DCIT RG 8(2), MUMBAI V. MELSTAR INFORMATION TECHNOLOGIES LTD, MUMBAI

ITA 3951/MUM/2010

• Counselvise Citation: 395119914 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 14-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O A MAO
• Keywords: Business income
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER ITA NO. 3951/MUM/2010 (ASSESSMENT YEAR: 2005-06) D C I T - 8(2) M/S. MELSTAR INFORMATION ROOM NO. 216-A, AAYAKAR BHAVAN TECHNOLOGIES LTD. M.K. ROAD, MUMBAI 400020 VS. MELSTAR HOUSE, MIDC CROSS ROAD ANDHERI (E), MUMBAI400092 PAN - AABCM 6270 G APPELLANT RESPONDENT APPELLANT BY: SHRI O.A. MAO RESPONDENT BY: SHRI SANJAY C. SHAH DATE OF HEARING: 15.11.2011 DATE OF PRONOUNCEMENT: 15.11.2011 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL IS FILED BY THE REVENUE AND IT PERTAINS TO THE ASSESSMENT YEAR 2005-06. THE ONLY GROUND RAISED BEFORE US READ S AS UNDER: - 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) ERRED IN ALLOWING CARRY FORWARD OF LOSS O N 10A UNIT, IN VIEW OF PROVISIONS OF SEC. 10A(6) OF THE ACT, FOR S ET OFF AGAINST PROFIT IN SUBSEQUENT YEARS, WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. THE FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE THAT ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND RELATED SERVICES. IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO A.Y. 2005- 06 ASSESSEE DECLARED A LOSS OF ` 2,57,03,641/-. THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT ASSESS EE COMPANY HAD EARNED PROFITS IN CERTAIN UNITS AND EXEMPTION UNDER SECTIO N 10A WAS CLAIMED ON SUCH PROFITS WITHOUT ADJUSTING THE LOSSES SUFFERED FROM OTHER UNITS. THE CASE OF THE ASSESSEE COMPANY IS THAT THE LOSS OF ONE UNDERTAKIN G CANNOT BE SET OFF AGAINST PROFITS OF OTHER UNDERTAKING BUT THE SAME CAN BE SE T OFF AGAINST OTHER TOTAL INCOME, WHICH IS ASSESSABLE TO TAX. THE A.O. REJECT ED THE CONTENTION OF THE ASSESSEE AND ACCORDINGLY COMPLETED THE ASSESSMENT. ITA NO. 3951/MUM/2010 M/S. MELSTAR INFORMATION TECHNOLOGIES LTD. 2 3. ON AN APPEAL FILED BY THE ASSESSEE THE LEARNED CIT( A) OBSERVED THAT THE LEGISLATURE HAS INTENTIONALLY NOT ALLOWED CARRY FORWARD OF LOSSES OF SECTION 10A UNITS IN RESPECT OF THE YEARS PRIOR TO 2002-03, WHICH MEANS THAT LOSSES INCURRED IN A.Y. 2002-03 AND SUBSEQUENT YEAR S, OF 10A UNITS, CAN BE CARRIED FORWARD FOR SET OFF AGAINST THE PROFITS IN FUTURE. HAVING REGARD TO THE PROVISIONS OF SECTION 10A(6)(II) OF THE INCOME TAX ACT THE PLEA OF THE ASSESSEE WAS ACCEPTED BY THE LEARNED CIT(A). 4. AGGRIEVED REVENUE PREFERRED AN APPEAL BEFORE US. AT THE TIME OF HEARING THE LEARNED COUNSEL PLACED BEFORE US A COPY OF THE ORDER PASSED BY THE ITAT B BENCH, MUMBAI IN ASSESSEES OWN CASE F OR A.Y. 2003-04 WHEREIN, ON IDENTICAL ISSUE, THE BENCH OBSERVED THA T IF THERE IS A PROFIT IN ONE OR MORE ELIGIBLE UNDERTAKINGS THE SAME WOULD QU ALIFY FOR DEDUCTION WITHOUT DEDUCTION OF LOSSES SUFFERED IN ANY OTHER U NDERTAKING. HE ALSO PLACED BEFORE US COPY OF THE ORDER OF THE HON'BLE B OMBAY HIGH COURT IN THE CASE OF HINDUSTAN UNILEVER LTD. VS. DCIT 325 ITR 10 2 WHEREIN THE HON'BLE COURT OBSERVED THAT LOSS SUSTAINED BY A UNIT CAN BE SET OFF AGAINST NORMAL BUSINESS INCOME BUT NOT AGAINST THE INCOME WHICH IS EXEMPT UNDER SECTION 10B OF THE ACT. 5. ON THE OTHER HAND, THE LEARNED D.R. STRONGLY RELIED UPON THE ORDER PASSED BY THE A.O. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION A ND PERUSED THE RECORD. SINCE THE VIEW TAKEN BY THE LEARNED CIT(A) IS IN CONSONANCE WITH THE VIEW TAKEN BY THE ITAT IN ASSESSEES OWN CASE IN EA RLIER YEARS AS WELL AS THE DECISION CITED SUPRA, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE CIT(A). 7. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH NOVEMBER 2011. SD/- SD/- (RAJENDRA SINGH) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 15 TH NOVEMBER 2011 ITA NO. 3951/MUM/2010 M/S. MELSTAR INFORMATION TECHNOLOGIES LTD. 3 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XVII, MUMBAI 4. THE CIT VIII, MUMBAI CITY 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.