Quickstart Resource Management India Private Limited, Vadodara V. The Deputy Commissioner of Income Tax, Circle-2(1)(2), Baroda

ITA 377/AHD/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4386 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 14-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANHAY R SHAH
• Keywords: CHAPTER IV
• Section: 10B; 274; 72

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA.NO.377/AHD/2017 / ASSTT.YEAR : 2011-12 QUICKSTART RESOURCE MANAGEMENT INDIA PVT. LTD. (NOW KNOWN AS TALENT ANYWHERE SERVICES P.LTD.) 1 ST FLOOR, VADODARA HYPER DR. VIKRAM SARABHAI MARG ALKAPURI, VADODARA 390 007 PAN : AAAFQ 1992 K VS DCIT, CIR.2(1)(2) BARODA. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI SANHAY R. SHAH, AR REVENUE BY : SHRI VINOD TANWANI, SR.DR / DATE OF HEARING : 26/02/2020 / DATE OF PRONOUNCEMENT: 27/02/2020 !'/ O R D E R PER RAJPAL YADAV, VICE-PRESIDENT ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-2, VADODARA DATED 18.11.2016 PASSED FOR T HE ASSTT.YEAR 2011-12. 2. SHORT ISSUE INVOLVED IN THE PRESENT APPEAL IS, W HETHER LOSS OF NON-10A UNITS AMOUNTING TO RS.15,78,135/- IS REQUIRED TO BE SET OFF AGAINST PROFIT OF 10A UNITS BEFORE GRANTING DEDUCTION TO THE ASSESSEE UNDER SECTION 10A OF THE INCOME TAX ACT, 1961. ITA NO.377/AHD/2017 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 29.11.2011 DECLARING TOTAL LOSS OF RS.13,27,157/ - . THE ASSESSEE HAS AN UNDERTAKING WHICH IS ENTITLED FOR DEDUCTION UNDER S ECTION 10A OF THE ACT. IT HAS CLAIMED SUCH DEDUCTION AT RS.1,91,89,535/-. TH E AO HAS OBSERVED THAT THERE ARE CERTAIN EXPENSES AMOUNTING TO RS.15,78,13 5/- REPRESENTING NON-10A UNIT, WHICH IS A LOSS IN THOSE UNITS. THUS, SUCH L OSS IS REQUIRED TO BE SET OFF AGAINST THE PROFIT OF 10A UNITS, AND THEREBY ON THE RESULTANT BALANCE, DEDUCTION UNDER SECTION 10A IS TO BE GRANTED. THE FOLLOWING OBSERVATION OF THE AO IS WORTH TO NOTE IN THIS CONNECTION. IT READS AS UNDE R: 5.3 AS THE EXPENSES CLAIMED BY THE ASSESSEE HAVE N OT BEEN JUSTIFIED, THE CLAIM OF LOSS OF RS.15,78,135/- IS NOT ALLOWABL E. HENCE, THE DEDUCTION CLAIMED U/S.10A IS REDUCED TO RS.1,76,11, 400/- [RS.1,91,89,535/- MINUS RS.15,78,135]. PENALTY PRO CEEDINGS U/S.271(1)(C) OF THE INCOME TAX ACT ARE BEING INITI ATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 4. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 5. THE LD.COUNSEL FOR THE ASSESSEE AT THE VERY OUTS ET SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. YOK OGAWA INDIA LTD., 391 ITR 274 = 77 TAXMANN.COM 41 (SC). BEFORE US, THE L D.DR IS UNABLE TO CONTROVERT THIS CONTENTION OF THE LD.COUNSEL FOR TH E ASSESSEE. 6. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. HONBLE SUPREME COURT HAS PROPOU ND THAT LOSS OF NON-10A UNITS CANNOT BE SET OFF AGAINST THE PROFIT OF 10A B EFORE COMPUTING THE DEDUCTION ADMISSIBLE UNDER SECTION 10A OF THE ACT. THE RELEVANT PART OF THE DISCUSSION READS AS UNDER: ITA NO.377/AHD/2017 3 16. FROM A READING OF THE RELEVANT PROVISIONS OF S ECTION 10A IT IS MORE THAN CLEAR TO US THAT THE DEDUCTIONS CONTEMPLATED THEREI N IS QUA THE ELIGIBLE UNDERTAKING OF AN ASSESSEE STANDING ON ITS OWN AND WITHOUT REFERENCE TO THE OTHER ELIGIBLE OR NON-ELIGIBLE UNITS OR UNDERTAKING S OF THE ASSESSEE. THE BENEFIT OF DEDUCTION IS GIVEN BY THE ACT TO THE INDIVIDUAL UNDERTAKING AND RESULTANTLY FLOWS TO THE ASSESSEE. THIS IS ALSO MORE THAN CLEAR FROM THE CONTEMPORANEOUS CIRCULAR NO. 794 DATED 9.8.2000 WHICH STATES IN PAR AGRAPH 15.6 THAT, 'THE EXPORT TURNOVER AND THE TOTAL TURNOVER FOR THE PURPOSES OF SECTIONS 10A AND 10B SHALL BE OF THE UNDERTAKING LOCATED IN SPECIFIED ZONES OR 100% EXPORT ORIENTED UNDERTAKINGS, AS THE CASE MAY BE, AND THIS SHALL NOT HAVE ANY MATERIAL RELATIONSHIP WITH THE OTHER BUSIN ESS OF THE ASSESSEE OUTSIDE THESE ZONES OR UNITS FOR THE PURPOSES OF TH IS PROVISION.' 17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [ FIRST PROVISO TO SECTIONS 10A(1); 10A (1A) AND 10A (4)] THAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDERTAKING AN D THAT IS ALSO HOW THE CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT (NO. 794 DATED 09.08.2000) UNDERSTOOD THE SITUATION, IT IS ONLY LOGICAL AND NA TURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, THEREFORE, IMMEDIATEL Y AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS. AT THAT STA GE THE AGGREGATE OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SE T OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOUL D BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION 10A THERE FORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE ACT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM T HE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION 'TOTAL IN COME OF THE ASSESSEE' IN SECTION 10A HAS ALREADY BEEN DEALT WITH EARLIER AND IN THE OVERALL SCENARIO UNFOLDED BY THE PROVISIONS OF SECTION 10A THE AFORE SAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPRESSION 'TOTAL I NCOME OF THE ASSESSEE' IN SECTION 10A AS 'TOTAL INCOME OF THE UNDERTAKING'. 18. FOR THE AFORESAID REASONS WE ANSWER THE APPEALS AND THE QUESTIONS ARISING THEREIN, AS FORMULATED AT THE OUTSET OF THIS ORDER, BY HOLDING THAT THOUGH SECTION 10A, AS AMENDED, IS A PROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGI BLE UNDERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPU TATION OF THE TOTAL INCOME UNDER CHAPTER VI. ALL THE APPEALS SHALL STAND DISPO SED OF ACCORDINGLY. 7. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF HON BLE SUPREME COURT, WE DIRECT THE AO NOT TO REDUCE THE DEDUCTION ADMISS IBLE TO THE ASSESSEE UNDER SECTION 10A OF THE ACT BY A SUM OF RS.15,78,135/-. IN OTHER WORDS, THIS ITA NO.377/AHD/2017 4 AMOUNT SHOULD NOT BE SET OFF FROM THE DEDUCTION ADM ISSIBLE TO THE ASSESSEE UNDER SECTION 10A OF THE ACT. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 27 TH FEBRUARY, 2020 AT AHMEDABAD. SD/- SD/- ( T.S. KAPOOR ) ACCOUNTANT MEMBER (RAJPAL YADAV) VICE-PRESIDENT AHMEDABAD; DATED 27/02/2020