABAD. ( APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI RAVI BHARADWAJ REVENUE BY : S HRI NILANJAN DEY DATE OF HEARING : 05 / 1 1 /2018 DATE OF PRONOUNCEMENT : 06 / 1 2 / 201 8 O R D E R PER S . RIFAUR RAHMAN , A .M. : T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) 5 , HYDERABAD DATED 3 0 / 1 0 /201 7 FOR AY 20 09 - 10 . 2. BRIEFLY THE FACTS OF THE CASE ARE, THE ASSESSEE , A PRIVATE LTD COMPANY ENGAGED IN THE BUSINESS OF DEVELOPING, TESTING, INTEGRATION AND DEPLOYMENT OF DIGITAL VIDEO DELIVERY ACROSS MULTIPLE PLATFORMS INCLUDING CABLE, IP AND MOBILE TECHNOLOGIES, FILED ITS RETURN OF INCOME ON 29 TH SEPTEMBER, 2009 DECLARING A TOTAL INCOME OF RS. 4,68,35,769/ - UNDER THE PROVISIONS OF SECTION 115JB OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT) AND A TOTAL INCOME OF RS. 14,19,335/ - UNDER THE NORMAL PROVISIONS OF THE ACT. IT HAD CLAIMED DEDUCTION U/S 10A OF THE ACT AMOUNTING TO RS. 6,95,70,554/ - IN THE RETURN OF INCOME. 2.1 THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT AND SUBSEQUENTLY, THE SAME WAS TAKEN FOR SCRUTINY ASSESSMENT U/S 143(3) 2 ITA NO. 2227 /HYD/1 7 COGNIZANT TECHNOLOGY SOLUTIONS INDIA PVT. LTD., CHENNAI. OF THE ACT AND THEREAFTER A DAFT ORDER WAS PASSED BY THE AO ON 18/03/2013 AS A TRANSFER PRICING ADJUSTMENT WAS PROPOSED IN THE ASSESSMENT. 2.2 WHEN THE ASSESSEE FILED ITS OBJECTIONS BEFORE THE DRP, THE DRP UPHELD THE ACTION OF AO/TPO VIDE ITS ORDER DATED 27 TH NOVEMBER, 2013 PASSED U/S 144(5) OF THE ACT. SUBSEQUE NTLY, THE AO PASSED A FINAL ASSESSMENT ORDER U/S 143(3) RWS 144(5) OF THE ACT ON 20/12/2013 WHEREIN AN ADJUSTMENT OF THE BROUGHT FORWARD BUSINESS LOSS WAS MADE PRIOR TO ALLOWING DEDUCTION U/S 10A OF THE ACT. 2.3 AGGRIEVED BY THE SAID ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE ITAT AND THE ITAT VIDE ITS ORDER DATED 31/07/2014 IN ITA NO. 159/HYD/2014 REMANDED THE ISSUE ON SET - OFF OF BROUGHT FORWARD LOSSES TO THE AO TO VERIFY THE ISSUE BY PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND PA SS AN ORDER ACCORDINGLY. 2.4 CONSEQUENTLY, THE AO VIDE HIS ORDER DATED 29/09/14 PASSED U/S 143(3) RWS 254 , ADJUSTED THE BROUGHT FORWARD LOSSES BEFORE ALLOWING DEDUCTION U/S 10A OF THE ACT. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO UPHELD THE ORDER OF AO. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: THE GROUNDS OF APPEAL LISTED BELOW ARE WITHOUT PREJUDICE TO EACH OTHER. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ['CIT(A) IS ERRONEOUS, BAD IN LAW, PREJUDICIAL TO THE A PPELLANT AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 3 ITA NO. 2227 /HYD/1 7 COGNIZANT TECHNOLOGY SOLUTIONS INDIA PVT. LTD., CHENNAI. CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT BEFORE ADJUSTING THE BROUGHT FORWARD BUSINESS LOSSES AGAINST THE CURRENT YEAR'S INCOME 2. THE LEARNED CIT(A) HAS ERRED IN NOT ADJUDICATING THE G ROUND OF THE APPELLANT THAT THE ASSISTANT COMMISSIONER OF INCOME - TAX ('LEARNED AO') HAS F AILE D TO PROVIDE AN OPPORTUNITY OF BEING HEARD ON THE ISSUE OF SET - OFF OF LOSSES, AS PER THE DIRECTIONS OF THIS HON'BLE TRIBUNAL IN ITA NO. 159/HYD/2014 DATED 31 JULY 2014 BEFORE PASSING AN ORDER GIVING EFFECT TO THE DIRECTIONS OF THIS TRIBUNAL. 3. THE LEARNE D CIT(A) HAS ERRED IN FACT AND LAW BY HOLDING THAT THE BROUGHT - FORWARD BUSINESS LOSSES OF THE UNIT ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT OUGHT TO BE SET - OFF PRIOR TO THE GRANT OF DEDUCTION UNDER SECTION 1 0A OF THE ACT. 4. THE LEARNED CIT(A) HAS ERRED IN NOT APPLYING THE PRINCIPLE LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS M / S YOKOGAWA INDIA LTD (391 ITR 274) IN RELATION TO THE STAGE AT WHICH THE DEDUCTION UNDER SECTION 10A SHALL BE ALLOWED. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS IN STATING THAT THE PRINCIPLE LAID DOWN IN THE CASE OF CIT VS MIS YOKOGAWA INDIA LTD (391 ITR 274) IS NOT RELEVANT TO THE PRESENT SET OF FACTS OF THE APPELLANT. 5. BEFORE US, THE LD. AR SUBMITTED THAT THE AO WAS WRONGLY SET OFF OF THE BROUGHT FORWARD LOSSES PRIOR TO GRANT OF DEDUCTION U/S 10A OF THE ACT. FOR THIS PROPOSITION, HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD. [2017] 77 TAXMANN.COM 41 (SC). 6. THE LD. DR, ON THE OTHER HAND, RE LIED ON THE ORDERS OF REVENUE AUTHORITIES. 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD . WE NOTICED THAT AO HAS ALLOWED THE DEDUCTION U/S 10A AFTER SETTING OFF OF THE BROUGHT FORWARD LOSSES BY TREATING THE DEDUCTION U/S 10A AS D EDUCTION U/S CHAPTER VIA. WHEREAS THE DEDUCTION AS PER AMENDED ACT OF FINANCE ACT, 2000 FIND PLACE IN CHAPTER III. THE QUESTION OF ALLOWING DEDUCTION OF SECTION 10A IN CHAPTER III OR 4 ITA NO. 2227 /HYD/1 7 COGNIZANT TECHNOLOGY SOLUTIONS INDIA PVT. LTD., CHENNAI. CHAPTER VIA WAS ADJUDICATED BY HONBLE SUPREME COURT IN THE CASE OF C IT VS. YOKOGAWA INDIA LTD. (SUPRA). THE RELEVANT RATIO IS AS UNDER: 17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [FIRST PROVISO TO SECTIONS 10A(L); 10 A ( 1 A) AND 10 A( 4 ) THAT THE UNIT THAT IS CONTEMPLATED FOR GRAN T OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDERTAKING AND THAT IS .C: ALSO HOW THE CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT (NO. 794 DATED 09.08.2000) UNDERSTOOD THE SITUATION, IT IS ONLY LOGICAL AND NATURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF , AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, 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 E PROVISIONS FOR SE T OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION 10 A THEREFORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE ACT FOR ARRIVI NG AT THE TOTAL E INCOME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION 'TOTAL INCOME OF THE ASSESSEE' IN SECTION 10 A HAS ALREADY BEEN DEALT WITH EARLIER AND IN THE OVERALL SCENARIO E UNFOLDED BY THE PROVISIONS O F SECTION 10 A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPRESSION 'TOTAL INCOME OF THE ASSESSEE' IN SECTION 10 A AS 'TOTAL INCOME OF THE UNDERTAKING'. 18. FOR THE AFORESAID REASONS WE ANSWER THE APPEALS AND THE QUESTIONS ARISING THEREI N, AS FORMULATED AT THE OUTSET OF THIS ORDER, BY HOLDING THAT THOUGH SECTION 10 A, AS AMENDED, IS A PROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDER C CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI. ALL THE APPEALS SHALL STAND DISPOSED OF ACCORDINGLY. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WHICH IS DIRECTLY ON THE SUBJECT, WE DIRECT THE AO TO ALLOW THE DEDUCTION U/S 10A BEFO RE SETTING OFF OF THE BROUGHT FORWARD LOSSES. ACCORDINGLY, GROUND S RAISED BY THE ASSESSEE ON THIS ISSUE ARE ALLOWED. 5 ITA NO. 2227 /HYD/1 7 COGNIZANT TECHNOLOGY SOLUTIONS INDIA PVT. LTD., CHENNAI. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 6 TH DECEMBER , 2018 . SD/ - SD/ - ( P. MADHAVI DEVI ) (S . RIFAUR RAHMAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 6 TH DECEMBER , 2018 KV C OPY TO: - 1) COGNIZANT TECHNOLOGY SOLUTIONS INDIA PVT. LTD., 165/110, 6 TH FLOOR, MENON ETERNITY BUILDING, ST. MARYS ROAD, ALWARPET, CHENNAI 600 018 2) AC IT, CIRCLE 17(1), 9 TH FLOOR, SIGNATURE TOWERS, OPP. TO BOTANICAL GARDENS, KONDAPUR, HYDERABAD 500 084 3) CIT(A) 5 HYDERABAD. 4) PR. CIT - 5 , HYD. 5 ) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6 ) GUARD FILE