Gateway Technolabs Pvt. Ltd., Ahmedabad V. The Income tax Officer, Ward-4(1), Ahmedabad

ITA 2473/AHD/2006

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9204 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 24-07-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 20-11-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K
• Assessee Lawyers: J P SHAH; P T SHAH
• Keywords: TDS
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N.PHAUJA, ACCOUNTANT MEMBER ITA NO.2473 & 2519/AHD/2006 ASSESSMENT YEAR:2003-04 DATE OF HEARING:24.7.09 DRAFTED:29.7.09 GATEWAY TECHNOLABS PVT. LTD., B-81, CORPORATE HOUSE, JUDGES BUNGLOW ROAD, S.G. HIGHWAY, BODAKDEV, AHMEDABAD PAN NO.AABCG4206C INCOME TAX OFFICER, WARD-4(1), AHMEDABAD V/S. V/S. ITO WARD-4(1), IT OFFICE BUILDING, AHMEDABAD GATEWAY TECHNOLABS PVT. LTD., B-81, CORPORATE HOUSE, JUDGES BUNGLOW ROAD, S.G.HIGHWAY BUDAKDEV, AHMEDABAD (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI J.P. SHAH & SHRI P.T. SHAH, AR REVENUE BY:- SHRI M.K. PANDIT SR. DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THESE CROSS APPEALS ONE BY THE ASSESSEE AND ANOT HER BY THE REVENUE ARE ARISING OUT OF COMMON ORDER OF COMMISSIONER OF INCO ME-TAX (APPEALS)-VIII, AHMEDABAD IN APPEAL NO. CIT(A)-VIII/ITO/4(1)/010/06 -07 DATED 14-09-2006. THE ASSESSMENT WAS FRAMED BY THE INCOME-TAX OFFICER, WA RD-4(1), AHMEDABAD U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 08-03-2006 FOR THE ASSESSMENT YEAR 2003 -04. ITA NO.2473 & 2519/AHD/2006 A.Y.2003-04 GATEWAY TECHNOLABS P. LTD. V. ITO WD-4(1) ABD PAGE 2 2. THE ONLY COMMON ISSUE IN THESE CROSS APPEALS O NE BY THE ASSESSEE AND OTHER BY THE REVENUE IS AS REGARD TO THE CLAIM OF D EDUCTION U/S.10B OF THE ACT. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND:- SECOND HAND LIBRARY BOOKS OF RS.38503/- USABLE FOR THE PURPOSE OF COMPUTER TRAINING CLASSES FOR STUDENTS PURCHASED FROM SISTER COMPANY. ERUDITE INFOTECH PVT. LTD. IS NOT PLANT WITHIN THE DEFINITION OF P LANT U/S.43(3) OF IT ACT 1961. THE BUSINESS OF THE APPELLANT COMPANY IS EXCLUSIVEL Y IN SOFTWARE DEVELOPMENT/AND EXPORTS THEREOF, WHILE THE BUSINESS OF THE APPELLANTS SISTER COMPANY ERUDITE INFOTECH PVT. LTD. IS IN RUNNING OF CLASS FOR COMPUTER TRAINING FOR STUDENTS ALTOGETHER A DIFFERENT BUSINESS. COMPU TER TRAINING CLASS IS AN EDUCATION CENTRE AND DOES NOT PRODUCE ANYTHING. THE SE BOOKS ARE NOT USED OR EVEN NEEDED BY EXPERT SOFTWARE ENGINEERS OF APPE LLANT COMPANY FOR DEVELOPMENT OF SOFTWARE FOR EXPORT PURPOSES. IN THE SE FACTS SECOND HAND LIBRARY BOOKS OF RS.28503/- IS NOT PLANT AND BE HEL D ACCORDINGLY FOR COMPUTING EXEMPTION U/S. 10B OF IT ACT 1961. IT IS CLAIMED TH AT SUCH ELEMENTARY BOOKS ARE NOT THE TOOLS OF THE BUSINESS IN AS MUCH AS EXP ERT / SKILLED PERSONS EMPLOYED BY APPELLANT FOR DEVELOPMENT OF SOFTWARE F OR EXPORT DO NOT NEED SUCH BOOKS FOR ANY REFERENCE. ON THE OTHER HAND, THE REVENUE HAS RAISED THE FOLLO WING GROUND NO.1 :- 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING TO ALLOW ELIGIBLE DEDUCTION U/S.80HHC OF THE I.T. ACT IN VIEW OF DENIAL OF CLAIM U/S.10B OF THE ACT. 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STAT ED THAT THE ASSESSEES BUSINESS WAS STARTED FOR THE FIRST TIME IN THE PREV IOUS YEAR RELEVANT TO ASSESSMENT YEAR 2002-03 IN A NEW PREMISES OF SOFTWARE DEVELOPM ENT AND EXPORT AND ALSO THE BUSINESS OF FOUR SISTER CONCERNS AS MENTIONED IN PAGE-8 & 9 OF THE ASSESSMENT ORDER FOR PROVIDING COMPUTER EDUCATION AND TRAINING AND THIS IS NOT THE FIRST YEAR IN WHICH THE DEDUCTION U/S.10B WAS CLAIMED. IN VIEW O F THIS, THE LD. COUNSEL FOR THE ASSESSEE TAKEN US TO THE FINDING OF CIT(A) PARA-2.3 AND THE RELEVANT OF THE PORTION, WHICH READS AS UNDER:- AT THIS JUNCTURE, IT IS MADE CLEAR THAT THE BUSIN ESS OF THE APPELLANT IS TOTALLY DISTINCT AND SEPARATE FROM THE BUSINESS OF COMPUTER TRAINING CAMIED ON BY THE SISTER CONCERNS AND THE SOFTWARE DEVELOPMENT AND EX PORT BEING NOT IN DISPUTE, IT IS TO BE HELD THAT THE NEW UNIT OF THE APPELLANT SET UP OF A DIFFERENT PREMISES IS NOT FORMED BY SPINNING UP OR THE RECONS TRUCTION OF AN EXISTING BUSINESS. BUT FOR THE PURPOSES OF FEW ITEMS OF ASSE TS, THERE IS NO OVERLOPPING OF THE BUSINESS ACTIVITIES AND THE APPELLANTS ELIG IBLE BUSINESS IS NEW AND SEPARATE ONE ENGAGED IN THE BUSINESS OF DEVELOPMENT OF SOFTWARE AND EXPORT. SECTION 10B ELIGIBILITY IS DENIED ON SIMPLE AND SPE CIFIC GROUND OF OLD PLANT AND MACHINERY CONSTITUTING MORE THAN 20% OF THE TOTAL V ALUE OF PLANT AND MACHINERY UTILIZED IN THE BUSINESS OF THE APPELLANT S GROUND NO.1 THUS FAILS. ITA NO.2473 & 2519/AHD/2006 A.Y.2003-04 GATEWAY TECHNOLABS P. LTD. V. ITO WD-4(1) ABD PAGE 3 4. IN VIEW OF THIS THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE TRIBUNALS ORDER OF CHANDIGARH BENCH B IN THE CASE OF JAIN UDHAY HOSIERY (P) LTD. V. ACIT (2005) 1 SOT 193 (CHD), WHEREIN THE TRIBUNAL HAS HELD IN PARA-6 AS UNDER:- 6. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTEN DED THAT CONDITIONS SPECIFIED IN SECTION 80-I ARE REQUIRED TO BE SATISF IED IN THE INITIAL YEAR AND ONCE ALL THE CONDITIONS ARE SATISFIED, ASSESSEE IS ENTIT LED TO DEDUCTION IN THE SUBSEQUENT ASSESSMENT YEARS SPECIFIED UNDER THE SAI D SECTION. IN THIS CONNECTION, HE REPLIED UPON THE DECISION OF THE SUP REME COURT IN THE CASE OF BAJAJ TEMPO LTDS CASE (SUPRA). RELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS IN SUPPORT OF THE AFORESAID CONTENTIONS:- (I) CIT V. NIPPON ELECTRONICS (INDIA) P. LTD. [1990] 181 ITR 518 (KAR.); (II) SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. V. CIT [1980] 123 ITR 669 (GUJ). IT WAS POINTED OUT THAT GUJARAT HIGH COURT HAS LAID DOWN THAT ONCE DEDUCTION IS ALLOWED IN THE FIRST YEAR, REVENUE HAS NO POWER TO DENY THE DEDUCTION IN SUBSEQUENT ASSESSMENT YEARS AS PROVIDED UNDER THE A CT. THE LD. COUNSEL FURTHER POINTED OUT THAT WHEREAS THERE ARE SEVERAL DECISIONS TO THE EFFECT THAT IF THE CONDITIONS SPECIFIED UNDER SECTION 80-I ARE SAT ISFIED IN ANY YEAR SUBSEQUENT TO THE YEAR OF COMMENCEMENT OF BUSINESS, THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION IN RESPECT OF THE PROFITS AND GAINS OF THAT YEAR IN WHICH SUCH CONDITIONS ARE SATISFIED. HOWEVER, ACCORDING T O THE LD. COUNSEL, THE REVERSE IS NOT TRUE. IT WAS FURTHER CONTENDED THAT IN ANY CASE, IT IS AN ADMITTED FACT THAT ASSESSEE HAD SET UP A NEW INDUSTRIAL UNDE RTAKING AND IT HAD NOT BEEN FORMED BY TRANSFER OF OLD MACHINERY THE VALUE OF WH ICH EXCEEDED 20% OF THE TOTAL VALUE OF THE MACHINERY. IT WAS ACCORDINGLY PL EADED THAT THE DECISION OF THE CIT(A) FOR THE ASSESSMENT YEAR 1997-98 MAY BE U PHELD AND FOR THE ASSESSMENT YEAR 1996-97 THE DECISION OF THE CIT(A) MAY BE REVERSED AND DEDUCTION ALLOWED TO THE ASSESSEE. AND FINALLY ALLOWED THE CLAIM OF THE ASSESSEE ON ME RITS ALSO, AS UNDER:- 10. IN THE FINAL ANALYSIS, WE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THIS CASE ARE OF THE VIEW THAT THE COMPANY HAD NOT BEEN FORME D BY THE TRANSFER OF OLD MACHINERY, THE VALUE OF WHICH EXCEEDED 20% OF THE T OTAL VALUE OF THE MACHINERY AND ACCORDINGLY, THE ASSESSEE WAS NOT DIS QUALIFIED FROM DEDUCTION UNDER SECTION 80-I MERELY BECAUSE IN ASSESSMENT YEA RS 1996-97 AND 1997-98 WITH THE PURCHASE OF MORE MACHINERY THE VALUE OF TH E OLD MACHINERY HAD EXCEEDED THE 20% LIMIT. WE REITERATE FOR THE SAKE O F CLEARITY THAT THE CONDITION UNDER SECTION 80-I(2)(I) APPLIES TO THE FORMATION O F THE INDUSTRIAL UNDERTAKING AND THE MERE TRANSFER OF OLD MACHINERY NOT HAVING E FFECTED THE FORMATION OF THE INDUSTRIAL UNDERTAKING IS SATISFIED IN THIS CAS E. AS HELD BY THEIR LORDSHIPS OF THE SUPREME COURT, MERE TRANSFER OF OLD MACHINERY I S NOT ENOUGH FOR DISQUALIFICATION FROM DEDUCTION UNDER SECTION 15C O F THE 1922 ACT (CORRESPONDING SECTION 80-I). WE THEREFORE, UPHOLD THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 1997-98. THE ORDER OF THE CIT(A ) AS WELL AS THAT OF ASSESSING OFFICER FOR ASSESSMENT YEAR 1996-97 ARE S ET ASIDE AND WE DIRECT ITA NO.2473 & 2519/AHD/2006 A.Y.2003-04 GATEWAY TECHNOLABS P. LTD. V. ITO WD-4(1) ABD PAGE 4 THE ASSESSING OFFICER TO GRANT DEDUCTION TO THE ASSESSEE UNDER SECTION 80-I FOR THE ASSESSMENT YEAR 1996-97 AS WELL AS FOR THE ASSESSMENT YEAR 1997-98. 5. IN VIEW OF THESE ARGUMENTS, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ONCE THE DEDUCTION FOR THE VERY FIRST IS ALLOWED THEN IN SUBSE QUENT YEAR THE DEDUCTION CANNOT BE DISALLOWED ON THE SAME GROUND. HE RELIED ON THE HON'BLE JURISDICTIO NAL HIGH COURT DECISION IN THE CASE OF SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. V. CIT [1980] 123 ITR 669 (GUJ), WHEREIN IT WAS POINTED OUT THAT HON'BLE GUJARAT HIGH COURT HAS LAID DOWN THAT ONCE D EDUCTION IS ALLOWED IN THE FIRST YEAR, REVENUE HAS NO POWER TO DENY THE DEDUCTION IN SUBSEQUENT ASSESSMENT Y EARS AS PROVIDED UNDER THE ACT. THE LD. COUNSEL FURTHER POINTED OUT THAT WHEREAS THERE ARE SEVE RAL DECISIONS TO THE EFFECT THAT IF THE CONDITIONS SPECIFIED UNDER SECTION 80-I ARE SATISFIED IN ANY YE AR SUBSEQUENT TO THE YEAR OF COMMENCEMENT OF BUSINESS, THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION IN RESPECT OF THE PROFITS AND GAINS OF THAT YEAR IN WHICH SUCH CONDITIONS ARE SATISFIED. 6. ON THE OTHER HAND, THE LD. DEPARTMENT REPRESENTAT IVE FAIRLY STATED THAT IN THE EARLIER YEAR THE DEDUCTION WAS ALLOWED. 7. IN VIEW OF THE ABOVE FACTS, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE, RESPECTFULLY FOLLOWING THE HO N'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. (SUPRA) AND CHANDIGARH BENCH OF THIS TRIBUNAL IN THE CASE OF JAIN UDHAY HOSIERY (P) LTD. (SUPRA), WE ALLOW THE CLAIM OF THE ASSESSEE. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND TH AT OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 04/09/2009 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 04/09/2009 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-VIII, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD