VISTAAR SYSTEMS P. LTD, MUMBAI V. ITO WD 10(1)(4), MUMBAI

ITA 2973/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78907 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 21-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Opportunity of being heard; Question of law
• Section: 80C; 10B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI . . , / BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND . , SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER . / ITA NO.2973/MUM/2010 / ASSESSMENT YEAR 2007-08 M/S. VISTAAR SYSTEMS PVT. LTD., RAHEJA POINT 1, WING-A, JN ROAD, SANTACRUZ(EAST), MUMBAI 400 055 / VS. INCOME TAX OFFICER, WARD 10(1)(4), 4 TH FLOOR, AAYKAR BHAVAN , MK ROAD, MUMBAI 400 020 ! ./ '# ./ PAN/GIR NO. : AABCV0613J ( !$ / APPELLANT ) .. ( %&!$ / RESPONDENT ) !$ ' / APPELLANT BY: S/SHRI CHANDRA SHEKHAR / HARSHAD J. SHAH %&!$ ( ' / RESPONDENT BY : SHRI RAJENDRA KUMAR ( ) / DATE OF HEARING : 20/05/2014 *+ ( ) / DATE OF PRONOUNCEMENT : 20/05/2014 , / O R D E R PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-15MUMBAI DATED 25/2/2010 FOR ASSESSMENT YEAR 2007-08. GROUNDS OF APPEAL READ AS UNDER: 1.1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEA L) HAS ERRED IN CONFIRMING LEARNED ASSESSING OFFICERS ORDER OF ADJUSTING THE BROUGHT FORWARD LOSSES AGAINST THE INCOME OF SECTION 10A UNIT, BEFORE DEDUCTION U/S. 10A OF RS.31,55,4446/-. 1.2. IT IS PRAYED THAT THE LEARNED AO BE DIRECTED TO ALLOW THE APPELLANT TO SET OFF THE AFORESAID BROUGHT FORWARD LOSSES & UNABSORBED DEPRE CIATION AGAINST ITS INCOME AFTER DEDUCTION U/S.10A, TO ARRIVE AT ITS TOTAL TAX ABLE INCOME OF ASSESSMENT YEAR. . / ITA NO.2973/MUM/2010 / ASSESSMENT YEAR 2007-08 2 2. AT THE OUTSET IT WAS SUBMITTED BY LD. AR THAT TH E ISSUE RAISED BY THE ASSESSEE IN THE PRESENT APPEAL IS COVERED IN FAVO UR OF THE ASSESEE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BLACK & VEATCH CONSULTANCY PVT. LTD., DECISION DATED 9/4/2012 PASSED IN I.T. A PPEAL NO.1237. COPY OF THE DECISION WAS PRODUCED BEFORE US. THE FOLLOWING QU ESTION WAS RAISED BY THE REVENUE BEFORE HONBLE HIGH COURT: (A) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE ITAT WAS CORRECT IN HOLDING THAT THE BROUGHT FORWARD UNABSOR BED DEPRECIATION AND LOSSES OF THE UNIT THE INCOME WHICH IS NOT ELIGIBLE FOR DEDUC TION UNDER SECTION 10A OF THE ACT CANNOT BE SET OFF AGAINST THE CURRENT PROFIT OF THE ELIGIBLE UNIT FOR COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE IT ACT. ANSWERING THE SAID QUESTION THEIR LORDSHIPS HAVE DE CIDED THIS ISSUE AS FOLLOWS: NONETHELESS, WHILE COMPUTING THE TOTAL INCOME OF T HE ASSESSEE THE ASSESSING OFFICER TOOK THE NET PROFIT AS PER THE PROFIT AND L OSS ACCOUNT AND AFTER, INTER ALIA, MAKING CERTAIN DISALLOWANCES AND ALLOWANCES, ARRIVE D AT THE TOTAL BUSINESS INCOME AT RS.86.07 LAKHS. A SET OFF WAS EFFECTED OF THE BR OUGHT FORWARD BUSINESS LOSS OF AY 2003-04 AND AY 2004-05 UPON WHICH THE ASSESSING OFF ICER CAME TO THE CONCLUSION THAT THERE WAS NIL INCOME WHICH WOULD QUALIFY FOR D EDUCTION UNDER SECTION 10A. THE CIT (A) HELD THAT THE ASSESSING OFFICER WAS JUSTIFI ED IN ADJUSTING THE BROUGHT FORWARD LOSSES OF EARLIER YEARS BEFORE ARRIVING AT THE GROSS TOTAL INCOME, FOR ALLOWING A DEDUCTION UNDER SECTION 10B. IN APPEAL, THE TRIBU NAL HAS RELIED UPON A DECISION OF ITS SPECIAL BENCH IN THE CASE OF SCIENTIFIC ATLANTA VS. ACIT IN WHICH IT HAS BEEN EMPHASIZED THAT THE PROVISION CONTAINED IN SECTION 10A IS NOT AN EXEMPTION BUT A DEDUCTION UNDER CHAPTER III. FOLLOWING THAT DECISIO N, THE TRIBUNAL HELD THAT THE DEDUCTION UNDER SECTION 10A IN RESPECT OF THE ALLOW ABLE UNIT UNDER SECTION 10A HAS TO BE ALLOWED BEFORE SETTING OFF BROUGHT FORWARDED LOSSES OF A NON 10A UNIT. 3. SECTION 1OA IS A PROVISION WHICH IS IN THE NATUR E OF A DEDUCTION AND NOT AN EXEMPTION. THIS WAS EMPHASISED IN A JUDGMENT OF A D IVISION BENCH OF THIS COURT WHILE CONSTRUING THE PROVISIONS OF SECTION 10B IN H INDUSTAN UNILEVER LTD VS. DEPUTY COMMISSIONER OF INCOME TAX2. THE SUBMISSION OF THE REVENUE PLACED ITS RELIANCE ON THE LITERAL READING OF SECTION 10A UNDER WHICH A DE DUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS IS TO BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE. THE DEDUCTION UNDER SECTION 10A, IN OUR VIEW, HAS TO BE GIVEN EFFECT TO AT THE STAGE OF COMPUTING THE PR OFITS AND GAINS OF BUSINESS. THIS IS ANTERIOR TO THE APPLICATION OF THE PROVISIONS OF SE CTION 72 WHICH DEALS WITH THE CARRY FORWARD AND SET OFF OF BUSINESS LOSSES. A DISTINCTI ON HAS BEEN MADE BY THE LEGISLATURE WHILE INCORPORATING THE PROVISIONS OF C HAPTER VI-A. SECTION 80A(1) STIPULATES THAT IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE, THERE SHALL BE ALLOWED FROM HIS GROSS TOTAL INCOME, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THE . / ITA NO.2973/MUM/2010 / ASSESSMENT YEAR 2007-08 3 CHAPTER, THE DEDUCTIONS SPECIFIED IN SECTIONS 80C T O 80U. SECTION 80B(5) DEFINES FOR THE PURPOSES OF CHAPTER VI-A GROSS TOTAL INCOME T O MEAN THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, BEFOR E MAKING ANY DEDUCTION UNDER THE CHAPTER. WHAT THE REVENUE IN ESSENCE SEEKS TO ATTAI N IS TO TELESCOPE THE PROVISIONS OF CHAPTER VI-A IN THE CONTEXT OF THE DEDUCTION WHI CH IS ALLOWABLE UNDER SECTION 10A, WHICH WOULD NOT BE PERMISSIBLE UNLESS A SPECIF IC STATUTORY PROVISION TO THAT EFFECT WERE TO BE MADE. IN THE ABSENCE THEREOF, SUC H AN APPROACH CANNOT BE ACCEPTED. IN THE CIRCUMSTANCES, THE DECISION OF THE TRIBUNAL WOULD HAVE TO BE AFFIRMED SINCE IT IS PLAIN AND EVIDENT THAT THE DED UCTION UNDER SECTION 10A HAS TO BE GIVEN AT THE STAGE WHEN THE PROFITS AND GAINS OF BU SINESS ARE COMPUTED IN THE FIRST INSTANCE. SO CONSTRUED, THE APPEAL BY THE REVENUE W OULD NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW AND SHALL ACCORDINGLY S TAND DISMISSED. THERE SHALL BE NO ORDER AS TO COSTS. 3. HOWEVER LD. DR RELIED UPON THE ORDER PASSED BY A O AND LD. CIT(A). 4. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. BEFORE LD. CIT(A) IT WAS THE CASE OF T HE ASSESSEE THAT BROUGHT FORWARD LOSSES AS PER RETURN OF INCOME FILED BE AD JUSTED WITH BUSINESS INCOME AFTER DEDUCTION UNDER SECTION 10A OF THE INCOME TA X ACT, 1961(THE ACT) OF RS.2,03,389/- IS GIVEN. THIS ISSUE HAS BEEN DEALT WITH BY LD. CIT(A) IN PAR-6 OF HIS ORDER AS FOLLOWS: 6. GROUND NO.3 RELATES TO NOT ALLOWING BROUGHT FOR WARD LOSSES AS PER RETURN FILED WITH BUSINESS INCOME AFTER DEDUCTION U/S.10A OF RS. 2,03,389/-. 6.1 THE APPELLANT SUBMITS THAT THE AO OUGHT TO HAVE SET OFF THE BROUGHT FORWARD LOSS AGAINST THE TAXABLE INCOME. THE APPELLANT PRAYS TH AT THE HONBLE CIT(A) GIVE DIRECTIONS TO THE AO TO ALLOW FOR SET OFF OF BROUGH T FORWARD LOSSES, IF ANY, AGAINST THE NEXT TAXABLE INCOME COMPUTED AFTER ALLOWING DEDUCTI ON U/S. 10A. THE APPELLANT HAS RELIED UPON THE FOLLOWING TRIBUNAL DECISIONS IN SUP PORT OF ITS STAND THAT IT IS ENTITLED TO APPLY THE PROVISIONS OF SECTIONS 70 TO 74 WHILE COMPUTING ITS TAXABLE INCOME. (A) HONEYWELL INTERNATIONAL (INDIA) (P) LTD. VS. DC IT, 108 TTJ 924 (DELHI BENCH.) (B) MIND TREE CONSULTANTS (P) LTD. VS. ACIT 102 TTJ 691 (BANGALORE BENCH) (C) NAVEEN BHARAT INDUSTRIES LTD., VS. DCIT, 92 TTJ 1166 (MUMBAI BENCH TM) 6.2 THE CONTENTION OF THE APPELLANT IS NOT ACCEPTA BLE AS IT IS CONTRARY TO THE SCHEME OF TAXATION AS PER THE ACT. DEDUCTION U/S. 10A CA N ONLY BE CLAIMED AFTER SETTING OFF BROUGHT FORWARD LOSSES FROM THE SAME UNITS. THE AO WAS CORRECT IN RESTRICTING THE CARRY FORWARD BALANCE OF UNABSORBED LOSSES. AS SUC H THIS GROUND OF APPEAL IS DISMISSED. 5. FROM THE ABOVE OBSERVATION OF LD. CIT(A) IT APP EARS THAT THE LOSS WHICH IS BEING CLAIMED BY THE ASSESSEE ARISE FROM THE SAME U NIT. HOWEVER, THE DECISION WHICH HAS BEEN RELIED UPON BEFORE US IN THE CASE OF CIT VS. BLACK & VEATCH . / ITA NO.2973/MUM/2010 / ASSESSMENT YEAR 2007-08 4 CONSULTANCY PVT. LTD (SUPRA) RELATED TO TWO DIFFERE NT UNITS AS IT CAN BE SEEN FROM THE QUESTION WHICH HAS BEEN REPRODUCED ABOVE. THE FACTS ARE NOT CLEAR EITHER FROM THE ASSESSMENT ORDER OR FROM THE ORDER OF LD. CIT(A). THEREFORE, CONSIDERING THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE TO T HE FILE OF AO WITH A DIRECTION TO GIVE THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD AND AFTER BRINGING THE FACTS ON RECORD ADJUDICATE THE MATTER IN THE LIGHT OF AFOREMENTIONED DECISION OF HONBLE JURISDICTIONAL HIGH COURT. WE DIRECT ACCOR DINGLY. 6. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EAL FILED BY THE ASSESSEE IS TREATED TO BE ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 20/05/201 4 , ( *+ - ./ 20/05/2014 + ( 0 1 SD/- SD /- ( . / D.KARUNAKARA RAO ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; . DATED 20/05/2014 , , , , ( (( ( %)2 %)2 %)2 %)2 32 ) 32 ) 32 ) 32 ) / COPY OF THE ORDER FORWARDED TO : 1. !$ / THE APPELLANT 2. %&!$ / THE RESPONDENT. 3. 4 ( ) / THE CIT(A)- 4. 4 / CIT 5. 250 %) , , / DR, ITAT, MUMBAI 6. 0 6 / GUARD FILE. , , , , / BY ORDER, &2) %) //TRUE COPY// 7 77 7 / 8 8 8 8 ' ' ' ' (DY./ASSTT. 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