TATA CONSULTANCY SERVICES LIMITED, MUMBAI V. CIT(LTU), MUMBAI

ITA 2904/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0837 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2010-2011
• Appeal Filed On: 20-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: DINESH VYAS
• Keywords: Transfer pricing; International transaction; Assessment record
• Section: 143(3); 10AA; 115JB; 263

Judgement Text

, E , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANJUNATHA G, AM ITA NO.2904/MUM/2016 : ASST.YEAR 2010-2011 M/S.TATA CONSULTANCY SERVICES LTD. 9 TH FLOOR, NIRMAL BUILDING NARIMAN POINT, MUMBAI 400 021. PAN : AAACR4849R. VS. THE COMMISSIONER OF INCOME-TAX (LARGE TAXPAYERS UNIT) MUMBAI. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : SHRI DINESH VYAS /RESPONDENT BY : SHRI V.JUSTIN, DR / DATE OF HEARING : 22.01.2018 / DATE OF PRONOUNCEMENT : 24.01.2018. / O R D E R PER SAKTIJIT DEY (JM) : THE AFORESAID APPEAL AT THE INSTANCE OF THE ASSESSE E IS DIRECTED AGAINST THE ORDER DATED 30.03.2016 PASSED BY THE CO MMISSIONER OF INCOME-TAX (LARGE TAXPAYERS UNIT), MUMBAI, U/S 263 OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2010-2011. 2. BRIEFLY THE FACTS ARE THE ASSESSEE, A COMPANY IS ENGAGED IN THE BUSINESS OF EXPORT OF COMPUTER SOFTWARE, PROVIDING E-SOLUTIONS, BPO ACTIVITIES AND OTHER MANAGEMENT CONSULTANCY ACTIVIT IES. FOR THE ASSESSMENT YEAR UNDER DISPUTE THE ASSESSEE FILED IT S RETURN OF INCOME ON 24.09.2010 DECLARING TOTAL INCOME OF RS.1483,18, 88,873 UNDER THE NORMAL PROVISION AND BOOK PROFIT OF RS.4473,00,27,4 17 U/S 115JB OF THE ACT. SUBSEQUENTLY, THE ASSESSEE FILED REVISED RETUR N OF INCOME ON 16.02.2012 ENHANCING THE CLAIM OF TDS FROM RS.146,8 4,69,198 TO ITA NO.2904/MUM/2016 M/S.TATA CONSULTANCY SERVICES LIMITED. 2 RS.161,84,69,198. IN THE RELEVANT PREVIOUS YEAR THE ASSESSEE HAVING ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AS SOCIATED ENTERPRISES, THE ASSESSING OFFICER MADE A REFERENCE TO THE TRANS FER PRICING OFFICER AND THE TRANSFER PRICING OFFICER PASSED AN ORDER MA KING ADJUSTMENT TO THE ARMS LENGTH PRICE SHOWN BY THE ASSESSEE. ON TH E BASIS OF TRANSFER PRICING ADJUSTMENT MADE BY THE TPO, THE ASSESSING O FFICER FRAMED AN ASSESSMENT ORDER WHICH WAS OBJECTED TO BY THE ASSES SEE BEFORE THE DRAFT RESOLUTION PANEL (DRP). ON THE BASIS OF DIREC TIONS OF THE DRP, THE ASSESSING OFFICER FINALIZED THE ASSESSMENT BY ORDER DATED 03.03.2014 PASSED U/S 143(3) R.W.S. 144C(3) OF THE ACT. HOWEVE R, IN THE PRESENT APPEAL WE ARE NOT CONCERNED WITH THE TRANSFER PRICI NG ADJUSTMENT. AFTER COMPLETION OF ASSESSMENT, THE LEARNED COMMISSIONER OF INCOME-TAX CALLED FOR AND EXAMINED THE ASSESSMENT RECORDS OF T HE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR. IN COURSE OF SUCH EXAMINA TION, WE FOUND THAT WHILE COMPUTING INCOME UNDER THE NORMAL PROVIS ION ASSESSEE HAS CLAIMED EXEMPTION OF AN AMOUNT OF RS.2077,81,99,022 FROM SEZ UNITS AS EXEMPT U/S 10AA OF THE ACT. FURTHER, WHILE COMPU TING TAX LIABILITY U/S 115JB OF THE ACT, THE ASSESSEE HAS REDUCED THE SAID INCOME EARNED FROM SEZ UNIT FROM THE BOOK PROFIT, WHICH HAS BEEN ALLOWED BY THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT YEAR. THE LEARNED CIT BEING OF THE VIEW AS A RESULT OF THE ALLOWANCE OF R EDUCTION OF INCOME FROM SEZ UNIT FROM THE BOOK PROFIT PREJUDICE WAS CA USED TO THE REVENUE AND THEREBY RENDERED THE ASSESSMENT ORDER ERRONEOUS , ISSUED A NOTICE U/S 263 OF THE ACT CALLING UPON THE ASSESSEE TO EXP LAIN WHY ASSESSMENT ORDER SO PASSED SHOULD NOT BE REVISED U/S 263 OF TH E ACT. THOUGH THE ITA NO.2904/MUM/2016 M/S.TATA CONSULTANCY SERVICES LIMITED. 3 ASSESSEE OBJECTED TO THE PROCEEDINGS INITIATED U/S 263 OF THE ACT AND MADE ELABORATE SUBMISSION JUSTIFYING THE COMPUTATIO N OF BOOK PROFIT AFTER REDUCING THE INCOME OF SEZ UNIT AND ALSO SUBM ITTED THAT THE ASSESSMENT ORDER PASSED CANNOT BE CONSIDERED TO BE EITHER ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE IN VIEW O F THE DECISION OF THE TRIBUNAL ON THE ISSUE, HOWEVER, THE CIT DID NOT FIN D MERIT IN THE SUBMISSIONS OF THE ASSESSEE. THOUGH, THE LEARNED CI T ACCEPTED THAT THE TRIBUNAL IN THE CASE OF GENESYS INTERNATIONAL CORPORATION LTD. HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, HOWEVE R, HE OBSERVED THAT THE DECISION OF THE TRIBUNAL HAS NOT REACHED FINALI TY, WHICH FACT HAS BEEN IGNORED BY THE ASSESSING OFFICER. ACCORDINGLY, HE S ET ASIDE THE IMPUGNED ASSESSMENT ORDER WITH THE DIRECTION TO THE ASSESSING OFFICER TO MODIFY THE SAME IN TERMS OF HIS DIRECTION RECORD ED IN THE REVISION ORDER. 3. SHRI DINESH VYAS, THE LEARNED SENIOR COUNSEL APP EARING FOR THE ASSESSEE SUBMITTED THAT THE ISSUE ON THE BASIS OF W HICH THE LEARNED CIT HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJU DICIAL TO THE INTEREST OF THE REVENUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT MUMBAI BENCH IN THE CASE OF DCIT V. GEBBS HEALTH CARE SOLUTIONS PVT. LTD. [(2016) 46 ITR (TRIB.) 551] , GENESYS INTERNATIONAL CORPORATION LTD. V. ACIT (2012-TIOL-767) AND DCIT V. GENESYS INTERNATIONAL CORPORATION LTD. (2015-TIOL-2098) . HE SUBMITTED ONCE IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AND THE DECISION OF THE ASSESSING OFFICER IS IN CONSONANCE ITA NO.2904/MUM/2016 M/S.TATA CONSULTANCY SERVICES LIMITED. 4 WITH THE VIEW EXPRESSED BY THE TRIBUNAL, THE ASSESS MENT ORDER CANNOT BE HELD TO BE ERRONEOUS. FURTHER, HE SUBMITTED THE CBDT VIDE CIRCULAR NO.14/2014 DATED 8 TH OCTOBER, 2014 HAS CLARIFIED THE ISSUE FURTHER BY STATING IN CASE OF NEW SEZ UNIT WHERE NEW TECHNICAL MANPOWER IS 50% OF THE TOTAL TECHNICAL MANPOWER, SUCH UNIT WILL BE ELIGIBLE FOR DEDUCTION U/S 10A / 10AA. HE SUBMITTED, THE CIRCULAR FURTHER ADVISED THE DEPARTMENT NOT TO CONTEST THE DECISION OF THE APPEL LATE AUTHORITY ON THE SAID ISSUE. HE SUBMITTED, IN ASSESSEES OWN CASE FO R ASSESSMENT YEARS 2008-2009, 2009-2010 AND 2019-2011, THE CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE DEPARTMENT KEEPING IN VIEW THE CBDT CIRCULAR NO.14/2014 DATED 8 TH OCTOBER, 2014, HAS NOT FILED ANY APPEAL BEFORE THE HIGHER APPELLATE AUTHORITY CONTES TING THE AFORESAID DECISION OF THE FIRST APPELLATE AUTHORITY. THEREFOR E, HE SUBMITTED THE CONDITIONS OF SECTION 263 OF THE ACT BEING NOT SATI SFIED, THE REVISIONAL AUTHORITY HAS WRONGLY EXERCISED HIS JURISDICTION IN REVISING THE ASSESSMENT ORDER. HENCE, THE ORDER PASSED U/S 263 O F THE ACT SHOULD BE SET ASIDE / QUASHED. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED U PON THE OBSERVATION OF THE LEARNED CIT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIALS ON RECORD. IT IS EVIDENT, THE ONLY ISSUE ON WHICH LEARNED CIT HAS HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF REVENUE AND THEREFORE, EXERCISED POWERS U/S 263 OF THE ACT IS, WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF TH E ACT THE INCOME OF ITA NO.2904/MUM/2016 M/S.TATA CONSULTANCY SERVICES LIMITED. 5 SEZ UNIT CLAIMED AS EXEMPT U/S 10AA OF THE ACT SHOU LD NOT HAVE BEEN REDUCED AS THE ASSESSING OFFICER HAS NOT ALLOWED SU CH EXEMPTION UNDER THE NORMAL PROVISIONS OF THE ACT. HOWEVER, FROM THE FINDING OF THE LEARNED CIT AS CONTAINED IN PARA 4.2 OF HIS ORDER, IT IS EVIDENT THAT WHILE CONSIDERING THE MERITS OF THE ISSUE, HE HAS ACCEPTE D THAT IN CASE OF GENESYS INTERNATIONAL CORPORATION LTD. (SUPRA) THE ITAT MUMBAI BENCH HAS DECIDED IDENTICAL ISSUE IN FAVOUR OF THE ASSESS EE. THUS, WHEN THE CIT HIMSELF AGREES THAT THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CAS E OF GENESYS INTERNATIONAL CORPORATION LTD. (SUPRA) , WE FAIL TO UNDERSTAND HOW THE ASSESSMENT ORDER CAN BE HELD TO BE ERRONEOUS WHEN I T IS IN CONSONANCE WITH THE DECISION OF THE TRIBUNAL IN THE CASE OF GENESYS INTERNATIONAL CORPORATION LTD. (SUPRA). THEREFORE, ONE OF THE CONDITIONS OF SECTION 263 OF THE ACT IS NOT SATISFIED. FURTHER, AS FAR AS THE ISSUE RELATING TO DISALLOWANCE OF ASSESSEES CLAIM OF EXEMPTION U/S 1 0AA OF THE ACT IS CONCERNED, SUCH ISSUE STANDS RESOLVED IN VIEW OF TH E DECISION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) WHILE DECIDIN G ASSESSEES APPEAL AGAINST SUCH DISALLOWANCE MADE BY THE ASSESS ING OFFICER. THE CIT(A) WHILE DECIDING THE ISSUE HAS ALLOWED ASSESSE ES CLAIM NOT ONLY IN THE IMPUGNED ASSESSMENT YEAR BUT ALSO IN ASSESSMENT YEARS 2008- 2009 AND 2009-2010. THAT BEING THE CASE, THE ASSESS MENT ORDER CANNOT BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF THE REVENUE ON THE GROUND OF REDUCTION OF INCOME OF SEZ UNIT FROM THE BOOK PROFIT. IN ANY CASE OF THE MATTER, EVEN IF WE ACCEPT THE REASO NING OF THE LEARNED CIT THAT THE DECISION OF THE TRIBUNAL IN THE CASE O F GENESYS ITA NO.2904/MUM/2016 M/S.TATA CONSULTANCY SERVICES LIMITED. 6 INTERNATIONAL CORPORATION LTD. (SUPRA) HAS NOT ATTAINED FINALITY, HOWEVER THE VERY FACT THAT THE TRIBUNAL HAS DECIDED IDENTIC AL ISSUE IN FAVOUR OF THE ASSESSEE AND ALSO THE FACT THAT IN ASSESSEES O WN CASE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ALLOWED AS SESSEES CLAIM OF EXEMPTION U/S 10AA OF THE ACT DEMONSTRATE THAT MORE THAN ONE VIEW IS POSSIBLE ON THIS ISSUE. THAT BEING THE CASE, EXERCI SE OF POWER U/S 263 OF THE ACT IS TOTALLY UNJUSTIFIED. IN VIEW OF THE AFOR ESAID, WE HAVE NO HESITATION IN SETTING ASIDE THE ORDER PASSED U/S 26 3 OF THE ACT BY THE LEARNED CIT. THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 144C(13) IS RESTORED. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 24 TH DAY OF JANUARY, 2018. !'#$ SD/- SD/- (MANJUNATHA G) (SAKTIJIT DEY) / ACCOUNTANT MEMBER ! / JUDICIAL MEMBER ! MUMBAI; ! DATED : 24 TH JANUARY, 2018. DEVDAS* '!#$%&%'# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ' ( ) / THE CIT, MUMBAI. 4. ' / CIT(LARGE TAXPAYER UNIT) , MUMBAI 5. *+#,,-. , -. , ! / DR, ITAT, MUMBAI 6. #012 / GUARD FILE. ITA NO.2904/MUM/2016 M/S.TATA CONSULTANCY SERVICES LIMITED. 7 / BY ORDER, *, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ! / ITAT, MUMBAI