DCIT, CHENNAI V. M/s. Indium Software (India) Ltd., CHENNAI

ITA 2441/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6305 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 23-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: A S SRIRAMAN
• Section: 43B

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL , SMC B BENCH, CHENNAI . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NOS.2440 & 2441/MDS/2016 ( / ASSESSMENT YEARS: 2007-08 & 2009-10) THE DCIT, CORPORATE CIRCLE 2(2), CHENNAI 34. VS M/S. INDIUM SOFTWARE (INDIA) LTD., NO.41, VDS HOUSE, 2 ND FLOOR, CATHEDRAL ROAD, GOPALAPURAM, CHENNAI 600 086. PAN: AAACI6333F ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI SUPRIYO PAL, JCIT /RESPONDENT BY : SHRI A.S. SRIRAMAN, ADVOCATES /DATE OF HEARING : 19.06.2017 !' /DATE OF PRONOUNCEMENT : 22.08.2017 / O R D E R THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST T HE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-6, CHENNAI BOTH DATED 21.06.2016 IN ITA NO.276/CIT(A)- 6/2014-15 & ITA NO.277/CIT(A)-6/2014-15 FOR THE ASSESSMENT YEAR S 2007-08 & 2009-10 RESPECTIVELY, PASSED U/S.250(6) R.W.S.143(3 ) & 147 OF THE ACT. 2 ITA NO.2440 & 2441/MDS/2016 2. ASSESSMENT YEAR 2007-08: THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS APPEA L, HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN DIRECTING THE LD.AO TO ALLOW DEDUCTION U/S.10A OF T HE ACT, TO THE ASSESSEE WITHOUT SETTING OFF THE LOSS OF ITS NON-EL IGIBLE UNITS. 3. ASSESSMENT YEAR 2009-10: THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS APPEA L, HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN DISALLOWING THE PAYMENT MADE TOWARDS SERVICE TAX BE YOND THE DUE DATE U/S.139(1) OF THE ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A DOMESTIC PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF SOFTWARE TESTING SERVICES, FILED ITS RETURN OF INCOME FOR TH E ASSESSMENT YEAR 2007-08 ON 25.09.2007 ADMITTING NIL INCOME & FOR THE ASSESSMENT YEAR 2099-10 ON 03.09.2009 ADMITTING LOSS OF RS.1,4 3,41,680/-. INITIALLY THE RETURNS WAS PROCESSED U/S.143(1) OF T HE ACT AND SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY UND ER CASS AND FINAL ASSESSMENT ORDER WAS PASSED U/S.143(3) R.W.S 147 OF THE ACT ON 30.01.2015 FOR BOTH THE ASSESSMENT YEARS. 3 ITA NO.2440 & 2441/MDS/2016 5. ASSESSMENT YEAR 2007-08: DEDUCTION U/S.10A OF THE A CT:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT W AS NOTICED BY THE LD.AO THAT THE ASSESSEE HAD NOT SET- OFF THE LOSSES FROM ITS INELIGIBLE UNIT FROM THE PROFITS OF THE EL IGIBLE UNIT WHILE CLAIMING DEDUCTION U/S.10A OF THE ACT. THE LD.AO O PINED THAT THE CLAIM OF THE ASSESSEE WAS IN VIOLATION OF THE CIRCU LAR NO.7/DV/2013 (FILE NO.279/MISC./M-116/2012-ITJ) DATED 16.07.2013 . THEREFORE THE LD.AO COMPUTED THE DEDUCTION U/S.10A OF THE ACT , BY SETTING OFF THE LOSSES INCURRED BY THE ASSESSEES INELIGIBL E UNIT WITH THE PROFITS OF THE ELIGIBLE UNIT OF THE ASSESSEE. ON A PPEAL, THE LD.CIT(A) FOLLOWING THE DECISION OF THE HONBLE HIG H COURT IN THE CASE CIT V/S YOKOGAWA INDIA LIMITED & OTHERS REPORT ED IN 246 CTR 226 AND THE DECISION OF THE SPECIAL BENCH OF T HE TRIBUNAL IN THE CASE SCIENTIFIC ATLANDA INDIA TECHNOLOGY PVT. L TD. V. JCIT REPORTED IN 2 ITR (TRIB) 66, HELD THE ISSUE IN FAVO UR OF THE ASSESSEE BY DIRECTING THE LD.AO TO ALLOW DEDUCTION U/S.10A O F THE ACT AS CLAIMED BY THE ASSESSEE IE., WITHOUT SETTING OFF TH E LOSSES OF ITS NON-ELIGIBLE UNITS FROM THE PROFITS OF THE ELIGIBLE UNITS OF THE ASSESSEE. 4 ITA NO.2440 & 2441/MDS/2016 5.1 AT THE OUTSET, THE LD.AR SUBMITTED THAT THE IS SUE IS COVERED BY THE DECISION OF THE HONBLE KARNATAKA HI GH COURT CITED BY THE LD.CIT(A) AND THE SPECIAL BENCH OF THE CHENN AI TRIBUNAL CITED SUPRA. IT WAS THEREFORE PLEADED THAT THE ORD ER OF THE LD.CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. THE LD.DR COULD NOT CONTROVERT TO THE SUBMISSION OF THE LD.AR, HOWEVER HE RELIED ON THE ORDER OF THE LD.AO. AFTER HEARING BOTH SIDES, I DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD.CIT (A) ON THIS ISSUE BECAUSE HE HAS ONLY FOLLOWED THE DECISION OF THE SP ECIAL BENCH OF THE CHENNAI TRIBUNAL AND HONBLE KARNATAKA HIGH COU RT CITED SUPRA. 6. ASSESSMENT YEAR 2009-10: DISALLOWANCE OF SERVICE TA X:- THE LD.AO HAD DISALLOWED THE EXPENDITURE OF RS.4,34,752/- BEING THE PAYMENT MADE TOWARDS SERVI CE TAX AFTER THE DUE DATE OF FILING OF THE RETURN U/S.139(1) OF THE ACT BY INVOKING THE PROVISION OF SECTION 43B OF THE ACT. ON APPEAL , THE LD.CIT(A) FOLLOWING THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE ACIT V. REAL IMAGE TECHNOLOGIES PVT. LTD. REPO RTED IN 114 ITD 537 HELD THAT THE SERVICE TAX PAYABLE IS NOT A LIABILITY TO BE TREATED AT PAR WITH SALES TAX OR EXCISE DUTY AND TH EREFORE PROVISIONS 5 ITA NO.2440 & 2441/MDS/2016 OF SECTION 43B OF THE ACT CANNOT BE INVOKED. ACCOR DINGLY HE DIRECTED THE LD.AO TO DELETE THE ADDITION. 6.1 BEFORE US, THE LD.AR SUBMITTED THAT THE ASSESS EE HAD NOT CLAIMED THE PAYMENT OF SERVICE TAX AS DEDUCTION AND HENCE THE ADDITION MADE BY THE LD.AO IS NOT WARRANTED. THE L D.AR DID NOT HAVE ANY OBJECTION FOR REMITTING BACK THE MATTER TO THE FILE OF LD.AO FOR VERIFICATION. THE LD.DR ON THE OTHER HAND RELI ED ON THE ORDERS OF THE LD.AO AND PLEADED FOR SUSTAINING THE SAME. 6.2 I HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIALS ON RECORD. SERVICE TAX IS A TAX ON THE S ERVICE PROVIDED, WHICH HAS TO BE COLLECTED FROM THE RECEIVER OF THE SERVICE BY THE SERVICE PROVIDER AND REMITTED TO THE GOVERNMENT TRE ASURY. THUS IF THE SERVICE PROVIDER HAS COLLECTED THE TAX AND HAS NOT REMITTED TO THE GOVERNMENT TREASURY, IT BECOMES THE INCOME OF T HE SERVICE PROVIDER AND ALSO VIOLATION OF THE PROVISIONS OF TH E SERVICE TAX ACT. SINCE, THE LD.AR HAS ALSO EXPRESSED HIS DESIRE FOR THE MATTER TO BE REMITTED BACK; I HEREBY REMIT THE MATTER BACK TO TH E FILE OF LD.AO FOR FRESH CONSIDERATION AND DECIDE THE MATTER IN THE LI GHT OF THE 6 ITA NO.2440 & 2441/MDS/2016 DECISION OF THE TRIBUNAL AND OUR OBSERVATIONS MENTI ONED HEREIN ABOVE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.2440 OF 2016 FOR THE ASSESSMENT YEAR 2007-08 IS DISMISSED AND TH E APPEAL OF THE REVENUE IN ITA NO.2441 OF 2016 FOR THE ASSESSME NT YEAR 2009-10 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 22 ND AUGUST, 2017 AT CHENNAI. SD/- ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER #$ /CHENNAI, %& /DATED 22 ND AUGUST, 2017 RSR & () *) /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. - ( )/CIT(A) 4. - /CIT 5. )./ 0 /DR 6. /1 /GF