M/s Sandvine Technologies (India) Private Limited , Bangalore V. Deputy Commissioner of Income Tax Circle-6(1)(1), Bangalore

ITA 2433/BANG/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3773 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-10-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 24-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: HARIPRASAD NAYAK
• Keywords: Depreciation; Additional depreciation; Set aside
• Section: 143(3); 142(1); 10AA; 40(a)(ia); 250; 201; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES A BENCH: BANGALORE BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA. NO. 2433 /BANG/2018 (ASSESSMENT YEAR: 201 4 - 15 ) M/S. SANDVINE TECHNOLOGIES (INDIA) PVT. LTD., RMZ ECOWORLD INFRASTRUCTURE PVT. LTD. SEZ, GROUND EAST WING, DEVARABISANAHALLI VILL., VARTHUR HOBLI, BANGALORE - 560 013 PAN: AAMCS1644M VS. DY. COMMISSIONER OF INCOME TAX , CIRCLE 6(1)(1), BANGALORE. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI HARIPRASAD NAYAK, C.A. REVENUE BY: SHRI SUNIL KUMAR AGARWAL, ADDL.CIT (D.R) DATE OF HEARING : 10.10 .2019 DATE OF PRONOUNCEMENT : 01 .11 .2019 O R D E R PER SHRI PAVAN KUMAR GADALE, JM : THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF C OMMISSIONER OF INCOME TAX (APPEALS), BANGALORE PASSED UNDER SECTION 143(3) AND 250 OF THE INCOME TAX ACT, 1961. 2 ITA NO. 2433/BANG/2018 2. AT THE TIME OF HEARING, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTE D THAT THE ADDITIONAL GROUND OF APPEAL HAS BEEN FILED IN RESPECT OF CLAIM AND HAS NOT PRESSED THE ORIGINAL GROUNDS OF APPEAL FILED ALONG WITH FORM 36 AND MADE ENDORSEMENT . A C CORDINGLY T HE ORIGINAL GROUNDS OF APPEAL ARE TREATED AS NOT PRESSED AND DISMISS ED AND THE ADDITIONAL GROUND OF APP EAL IS AS UNDER : 3. THE BRIEF FACTS OF THE CASE OF THE ASSESSEE ARE THAT THE ASSESSEE IS ENGAGED IN THE MARKETING AND PRESALES SUPPORT SERVICES TO SANDVINE INC. AND FILED THE RETURN OF INCOME FOR THE ASSESSMENT Y EAR 2014 - 15 ON 29.11.2014 WITH TOTAL INCOME OF RS.1,37,460 AFTER CLAIMING DEDUCTION UNDER SECTION 10AA OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPONSE, THE LEAR NED AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME BEFORE THE ASSESSING OFFICER AND 3 ITA NO. 2433/BANG/2018 SUBMITTED THE DETAILS. WHEREAS THE ASSESSING OFFICER HAS MADE DISALLOWANCE IN RESPECT OF EXCESS CLAIM UNDER SECTION 10AA OF THE ACT OF RS.17,79,826 AND DISALLOWED THE ADDITIONAL DEPRECIATION ON THE COMPUTERS AS THE ASSESSEE IS IN THE BUSINESS OF MARKETING AND PRESALES SUPPORT SERVICES TO SANDVINE INC. AND IS NOT ENGAGED IN THE BUSINESS OF MANUFACTURING, PRODUCTION OF AN ARTICLE OR THING . H ENCE THE AS SESSEE IS NOT ENTITLED FOR ADDITIONAL DEPRECIATION UNDER SECTION 32(I )( IIA ) OF THE ACT AND DISALLOWED RS.48,91,761 AND MADE ADDITION OF PAYMENT OF TECHNICAL SERVICES FOR NON - DEDUCTION OF TAX RS.6 LAKHS AND ASSESSED THE TOTAL INCOME OF RS.74,16,077 AND PASS ED THE ORDER UNDER SECTION 143(3) OF THE ACT DT.21.12.2016. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL WITH THE LEARNED CIT(APPEALS) AND WHEREAS THE LEARNED CIT(APPEALS) HAS GRANTED RELIEF O N CLAIM OF DEDUCTION UNDER SECTION 10AA OF THE ACT BU T CONFIRMED THE DISALLOWANCE OF EXCESS CLAIM OF DEPRECIATION ON COMPUTERS AS COMPUTERS DOES NOT COME UNDER THE CATEGORY OF PLANT AND MACHINERY AND PARTLY ALLOWED THE APPEAL. AGGRIEVED BY THE LEARNED CIT(APPEALS) ORDER, THE ASSESSEE HAS FILED AN APPEAL BEF ORE THE TRIBUNAL. 4 ITA NO. 2433/BANG/2018 4. AT THE TIME OF HEARING, THE LEARNED AUTHORISED REPRESENTATIVE HAS PRESSED ONLY THE ADDITIONAL GROUND OF APPEAL AND SUBMITTED THAT ANY DISALLOWANCE OF EXCESS DEPRECIATION UNDER SECTION 32(I )( II A) OF THE ACT HAS TO BE ALLOWED AS DEDUCTION AGAINST THE B USINESS PROFIT S OF E LIGIBLE UNIT UNDER THE PROVISIONS OF SECTION 10AA OF THE ACT AND SUPPORTED THE A RGUMENT WITH EVIDENCES I N THE PAPER BOOK AND JUDICIAL DECISIONS. CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPO RTED THE ORDER OF LEARNED CIT(APPEALS). 5. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. PRIMA FACIE, THE ONLY DISPUTED ISSUE ARGUED BY THE LEARNED AUTHORISED REPRESENTATIVE IN RESPECT OF DISALLOWANCE OF EXCESS ADDITIONAL ALL OWANCE OF DEPRECIATION ON COMPUTERS DISALLOWED UNDER SECTION 32( I )( II A ) OF THE ACT BE ALLOWED AS DEDUCTION AGAINST THE BUSINESS PROFITS UNDER SECTION 10AA OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE VEHEMENTLY SUBMITTED THAT THE ASSESSEE HAS ACCEPT ED THE DISALLOWANCE OF ADDITIONAL DEPRECIATION AND ALSO FILED THE ADDITIONAL GROUND OF APPEAL FOR ALLOWING DEDUCTION AGAINST THE BUSINESS PROFITS OF ELIGIBLE SEZ UNIT UNDER SECTION 10AA OF THE ACT. WE FOUND THE SUBMISSIONS OF THE LEARNED 5 ITA NO. 2433/BANG/2018 AUTHORISED REPRE SENTATIVE ARE REALISTIC AND SUPPORT OUR VIEW ON THE ADDITIONS /DISALLOWANCES ELIGIBLE FOR DEDUCTION UNDER SECTION 10AA OF THE ACT RELYING ON THE CO - ORDINATE BENCH DECISION IN THE CASE OF DCIT VS . GOLDMAN SACHS IN IT(TP)A NO.66/BANG/2014 AND C.O. NO.43/BANG /2016 FOR THE ASSESSMENT YEAR 2009 - 10 DT.5.4.2017 WHERE T HE TRIBUNAL HAS CONSIDERED THE DISPUTED ISSUE AT PAGE 7 PARAS 10 & 11 WHICH READ AS UNDER : 10.HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, AT THE OUTSET WE NOTE THAT THIS ISSUE OF DISALLOWANCE MADE U/S. 40(A)(IA) ELIGIBLE FOR DEDUCTION OF TAX HOLIDAY UNDER LAW IS COVERED BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF ITO VS KEVAL CONSTRUCTION (SUPRA) WHEREIN THE HONBLE HIGH COURT HAS HELD IN PARA 5 AS UNDER: 5. HAVING HEARD COUNSEL ON BOTH THE QUESTION TODAY IN THIS APPEAL, WE FIND NO ERROR IN THE TRIBUNAL'S ULTIMATE CONCLUSION. EVEN IF A CERTAIN EXPENDITURE WHICH WAS INCURRED BY THE ASSESSEE FOR THE PURPOSE OF DEVELOPING HOUSING PROJECT WAS NOT ALLO WABLE BY VIRTUE OF SECTION 40(A)(IA) OF THE ACT, SINCE THE ASSESSEE HAD NOT DEDUCTED THE TAX AT SOURCE AS REQUIRED UNDER LAW, IT CANNOT BE DENIED THAT SUCH DISALLOWANCE WOULD ULTIMATELY GO TO I INCREASE THE ASSESSEE'S PROFIT FROM THE BUSINESS OF DEVELOPING HOUSING PROJECT. WHATEVER BE THE ULTIMATE PROFIT OF ASSESSEE AS COMPUTED EVEN AFTER MAKING DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT, WOULD QUALIFY FOR DEDUCTION AS PROVIDED UNDER THE LAW. 11.FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT W E UPHELD THE DIRECTIONS OF THE DRP ON THIS ISSUE. SINCE THE ALTERNATIVE CLAIM OF THE ASSESSEE IS ALLOWED THEREFORE WE DO NOT PROPOSE TO GO INTO THE ISSUE OF NATURE OF PAYMENT IN QUESTION. THE SAME BECOMES INFRUCTUOUS. WE FOUND THE DECISION OF THE CO - ORD INATE BENCH IS APPLICABLE TO THE DISPUTED ISSUE, WHERE THE DISALLOWANCES BY THE ASSESSING OFFICER IN ASSESSMENT PROCEEDINGS WOULD QUALIFY FOR DEDUCTION UNDER SECTION 10AA OF THE ACT. ACCORDINGLY, WE SET ASIDE THE 6 ITA NO. 2433/BANG/2018 ORDER OF THE LEARNED CIT(APPEALS) ON THIS DISPUTED ISSUE AND DIRECT THE ASSESSING OFFICER TO CONSIDER DISALLOWANCE OF DEDUCTION OF CLAIM OF ADDITIONAL ALLOWANCE OF DEPRECIATION AGAINST THE B USINESS PROFITS OF E LIGIBLE SEZ UNIT UNDER THE PROVISIONS OF SECTION 10AA OF THE ACT AND ALLOW THE ADDITIONA L GROUND OF APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE ASSESSEE'S APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1ST NOV ., 2019. SD/ - SD/ - (A.K. GARODIA) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 01 .1 1 . 2019. *REDDY GP COPY TO I) THE APPELLANT II) THE RESPONDENT III) CIT (APPEALS) IV) PR. CIT V) DR, ITAT, BANGALORE VI) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE