The ITO, Kottayam V. Sri. Zigi P. John, Kottayam

ITA 357/COCH/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7617 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-10-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 24-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A DNANARAJ
• Assessee Lawyers: A MAHEW JOSEPH
• Keywords: Revised return
• Section: 10B; 263

Judgement Text

ITA NO 357/C/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH (SMC) KOCHI BEFORE SHRI GEORGE GEORGE K , JUDICIAL MEMBER ITA NO 357/COCH/2016 (A SST YEAR 2011 - 12 ) THE INCOME TAX OFFICER WARD5 KOTTAYAM VS SHRI ZIGI P JOHN M/S WEBSIGHT TECHNOLOGIES NO. 483 A/II 1 ST F LOOR PARANGOT,VADAKKENADA ROAD MUTTAMBALAM 686 004 KOTTAYAM ( APPELLANT) (RESPONDENT) PAN NO. AFQPJ9674Q ASSESSEE BY SH A MAHEW JOSEPH REVENUE BY SH A DNANARAJ, SR DR DATE OF HEARING 26 TH OCT 2016 DATE OF PRONOUNCEMENT 21 ST NOV 2016 ORDER PER GEORGE GEORGE K,J M : THIS APPEAL, AT THE INSTANCE OF THE REVENUE, IS DIRECTED AGAINST THE CIT(A)S ORDER DATED 6.6.2016. THE RELEVANT ASSESSMENT YEAR IS 2011 - 12. 2 THE GROUNDS RAISED, READ AS FOLLOWS: THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS), KOTTAYAM IN SO FAR AS THE POINTS STATED BELOW ARE CONCERNED, IS OPPOSED TO LAW ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THAT DEDUCTION OF RS. 54,71,633 I - BE ALLOWED TO THE ASSESSEE UNDER SECTION 10A OF THE ACT. 3. THE LD. CIT (A) OUGHT TO HAVE APPRECIATED THE FACT THAT IN THE RETURN OF INCOME, THE ASSESSEE HAD CLAIMED DEDUCTION ONLY U/S 10B OF THE ACT AND NOT UNDER SECTION 10A OF THE ACT. ITA NO 357/C/2016 2 4. WHILE UPHOLDI NG THE DISALLOWANCE U/S 10B, THE LD. CIT (APPEALS) OUGHT NOT TO HAVE HELD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT FOR THE AY 2011 - 12 WHEN THERE WAS NO SUCH CLAIM MADE BEFORE THE ASSESSING OFFICER IN THE RETURN OF INCOME FOR THE SAID ASSESSMENT YEAR. 5. THE LD. CIT (A) OUGHT TO HAVE NOTICED THAT AS PER THE PROVISIONS OF SECTION 80A(5) OF THE INCOME TAX ACT, WHERE THE ASSESSEE FAILS TO MAKE A CLAIM IN HIS RETURN OF INCOME FOR ANY DEDUCTION U/S 10A, 10B, ETC., NO DEDUCTION SHALL' BE ALL OWED TO HIM UNDER THESE SECTIONS OF THE ACT. 6. THE DECISION OF THE CIT (A) GOES AGAINST THE ORDER OF THE SUPREME COURT IN THE CASE OF MIS. GOETZE (INDIA) LTD.[2006] 284 ITR 323 (SC) WHICH DENIES POWER TO THE ASSESSING OFFICER EVEN TO ENTERTAIN A CLAIM FO R DEDUCTION OTHERWISE THAN BY FILING A REVISED RETURN. IN THE DECISION, THE APEX HAS NOT STATED THAT DEDUCTIONS, IF NOT CLAIMED IN THE RETURN OF INCOME, CAN BE CLAIMED BEFORE THE APPELLATE AUTHORITIES. 7. THE ACTION OF THE CIT (A) HAS THE EFFECT OF ENLARG ING THE SCOPE OF SECTION 80A(5) OF THE ACT. IF THE DECISION OF THE CIT (A) IS ACCEPTED, THEN, IN SITUATIONS LIKE THIS, THE ASSESSEES CAN MAKE CLAIMS FOR DEDUCTION DIRECTLY BEFORE THE APPELLATE AUTHORITIES AND MANY OF THE SECTIONS LIKE 80A(5) WILL BECOME RE DUNDANT. FOR THESE AND OTHER GROUNDS THAT MAY BE ADVANCED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THE ABOVE POINTS MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3 BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS AN INDIVIDUAL, WHO IS THE PROPRIETOR OF M/S WEBSIGHT TECHNOLOGIES. M/S WEBSIGHT TECHNOLOGIES IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND EXPORT OF COMPUTER SOFTWARE. THE RETURN OF INCOME FOR THE A Y 2011 - 12 WA S FILED ON 1.9.2011 DECLARING NIL INCOME AFTER CLAIMING DEDUCTION U/S 10B OF THE ACT. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTICE U/S 143(2). WHILE COMPLETING THE SCRUTINY ASSESSMENT, THE ASSESSING OFFICER , PLACING RELIANCE ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE ITA NO 357/C/2016 3 CASE OF CIT VS REGENCY CREATIONS LTD REPORTED IN 255 CTR 63 , DENIED THE CLAIM OF DEDUCTION U/S 10B OF THE ACT . ACCORDING TO THE ASSESSING OFFICE, THE ASSESSEE WAS NOT HAVING REQUISITE APPROVAL FOR CALMING D EDUCTION U/S 10B OF THE ACT . THE ALTERNATIVE CLAM FOR DEDUCTION U/S 10A OF THE ACT , WAS ALSO REJECTED BY THE ASSESSING OFFICER BY PLACING RELIANCE OF SECTION 80A (5) AND THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF M/S GOETZE INDIA LTD VS CIT RE PORTED IN 284 ITR 323(SC). 4 AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER REJECTING THE CLAIM U/S10B AND THE ALTERNATIVE CLAIM U/S 10A OF THE ACT, THE ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) TAKING NOTE OF THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE AY 2010 - 11 ALLOWED THE ALTERNATIVE CLAIM OF THE ASSESSEE U/S 10A OF THE ACT. THE CIT(A) EXAMINED THE DOCUMENTS PRODUCED IN SUPPORT OF THE ASSESSEES ALTERNATIVE CLAIM U/S 10A OF THE AC T, WHICH WAS ALREADY ON RECORD BE FORE THE ASSESSING OFFICER. THE RELEVANT FINDINGS OF THE CIT(A), READ AS FOLLOWS: 6. I HAVE STUDIED THE FACTS AND CAREFULLY GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT. THE QUESTION INVOLVED IN THE APPEAL IS WHETHER THE ASSESSEE IS ELIGIBLE FOR EX EMPTION U/S 10A FOR THE ASSESSMENT YE A R 2011 - 12 THOUGH HE CLAIMED EXEMPTION U/S 10B IN THE RETURN FOR THE ASSESSMENT YEAR . IN ASSESSEES OWN CASE FOR THE AY 2010 - 11, THE HONBLE APPELLATE TRIBUNAL HAD CONSIDERED THIS ASPECT AND DIRECTED THE ASSESSING OFF ICER TO CONSIDER THE APPELLANTS ALTERNATIVE CLAIM U/S 10A AND THE ASSESSING OFFICER BY HIS ORDER DATED 25 TH AUGUST 2015 HAS ALLOWED THE APPELLANTS ALTERNATIVE CLAIM FOR ASSESSMENT YEAR 2010 - 11. THE FACTS OF THE CASE FOR THE ASSESSMENT YEAR 2011 - 12 ARE A LSO THE SAME. THE APPELLANT HAS PRODUCED VARIOUS DOCUMENTS IN SUPPORT OF HIS CLAIM U/S 10A. I HAVE ALSO GONE THROUGH T HE CIRCULARS AND CASE LAWS SUBMITTED BY THE APPELLANT. IN VIEW F THE ABOVE I HOLD THAT THE APPELLANT IS ELIGIBLE FOR EXEMPTION U/S 10A FOR THE AY 2011 - 12. ITA NO 357/C/2016 4 5 THE REVENUE BEING AGGRIEVED BY THE ORDER OF THE CIT(A) IS IN APPEAL BEFORE THE TRIBUNAL. THE LD DR RELIED ON THE GROUNDS RAISED. THE LD COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVER ED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010 - 11. IT WAS SUBMITTED BY THE LD COUNSEL FOR THE ASSESSEE THAT THE TRIBUNAL, FOR THE ASSESSMENT YEAR 2010 - 11, WHILE UPHOLDING THE ORDER PASSED U/S 263 OF THE ACT, DIRECTED T HE ASSESSING OFFICER TO CONSIDER THE ALTERNATIVE CLAIM OF THE ASSESSEE U/S 10A OF THE ACT. PURSUANT TO THE TRIBUNAL ORDER, THE ASSESSING OFFICER HAD ALLOWED THE ALTERNATIVE CLAIM OF THE ASSESSEE U/S 10A OF THE AC T AND THE MATTER HAS CONCLUDED FINALITY. I T WAS STATED THAT T HE FACTS FOR THE INSTANT ASSESSMENT YEAR BEING SIMILAR TO THE ASSESSMENT YEAR 2010 - 11, THE ALTERNATIVE CLAIM U/S 10A ALLOWED BY THE CIT(A), IS TO BE UPHELD. 6 I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE , IN THE RETURN OF INCOME , HAD CLAIMED DEDUCTION U/S 10B OF THE ACT, WHICH WAS DENIED IN THE COURSE OF SCRUTINY ASSESSMENT. THE PLEA OF THE ASSESSEE FOR ALLOWING THE ALTERNATIVE CLAIM U/S 10A OF THE ACT WAS ALSO DENIED BY THE ASSESSING OFFICER. FO R THE ASSESSMENT YEAR 2010 - 11, THE CASSESSEES CLAIM OF DEDUCTION U/S 10B OF THE ACT WAS DENIED BY THE CIT WHILE INVOKING HIS REVISIONARY JURISDICTION U/S 263 OF THE ACT. ON FURTHER APPEAL, THE TRIBUNAL UPHELD THE ORDER PASSED BY THE CIT, HOWEVER , THE TRI BUNAL DIRECTED THE ASSESSING OFFICER TO ITA NO 357/C/2016 5 CONSIDER THE ALTERNATIVE CLAIM OF DEDUCTION OF THE ASSESSEE U/S 10A OF THE ACT. PURSUANT TO THE TRIBUNAL ORDER, THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2010 - 11 PASSED ORDER U/S 143 R.W.S 263 (ORDER DATED 25 .8.2015) ALLOWED THE ASSESSEES ALTERNATIVE CLAIM OF DEDUCTION U/S 10A OF THE ACT. THE CIT(A), IN THE INSTANT CASE, AFTER GOING THROUGH THE DOCUMENTS FILED BY THE ASSESSEE FOR CLAIMING DEDUCTION U/S 10A OF THE ACT HELD THAT THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 10A OF THE ACT. 7 ON IDENTICAL FACTS, T HE COCHIN BENCH OF THE TRIBUNAL , IN THE CASE OF ACIT VS FIRMUSOFT SOLUTIONS P LTD IN ITA NO. 244/COCH/2015 (ORDER DATED 22.1.2016) AND IN THE CASE OF M/S Q BURST TECHNOLOGIES P LTD I N ITA NOS. 172 & 173/COCH/2015 (ORDER DATED 17 TH NOV 2015) HAD HELD THAT WHEN THE CLAIM OF DEDUCTION U/S 10B HAS BEEN DENIED BY THE AO, THE CIT IS JUSTIFIED IN CONSIDERING THE ALTERNATIVE CLAIM OF THE ASSESSEE U/S 10A OF THE ACT. THE RELEVANT FINDINGS OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF FIRMSOFT SOLUTIONS P LTD (SUPRA) READ AS UNDER: 6 WE HAVE HEARD THE LD DR AND PERUSED THE MATERIAL ON RECORD. IN THE RETURN OF INCOME, THE ASSESSEE HAD CLAIMED DEDUCTION U/S 10B OF THE ACT. THE CLAIM OF DEDUCTION U/S 10B OF THE ACT WAS WITHDRAWN IN THE REASSESSMENT ORDER DATED 9.3.2013 BY FOLLOWING THE DICTUM LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF REGENCY CREATIONS LTD (SUPRA). THE FIRST APPELLATE AUTHORITY HAS CONFIRMED THE ACTION O F THE AO IN MAKING THE DISALLOWANCE OF DEDUCTION U/S 10B OF THE ACT BASED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT, CITED SUPRA. HOWEVER, THE FIRST APPELLATE AUTHORITY HAS ALLOWED THE ALTERNATIVE CLAIM FOR DEDUCTION U/S 10A OF THE ACT BASED ON THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF CWP TAYLOR IN ITA NO. 695/COCH/2008(ORDER DATED 28.7.2009). THE CIT(A) HAS ALSO VERIFIED THE FACTS RELATING TO THE COMPLIANCE OF ALL THE ITA NO 357/C/2016 6 CONDITIONS PRESCRIBED UNDER SECTION 10A OF THE ACT ( IN PA RA 3.6.8 OF THE IMPUGNED ORDER). BASED ON THE VERIFICATION OF FACTS, THE CIT(A) DIRECTED THE AO TO ALLOW DEDUCTION U/S 10A OF THE ACT. THE FOLLOWING JUDGMENT OF THE HONBLE DELHI HIGH COURT AND ORDERS OF THE ITAT HAVE HELD THAT WHEN DEDUCTION U/S 10B IS DENIED, IT IS THE DUTY OF THE REVENUE TO EXAMINE WHETHER THE ALTERNATIVE CLAIM OF DEDUCTION U/S 10A CAN BE GRANTED ON FACTS AND CIRCUMSTANCES OF THE CASE: I) FAST BOOKING (I) PVT LTD VS DCIT IN ITA 334/2015 ( JUDGMENT DATED 2.9.2015)(DELHI HIGH COURT J UDGMENT ) II ) M/S DEVICE DRIVEN (INDIA) P LTD (ITA NO. 282/COCH/2013 (ORDER DT 29.11.2013) III ) CRONOS CONSULTING INDIA P LTD VS ACIT (ITA NO. 105/COCH/2014 (ORDER DT 6.6.2014) 7 FURTHER, WE NOTICE THAT THE AO, IN THE REMAND REPORT HAS NOT STATED THAT THE ASS ESSEE HAS NOT SATISFIED THE CONDITIONS PRECEDENT TO CLAIM DEDUCTION U/S 10A OF THE ACT. THE AO HAD ONLY RAISED A TECHNICAL OBJECTION NAMELY, THE ASSESSEE IS NOT ENTITLED DEDUCTION U/S 10A OF THE ACT , SINCE, THE CLAIM WAS NOT MADE IN THE RETURN OF INCOME F ILED. HOWEVER, WE NOTICE THAT THE CLAIM OF DEDUCTION U/S 10B OF THE ACT WAS MADE IN THE RETURN OF INCOME AND THE REVENUE WAS GRANTING THE DEDUCTION U/S 10B OF THE ACT IN THE PREVIOUS ASSESSMENT YEARS. ONLY WHEN THE JUDGMENT OF THE HONBLE DELHI HIGH COUR T IN THE CASE OF REGENCY CREATIONS LTD, CITED SUPRA, WAS PRONOUNCED, THE CLAIM OF DEDUCTION U/S 10B WAS DENIED IN THE ASSESSMENT CONCLUDED. WHEN THE CLAIM OF DEDUCTION U/S 10B WAS DENIED, THE AO OUGHT TO HAVE EXAMINED WHETHER THE ASSESSEE IS ELIGIBLE FOR D EDUCTION U/S 10A OF THE ACT. THE CBDT CIRCULAR NO.14 (XL - 35) DATED 11.4.1955 HAS CLARIFIED THAT THE REVENUE SHALL NOT TAKE ADVANTAGE OF IGNORANCE OF THE ASSESSEE AS TO HIS RIGHTS AND THE OFFICERS ARE DUTY BOUND TO GRANT DEDUCTION LEGALLY AVAILABLE TO THE ASSESSEE. THE CIT(A) ALSO RELIED THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS TECHNOVATE E SOLUTION P LTD REPORTED IN 354 ITR 110 WHEREIN IT WAS HELD THAT REGISTRATION WITH SOFTWARE TECHNOLOGY PARKS OF INDIA IS SUFFICIENT TO ALLOW D EDUCTION U/S 10A OF THE ACT .THE COPIES OF THE CERTIFICATE OF REGISTRATION ISSUED BY STPI AND THE CERTIFICATE OF THE CHARTERED ACCOUNTANT IN FORM 56F WERE EXAMINED BY THE CIT(A) AND NO DEFECT WAS POINTED OUT BEFORE US. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) IS JUSTIFIED IN ALLOWING THE ALTERNATIVE CLAIM OF DEDUCTION U/S 10A OF THE ACT. IT IS ORDERED ACCORDINGLY. ITA NO 357/C/2016 7 8 THE CLAIM OF DEDUCTION U/S 10A AND 10B IS MORE OR LESS PARA - MATERIA EXCEPT THAT REGISTRATION U/S 10B & 10A ARE WITH DIFFERENT AUTHOR ITIES AND ALSO CLAIM IS TO BE MADE IN FORM 56G AND 56F RESPECTIVELY. THE BASIS FOR DENYING THE CLAIM OF DEDUCTION U/S 10B OF THE ACT IS THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF REGENCY CREATIONS LTD REPORTED IN 255 CTR 63, WHEREIN IT W AS HELD THAT THE ASSESSEE, HAVING NOT GOT THE NECESSARY APPROVAL FROM THE APPROPRIATE AUTHORITY, UNDER THE STATUTE, WAS NOT ENTITLED TO CLAIM DEDUCTION U/S 10B OF THE ACT. HOWEVER, THE ABOVE SAID JUDGMENT OF THE HONBLE DELHI HIGH COURT WAS MODIFIED IN T HE REVIEW PETITION IN THE CASE OF CIT VS VALLANT COMMISSIONS LTD IN ITA 2002 OF 2010(ORDER DATED 4.1.2013), WHEREIN THE MATTER WAS REMANDED TO THE TRIBUNAL TO CONSIDER THE ASSESSEES ALTERNATIVE CLAIM U/S 10A OF THE ACT. 9 AS MENTIONED EARLIER, THE CI T(A) WAS SATISFIED THAT THE ASSESSEE HAD FULFILLED THE CONDITIONS MENTIONED IN THE SECTION FOR THE CLAIM OF DEDUCTION U/S 10A OF THE ACT . HENCE, I SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). IT IS ORDERED ACCORDINGLY. 10 IN THE RESULT, T HE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 S T DAY OF NOV 2016 . SD/ - ( GEORGE GEORGE K) JUDICIAL MEMBER COCHIN: DATED 21 ST NOV 2016 RAJ* ITA NO 357/C/2016 8 COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT, 5 . DR 6 . GUARD FILE BY ORDER A SSISTANT REGISTRAR ITAT, COCHIN