ITO 20(3)(1), MUMBAI V. UNNO SOURCE CORPORATION, MUMBAI

ITA 3941/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2057 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 04-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 17-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIVAY KUMBHAR
• Keywords: Depreciation; Transfer pricing; Additional evidence
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.3941/M/2013 ASSESSMENT YEAR: 2009-10 ITO -20(3)(1), PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI - 400012 VS. M/S. UNNO SOURCE CORPORATION, A/402, DIPTI CLASSIC, SUREN ROAD, ANDHERI (E), MUMBAI - 93 PAN: AABFU 5036B (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI PRADIP KAPASI, A.R. REVENUE BY : SHRI ABHIVAY KUMBHAR, D.R. DATE OF HEARING : 29.10.2015 DATE OF PRONOUNCEMENT : 11.12.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 07.03.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2009-10. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL: '1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING TO ALLOW EXEMPTION U/ S. 10A OF I.T. ACT, 1961 WITHOUT APPRECIATING THAT NEITHER A.O. NOR CIT(A) H AS DONE ANY COMPARATIVE STUDY ABOUT THE GENUINENESS AND REASONABLENESS OF E XPENSES AND PROFIT EARNED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THAT THE ASSES SEE HAS DECLARED VERY HIGH AND ABNORMAL PROFIT AND CLAIMED IT AS EXEMPT U/S 10A, T HIS ASPECTS NEEDS DETAILED INVESTIGATION ESPECIALLY IN VIEW OF THE FA CT THAT USA FIRM AND THE ASSESSEE HAS COMMON DIRECT CONTROL JOINTLY BY ONE I NDIVIDUAL AND HIS RELATIVES. 3. THE APPELLANT PRAYS THAT THE ORDER OF LD.CIT(A ) ON THE ABOVE GROUND BE SET ASIDE AND MATTER BE RESTORED TO THE ASSESSIN G OFFICER. ITA NO.3941/M/2013 M/S. UNNO SOURCE CORPORATION 2 4. THE APPELLANT CRAVES LEAVE TO AMEND OR TO ALTER, ANY GROUND OR ADD A NEW GROUND, WHICH MAY BE NECESSARY.' 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS T HE AO) OBSERVED THAT THE TOTAL EXPENSES OF THE ASSESSEE FOR THE YEAR UNDER CONSIDE RATION WERE RS.2.34 CRORES AS AGAINST INCOME RECEIVED OF RS.7.04 CRORES AND TH US THE ASSESSEE SHOWED A HIGH NET PROFIT RATIO. THE AO FURTHER NOTED THAT T HE ASSESSEE HAD ONLY ONE CLIENT M/S UNNO SOURCE CORPORATION USA WHICH WAS OW NED BY MR. PRANAV GUNDARIA AND HIS WIFE AND MR. JANAK BHALARIA AND HI S WIFE. ON EXAMINING THE MONTHLY USAGE OF TELEPHONE/INTERNET BY THE ASSESSEE , THE A.O CONCLUDED THAT THE ASSESSEE HAD INCURRED PALTRY EXPENSES AND THAT IT WAS NOT POSSIBLE TO GENERATE A TURNOVER OF RS.7.04 CRORES BASED ON THE INCURRING OF SUCH EXPENSES. THE AO ALSO NOTED THAT AS PER TRANSFER PRICING REPO RT, THE NUMBER OF EMPLOYEES OF THE ASSESSEE CONCERN WAS 80 BUT THE SALARY REGIS TER SHOWED ONLY 52 AND OBSERVED THAT THE ASSESSEE HAD NOT BEEN ABLE TO PRO VE THE TECHNICAL COMPETENCE OF ANY OF THE WORKERS WHO PROVIDED THE IT ENABLED S ERVICES FOR CIVIL ENGINEERING. THE AO ALSO TOOK EXCEPTION TO THE EXPE NSES INCURRED BY THE ASSESSEE TOWARDS FOREIGN TRAVEL, PARTNER'S REMUNERA TION, DEPRECIATION ON OFFICE PREMISES, PURCHASE OF IPHONE ETC. THE AO ALSO OBSER VED THAT THE SALARY PAID TO EMPLOYEES WAS WITHIN THE RANGE OF RS.11,000/- TO RS .15,000/- IN THE CITY OF MUMBAI. THE AO THEN CONCLUDED THAT NO ACTUAL BUSINE SS WAS DONE AND THE ENTIRE SET UP WAS CREATED TO CLAIM TAX-FREE INCOME IN INDIA AND THEREFORE PROCEEDED TO DENY THE EXEMPTION CLAIMED BY THE ASSE SSEE U/S 10A. BEING AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED APPEAL BEFORE THE LD. CIT(A). THE ASSESSEE MADE A DETAILED SUBMISSION IN SUPPORT OF ITS CLAIM AND ALSO FURNISHED THE ADDITIONAL EVIDENCES AS MENTIONE D IN PARA 4.2 OF THE IMPUGNED ORDER. THE LD. CIT(A) FORWARDED THE SAID EVIDENCES TO THE AO FOR VERIFICATION AND COMMENTS. THE AO THEREAFTER CONDU CTED THE INVESTIGATION IN M/S UNNO SOURCE CORPORATION USA WHICH WAS OWNED BY MR. PRANAV GUNDARIA, HIS WIFE AND ITA NO.3941/M/2013 M/S. UNNO SOURCE CORPORATION 3 RESPECT OF THE EVIDENCES SUBMITTED BY THE ASSESSEE AND CAME TO THE FOLLOWING CONCLUSION: THE FIRM HAS PRODUCED VOLUMINOUS DATA REGARDING DR AWINGS IN PAPER FORM AND SOFTCOPY IN FORM OF 9 CDS. THE SAID CDS HAS BEEN VE RIFIED BY ME AND TO THE BEST OF MY KNOWLEDGE THE SAME CONTAINS DRAWINGS, AND WORK O F CLIENTS OF THE ASSESSEE FIRM. THE FIRM WAS REGISTERED WITH STPI AND HAS PRODUCED RETURNS FILED WITH THE STPI. THE ASSESSEE FIRM HAS PRODUCED PURCHASE OF VARIOUS SOFT-WARES WHICH ARE USEFUL REQUIREMENT IN THE LINE OF DESIGNING LIKE TEKLA SOF TWARE, CAD/CAM SOFTWARE ETC., THE FIRM HAS FILED CLIENT WISE, PROJECT WISE, DATE WISE, INBOUND AND OUTBOUND USE OF INTERNET SPACE. THE FIRM USES COST EFFECTIVE MTNL T RIBAND FACILITY WHICH IS MUCH CHEAPER THAN OTHER OPTIONS. AS REGARDS VARIOUS EXPENSES THE FIRM HAS PRODUCED V ARIOUS INTERNET CONNECTION BILLS OF MTNL, TATA ETC., WHICH HAS BEEN USED FOR THE BUS INESS. AS REGARDS, SALARY TO STAFF IT IS SEEN THAT THE ASS ESSEE HAS 2 UNITS ONE AT MUMBAI AND AT NASIK, TOTAL STRENGTH OF THE FIRM IN HUMAN RESOU RCE IS TOTALING TO ABOUT 88 EMPLOYEES. FROM THE DETAILS OF EMPLOYEES AND QUALIFICATIONS, I T IS SEEN THAT THE EMPLOYEES ARE ALL QUALIFIED TO DO THE REQUISITE FIRMS WORK.' RELYING UPON THE REMAND REPORT OF THE AO, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE OBSERVING THAT THE ASSESSEE H AD SATISFIED THE CONDITIONS FOR ELIGIBILITY TO CLAIM EXEMPTION UNDER SECTION 10 A OF THE ACT. HE HAS OBSERVED THAT THE ASSESSEES CLAIM HAS ALSO BEEN AL LOWED FOR THE TWO ASSESSMENT YEARS FOLLOWING ITS INCEPTION. THE ASSE SSEE HAS DULY PROVED BY VARIOUS EVIDENCES THAT THE BUSINESS WAS ACTUALLY CA RRIED OUT BY THE ASSESSEE AND THAT THERE WERE 88 EMPLOYEES EMPLOYED BY THE ASSESS EE AND THEY WERE HAVING THE REQUISITE EXPERTISE AND QUALIFICATION REQUIRED FOR THE WORK OF THE ASSESSEE AND THAT THE ASSESSEE HAD ACTUALLY CARRIED OUT THE BUSINESS DURING THE RELEVANT FINANCIAL YEAR. ALL THE CLAIMS HAVE BEEN DULY VERI FIED BY THE AO AND IN VIEW OF THIS, HE DELETED THE ADDITION. 4. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ARRIVED AT AFTER CONSIDERATION OF THE RELEVANT FACTS AND THE E VIDENCES SUBMITTED WHICH IS ALSO BASED ON THE VERIFICATIONS CONDUCTED BY THE AO DURING THE REMAND PROCEEDINGS. THE ORDER OF THE LD. CIT(A) IS THEREF ORE UPHELD. ITA NO.3941/M/2013 M/S. UNNO SOURCE CORPORATION 4 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS HERE BY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.12.2015. SD/- SD/- (B.R. BASKARAN) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 11.12.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.