IIC Services (India) Private Limited, Hyd, Hyderabad V. ACIT, Circle-2(2), Hyd, Hyderabad

ITA 337/HYD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2552 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 06-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: C SUBRAMANYAM
• Keywords: Revised return
• Section: 143(3); 154

Judgement Text

ITA NO 337 OF 2 015 IIC SERVICES INDIA P LTD HYDERABAD. PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.337/HYD/2015 (ASSESSMENT YEAR: 2010-11) M/S. IIC SERVICES (INDIA) PRIVATE LIMITED HYDERABAD PAN: AAACI 4455 N VS ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 2(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI C. SUBRAMANYAM FOR REVENUE : SMT. SUMAN MALIK, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2010-11 AGAIN ST THE ORDER OF THE CIT (A)-2, HYDERABAD, DATED 18 TH DECEMBER, 2014.. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL: 1.0 THAT THE ORDERS PASSED BY THE CIT (A) ARE CONTRARY TO THE PROVISIONS OF LAW. 1.1 THE LEARNED CIT (A) OUGHT TO HAVE ALLOWED FOR CARRY FORWARD AND SET OFF OF LOSSES OF AMALGAMATING COMPANY, LOSSES UP TO THE DATE OF MERGER, AS PER THE PROVISIONS OF SECTION 72A OF THE I.T. ACT. 1.2 THE LEARNED CIT (A) OUGHT TO HAVE KNOWN THAT CLAIM FOR SET OFF OF CARRY FORWARD LOSSES OF DATE OF HEARING : 19.09.2017 DATE OF PRONOUNCEMENT : 29.09.2017 ITA NO 337 OF 2 015 IIC SERVICES INDIA P LTD HYDERABAD. PAGE 2 OF 6 AMALGAMATING COMPANY, THERE IS NO SUCH CONDITION PROVIDED IN SUB-SECTION 7 OF SECTION 72A OF THE I.T. ACT THAT THE LOSS SHOULD ARISE OUT OF MANUFACTURE OF COMPUTER SOFTWARE WHEN IT IS ENOUGH IF ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF COMPUTER SOFTWARE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN THE BUSINESS OF EXPORT OF SOFTWARE AND T ECHNICAL SERVICES, FILED ITS RETURN OF INCOME FOR THE A.Y 201 0-11 ON 28.09.2010 ADMITTING TOTAL INCOME OF RS.45,38,643. THE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ASSE SSING THE TAXABLE INCOME AT RS.3,37,43,080. THEREAFTER, THE A SSESSEE FILED AN APPLICATION U/S 154 OF THE I. T. ACT STATING THA T THE ADJUSTMENT FOR CARRY FORWARD LOSS OF RS.7,48,28,011 SHOULD BE GIVEN AGAINST THE ASSESSED INCOME OF RS.3,37,43,080. IT WAS ALSO STATED THAT A COMPANY BY NAME M/S. BEACON GLOBAL SERVICES LTD HAD MERGED WITH THE ASSESSEE COMPANY DURING THE FINANCIAL YEAR RELEVANT TO A.Y 2010-11, AND AS SUCH, THE LOSS OF THE SAID COMPA NY UP TO THE DATE OF MERGER, WOULD ALSO BE AVAILABLE TO ASSESSEE TO BE SET OFF AGAINST THE CURRENT YEARS INCOME. THE ASSESSEE WAS ASKED TO FILE THE DETAILS OF ABOVE CLAIM. THE ASSESSEE FILED THE DETAILS OF ITS OWN BROUGHT FORWARD LOSS AND ALSO THE BROUGHT FORWARD L OSS OF M/S. BEACON GLOBAL SERVICES LTD ALONG WITH THE ANNUAL RE PORT & TAX AUDIT REPORT OF M/S. BEACON GLOBAL SERVICES LTD. TH E AO OBSERVED THAT IN THE APPLICATION U/S 154 OF THE ACT, THE ASS ESSEE HAS CLAIMED CARRY FORWARD BUSINESS LOSS OF M/S. BEACON GLOBAL SERVICES LTD AS WELL AS THE ASSESSEES OWN LOSS TO BE SET OFF AGAINST THE ASSESSEES CURRENT YEARS INCOME. THE AO OBSERV ED THAT THE CARRY FORWARD BUSINESS LOSS OF M/S. BEACON GLOBAL S ERVICES LTD IS NOT ALLOWABLE AS THE SAID COMPANY IS NOT INTO THE M ANUFACTURE OF ITA NO 337 OF 2 015 IIC SERVICES INDIA P LTD HYDERABAD. PAGE 3 OF 6 COMPUTER SOFTWARE AS IS REQUIRED UNDER SUB SECTION (2) OF SECTION 72A OF THE I.T. ACT. HE OBSERVED THAT THE M/S. BEAC ON GLOBAL SERVICES LTD WAS ENGAGED IN THE BUSINESS OF EXPORT OF CALL CENTRE SERVICES AND NOT IN MANUFACTURE OF COMPUTER SOFTWAR E. HE THEREFORE, HELD THAT THE CLAIM TO SET OFF THE CARRY FORWARD LOSS OF M/S. BEACON GLOBAL SERVICES LTD FROM THE ASSESSEES CURRENT YEARS INCOME IS NOT ALLOWABLE. AS REGARDS THE ASSE SSEES CLAIM OF SET OFF OF CARRY FORWARD LOSS OF ITS OWN FROM THE B USINESS OF EXPORT OF COMPUTER SOFTWARE, HE ALLOWED THE SAME TO THE EX TENT OF RS.35,88,949. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO CONFIRMED THE ORDER OF THE AO AND T HE ASSESSEE IS IN SECOND APPEAL BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT M/S. BEACON GLOBAL SERVICES LTD WAS SET UP FOR FAC ILITATING BUSINESS DEVELOPMENT OF COMPUTER SOFTWARE, PROGRAMM ES, MANAGEMENT CONCEPTS, INFORMATION AND COMMUNICATION FACILITY AS IS EVIDENT FROM THE MAIN OBJECTIVES TO BE PURSUE D BY THE COMPANY (ON ITS INCORPORATION), FROM THE MEMORANDUM OF ASSOCIATION. THEREFORE, ACCORDING TO HIM, THE SAID COMPANY WAS FORMED FOR MANUFACTURE OF COMPUTER SOFTWARE AND IT IS TO BE CONSIDERED AS ENGAGED IN THE BUSINESS OF DEVELOPMEN T OF COMPUTER SOFTWARE SINCE ITS INCORPORATION. HE SUBMI TTED THAT IT IS SUFFICIENT IF THE AMALGAMATED COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF COMPUTER SERVICES AND IT IS NOT R EQUIRED THAT IT HAS ALSO TO BE MANUFACTURING COMPUTER SOFTWARE. FOR THIS PURPOSE, HE PLACED RELIANCE UPON THE DECISION OF TH E HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M/S. KB D SUGARS & DISTILLERIES LTD IN ITA NO.773 OF 2009 DATED 16.10. 2015 WHEREIN ITA NO 337 OF 2 015 IIC SERVICES INDIA P LTD HYDERABAD. PAGE 4 OF 6 AFTER CONSIDERING THE PROVISIONS OF SECTION 72A OF THE ACT, IT WAS HELD THAT SECTION 72A OF THE ACT, BEING A BENEFICIA L PROVISION, SHOULD BE INTERPRETED LIBERALLY IN FAVOUR OF THE AS SESSEE. HE ALSO RELIED UPON THE CASE OF DY. CIT VS. GUJARAT NRE COK E LTD, REPORTED IN (2008) 15 TTJ 822, WHEREIN IT WAS HELD THAT THE WORD USED IN SECTION 72A, I.E. ENGAGED IN BUSINESS MEA NS THAT A PERSON IS STATED TO BE ENGAGED IN THE BUSINESS WHER EIN A BUSINESS HAS BEEN SET UP OR IT HAS COME INTO EXISTENCE AND ENGAGED IN BUSINESS DOES NOT IMPLY ENGAGED IN PRODUCTION. 4. THE LEARNED COUNSEL FOR THE ASSESSEE HAD ALSO CONTESTED THE FINDINGS OF THE AO THAT THE ASSESSEE HAS NOT FILED ITS RETURN OF INCOME AND THE ASSESSEES CLAIM U/S 154 C ANNOT BE ALLOWED OR CONSIDERED IN VIEW OF THE HON'BLE SUPREM E COURT IN THE CASE OF GOETZE (INDIA) LTD VS. CIT (284 ITR 0323) ( S.C). THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FILED THE REVISED RETURN WITHIN THE TIME ALLOWED UN DER THE ACT AND HE HAS FILED A COPY OF THE E-FILE IN SUPPORT OF ASS ESSEES CONTENTIONS THAT IT HAS FILED ITS REVISED RETURN OF INCOME FOR THE A.Y 2010-11 I.E. WITHIN THE TIME PERMITTED. 5. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE COMPANY M/S. BEACON GLOBAL SERVICES LTD WAS NEVER ENGAGED I N THE BUSINESS OF MANUFACTURE OF COMPUTER SERVICES AND AD MITTEDLY IT WAS ONLY IN EXPORT OF CALL CENTRE SERVICES. THEREFO RE, ACCORDING TO HER, THE ASSESSEE IS NOT ELIGIBLE FOR SET OFF OF CA RRY FORWARD LOSSES OF THE AMALGAMATED COMPANY FROM ITS CURRENT YEARS INCOME. ITA NO 337 OF 2 015 IIC SERVICES INDIA P LTD HYDERABAD. PAGE 5 OF 6 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE IS CLAIMING SE T OFF OF CARRY FORWARD LOSSES OF AMALGAMATED COMPANY M/S. BEACON G LOBAL SERVICES LTD. SECTION 72A OF THE ACT ALLOWS SET OFF OF CARRIED FORWARD LOSS OF AN AMALGAMATING COMPANY FROM THE IN COME OF AN AMALGAMATED COMPANY, PROVIDED IT SATISFIED CERTAIN CONDITIONS. CLAUSE (AA) OF SUB SECTION 7 OF SECTION 72A DESCRIB ES INDUSTRIAL UNDERTAKING TO MEAN ANY UNDERTAKING WHICH IS ENGAG ED IN (I) THE MANUFACTURE OR PROCESSING OF GOODS; OR (II) THE MAN UFACTURE OF COMPUTER SOFTWARE. IN THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE HON'BLE COURTS HAVE H ELD THAT IF THE AMALGAMATING COMPANY HAS OBTAINED LICENSE OR WHEN I T HAS SET UP THE BUSINESS, IT HAS TO BE CONSIDERED TO BE ENGA GED IN THE BUSINESS. THE QUESTION BEFORE US IS, WHETHER THE AM ALGAMATING COMPANY BEFORE US IS ENGAGED IN THE BUSINESS OF MAN UFACTURE OF COMPUTER SOFTWARE?. THOUGH ONE OF THE MAIN OBJECTIV ES OF THE SAID COMPANY IS DEVELOPMENT OF COMPUTER SOFTWARE, IT I S NOT BROUGHT OUT ON RECORD BY THE ASSESSEE THAT THE SAID COMPANY HAD TAKEN ANY STEP IN THIS REGARD OR THAT IT HAS EVER ENGAGED ITSELF IN THE MANUFACTURE OF COMPUTER SOFTWARE. THE ASSESSEES CO NTENTION THAT FROM THE DATE OF INCORPORATION, THE ASSESSEE COMPAN Y SHOULD BE CONSIDERED AS ENGAGED IN THE MANUFACTURE OF COMPUTE R SOFTWARE, IS NOT ACCEPTABLE BECAUSE THE MEMORANDUM OF ASSOCIA TION OF A COMPANY HAS TO CONTAIN ALL THE OBJECTIVES THAT A CO MPANY WISHES TO ENGAGE IN EITHER IN THE PRESENT OR IN FUTURE BUT ALL THE OBJECTIVES MAY NOT BE PURSUED AT THE SAME TIME. IT MAY ALSO SO HAPPEN THAT SOME OF THE OBJECTIVES MAY NEVER BE PUR SUED AT ALL. IN THAT CASE, IT CANNOT BE SAID THAT THE SAID COMPA NY IS ENGAGED IN ALL OF THE BUSINESSES WHICH ARE MENTIONED IN THE ITA NO 337 OF 2 015 IIC SERVICES INDIA P LTD HYDERABAD. PAGE 6 OF 6 OBJECTIVES/CLAUSE OF THE MEMORANDUM OF ASSOCIATION, UNLESS AND UNTIL THE COMPANY HAS TAKEN SOME CONCRETE STEPS IN THIS REGARD. IN THE ABSENCE OF ANY MATERIAL ON RECORD TO SHOW TH AT M/S. BEACON GLOBAL SERVICES LTD HAS EVER CARRIED OR TAKE N ANY STEPS FOR MANUFACTURE OF COMPUTER SOFTWARE, WE ARE NOT ABLE T O ACCEPT THE ASSESSEES CONTENTION. IN VIEW OF THE SAME, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) AND THE ASS ESSEES APPEAL IS ACCORDINGLY DISMISSED. 7. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH SEPTEMBER, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 29 TH SEPTEMBER, 2017. VINODAN/SPS COPY TO: 1 M/S. IIC SERVICES (INDIA) PVT. LTD, 405 BABUKHAN MILLENIUM CENTRE, RAJ BHAVAN ROAD, NEAR YASHODHA HOSPITAL, SOM AJIGUDA, HYDERABAD 2 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 2(2), 8 TH FLOOR, IT TOWERS, AC GUARDS, HYDERABAD 3 CIT (A)-2 HYDERABAD 4 CIT 2 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER