Quest Global Engineering Private Limited., Hukkeri V. Principal Commissioner of Income Tax., Belgaum., Belagavi

ITA 265/PAN/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1404 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 05-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANAND S MARATHE
• Assessee Lawyers: ANKUR PAI DUNGAT
• Keywords: Opportunity of being heard
• Section: 143(3); 10AA; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 2 65 /PNJ/201 5 (ASST. YEAR : 20 1 0 - 1 1 ) M/S. QUEST GLOBAL ENGINEERING PRIVATE LTD., QUEST SEZ, 437A, HATTARGI VILLAGE , POST YAMAKANMARDI, TAL : HUKKERI, DIST. BELAGAVI. VS. P CIT, BELGAUM . PAN NO. AAACQ 1782 C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANKUR PAI DUNGAT DEPARTMENT BY : SHRI ANAND S. MARATHE - D R DATE OF HEARING : 1 9 / 0 8 /2015 . DATE OF PRONOUNCEMENT : 1 9 / 0 8 /201 5 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF PRINCIPAL COMMISSIONER OF INCOME TAX , BEL A GA VI , DATED 2 8 /0 3 /201 5 FOR THE ASSESSMENT YEAR 2010 - 11 . 2. THE ASSESSEE HAS CHALLENGED THE ORDER OF PRINCIPAL COMMISSIONER OF INCOME TAX PASSED UNDER SEC. 263 OF THE ACT ON 03 GROUNDS : - ( I ) PRINCIPAL COMMISSIONER OF INCOME TAX ERRED IN REMANDING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER ON THE GR O UND THAT THE FORM NO. 56F WAS NOT FILED BEFORE HIM AND HE ALLOWED DEDUCTION UNDER SEC. 10AA TO THE ASSESSEE WITHOUT VERIFYING THE SAME AND SATISFYING WHETHER THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SEC. 10AA OF THE ACT. (II ) PRINCIPAL COMMISSIONER OF INCOME TAX ERRED IN RESTORING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER ON THE 2 ITA NO. 265 /PNJ/201 5 GROUND THAT THE ASSESSING OFFICER HAS ALLOWED DEDUCTION UNDER SEC. 10AA TO THE ASSESSEE WITHOUT SETTING OFF OF UNABSORBED CURRE NT AND BROUGHT FORWARD LOSSES AGAINST THE ELIGIBLE UNIT B Y NOT FOLLOWING THE CIRCULAR NO. 07/2013 DATED 16/07/2013 WHICH IS BINDING ON THE ASSESSING OFFICER . (III ) PRINCIPAL COMMISSIONER OF INCOME TAX ERRED IN RESTORING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER ON THE GROUND THAT DEDUCTION UNDER SEC. 10AA IS NOT ALLOWABLE FOR DISALLOWANCE MADE UNDER SEC. 40(A)(IA) OF THE ACT AND THAT THE ASSESSING OFFICER HAS NOT FOLLOWED THE CIRCULAR NO. 07/2013 DATED 16/07/2013 IN THIS REGARD. 3 . REGARDING THE FIRST GROUND TAKEN BY THE ASSESSEE , IT IS NOT IN DISPUTE THAT THE FORM NO. 5 6 F WAS NOT FILED BEFORE THE ASSESSING OFFICER AND THE SAME WAS FILED FOR THE FIRST TIME BEFORE THE PRINCIPAL COMMISSIONER OF INCOME TAX DURING THE COURSE OF HEARING . 4 . WE FIND THAT THE PRINCIPAL COMMISSIONER OF INCOME TAX AT PAGE NO.8 PARA 4.1 OF HIS ORDER HAS OBSERVED THAT CIRCULAR NO. 03/2009 DATED 21/05/2009 PROVIDES THAT THE AUDIT REPORT IN FORM NO. 56F SHOULD BE RETAINED BY THE ASSESSEE AND BE FURNISHED IN ORIGINAL IF CALLED FOR BY ANY AUTHORITY DURING ANY PROCEEDING UNDER THE ACT. THEREFORE, FOLLOWING THE SAME, HE DIRECTED THE ASSESSING OFFICER TO CALL FOR THE ORIGINAL AUDIT REPORT IN FORM NO. 56F AND EXAMINE THE DETAILS RELATING TO THE CLAIM BY THE ASSESSEE FOR DEDUCTION UNDER SEC. 10AA OF THE ACT AFTER PROVIDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE COULD NOT POINT OUT ANY ERROR IN THE FINDING OF THE PRINCIPAL COMMISSIONER OF INCOME TAX. 6 . THEREFORE, WE FIND NO GOOD REASON TO INTERFERE IN THIS PART OF THE ORDER OF PRINCIPAL COMMISSIONER OF INCOME TAX PASSED UNDER 263 OF THE ACT. 3 ITA NO. 265 /PNJ/201 5 7 . REGARDING THE ISSUE OF SET OFF OF UNABSORBED CURRENT AND BROUGHT FORWARD LOSSES AGAINST THE PROFITS OF ELIGIBLE UNIT AND PRIOR TO ALLOWING A DEDUCTION UNDER SEC. 10AA OF THE ACT, WE FIND THAT THE ISSUE IS COVERED BY THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT AND ANOTHER VS. YOKOGAWA INDIA LTD. REPORTED IN (2012) 341 ITR 385 (KARN.) , WHEREIN IT WAS HELD THAT SEC. 10A BEING AN EXEMPTION PROVISION, INCOME OF THE 10A UNIT HAS TO BE EXCLUDED AT SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL INCOME AND SINCE THIS INCOME IS NOT TO BE INCLUDED IN THE INCOME OF THE ASSESSEE AT ALL, THERE IS NO OCCASION TO SET OFF THE LOSSES OF THE ASSESSEE IN RESPECT OF ITS OTHER BUSINESS AGAINST THE PROFITS OF THE EX E MPTED UNIT. 8 . THEREFORE, THE ORDER OF THE ASSESSING OFFICER IS INCONFORMITY WITH THE ORDER OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD . (SUPRA). A L E G A L L Y POSSIBLE VIEW WAS TAKEN BY THE ASSESSING OFFICER, HENCE, PRINCIPAL COMMISSIONER OF INCOME TAX HAD N O JURISDICTION TO INTERFERE WITH THE ORDER OF THE ASSESSING OFFICER ON THIS POINT. FURTHER, THE CIRCULAR NO. 07/2013 DATED 16/07/2013 RELIED ON BY THE PRINCIPAL COMMISSIONER OF INCOME TAX IS LATER IN POINT OF TIME THAN PASSING OF THE ORDER BY THE ASSESSING OFFICER UNDER SEC. 143(3) ON 11/03/2013 . THUS, ON THE DATE OF PASSING OF THE ORDER, THE CIRCULAR WAS NOT AVAILABLE AND THEREFORE, THE ORDER OF THE ASSESSING OFFICER WAS IN CONSONANCE WITH THE HONBLE KARNATAKA HIGH COURT AND PRINCIPAL COMMISSION ER OF INCOME TAX HAD NO JURISDICTION TO INTERFERE WITH THE SAME BY PASSING THE ORDER UNDER SEC. 263 OF THE ACT. THEREFORE, WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE . 9. LASTLY, REGARDING THE ISSUE OF NO T ALLOWING DEDUCTION UNDER SEC. 10AA ON AMOUNT DISALLOWED UNDER SEC. 40(A)(IA) OF THE ACT, WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF COORDINATE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF BROADCOM INDIA RESEARCH PRIVA TE LIMITED VS. DCIT IN I.T.A.NO. 1180/BANG/2011 4 ITA NO. 265 /PNJ/201 5 FOR THE ASSESSMENT YEAR 2007 - 08 VIDE ORDER DATED 28/01/2015 , WHEREIN THE TRIBUNAL HAS HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SEC. 10A OF THE ACT ON THE BUSINESS PROFITS AS COMPUTED BY THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT AND AFTER INCLUDING DISALLOWANCE MADE UNDER SEC. 40 (A)(IA) OF THE ACT . T HEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF BROADCOM INDIA RESEARCH PRIVATE LIMITED (SUPRA) , WE HOLD THAT THE PRINCIPAL COMMISSIONER OF INCOME TAX WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO NOT TO ALLOW DEDUCTION TO THE ASSESSEE ON THE EXPENSES DISALLOWED UNDER SEC. 40(A)(IA) OF THE ACT AND TO COMPUTE THE ELIGIBLE PRO FITS AS PER CIRCULAR NO. 07/2013 DATED 16/07/2013. WE FURTHER OBSER VE THAT WHEN THE ORDER UNDER SEC. 143(3) WAS PASSED ON 11/03/2013, THE SAID CIRCULAR N O . 07/2013 DATED 16/07/2013 WAS NOT THERE . THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN ALLOWING DEDUCTION TO THE ASSESSEE ON DISALLOWANCE OF EXPENDITURE MADE UNDER SEC. 40(A)(IA) OF THE ACT . A S HIS ORDER WAS IN CONSONANCE WITH THE DECISION OF THE BANGALORE BENCH OF THE TRIBUN A L IN THE CASE OF BROADCOM INDIA RESEARCH PRIVATE LIMITED (SUPRA) A N D A L E G A L L Y P O S S I B L E V I E W , WE THEREFORE, ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE AND HOLD THAT THE PRINCIPAL COMMISSIONER OF INCOME TAX WAS NOT JUSTIFIED IN PASSING THE ORDER UNDER SEC. 263 OF THE ACT ON THIS ISSUE. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON WEDNESDAY , THE 1 9 TH DAY OF AUGUST , 201 5 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER D ATED : 1 9 TH AUGUST , 201 5 . VR/ - 5 ITA NO. 265 /PNJ/201 5 COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI 6 ITA NO. 265 /PNJ/201 5 DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 1 9 .0 8 .2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 2 0 .08 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 20 /08 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 20 /0 8 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 20 /08 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 19 /0 8 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 20 /08 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER