BTP Info-serve Pvt. Ltd., Belgaum V. Principal Commissioner of Income Tax., Belgaum

ITA 250/PAN/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1410 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 29-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH LD
• Assessee Lawyers: ULHAS KINI
• Keywords: Depreciation
• Section: 143(3); 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI, HON'BLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 250/PNJ/2015 : (A.Y 2010 - 11) BTP INFOSERVE PVT. LTD., 4112, PATSON HOUSE, P.B. ROAD, BELAGAVI 590 003, KARNATAKA. PAN : AACCB0971C (APPELLANT) VS. PRINCIPAL COMMISSIONER OF INCOME TAX, BELGAUM (RESPONDENT) ASSESSEE BY : ULHAS KINI, CA RESPONDENT BY : K.M. MAHESH, LD. DR DATE OF HEARING : 17/08/2015 DATE OF PRONOUNCEMENT : 17/08/2015 O R D E R PER GEORGE MATHAN : 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX IN F.NO. 13/263/CIT/BGM/2014 - 15/1697 DT. 27.3.2014 FOR THE A.Y 2010 - 11. SHRI ULHAS KINI, CA REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI K.M. MAHESH, LD. DR REPRESENTED ON BEHALF OF THE REVENUE. 2. IT WAS SUBMITTED BY THE LD. AR THAT THE ASSESSEE IS A DOMESTIC COMPANY DOING BUSINESS OF DATA PROCESSING. IT WAS THE SUBMISSION THA T THE ASSESSEE HAD FILED ITS RETURN CLAIMING EXEMPTION U/S 10A OF THE ACT. IT WAS THE SUBMISSION THAT THE AO HAD PASSED AN ORDER U/S 143(3) OF THE ACT DT. 30.11.2012 ACCEPTING 2 ITA NO. 250/PNJ/2015 (A.Y : 2010 - 11) THE ASSESSEES CLAIM OF EXEMPTION U/S 10A. IT WAS THE SUBMISSION THAT THE PRIN CIPAL COMMISSIONER OF INCOME TAX HAD VIDE ORDER DT. 27.3.2014 HELD THE ASSESSMENT ORDER PASSED BY THE AO TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE INSOFAR AS THE CBDT CIRCULAR DT. 16.7.2013 HAD NOT BEEN FOLLOWED BY THE AO. IT WAS THE SUBMISSION THAT THE AO HAD IN THE COURSE OF THE ASSESSMENT QUESTIONED THE ASSESSEES CLAIM OF EXEMPTION U/S 10A OF THE ACT AND IN VIEW OF THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD. REPORTED IN 341 ITR 385 HAD ALLOWE D THE ASSESSEES CLAIM OF EXEMPTION U/S 10A OF THE ACT. IT WAS THE SUBMISSION THAT THE ORDER U/S 263 PASSED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX , INSOFAR AS IT WAS CONTRARY TO THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT, WAS LIABLE TO BE QUASH ED. HE PLACED RELIANCE UPON THE DECISION OF THE PANAJI BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. SAFRAN AEROSPACE INDIA PVT. LTD. IN ITA NO. 1261/BANG/2010 DT. 31.12.2014 WHEREIN IN PARA 4.5 IT HAS BEEN HELD AS FOLLOWS : 4.5 THE HONBLE HIGH COURT OF K ARNATAKA, IN THE CASE OF YOKOGAWA INDIA LTD (SUPRA) WAS CONSIDERING THE CASE OF AN ASSESSEE WHICH WAS IN THE BUSINESS OF MANUFACTURE AND TRADING OF PROCESS CONTROLLED INSTRUMENTS AND IT HAD FILED RETURN OF INCOME DECLARING LOSS. DURING THE ASSESSMENT PROCE EDINGS U/S 143(3), THE AO HAD OBSERVED THAT THE ASSESSEE HAD CLAIMED EXEMPTION U/S 1 0 A FOR ITS STPI UNIT BEFORE SET OFF OF BROUGHT FORWARD LOSSES AND DEPRECIATION. THE A O , THEREIN, HAD ALSO OBSERVED THAT 1 0 A BENEFIT CAN BE GIVEN ONLY AFTER ADJUSTING BROUGH T FORWARD LOSS AND DEPRECIATION FROM THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO GRANTED RELIEF TO THE ASSESSEE AND ON FURTHER APPEAL BY THE REVENUE TO THE TRIBUNAL, IT WAS HELD THAT BUSINESS LOSS OF OTHER UNITS CANNOT BE SET OFF AGAINST THE PROFITS OF THE UNDERTAKING ENGAGED IN THE BUSINESS OF COMPUTER SOFTWARE FOR PURPOSES OF DETERMINATION OF THE ALLOWABLE DEDUCTION U/S 10 B OF THE ACT. THE REVENUE, THEREFORE, FILED APPEAL BEFORE THE HONBLE HIGH COUR T AND THE HIGH COURT FRAMED THE FOLLOWING QUESTION FOR DETERMINATION: WHETHER THE TRIBUNAL WAS CORRECT IN HOLDING THAT THE DEDUCTION U/S 10 A OR 1 0 B OF THE ACT DURING THE CURRENT ASSESSMENT YEAR HAS TO BE ALLOWED WITHOUT SETTING OFF BROUGHT FORWARD UNABSO RBED LOSSES AND THE 3 ITA NO. 250/PNJ/2015 (A.Y : 2010 - 11) DEPRECIATION FROM EARLIER ASSESSMENT YEAR OR CURRENT ASSESSMENT YEAR EITHER IN THE CASE OF NON - STP UNITS OR IN THE CASE OF THE VERY SAME UNDERTAK IN G? THE HONBLE HIGH COURT HAS CONSIDERED THE ISSUE AT LENGTH AND AT PARA 31 OF ITS ORDER HAS HELD THAT AS DEDUCTION U/S 1 0 A HAS TO BE EXCLUDED FROM THE TOTAL INCOME OF THE ASSESSEE, THE QUESTION OF UNABSORBED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFITS AND GAINS OF UNDERTAKING WOULD NOT ARISE AND IN THAT VIEW OF THE MATTE R, THE APPROACH OF THE AO WAS QUITE CONTRARY TO THE AFORESAID PROVISION AND THE APPELLATE COMMISSIONER AS WELL AS THE TRIBUNAL WERE FULLY JUSTIFIED IN SETTING ASIDE THE SAID ASSESSMENT ORDER AND GRANTING THE BENEFIT OF SEC.1 0 A TO THE ASSESSEE. THUS, THE QU ESTION OF LAW WAS ANSWERED IN FAVOUR OF THE ASSESSEE. THUS, THERE ARE TWO JUDGMENTS OF THE HONBLE KARNATAKA HIGH COURT CONTRARY TO EACH OTHER. WHEN THERE ARE TWO JUDGMENTS OF THE VERY SAME HIGH COURT BY BENCHES OF EQUAL STRENGTH, THEN THE LATER JUDGMENT O F THE HIGH COURT HAS TO BE FOLLOWED AS HELD BY THE HONBLE APEX COURT IN THE CASE OF BHIKA RAM AND OTHERS VS. U O I REPORTED IN 238 ITR 113. THE DECISION OF THE HIGH COURT IN THE CASE OF HIMATSINGIKE SIEDE (SUPRA) IS DATED 4 TH AUGUST 2006 WHEREAS THE DECISIO N OF THE HONBLE HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD.(SUPRA) IS DATED 9 TH AUGUST, 2011. AS REGARDS THE DISMISSAL OF THE SLP BY THE HONBLE SUPREME COURT AGAINST THE DECISION OF THE HONBLE KA RN ATAKA HIGH COURT IN THE CASE OF HIMATSINGIKE SIEDE (SU PRA) IS CONCERNED, WE FIND THAT THE HONBLE SUPREME COURT HAS DISMISSED THE APPEAL IN LIMINE WITHOUT LAYING DOWN ANY RATIO DECIDENDI THEREIN AND, THEREFORE, AS HELD BY THE HONBLE APEX COURT IN THE CASE OF INDIAN OIL CORPORATION LTD. VS. STATE OF BIHAR & O THERS, REPORTED IN 167 ITR 897, THE DECISION OF THE HONBLE KARNATAKA HIGH COURT I N THE CASE OF YOKOGAWA INDIA LTD.(SUPRA) HOLDS THE FIELD. FURTHER, THE HONBLE APEX COURT IN THE CASE OF VEGETABLE PRODUCTS LTD., REPORTED IN 88 ITR 192 (SC) HAS HELD THAT WH ERE TWO REASONABLE CONSTRUCTIONS ARE POSSIBLE, THEN THE CONSTRUCTION IN FAVOUR OF THE ASSESSEE MUST BE ADOPTED. RESPECTFULLY FOLLOWING THE SAID DECISION, WE ALLOW THE GROUND OF APPEAL NO. 2. IT WAS THE SUBMISSION THAT THE ORDER OF THE PRINCIPAL COMMISSI ONER OF INCOME TAX PASSED U/S 263 OF THE ACT WAS LIABLE TO BE QUASHED. 4 ITA NO. 250/PNJ/2015 (A.Y : 2010 - 11) 3. IN REPLY, THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMITTEDLY THE FACTS REMAIN THAT THE AO HAS PASSED THE ORIGINAL ASSESSMENT ORDER U/S 143(3) ON 30.11.2012 ALLOWING THE CLAIM OF EXEMPTION U/S 10A OF THE ACT. THE CIRCULAR OF CBDT IS OF 16.7.2013. THE DECISION OF THE JURISDICTION HIGH COURT OF KARNATAKA IN THE CASE OF YOKOGAWA INDIA LTD. REF ERRED TO SUPRA IS DATED 9.8.2011. THUS, WHEN THE AO HAD COMPLETED THE ASSESSMENT U/S 143(3) HE WAS BOUND BY THE DECISION OF THE JURISDICTION HIGH COURT OF KARNATAKA. FURTHER, A PERUSAL OF THE CIRCULAR ISSUED BY CBDT DT. 16.7.2013 SHOWS THAT THE OPENING W ORDS ARE AS FOLLOWS : IT HAS BEEN BROUGHT TO THE NOTICE OF THE BOARD THAT THE PROVISIONS OF 10A/10AA/10B/10BA OF THE INCOME - TAX ACT, WITH REGARD TO APPLICABILITY OF CHAPTER IV OF THE ACT AND SET OFF AND CARRY FORWARD OF LOSSES, ARE BEING INTERPRETED DIFFERENTLY BY THE OFFICERS OF THE DEPARTMENT AS WELL AS BY DIFFERENT HIGH COURTS. CLEARLY, THERE ARE DIFFERENT INTERPRETATIONS AS HAS BEEN ADMITTED BY THE CBDT. THE ISSUE CLEARLY IS A DEBATABLE ONE. THE AO HAS ALSO FOLLOWED THE PRINCIPLES LAID DOWN BY THE JURISDICTION HIGH COURT OF KARNATAKA. FOLLOWING THE DECISION OF THE JURISDICTION HIGH COURT CANNOT BE HELD TO MAKE THE ORDER OF ASSESSMENT ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. FURTHER, ON IDENTICAL GROUNDS THE CO - ORDINATE BENCH O F THIS TRIBUNAL IN THE CASE OF M/S. SAFRAN AEROSPACE INDIA PVT. LTD. REFERRED TO SUPRA HAS ALSO HELD THE ISSUE IN FAVOUR OF THE ASSESSEE UPHOLDING THE PRINCIPLES APPLIED BY THE AO IN THE COURSE OF THE ORIGINAL ASSESSMENT IN HIS ORDER U/S 143(3) DT. 30.11.2 012. THEREFORE, THE ORDER PASSED BY THE AO IS BY FOLLOWING ONE OF THE TWO POSSIBLE VIEWS AND SAME CANNOT BE HELD TO BE ERRONEOUS WHICH CALLS FOR INVOCATION OF THE POWERS OF THE PRINCIPAL COMMISSIONER OF INCOME TAX U/S 263 OF THE ACT. IN THE 5 ITA NO. 250/PNJ/2015 (A.Y : 2010 - 11) CIRCUMSTANCES , THE ORDER PASSED U/S 263 BY THE PRINCIPAL COMMISSIONER OF INCOME TAX STANDS SET ASIDE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/08/2015. S D / - (N.S. SAINI) ACCOUNTANT MEMBER S D / - ( GEORGE MATHAN ) JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 17/08/ 201 5 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER , 6 ITA NO. 250/PNJ/2015 (A.Y : 2010 - 11) DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ORDER ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 17/08/2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 18/08/2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 18/08/2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 18/08/2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 18/08/2015 SR.PS 6. DATE OF PRONOUNCEMENT 17/08/2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 18/08/2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER