ITO, CHENNAI V. M/s. Lycatel BPO Pvt. ltd., CHENNAI

ITA 2881/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8137 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 06-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAHADEVAN
• Section: 143(3); 10AA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . . . , . , % BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.2881/MDS/2016 ( / ASSESSMENT YEAR: 2011-12) THE INCOME TAX OFFICER, CORPORATE WARD-4(4), CHENNAI-34. VS M/S. LYCATEL BPO PVT.LTD., BLOCK 7, 1 ST FLOOR DLF SEZ, 1/124,SHIVAJI GARDENS, RAMAPURAM, CHENNAI-600089. PAN: AABCL5554A ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. B.SAHADEVAN, JCIT /RESPONDENT BY : NONE /DATE OF HEARING : 2 ND JANUARY, 2017 /DATE OF PRONOUNCEMENT : 5 TH JANUARY, 2017 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED BY TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- 8, CHENNAI DATED 26.07.2016 IN ITA NO.02/2015-16 PA SSED UNDER SECTION 143(3) R.W.S. 250(6) OF THE ACT. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEAL, HOWEVER THE CRUX OF THE ISSUE IS AS FOLLOWS:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THAT INCOME OF SECTION 10AA UNIT HAS TO BE DEDUCTED AT SOURCE 2 ITA NO.2881 /MDS/2016 ITSELF AND NOT AFTER COMPUTING THE GROSS TOTAL INCOME. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF PROVIDING IT ENA BLED SERVICES TO ITS GROUP OF COMPANIES LOCATED OUTSIDE INDIA FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-1 2 ON 30.11.2011 DECLARING NIL INCOME. THE CASE WAS SELE CTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) WAS ISSUED TO THE ASSESSEE ON 17.09.2012. SUBSEQUENTLY, THE ASSESSME NT WAS COMPLETED BY THE LEARNED ASSESSING OFFICER UNDE R SECTION 143(3) OF THE ACT ON 27.02.2015 WHEREIN THE LEARNED ASSESSING OFFICER WITHDREW THE BENEFIT OF DEDUCTION UNDER SECTION 10AA OF THE ACT WITH RESPECT TO FOREIGN EXC HANGE FLUCTUATION AND BROUGHT FORWARD BUSINESS LOSS OF TH E ASSESSMENT YEAR 2010-11. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE COMPANY HAD CARRIED FORWARD ITS BUSINESS LOSSES AMO UNTING TO RS.1,70,14,586/- PERTAINING TO THE ASSESSMENT YE AR 2010- 11. THIS BROUGHT FORWARD BUSINESS LOSS WAS NOT SET OFF 3 ITA NO.2881 /MDS/2016 AGAINST THE CURRENT YEARS INCOME WHILE CLAIMING DE DUCTION UNDER SECTION 10AA OF THE ACT, BUT THE ENTIRE INCOM E OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT OF RS.4,48,65, 320/- WAS CLAIMED AS DEDUCTION U/S. 10AA OF THE ACT. THE LEARNED ASSESSING OFFICER OPINED THAT THE ASSESSEE OUGHT TO HAVE SET OFF THE BROUGHT FORWARD LOSS BEFORE CLAIMING DEDUCT ION UNDER SECTION 10AA OF THE ACT AS PER CBDT CIRCULAR NO.7/2 013 DATED 16.07.2001. 5. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) DECIDED THE ISSUE IN FAVOUR OF THE ASSESS EE FOLLOWING THE DECISION OF THE HONBLE KARNATAKA H IGH COURT IN THE CASE CIT VS. YOKOGAWA INDIA LTD. REPORTED IN 341 ITR 385, AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BE FORE US. 6. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE VEHEMENTLY ARGUED IN SUPPORT OF THE ORDER OF THE LE ARNED ASSESSING OFFICER WHILE AS THE LEARNED AUTHORIZED REPRESENTATIVE FAILED TO APPEAR. 4 ITA NO.2881 /MDS/2016 7. AFTER HEARING THE LD.D.R AND CAREFULLY PERUSED T HE MATERIALS ON RECORD WE FIND THAT THE LD.CIT(A) HAS ONLY FOLLOWED THE ORDER OF THE HONBLE KARNATAKA HIGH CO URT WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. THE GIST OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 4.1 I HAVE CONSIDERED THE OBSERVATION OF THE ASSESSING OFFICER AND THE SUBMISSIONS MADE BY THE APPELLANT. THE FIRST GROUND OF APPEAL IS WITH REGARD TO THE SETTIN G OFF OF BROUGHT FORWARD LOSS OF RS.1,70,14,586/- PERTAINING TO A.Y.2010-11 BEFORE ALLOWING DEDUCTION U/S.10AA. TH E APPELLANT OBJECTS TO THIS AND RELIES ON THE DECISIO N OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD. (341 ITR 385) WHEREIN IT WAS OBSERVED AS UNDER:- THE INCOME OF SECTION 10A UNIT HAS TO BE EXCLUDED BEFORE ARRIVING AT THE GROSS TOTAL INCOME OF THE ASSESSEE. THE INCOME OF SECTION 10A UNIT HAS TO BE DEDUCTION AT SOURCE ITSELF AND NOT AFTER COMPUTING THE GROSS TOTAL INCOME. AS THE INCOME OF SECTION 10A UNIT HAS TO BE EXCLUDED AT SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL INCOME, THE LOSS OF NON-SECTION 10A UNIT CANNOT BE SET OFF AGAINST THE INCOME OF 10A UNIT UNDER SECTION 72. THE LOSS INCURRED BY THE ASSESSEE UNDER THE HEAD PROFITS & GAINS OF BUSINESS OR PROFESSION HAS TO BE SET OFF AGAINST THE PROFITS AND GAINS, IF ANY OF ANY BUSINESS OR PROFESSION CARRIED ON BY SUCH ASSESSEE . AS THE PROFITS AND GAINS OF U/S.10A IS NOT INCLUDED IN THE INCOME OF THE ASSESSEE AT ALL, THE QUESTION OF SETTING OFF THE LOSS OF THE ASSESSEE OF ANY PROFITS AND GAINS OF BUSINESS AGAINST SUCH PROFITS AND GAINS OF UNDERTAKING WOULD NOT ARISE. AS DEDUCTION U/S10A HAS TO BE EXCLUDED FROM THE TOTAL INCOME OF THE ASSESSEE, THE QUESTION OF UNABSORBED 5 ITA NO.2881 /MDS/2016 BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFIT AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. SECTION 10AA BEING A PROVISION IN THE NATURE A DEDUCTION, HAS TO BE GIVEN EFFECT TO AT THE STAGE O F COMPUTING THE PROFITS & GAINS OF BUSINESS. THIS VIE W HAS ALSO BEEN SUPPORTED BY THE CHENNAI A BENCH OF THE I TAT IN THE CASE OF ACIT VS. CHARON TEC P.LTD. 56 SOT 65 . RESPECTFULLY FOLLOWING THE VIEW ENDORSED BY THE HON BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD. (SUPRA) THIS ISSUE IS DECIDED I N FAVOUR OF THE APPELLANT. 8. SINCE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ONLY FOLLOWED THE DECISION OF THE HON BLE HIGH COURT, WE DO NOT FIND IT NECESSARY TO INTERFERE WIT H HIS ORDER. MOREOVER, IT IS WORTH MENTIONING THAT WHILE COMPUTI NG DEDUCTION UNDER SECTION 10AA OF THE ACT WHICH IS A BENEFICIAL PROVISION HAVING LEGAL FICTION, ANOTHER PROVISION W HICH HAS A LEGAL FICTION CANNOT BE SUPER IMPOSED. CARRY FORWAR D AND SET OFF OF BUSINESS LOSSES PROVIDED UNDER SECTION 72 OF THE ACT IS ALSO A PROVISION WITH LEGAL FICTION BECAUSE THE BUS INESS LOSS OF THE EARLIER YEARS IS ALLOWED TO BE SET OFF AGAIN ST THE BUSINESS PROFIT OF THE SUBSEQUENT YEARS WITH CERTAI N CONDITIONS BY VIRTUE OF THE ACT WHICH IS OTHERWISE NOT PERMISSIBLE UNDER THE ACT. THEREFORE, IN THE PRESE NT CASE WHILE COMPUTING DEDUCTION UNDER SECTION 10AA OF THE ACT SECTION 72 SHOULD NOT BE GIVEN EFFECT TO. FOR THE A FORESAID 6 ITA NO.2881 /MDS/2016 REASONS, WE HEREBY CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 5 TH JANUARY, 2017 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATE: 05.01. 2017 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF