M/s. On Semiconductor Technology India Private Limited, Bengaluru V. Commissioner of Income Tax, Bengaluru

ITA 2608/BANG/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8941 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-08-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 04-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: C NARAYAN
• Keywords: Rectification of order
• Section: 154

Judgement Text

ITA NO.2608 /BANG/2017 ON SEMICONDUCTOR TECHNOLOGY INDIA PVT. LTD., BANGAL ORE IN THE INCOME TAX APPELLATE TRIBUNAL CBENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.2608/BANG/2017 ASSESSMENT YEAR: 2014-15 ON SEMICONDUCTOR TECHNOLOGY INDIA PVT. LTD. RAMASUBRAMANIAN GOPALAKRISHNAN NO.1, CONSULATE-1, RICHMOND ROAD BENGALURU 560 025. PAN NO :AADCP8949D VS. ACIT -5(1)(2) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI C. NARAYAN, A.R. RESPONDENT BY : SMT. SUPRIYA RAO, D.R. DATE OF H EARING : 09.08.2021 DATE OF PRONOUNCEMENT : 11.08.2021 O R D E R PERB.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 31.8.2017 PASSED BY LD. CIT(A)-5, BENGALURU AND IT RELATES TO THE ASSESSMENT YEAR 2014-15. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN CONFIRMING THE DISALLOWAN CE RELATING TO PRIOR PERIOD EXPENSES MADE BY THE A.O. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DESIGN, DEVE LOPMENT AND TESTING OF SOFTWARE. DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS DECLARED A S UM OF ITA NO.2608 /BANG/2017 ON SEMICONDUCTOR TECHNOLOGY INDIA PVT. LTD., BANGAL ORE PAGE 2 OF 5 RS.16,86,334/- AS OTHER NON-OPERATING INCOME (NET O F EXPENSES). IT WAS SUBMITTED THAT THE SAME REPRESENTS NET PRIOR P ERIOD ITEM AS DETAILED BELOW: SALE OF SERVICES - RS.1,29,28,560/- LESS: SALARIES AND WAGES - RS.1,12,42,226/- RS. 16,86,334/- 3. THE A.O. EXPRESSED THE VIEW THAT THE PRIOR PERIO D EXPENSES ARE NOT ALLOWABLE AS EXPENDITURE. HOWEVER, PRIOR P ERIOD INCOME CAN BE BROUGHT TO TAX. ACCORDINGLY, THE AO COMPUTED DI SALLOWANCE AS UNDER: PRIOR PERIOD INCOME - RS.1,29,28,560/- PRIOR PERIOD EXPENSES - RS.1,12,42,226/- - RS.2,41,70,786/- LESS : INCOME OFFERED - RS.16,86,334/- RS.2,24,84,452/- SUBSEQUENTLY, THE A.O. NOTICED THAT THE INCOME OF R S.16,86,334/- DECLARED BY THE ASSESSEE IS NET OF PRIOR PERIOD INC OME LESS PRIOR PERIOD EXPENSES, MEANING THEREBY, THE PRIOR PERIOD INCOME HAS ALREADY BEEN OFFERED TO TAX. HENCE MAKING ADDITIO N OF PRIOR PERIOD INCOME AGAIN HAS RESULTED IN DOUBLE ASSESSMENT. ACC ORDINGLY PASSED A RECTIFICATION ORDER ON 6.3.2017, WHEREIN H E REDUCED RS.1,12,42,226/- (RS.1,29,28,560/- LESS RS.16,86,33 4) FROM THE ASSESSED INCOME BY OBSERVING INCOME ALREADY OFFERE D TO TAX. AS A RESULT OF PASSING OF RECTIFICATION ORDER, ONLY PRIO R PERIOD EXPENSES OF RS.1,12,42,226/- CAME TO BE DISALLOWED. 4. THE ASSESSEE CHALLENGED THE ADDITIONS MADE IN TH E ASSESSMENT ORDER BY FILING APPEAL BEFORE LD. CIT(A) . THE FIRST ITA NO.2608 /BANG/2017 ON SEMICONDUCTOR TECHNOLOGY INDIA PVT. LTD., BANGAL ORE PAGE 3 OF 5 APPELLATE AUTHORITY NOTICED THE RECTIFICATION ORDER HAS BEEN PASSED BY THE ASSESSING OFFICER U/S 154 OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT]. ACCORDINGLY HE DISMISSED THE APPE AL OF THE ASSESSEE WITH THE FOLLOWING OBSERVATION:- AS SUCH, THE ISSUE RAISED BY THE APPELLANT THAT TH E PRIOR PERIOD INCOME HAS BEEN OFFERED WAS CONSIDERED BY TH E AOS ORDER U/S 154 OF THE ACT, THE PRESENT APPEAL IS TRE ATED AS DISMISSED. AGGRIEVED BY THE ORDER PASSED BY LD. CIT(A), THE AS SESSEE HAS FILED THIS APPEAL BEFORE US. 5. THE ONLY THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE TAX AUTHORITIES ARE JUSTIFIED IN DISALLOWING THE PRIOR PERIOD EXPENSES ALONE, WHILE ASSESSING THE PRIOR PERIOD INCOME? 6. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAS DED UCTED THE PRIOR PERIOD EXPENSES FROM PRIOR PERIOD INCOME. TH E AO HAS ASSESSED PRIOR PERIOD INCOME AND DISALLOWED PRIOR P ERIOD EXPENSES. HE SUBMITTED THAT THE INCOME RELATING TO A PARTICUL AR YEAR IS ONLY ASSESSED IN THAT YEAR. HENCE THE AO HAS TO EITHER IGNORE BOTH PRIOR PERIOD INCOME AND PRIOR PERIOD EXPENDITURE OR ASSES S NET INCOME ONLY. INVITING OUR ATTENTION TO THE DECISION RENDE RED BY HONBLE GUJARAT HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. DISHMAN PHARMACEUTICALS & CHEMICALS LTD. (2019) 112 TAXMANN .COM 91 (GUJ.), THE LD. A.R. SUBMITTED THAT THE HONBLE GUJ ARAT HIGH COURT HAS UPHELD THE VIEW TAKEN BY THE ITAT THAT ONCE TH E ASSESSEE OFFERS PRIOR PERIOD INCOME, THEN THE EXPENDITURE IN CURRED UNDER DIFFERENT HEADS SHOULD BE GIVEN SET OFF AGAINST THA T INCOME AND ONLY THE NET INCOME SHOULD BE ADDED. THE LD. A.R. SUBM ITTED THAT THE ASSESSEE HAS ALREADY OFFERED NET INCOME OF RS.16,86 ,334/- AND HENCE, NO SEPARATE DISALLOWANCE IS CALLED FOR. ITA NO.2608 /BANG/2017 ON SEMICONDUCTOR TECHNOLOGY INDIA PVT. LTD., BANGAL ORE PAGE 4 OF 5 7. ON THE CONTRARY, THE LD. D.R. SUPPORTED THE ORDE R PASSED BY LD. CIT(A). 8. HAVING HEARD THE RIVAL CONTENTIONS, WE ARE OF TH E VIEW THAT THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE. IT IS A FACT THAT THE ASSESSEE HAS OFFERED NO PRIOR PERIOD INCOME OF RS.1 6,86,334/-, WHICH HAS BEEN ARRIVED AT AFTER DEDUCTING PRIOR PER IOD EXPENDITURE OF RS.1,12,42,226/- FROM THE PRIOR PERIOD INCOME OF RS.1,29,28,460/-. THOUGH THE A.O. INITIALLY ADDED BOTH PRIOR PERIOD INCOME AND PRIOR PERIOD EXPENDITURE IN THE ORIGINAL ASSESSMENT ORDER, YET IN THE RECTIFICATION ORDER PASSED BY THE A.O. U/S 154 OF THE ACT, HE HAS DELETED THE DISALLOWANCE RELATING T O PRIOR PERIOD INCOME. THE NET EFFECT OF THE ACTION OF AO RESULTED IN DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS.1,12,42,226/-. THE HONBLE GUJARAT HIGH COURT HAS HELD IN THE CASE OF DISHMAN PHARMACE UTICALS & CHEMICALS LTD. (SUPRA) THAT ONCE THE PRIOR PERIOD I NCOME IS ASSESSED TO TAX, THEN THE CORRESPONDING PRIOR PERIO D EXPENDITURE ALSO SHOULD BE ALLOWED TO BE SET OFF. HENCE THE A CTION OF THE AO WAS CONTRADICTORY TO THE DECISION RENDERED BY HONB LE GUJARAT HIGH COURT IN THE ABOVE SAID CASE. WE NOTICE THAT THE AS SESSEE HAS OFFERED RS.16,86,334/- AS PER THE PRINCIPLE LAID DO WN BY THE HONBLE GUJARAT HIGH COURT IN THE ABOVE SAID CASE. 9. ACCORDINGLY, FOLLOWING THE DECISION RENDERED B Y HONBLE GUJARAT HIGH COURT IN THE CASE OF DISHMAN PHARMACEUTICALS & CHEMICALS LTD. (SUPRA), WE DIRECT THE AO TO ALLOW THE PRIOR P ERIOD EXPENDITURE AS DEDUCTION AGAINST PRIOR PERIOD INCOME. ACCORDING LY, WE DIRECT THE A.O. TO DELETE THE DISALLOWANCE OF RS.1,12,42,226/- RELATING TO PRIOR PERIOD EXPENDITURE. ITA NO.2608 /BANG/2017 ON SEMICONDUCTOR TECHNOLOGY INDIA PVT. LTD., BANGAL ORE PAGE 5 OF 5 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH AUG, 2021 SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 11 TH AUG, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.