Cornet Technology (India) Pvt Ltd., Kancheepuram V. ACIT, CHENNAI

ITA 259/CHNY/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3874 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 09-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: LALITHA KRISHNAMURTHY; R BALASUBRAMANIAN
• Keywords: Reopening of assessment; Depreciation; Competent authority; Reason to believe; Unabsorbed depreciation
• Section: 143(3); 10B; 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NOS.257, 258 & 259/MDS/2016 ' (' / ASSESSMENT YEARS : 2006-07, 2010-11 & 2011-12 M/S CORNET TECHNOLOGY (INDIA) PVT. LTD., A WING, II FLOOR, NEW PLOT NO.10 A-16, 5 TH CROSS ROAD, SIPCOT INFORMATION TECHNOLOGY PARK, PADUR POST, SIRUSERI, KANCHIPURAM DISTRICT 603 103. PAN : AABCC 5184 B V. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(3), CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SH. R. BALASUBRAMANIAN, CA & MS. LALITHA KRISHNAMURTHY, CA ,-*+ . / / RESPONDENT BY : SHRI A.V. SREEKANTH, JCIT 0 . 1$ / DATE OF HEARING : 15.06.2016 2!( . 1$ / DATE OF PRONOUNCEMENT : 06.09.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: ALL THE THREE APPEALS OF THE ASSESSEE ARE DIRECT ED AGAINST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI, FOR THE ASSESSMENT YEARS 2006 -07, 2010-11 2 I.T.A. NOS.257 TO 259/MDS/16 AND 2011-12. SINCE COMMON ISSUE ARISES FOR CONSIDE RATION IN ALL THESE THREE APPEALS, WE HEARD THESE APPEALS TOGETHE R AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. SHRI R. BALASUBRAMANIAN, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO DISALLOWANCE OF DEDUCTION CLAIMED UN DER SECTION 10B OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 10B OF THE ACT ON THE CURRENT YEAR PROFIT OF THE EL IGIBLE UNIT. HOWEVER, THE ASSESSING OFFICER SET OFF LOSSES SUFFE RED BY THE ASSESSEE IN THE NON-ELIGIBLE UNIT. THE LD. REPRESE NTATIVE CLARIFIED THAT THE ASSESSEE HAS MULTIPLE UNITS AND ONE OF THE UNITS IS ELIGIBLE FOR DEDUCTION UNDER SECTION 10B OF THE ACT SINCE IT EXPORTS THE SOFTWARE. THE OTHER UNITS ARE NOT ELIGIBLE FOR DED UCTION UNDER SECTION 10B OF THE ACT. THEREFORE, ACCORDING TO TH E LD. REPRESENTATIVE, THE PROFIT OF THE ELIGIBLE UNITS FO R DEDUCTION UNDER SECTION 10B OF THE ACT HAS TO BE COMPUTED ON STAND- ALONE BASIS. THEREFORE, THE LOSS OR DEPRECIATION OF THE NON-ELIG IBLE UNIT CANNOT BE SET OFF AGAINST THE PROFIT OF THE ELIGIBLE UNIT WHI LE COMPUTING DEDUCTION UNDER SECTION 10B OF THE ACT. THE LD. RE PRESENTATIVE 3 I.T.A. NOS.257 TO 259/MDS/16 PLACED HIS RELIANCE ON VARIOUS JUDGMENTS OF HIGH CO URTS TO SUPPORT HIS CLAIM. 3. THE LD. REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT FOR THE ASSESSMENT YEAR 2006-07, THE ASSESSEE S ONE OF THE GROUNDS WAS WITH REGARD TO REASSESSMENT UNDER SECTI ON 147 OF THE ACT. ACCORDING TO THE LD. REPRESENTATIVE, THERE WA S NO MATERIAL FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE A CT. IN THE ABSENCE OF ANY REASON TO BELIEVE THAT THE INCOME ES CAPED ASSESSMENT, ACCORDING TO THE LD. REPRESENTATIVE, TH E REASSESSMENT PROCEEDING INITIATED BY THE ASSESSING OFFICER IS BA D IN LAW. THE LD. REPRESENTATIVE FURTHER SUBMITTED THAT IN THE ABSENC E OF LIVE LINK OR NEXUS BETWEEN THE MATERIAL AVAILABLE ON RECORD AND FORMATION OF BELIEF THAT THERE WAS ESCAPEMENT OF INCOME, THE ASS ESSING OFFICER OUGHT NOT TO HAVE REOPENED THE ASSESSMENT. 4. ON THE CONTRARY, SHRI A.V. SREEKANTH, THE LD. DE PARTMENTAL REPRESENTATIVE, SUBMITTED THAT FOR THE ASSESSMENT Y EAR 2006-07, THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 14 3(1) OF THE ACT AND IT WAS NOT EXAMINED UNDER SECTION 143(3) OF THE ACT. SINCE THE RETURN WAS NOT SCRUTINIZED UNDER SECTION 143(3) OF THE ACT AND NO ORDER WAS PASSED BY THE ASSESSING OFFICER, ACCORDIN G TO THE LD. 4 I.T.A. NOS.257 TO 259/MDS/16 D.R., THE ASSESSING OFFICER HAS EVERY RIGHT TO REOP EN THE ASSESSMENT WHEN HE FINDS THAT THE INCOME OTHERWISE CHARGEABLE TO TAX ESCAPED ASSESSMENT. THE LD. D.R. FURTHER SUBMI TTED THAT DURING THE COURSE OF SCRUTINY PROCEEDING, THE ASSES SING OFFICER FOUND THAT THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 10B OF THE ACT AFTER SETTING OFF THE BROUGHT FORWARD LO SSES AND UNABSORBED DEPRECIATION AGAINST THE CURRENT YEAR PR OFIT. THEREFORE, THE ASSESSING OFFICER FOUND THAT THERE WAS ESCAPEME NT OF INCOME, HENCE, THE ASSESSMENT WAS REOPENED UNDER SECTION 14 7 OF THE ACT. 5. REFERRING TO THE CLAIM OF THE ASSESSEE FOR DEDUC TION UNDER SECTION 10B OF THE ACT, THE LD. D.R. SUBMITTED THAT THE ASSESSEE NOW CLAIMS BEFORE THIS TRIBUNAL THAT THERE ARE MULT IPLE UNITS AND ONE OF THE UNITS IS ELIGIBLE FOR DEDUCTION UNDER SECTIO N 10B OF THE ACT, THEREFORE, THE LOSS/UNABSORBED DEPRECIATION OF THE NON-ELIGIBLE UNITS CANNOT BE SET OFF AGAINST THE PROFIT OF THE ELIGIBL E UNIT. REFERRING TO THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE FOR AL L THE THREE ASSESSMENT YEARS, THE LD. D.R. POINTED OUT THAT THE GROUNDS OF APPEAL PROCEED AS IF THE ASSESSING OFFICER SET OFF / ADJUSTED THE BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION AGAINST THE CURRENT YEAR PROFIT OF ELIGIBLE UNIT. NEITHER IN T HE GROUNDS OF APPEAL 5 I.T.A. NOS.257 TO 259/MDS/16 OR IN THE MATERIAL AVAILABLE BEFORE THIS TRIBUNAL T HERE WAS AN INDICATION THAT THE ASSESSEE HAS MULTIPLE UNITS AND THE ASSESSING OFFICER SET OFF THE LOSS AND UNABSORBED DEPRECIATIO N OF THE NON- ELIGIBLE UNITS AGAINST THE PROFIT OF ELIGIBLE UNITS . SINCE THERE WAS FACTUAL DISPUTE, ACCORDING TO THE LD. D.R., THE CIT (APPEALS) HAS RIGHTLY CONFIRMED THE ADDITION. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. SINCE THE ISSUE OF REOPENING OF ASSESSMENT GOES TO THE ROOT OF THE MATTER FOR ASSESSMENT YEAR 2006-07, THIS TRIBUNAL FINDS THAT T HIS HAS TO BE ADJUDICATED AT THE FIRST INSTANCE. ADMITTEDLY, THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND INTIMATION WAS ISSUED. NO ASSESSMENT ORDER WAS PAS SED UNDER SECTION 143(3) OF THE ACT. THE ASSESSING OFFICER F OUND THAT THE ASSESSEE CLAIMED DEDUCTION, HOWEVER, NO EVIDENCE WA S AVAILABLE ON RECORD WITH REGARD TO APPROVAL OF THE COMPETENT AUTHORITY, NAMELY, THE BOARD OF APPROVAL. THEREFORE, THE ASSE SSING OFFICER FOUND THAT THE ASSESSEE DID NOT HAVE THE APPROVAL F OR THE UNIT FOR WHICH DEDUCTION UNDER SECTION 10B OF THE ACT WAS CL AIMED. HENCE, THE INCOME OTHERWISE CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 6 I.T.A. NOS.257 TO 259/MDS/16 IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CONSI DERED OPINION THAT THE ASSESSING OFFICER HAS RIGHTLY REOPENED THE ASSE SSMENT. WHEN THE ASSESSEE CLAIMS DEDUCTION UNDER SECTION 10B OF THE ACT AND NO MATERIAL WAS FILED WITH REGARD TO APPROVAL OF THE B OARD AND THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SE CTION 143(1) OF THE ACT AND NO ORDER WAS PASSED UNDER SECTION 143(3 ) OF THE ACT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS RIGHTLY FOUND THAT THE INCOME OTHERWISE CHARGEA BLE TO TAX HAS ESCAPED FROM ASSESSMENT. THEREFORE, THE CIT(APPEAL S) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 7. NOW COMING TO THE MERIT OF THE APPEAL, THE ASSES SEE CLAIMS BEFORE THIS TRIBUNAL THAT DEDUCTION UNDER SECTION 1 0B OF THE ACT HAS TO BE GRANTED BEFORE SETTING OFF THE BROUGHT FORWAR D LOSS AND UNABSORBED DEPRECIATION OF THE NON-ELIGIBLE UNIT. THE ASSESSEE CLAIMS THAT THERE ARE MULTIPLE UNITS AND ONE OF THE UNITS IS ELIGIBLE FOR DEDUCTION UNDER SECTION 10B OF THE ACT AND OTHER UN ITS ARE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 10B OF THE ACT . THEREFORE, THE LOSS AND UNABSORBED DEPRECIATION OF THE NON-ELIGIBL E UNITS, 7 I.T.A. NOS.257 TO 259/MDS/16 ACCORDING TO THE LD. D.R., CANNOT BE SET OFF AGAINS T THE PROFIT OF ELIGIBLE UNIT. AFTER GOING THROUGH THE MATERIAL AV AILABLE ON RECORD AND GROUNDS OF APPEAL RAISED BY THE ASSESSEE, IT AP PEARS THAT THE ENTIRE CLAIM RIGHT FROM BEFORE THE ASSESSING OFFICE R IS THAT SET OFF / ADJUSTMENT OF BUSINESS LOSS / UNABSORBED DEPRECIATI ON OF THE EARLIER YEAR AGAINST THE PROFIT OF THE CURRENT YEAR OF THE SAME UNIT. NO MATERIAL AVAILABLE ON RECORD TO INDICATE THAT THE A SSESSEE HAS MULTIPLE UNITS AND ONE OF SUCH UNITS IS ELIGIBLE FO R DEDUCTION UNDER SECTION 10B OF THE ACT. SINCE THERE IS A FACTUAL D ISPUTE WITH REGARD TO UNIT / UNDERTAKING OWNED BY THE ASSESSEE, THIS T RIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-E XAMINED BY THE ASSESSING OFFICER. ACCORDINGLY THE ORDERS OF THE A UTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE CLAIM OF DEDUCTION UND ER SECTION 10B OF THE ACT IS REMITTED BACK TO THE FILE OF THE ASSESSI NG OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE ISSUE AFRESH AND BRING ON RECORD WHETHER THE ASSESSEE HAS MULTIPLE UNITS AND ONE OF SUCH UNITS IS ELIGIBLE FOR DEDUCTION UNDER SECTION 10B O F THE ACT AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WI TH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 8 I.T.A. NOS.257 TO 259/MDS/16 8. IN THE RESULT, ALL THE THREE APPEALS FILED BY TH E ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 6 TH SEPTEMBER, 2016 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 6 TH SEPTEMBER, 2016. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-1, CHENNAI 4. PRINCIPAL CIT, CHENNAI-1, CHENNAI 5. 69 ,1 /DR 6. :' ; /GF.