DCIT CORPORATE CIRCLE 1(2), CHENNAI V. CSS CORP. PVT. LTD., CHENNAI

ITA 2968/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9333 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 26-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PAVITHRAN N
• Keywords: Depreciation; Services rendered outside India; Tax effect; Unabsorbed depreciation; Set aside
• Section: 80HHC

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . . , . , BEFORE SHRI DUVVURU R.L. REDDY, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NOS.2967 & 2968/CHNY/2018 ! ! /ASSESSMENT YEARS: 2004-05 & 2005-06 THE DY. COMMISSIONER OF- INCOME TAX, CORPORATE CIRCLE-1(2), CHENNAI-34. VS. M/S.CSS CORP. PVT. LTD., 6 TH FLOOR, AMBIT IT PARK, NO.32A & B, AMBIT ROAD, AMBATTUR INDUSTRIAL ESTATE, CHENNAI-58. [PAN: AAECS 2087 A] ( $ /APPELLANT) ( %&$ /RESPONDENT) DEPARTMENT BY : MR. GURUBASHYAM, JCIT ASSESSEE BY : MR.PAVITHRAN.N, ADV. ( /DATE OF HEARING : 26.06.2019 ( /DT. OF PRONOUNCEMENT : 27.06.2019 / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER : THE REVENUE FILED THESE APPEALS AGAINST THE CONSOL IDATED ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI , IN ITA NO.NEW NO.84, 86 & 83/CIT(A)-1/2009-10, 2008-09 & 2009-10 DATED 31.07.2018 FOR THE AYS 2004-05 & 2005-06. 2 M/S.CSS CORP. PVT. LTD., THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING VOICE BASED TECHNICAL SERVICES TO ITS CLI ENTS AND HAS SUBSTANTIAL ITA NOS.2967 & 2968/CHNY/2018 :- 2 -: REVENUE FROM EXPORT OF SERVICES. IN THE ORDER PASS ED U/S.143(3) R.W.S.147 FOR THE AY 2004-05, THE AO ALLOWED THE SE T OFF BROUGHT FORWARD LOSSES IN RESPECT OF ALL THE YEARS SUBSEQUENT TO TH E AY 2000-01, BUT FOR THE SET OFF OF LOSS PERTAINING TO THE AY 2000-01, I NVOKING THE PROVISIONS OF SEC.10A(6)(II), THE AO REFUSED TO SET OFF AGAINST T HE PROFITS OF UNDERTAKING. SIMILARLY, BY AN ORDER U/S.154, THE AO DENIED THE S ET OFF BROUGHT FORWARD LOSSES PERTAINING TO THE AY 2000-01 AND RE-COMPUTED THE INCOME. 3. AGGRIEVED AGAINST THOSE ORDERS, THE REVENUE FILE D THESE APPEALS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE LD.CIT(A) APPLYING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S.YOKOGAWA INDIA LTD., REPORTED IN [2017] 77 TAXM ANN.COM 41 (SC), ALLOWED THE ASSESSEES APPEAL. 4. AGGRIEVED AGAINST THOSE ORDERS, THE REVENUE FILE D THESE APPEALS WITH THE FOLLOWING GROUNDS FOR BOTH THE AYS: 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW, FACT S AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) ERRED IN NOT APPLYING THE RATIONALE O F THE APEX COURT DECISION IN M/S.HIMATSINGIKE SEIDA CASE [2014] 48 TAXMANN.COM 357 (SC) , WHERE IT WAS HELD THAT THE UNABSORBED LOSS OF 10A/10B UNITS CANNOT BE SET O FF AGAINST OTHER INCOMES, WHICH WAS NEITHER OVER-RULED NOR DISCUSSED IT IN THE YOKO GAWA INDIA LTD CASE (2017) 77 TAXMAN.COM 41 (SC). 3. THE LD. CIT(A) ERRED IN HOLDING THAT DEDUCTION U/S.10 A TO BE ALLOWED WITHOUT CONSIDERING THE CARRY FORWARD OF LOSS, WHEN IT WAS HELD BY THE HON'BLE APEX COURT IN THE DECISION RELIED IN THE CASE OF YOKOGAWA INDIA LTD, SUPRA, THAT DEDUCTION U/S.10A IS TO BE ALLOWED WHILE COMPUTING GROSS TOTAL INCOME OF ELIGI BLE UNDERTAKING UNDER CHAPTER IV OF THE ACT. 4. IT IS ALSO SUBMITTED THAT ALTHOUGH THE TAX EFFECT I S BELOW THE PRESCRIBED LIMITS AS PER CIRCULAR 3/2018 ISSUED BY CBDT IT IS PERTINENT TO PO INT OUT THAT AN RAP OBJECTION HAS BEEN ACCEPTED BY THE DEPARTMENT AND THIS APPEAL IS ELIGIBLE AS IT IS COVERED BY EXCEPTION 10(C). ITA NOS.2967 & 2968/CHNY/2018 :- 3 -: 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND TH AT OF THE AO RESTORED. 5. THE LD.DR ARGUED THE CASES ON THE LINES OF THE G ROUNDS OF APPEAL, SUPRA. 6. PER CONTRA, THE LD.AR SUPPORTED THE ORDERS OF TH E LD.CIT(A) AND PLEADED THAT SINCE THE LD.CIT(A) FOLLOWED THE DECIS ION OF THE HONBLE SUPREME COURT, THE APPEALS FILED BY THE REVENUE MAY BE DISMISSED. 7. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIALS. THE LD.CIT(A) EXTRACTED THE FOLLOWING P ORTION OF THE ORDER OF THE HONBLE SUPREME COURT AND ALLOWED THE APPEALS: 15. SUB-SECTION 4 OF SECTION 10A WHICH PROVIDES FOR PRO RATA EXEMPTION, NECESSARILY INVOLVING DEDUCTION OF THE PROFITS ARIS ING OUT OF DOMESTIC SALES, IS ONE INSTANCE OF DEDUCTION PROVIDED BY THE AMENDMENT. PR OFITS OF AN ELIGIBLE UNIT PERTAINING TO DOMESTIC SALES WOULD HAVE TO ENTER IN TO THE COMPUTATION UNDER THE HEAD 'PROFITS AND GAINS FROM BUSINESS' IN CHAPTER I V AND DENIED THE BENEFIT OF DEDUCTION. THE PROVISIONS OF SUB-SECTION 6 OF SECTI ON 10A, AS AMENDED BY THE FINANCE ACT OF 2003, GRANTING THE BENEFIT OF ADJUST MENT OF LOSSES AND UNABSORBED DEPRECIATION ETC. COMMENCING FROM THE YEAR 2001-02 ON COMPLETION OF THE PERIOD OF TAX HOLIDAY ALSO VIRTUALLY WORKS AS A DEDUCTION WHICH HAS TO BE WORKED OUT AT A FUTURE POINT OF TIME, NAMELY, AFTER THE EXPIRY OF P ERIOD OF TAX HOLIDAY. THE ABSENCE OF ANY REFERENCE TO DEDUCTION UNDER SECTION 10A IN CHAPTER VI OF THE ACT CAN BE UNDERSTAND BY ACKNOWLEDGING THAT ANY SUCH REFERENCE OR MENTION WOULD HAVE BEEN A REPETITION OF WHAT HAS ALREADY BEEN PROVIDED IN SECTION 10A. THE PROVISIONS OF SECTIONS 80HHC AND 80HHE OF THE ACT P ROVIDING FOR SOMEWHAT SIMILAR DEDUCTIONS WOULD BE WHOLLY IRRELEVANT AND R EDUNDANT IF DEDUCTIONS UNDER SECTION 10A WERE TO BE MADE AT THE STAGE OF OPERATI ON OF CHAPTER VI OF THE ACT. THE RETENTION OF THE SAID PROVISIONS OF THE ACT I.E . SECTION 80HHC AND 80HHE, DESPITE THE AMENDMENT OF SECTION 10A, IN OUR VIEW, INDICATES THAT SOME ADDITIONAL BENEFITS TO ELIGIBLE SECTION 10A UNITS, NOT CONTEMP LATED BY SECTIONS 80HHC AND 80HHE, WAS INTENDED BY THE LEGISLATURE. SUCH A BENE FIT CAN ONLY BE UNDERSTOOD BY A LEGISLATIVE MANDATE TO UNDERSTAND THAT THE STAGES FOR WORKING OUT THE DEDUCTIONS UNDER SECTION 10A AND 80HHC AND 80HHE AR E SUBSTANTIALLY DIFFERENT. THIS IS THE NEXT ASPECT OF THE CASE WHICH WE WOULD NOW LIKE TO TURN TO. ITA NOS.2967 & 2968/CHNY/2018 :- 4 -: SINCE THE LD.CIT(A) APPLIED THE DECISION OF THE HO NBLE SUPREME COURT, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE LD.CIT(A). 8. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JUNE, 2019, IN CHENNAI. SD/- SD/- ( - . . . / ) (DUVVURU R.L. REDDY) /JUDICIAL MEMBER ( . ) (S. JAYARAMAN) /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: 27 TH JUNE, 2019. TLN ( % 23 43 /COPY TO: 1. $ /APPELLANT 4. 5 /CIT 2. %&$ /RESPONDENT 5. 3 % /DR 3. 5 ( ) /CIT(A) 6. ! /GF