M/s. LARSEN & TOUBRO INFOTECH LTD., MUMBAI V. DYCIT CIR 2(2), MUMBAI

ITA 3781/MUM/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2601 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-12-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 30-05-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DAYA SHANKAR
• Assessee Lawyers: A V SONDE
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, SR.VP AND SHRI R. K. PANDA, AM I.T.A. NO.3781/MUM/2008 (ASSESSMENT YEAR : 2003-04 ) LARSEN & TOUBRO INFOTECH LTD. TAXATION DEPARTMENT, L & T HOUSE, 3 RD FLOOR, N.M.MARG, BALLARD ESTATE, MUMBAI-400 001. PAN:AAACL1681P VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(2), R.NO.384, AAYAKAR BHAVAN, M.K.MARG, MUMBAI-400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. A.V.SONDE RESPONDENT BY : MR.DAYA SHANKAR O R D E R PER R.V.EASWAR, SENIOR VICE PRESIDENT: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED B Y THE CIT ON 19.3.2008 UNDER SECTION 263 OF THE INCOME TAX ACT. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF SOFTWARE DEVELOPMENT. IN THE ASSESSMENT ORDER PASSE D UNDER SECTION 143(3) ON 27.2.2006, THE ASSESSING OFFICER DETERMINED THE TOTAL INCOME AT A NEGATIVE FIGURE OF RS.44,81,1 02/- AND PERMITTED THE SAME TO BE CARRIED FORWARD TO THE SUB SEQUENT YEARS. THE CIT CONSIDERED THE SAME TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND TOOK PROCEEDINGS UNDER SECTION 263. AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE, THE CIT TOOK THE VIEW THAT THE ASSESSING OFFICER WAS IN ERROR IN ALLOWING THE CARRY-FORWARD OF THE ABOVE A MOUNT AND DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DEDU CTION CLAIMED BY THE ASSESSEE UNDER SECTION 10A TO THE EXTENT OF THE AVAILABLE TOTAL INCOME AND NOT TO CARRY FORWARD ANY EXCESS TO THE SUBSEQUENT YEARS. IT IS AGAINST THE AFORESAID DIREC TION THAT THE ASSESSEE HAS COME IN APPEAL BEFORE THE TRIBUNAL. ITA NO.3781/MUM/08 2 3. IN ORDER TO APPRECIATE THE DISPUTE IN THE PROPER PERSPECTIVE, IT IS NECESSARY TO BRING OUT THE BASIC FACTS AND FIGURES. THE ASSESSEE IS UNDISPUTEDLY ELIGIBLE FOR THE DEDUCTION UNDER SECTION 10A OF THE ACT WHICH MAKES SPECIAL PR OVISIONS IN RESPECT OF NEWLY ESTABLISHED UNDERTAKINGS IN THE FR EE TRADE ZONE. SUB-SECTION (1) PROVIDES THAT SUBJECT TO THE PROVIS IONS OF THE SECTION, THE DEDUCTION OF PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM THE EXPORT OF COMPUTER SOFTWARE S HALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE. TH E OTHER PROVISIONS OF THE SECTION ARE NOT RELEVANT FOR THE CONTROVERSY BEFORE US. THE DEDUCTION TO WHICH THE ASSESSEE WAS ELIGIBLE UNDER SECTION 10A WAS RS.107,361,113/-. THE INCOME FROM THE BUSINESS WAS RS.90,475,309/-. THESE FIGURES ARE NO T IN DISPUTE. THE ASSESSEE ALSO HAD INCOME OF RS.12,404 ,702/- UNDER THE HEAD INCOME FROM OTHER SOURCES AND THIS FIGURE IS ALSO NOT IN DISPUTE. THE GROSS TOTAL INCOME OF THE ASSESSEE, CONSISTING OF THE INCOME FROM BUSINESS AND THE I NCOME FROM OTHER SOURCES CAME TO RS.102,880,011/-. THE TOTA L INCOME OF THE ASSESSEE WAS ALSO THE SAME FIGURE BECAUSE THE ASSESSEE WAS NOT ELIGIBLE FOR ANY DEDUCTION UNDER CHAPTER VI -A OF THE ACT. SINCE SUB-SECTION (1) OF SECTION 10A PROVIDED THAT THE DEDUCTION UNDER THAT SECTION SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE, THE ASSESSEE ADJUSTED THE D EDUCTION OF RS.107,361,113/- AGAINST THE TOTAL INCOME OF RS.102 ,880,011/-, WHICH GAVE A NEGATIVE FIGURE OF RS.44,81,102/- . TH E ASSESSEE CLAIMED THAT THIS NEGATIVE FIGURE OF RS.44,81,102/- SHOULD BE CARRIED FORWARD TO THE SUBSEQUENT YEARS WHICH CLAIM WAS ACCEPTED BY THE ASSESSING OFFICER AS NOTED EARLIER. ACCORDING TO THE CIT, HOWEVER THE DEDUCTION OF RS.44,81,102/- R EPRESENTS ONLY THE UNABSORBED PORTION OF THE DEDUCTION UNDER SECTION 10A WHICH CANNOT BE CARRIED FORWARD AS A BUSINESS LOSS TO THE SUBSEQUENT YEARS. HE TOOK THE VIEW THAT THE DEDUCT ION SHOULD ITA NO.3781/MUM/08 3 BE RESTRICTED TO THE AVAILABLE TOTAL INCOME AND ANY EXCESS OF THE DEDUCTION, IN THE ABSENCE OF ANY ENABLING PROVISIO N CANNOT BE CARRIED FORWARD TO THE SUBSEQUENT YEARS. IN THIS VI EW OF THE MATTER, HE DIRECTED THE ASSESSING OFFICER TO RESTRI CT THE DEDUCTION UNDER SECTION 10A TO THE EXTENT OF THE TO TAL INCOME THAT MAY BE COMPUTED BY THE ASSESSING OFFICER AFTER GIVING EFFECT TO CERTAIN OTHER DIRECTIONS WHICH THE CIT HA D GIVEN IN HIS ORDER IN RELATION TO THE COMPUTATION OF THE DEDUCTI ON. WE ARE NOT IMMEDIATELY CONCERNED WITH THOSE DIRECTIONS, BU T THE PRINCIPLE WHICH THE CIT HAS ADOPTED IS THIS, NAMELY , THAT ANY EXCESS OF THE DEDUCTION UNDER SECTION 10A OVER AND ABOVE THE AVAILABLE TOTAL INCOME CANNOT BE CONSIDERED AS A BU SINESS LOSS SO THAT IT CAN BE CARRIED FORWARD TO THE SUBSEQUENT YEARS. 4. IT IS AGAINST THE AFORESAID DIRECTION OF CIT THA T THE ASSESSEE HAS COME IN APPEAL BEFORE US. THE APPEAL I S DELAYED BY FIVE DAYS AND AN APPLICATION FOR CONDONATION OF DEL AY HAS BEEN FILED. ON GOING THROUGH THE SAME, WE ARE SATISFIED THAT THE DELAY WAS DUE TO SUFFICIENT CAUSE. IT SEEMS THAT THE HEAD OF FINANCE & ACCOUNTS WAS ON LEAVE DURING WHICH PERIOD THE ORD ER OF THE CIT HAD BEEN SERVED ON THE ASSESSEE AND HENCE WAS N OT ATTENDED TO AND WHEN HE RETURNED FROM LEAVE IMMEDIA TE ACTION WAS TAKEN TO FILE THE APPEAL. SINCE THIS CONSTITUTE S SUFFICIENT CAUSE, WE CONDONE THE DELAY AND ADMIT THE APPEAL. 5. TURNING TO THE MERITS OF THE APPEAL, WE ARE UNAB LE TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE AMOU NT OF RS.44,81,102/- SHOULD BE CARRIED FORWARD AS BUSINES S LOSS OR UNABSORBED DEPRECIATION TO THE SUBSEQUENT YEARS. T HIS FIGURE ACTUALLY REPRESENTS THE EXCESS OF THE DEDUCTION UND ER SECTION 10A, COMPUTED AT RS.107,361,113/-, OVER THE FIGURE OF TOTAL INCOME OF RS.102,880,011/-. WE AGREE WITH THE CIT THAT THERE IS NO PROVISION IN THE INCOME TAX ACT TO CARRY FORW ARD SUCH ITA NO.3781/MUM/08 4 EXCESS DEDUCTION TO THE SUBSEQUENT YEARS. THE PROV ISIONS OF SECTION 72 TO WHICH OUR ATTENTION WAS DRAWN ON BEHA LF OF THE ASSESSEE POSTULATE A LOSS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND IF SUCH LOSS C ANNOT BE WHOLLY SET OFF AGAINST ANY OTHER HEAD OF INCOME AS CONTEMPLATED BY SECTION 71, THEN SO MUCH OF THE LOSS WHICH HAS N OT BEEN SET OFF SHALL BE CARRIED FORWARD AS BUSINESS LOSS TO TH E SUBSEQUENT YEARS AND SET OFF AGAINST THE PROFITS AND GAINS OF BUSINESS. THE CHARACTER OF THE EXCESS AMOUNT OF RS.44,81,102/- IS COMPLETELY DIFFERENT. IT IS NOT OF THE CHARACTER OF THE LOSS T HAT IS CONTEMPLATED BY SECTION 72. THE EXCESS AMOUNT OF RS.44,81,102/- IN FACT IS NOT A LOSS AT ALL. PERHA PS THE APPROPRIATE MANNER IN WHICH IT CAN BE DESCRIBED IS THE WAY IN WHICH IT HAS BEEN DESCRIBED BY THE CIT, NAMELY DEFI CIENCY IN THE ALLOWANCE OF DEDUCTION. AS WE HAVE ALREADY NOTICED , UNDER SUB- SECTION (1) OF SECTION 10A THE DEDUCTION COMPUTED U NDER THAT SECTION IS ALLOWED FROM THE TOTAL INCOME OF THE ASS ESSEE. IF THE DEDUCTION IS IN EXCESS OF THE TOTAL INCOME, THE EXC ESS LAPSES AND THERE IS NO PROVISION IN THE ACT TO CARRY FORWARD T HE SAME TO THE FOLLOWING YEARS TO BE SET OFF AGAINST THE BUSINESS PROFITS. WE ARE UNABLE TO AGREE WITH THE ARGUMENT OF THE LEARNED CO UNSEL FOR THE ASSESSEE THAT THE EXCESS OF RS.44,81,102/- IS A LOS S COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION. IN ORDER TO BE ELIGIBLE TO BE CARRIED FORWARD AS A LOS S UNDER SECTION 72(1), THE LOSS SHOULD HAVE BEEN COMPUTED UNDER TH E ABOVE HEAD. IN OTHER WORDS, THE LOSS SHOULD HAVE BEEN CO MPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION S 30 TO 43D, AS INDICATED BY SECTION 29 OF THE ACT. THAT CONDITI ON HAS NOT BEEN SATISFIED. WE ARE, THEREFORE, UNABLE TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT OF RS.44 ,81,102/- IS A LOSS COMPUTED UNDER THE HEAD PROFITS AND GAINS O F BUSINESS AND PROFESSION IN ACCORDANCE WITH SECTIONS 30 TO 4 3D AND ITA NO.3781/MUM/08 5 THEREFORE, ELIGIBLE FOR BEING CARRIED FORWARD TO TH E FOLLOWING YEARS UNDER SECTION 72(1). 6. FOR THE ABOVE REASONS, GROUND NOS. 1 & 2 ARE DIS MISSED. GROUND NOS.3 & 4 ARE AGAINST THE OTHER DIRECTIONS O F THE CIT CONTAINED IN HIS ORDER AND THESE GROUNDS ARE NOT PR ESSED. THEY ARE ALSO DISMISSED. 7. IN THE RESULT, THE APPEAL IS DISMISSED WITH NO O RDER AS TO COSTS. ORDER PRONOUNCED ON THIS 8 TH DAY OF DECEMBER, 2009. SD/- (R.K. PANDA) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER SENIOR VICE PRESIDENT MUMBAI, DATED 8 TH DECEMBER, 2009. SOMU COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE DCIT-2(2) MUMBAI. 4. THE CIT-2, MUMBAI 5. THE DR A BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR, I.T.A.T, MUMBAI