ITO 15(1)(3), MUMBAI V. CREDIT SUISSE BUSINESS ANALYTICS (INDIA) P.LTD, MUMBAI

ITA 3306/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9202 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 05-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Non compliance; Set aside
• Section: 43B; 40(a)(ia)

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH MUMB AI BEFORE SHRI G. S. PANNU, VICE- PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 3306/MUM/2017 (ASSESSMENT YEAR 2011-12 ) ITO-15(1)(3) ROOM NO. 15B, GR. FLOOR, AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020 VS. M/S CREDIT SUISSE BUSINESS ANALYTICS (INDIA) PVT. LTD. 3 RD & 4 TH FLOOR, CITY PARK, CENTRAL AVENUE, HIRANANDANI BUSINESS PARK, POWAI, MUMBAI-400076 . PAN: AADCC5878L APPELLANT RESPONDE NT APPELLANT BY : SH. LOVE KUMAR SR DR SHRI MANISH KUMAR SINGH (SR.DR) RESPONDENT BY : SHRI ANISH THACKER (AR) DATE OF HEARING : 21.06.2019 DATE OF PRONOUNCEMEN T : 26.06.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-24 [THE LD. CI T(A)], MUMBAI DATED 28 TH FEBRUARY 2017 FOR ASSESSMENT YEAR 2011-12. THE RE VENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: I) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN RELYING ON THE DECISION IN THE CASE OF GEM PLUS JEWELLERY INDIA LTD. (330 ITR 175), IGNORING THAT T HE INCOME TAX DEPARTMENT HAS NOT ACCEPTED THE PRINCIPLES LAID DOW N BY THE SAID DECISION AND SLP (CIVIL) 11030/2011 HAS BEEN FILED AGAINST THE SAID DECISION?' ITA NO 3306 MUM 2017-M/S CREDIT SUISSE BUSINESS ANALYTICS (INDIA) PVT. LTD. 2 (II) 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT EXPENSES DISALLOWED U/ S. 40(A)(IA) AMOUNTING TO RS.7,77,98,460/- SHALL BE REDUCED FROM THE EXPORT TURNOVER AND THE TOTAL TURNOVER WHILE WORKING OUT T HE AMOUNT ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT, IGNORING THAT THE DISALLOWANCES MADE ON THE GROUND OF NON COMPLIANCE OF THE MANDATORY PR OVISIONS OF THE ACT CANNOT BE USED FOR CLAIMING DEDUCTION PROVIDED U/S 10A OF THE INCOME TAX ACT?' (III) THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT (A) ON THE ABOVE DIRECTIONS BE SET ASIDE AND THAT OF THE ASSESSING O FFICER BE RESTORED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF PROVIDING VARIOUS INFORMATION TECHNOLOGY ENABLED SERVICES TO ITS GROUP COMPANIES LOCATED WITHIN AND OUTSIDE INDIA. T HE ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2011-12 ON 23.11.2011 DECLARING TOTAL INCOME OF RS. 93,924/-. IN THE RETU RN OF INCOME, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 10A FOR AS SESSMENT YEAR, THE ASSESSEE WAS LIABLE TO DISALLOW A SUM OF RS. 7, 80,06,253/- UNDER SECTION 40(A)(IA). ACCORDINGLY, THE ASSESSEE DISALL OWED RS. 7,80,06,253/- WHILE COMPUTING DEDUCTION UNDER SECTI ON 10A, ACCORDINGLY ADDED BACK THE SAID SUM FOR THE PURPOSE OF COMPUTING PROFIT & GAINS OF ELIGIBLE UNIT. ON THE GROUND THAT THERE BEING NO INCOME OTHER THAN THE PROFIT & GAINS OF UNIT ELIGIB LE FOR DEDUCTION UNDER SECTION 10A. DURING THE ASSESSMENT, THE ASSES SING OFFICER HOLD THAT ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER S ECTION10A ON THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF RS. 7, 77,98,460/-, ITA NO 3306 MUM 2017-M/S CREDIT SUISSE BUSINESS ANALYTICS (INDIA) PVT. LTD. 3 THEREFORE, NOT ELIGIBLE FOR COMPUTING PROFIT & GAIN S OF THE BUSINESS OF UNIT, ELIGIBLE FOR DEDUCTION UNDER SECTION 10A. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSESSING OFFICER WAS REVERSE D. THE LD. CIT(A) WHILE GRANTING RELIEF TO THE ASSESSEE FOLLOWED THE DECISION OF JURISDICTIONAL HIGH COURT IN CIT VS. GEM PLUS JEWEL LERY PVT. LTD. [2010] 194 TAXMAN 192. THUS, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. AT THE OUTSET OF HEARING, THE LD. AR OF THE ASSESSE E SUBMITS THAT THE GROUND OF APPEAL RAISED BY REVENUE IS SQUARELY COVE RED BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT Y EAR 2010-11 IN ITA NO. 1900/MUM/2015 DATED 28.02.2017, WHEREIN ON IDENTICAL GROUNDS OF APPEAL, THE APPEAL OF REVENUE WAS DISMIS SED. THE LD. AR OF THE ASSESSEE FURNISHED THE COPY OF ORDER OF TRIBUNA L FOR ASSESSMENT YEAR 2020-11 DATED 28.02.2017. 4. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE AFTER GOING THROUGH THE CONTENTS OF ORDER O F TRIBUNAL RELIED UPON THE ORDER OF ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE AL SO DELIBERATED ON CASE LAWS RELIED BY LOWER AUTHORITIES. WE HAVE NOTE D THAT ON IDENTICAL GROUNDS OF APPEAL, THE CO-ORDINATE BENCH OF TRIBUNA L IN ASSESSEES OWN ITA NO 3306 MUM 2017-M/S CREDIT SUISSE BUSINESS ANALYTICS (INDIA) PVT. LTD. 4 CASE FOR ASSESSMENT YEAR 2020-11 IN ITA NO. 1900/MU M/2015 PASSED THE FOLLOWING ORDER: 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PE RUSED THE MATERIAL PLACED ON RECORD INCLUDING THE DECISIONS RELIED UPO N BY THE PARTIES. THE LD. CIT(A) HAS DECIDED THIS GROUND OF APPEAL HOLDIN G AS UNDER- '3.5 IN VIEW OF THE ABOVE, I AM OF THE VIEW THAT TH E APPELLANT IS ENTITLED TO CLAIM OF DEDUCTION U/ S 10A ON AN ENHANCED INCOM E. THE APPELLANT HAD RELIED ON VARIOUS OTHER DECISIONS AND CONTENDED THAT DEDUCTION U/S 10A SHOULD BE ALLOWED ON THE INCOME WHICH WAS ASSES SED TO TAX BY THE A.O AFTER CONSIDERING THE ALLOWANCE/ DISALLOWANCE M ADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS PER THE PROVISI ONS OF THE I. T. ACT. I FIND THESE DECISIONS SUPPORT THE CASE OF THE APPE LLANT. THEREFORE, THE ACTION OF A.O IN NOT CONSIDERING THE DISALLOWANCE M ADE U/S 40 A (IA) WHILE COMPUTING THE DEDUCTION U/S 10A IS NOT CORREC T AND HENCE, THE ADDITION MADE IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 6. WE NOTICE THAT IN CIT VS. GEM PLUS JEWELLERY INDIA LTD. (SUPRA) ONE OF THE ISSUE BEFORE THE HON'BLE HIGH COURT WAS WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE TRIBUNAL WAS JUST IFIED IN DIRECTING THE A.O TO EXEMPT U/S 10A OF THE ACT, ON THE ASSESSED I NCOME WHICH WAS ENHANCED DUE TO ALLOWANCE OF THE EMPLOYERS AS WELL AS THE EMPLOY EES CONTRIBUTION TOWARDS PROVIDENT FUND/ESIC. THE HON'BLE HIGH COURT DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING AS UNDER:- 11. FOR THE PURPOSES OF THE APPEAL IT IS NECESSARY TO REFER TO THE ADMITTED POSITION WHICH IS THAT THE ASSESSEE HAD DE POSITED BOTH THE EMPLOYER'S AND THE EMPLOYEES CONTRIBUTION TOWARDS P ROVIDENT FUND AND ESIC, THOUGH BEYOND THE DUE DATE INCLUDING THE GRAC E PERIOD. THE ASSESSING OFFICER ADDED THESE PAYMENTS TO THE TOTAL INCOME OF THE ASSESSEE AND MADE AN ADDITION IN THE AMOUNT OF RS. 71.59 LAKHS, HOWEVER, FOR THE DEDUCTION UNDER SECTION 10A, THE A DDITION MADE ON ACCOUNT OF THE EMPLOYEES' CONTRIBUTION WAS IGNORED IN CALCULATING THE ITA NO 3306 MUM 2017-M/S CREDIT SUISSE BUSINESS ANALYTICS (INDIA) PVT. LTD. 5 PROFITS ELIGIBLE FOR DEDUCTION ON THE GROUND THAT T HESE RECEIPTS WERE NOT GENERATED OUT OF THE MANUFACTURING ACTIVITY OF THE ASSESSEE-COMPANY. 12. BY REASON OF THE JUDGMENT OF THE SUPREME COURT IN CIT VS. ALOM EXTRUSIONS LIMITED [2009] 319 ITR 306 THE EMPLOYER' S CONTRIBUTION WAS LIABLE TO BE ALLOWED, SINCE IT WAS DEPOSITED BY THE DUE DATE FOR THE FILING OF THE RETURN. THE PECULIAR POSITION, HOWEVE R, AS IT OBTAINS IN THE PRESENT CASE ARISES OUT OF THE FACT THAT THE DISALL OWANCE WHICH WAS EFFECTED BY THE ASSESSING OFFICER HAS NOT, THE COUR T IS INFORMED, BEEN CHALLENGED BY THE ASSESSEE. AS A MATTER OF FACT THE QUESTION OF LAW WHICH IS FORMULATED BY THE REVENUE PROCEEDS ON THE BASIS THAT THE ASSESSED INCOME WAS ENHANCED DUE TO THE DISALLOWANC E OF THE EMPLOYER'S AS WELL AS THE EMPLOYEES CONTRIBUTION TO WARDS PROVIDENT FUND/ ESIC AND THE ONLY QUESTION WHICH IS CAN-VASSE D ON BEHALF OF THE REVENUE IS WHETHER ON THAT BASIS THE TRIBUNAL WAS J USTIFIED IN DIRECTING THE ASSESSING OFFICER TO GRANT THE EXEMPTION UNDER SECTION 10A. ON THIS POSITION, IN THE PRESENT CASE IT CANNOT BE DIS PUTED THAT THE NET CONSEQUENCE OF THE DISALLOWANCE OF THE EMPLOYER'S A ND THE EMPLOYEES' CONTRIBUTION IS THAT THE BUSINESS PROFITS HAVE TO T HAT EXTENT BEEN ENHANCED. THERE WAS AS WE HAVE ALREADY NOTED, AN AD D BACK BY THE ASSESSING OFFICER TO THE INCOME. ALL PROFITS OF THE UNIT OF THE ASSESSEE HAVE BEEN DERIVED FROM MANUFACTURING ACTIVITY. THE SALARIES PAID BY THE ASSESSEE, IT HAS NOT BEEN DISPUTED, RELATE TO T HE MANUFACTURING ACTIVITY. THE DISALLOWANCE OF THE PROVIDENT FUND/ E SIC PAYMENTS HAS BEEN MADE BECAUSE OF THE STATUTORY PROVISIONS-SECTI ON 43B IN THE CASE OF THE EMPLOYER'S CONTRIBUTION AND SECTION 36(V) RE AD WITH SECTION 2(24) (X) IN THE CASE OF THE EMPLOYEES' CONTRIBUTIO N WHICH HAS BEEN DEEMED TO BE THE INCOME OF THE ASSESSEE. THE PLAIN CONSEQUENCE OF THE DISALLOWANCE AND THE ADD BACK THAT HAS BEEN MADE BY THE ASSESSING OFFICER IS AN INCREASE IN THE BUSINESS PROFITS OF T HE ASSESSEE. THE CONTENTION OF THE REVENUE THAT IN COMPUTING THE DED UCTION UNDER SECTION 10A THE ADDITION MADE ON ACCOUNT OF THE DIS ALLOWANCE OF THE PROVIDENT FUND/ ESIC PAYMENTS OUGHT TO BE IGNORED C ANNOT BE ITA NO 3306 MUM 2017-M/S CREDIT SUISSE BUSINESS ANALYTICS (INDIA) PVT. LTD. 6 ACCEPTED. NO STATUTORY PROVISION TO THAT EFFECT HAV ING BEEN MADE, THE PLAIN CONSEQUENCE OF THE DISALLOWANCE MADE BY THE A SSESSING OFFICER MUST FOLLOW. THE SECOND QUESTION SHALL ACCORDINGLY STAND ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE.' 7. WE ALSO NOTICE THAT THE ITAT HYDERABAD BENCH HAS DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF ITA NO. 2040/HYD/2011 AND CROSS APPEAL (SUPRA). 2007-08. WE FIND THAT THE LD. CIT(A) HAS PASSED THE IMPUGNED ORDER IN ACCORDANCE WITH THE LAW LAID DOWN BY THE HON 'BLE JURISDICTIONAL HIGH COURT IN E RR VS. GEM PLUS JEWELLERY INDIA LTD. (SUPRA). HENCE, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) TO INTERFER E WITH THE SAME. WE THEREFORE, UPHOLD THE ORDER PASSED BY THE LD. CIT(A ) AND DISMISS THE SOLE GROUND OF APPEAL OF THE REVENUE. 7. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR PRECEDING YEAR AND RESPECTFULLY FOLLOWING THE SAME, WE AFFIRM THE ORDER PASSED BY LD CIT(A). NO CONTRARY FACT OR LAW IS BROUGHT TO OUR NOTICE, THUS, THE GROUNDS OF APPEAL RAISED BY REVEN UE ARE DISMISSED. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/06/2019. SD/- SD/- G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUDICIAL MEMBER MUMBAI, DATE: 26 .06.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR C BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI