DCIT, Cir.-2, Pune V. Ntrance Customer Services Pvt. Ltd., Mumbai

ITA 40/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9863 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 10-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINITA MENON
• Assessee Lawyers: R MURLIDHAR
• Keywords: Non-deduction of tax

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI R.K. PANDA, AM ITA NO. 40/PN/2011 (ASSESSMENT YEAR: 2007-08) DY. CIT CIR. 2, PUNE .. APPELLANT VS. M/S. NTRANCE CUSTOMER SERVICES PVT.LTD., 4 TH FLOOR, TOWER 1, WING 4A & B MAGARPATTA, HADAPSAR, PUNE-411 028 PAN AABCN 8825 A RESPONDENT APPELLANT BY: MS. VINITA MENON RESPONDENT BY: SHRI R. MURLIDHAR DATE OF HEARING: 17-10-2012 DATE OF PRONOUNCEMENT: 31-10-2012 ORDER PER SHAILENDRA KUMAR YADAV, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)- II PUNE DATED 12-10-2010 FOR A.Y. 2007-0 8 ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) THAT THE CIT(A) ERRED IN ALLOWING THE ASSESSEES APPEAL BY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD. IN ITA NO. 2426 OF 2009 DATED 23-6-2010 INSTEAD OF CONFIRMING THE ASSESSMENT. 3. THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION U/S 10A OF THE ACT IN RESPECT OF THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT. 2 ITA NO 40/PN/11 NTRANC E CUSTOMER A.Y. 2007-08 4. THE LEARNED CIT(A) ERRED IN FAILING TO APPRECIATE THAT THE SAID ADDITION OF DISALLOWANCE U/S 40(A)(IA) MADE ON ACCOUNT OF NON-DEDUCTION OF TDS WAS NOT INCOME DERIVED FROM THE EXPORT OF SOFTWARE AND, THEREFORE, ADDITION U/S 10A WAS NOT ADMISSIBLE TO THE ASSESSEE IN RESPECT OF THE SAID AMOUNT. 5. THE LEARNED CIT(A) ERRED IN FAILING TO APPRECIATE THAT THE REASON BEHIND INSERTING SEC. 40(A) AND THEREBY DISALLOWING THE DEDUCTION OF EXPENDITURE WHICH HAS BEEN INCURRED FOR THE BUSINESS PURPOSE IS TO FORBID THE ASSESSEE FROM NON-PAYMENT OR NON-DEDUCTION OF TAX PAYABLE TO THE GOVT. UNDER CHAPTER XVII-B THAT OUGHT TO BE PAID. 6. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT(A) MAY BE VACATED AND THAT OF THE AO BE RESTORED. 2. THE ASSESSEE HAS RAISED THE ISSUE OF DISALLOWANC E U/S 40(A)(IA) OF THE ACT. THE ASSESSING OFFICER HE LD THAT THE ENHANCED PROFIT DUE TO THE DISALLOWANCE CO ULD NOT BE ELIGIBLE FOR CLAIM U/S 10A/10B OF THE ACT. T HE A.O HAS FURTHER HELD THAT SINCE ONLY THE PROFIT DER IVED BY THE UNDERTAKING FROM EXPORT OF ARTICLE OR THINGS AND COMPUTER SOFTWARE WERE TO BE ALLOWED AS DEDUCTION FROM THE TOTAL INCOME OF THE ASSESSEE, THE DISALLOW ANCE U/S 40(A)(IA) WHICH WAS ONLY NOTIONALLY INCREASING THE INCOME, CANNOT BE TREATED AS PROFIT DERIVED BY THE UNDERTAKING. 3. ON APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, THE CIT(A), FOLLOWING THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY IND IA LTD. IN ITA NO. 2426 OF 2009 VIDE ORDER DATED 23-6- 2010 (330 ITR 175), AND THE DECISION OF BOMBAY BENCH OF THE TRIBUNAL IN THE CASE OF SABA SOFTWARE 3 ITA NO 40/PN/11 NTRANC E CUSTOMER A.Y. 2007-08 PVT. LTD. VS. ITO IN ITA NO. 1454/MUM/2009 DT. 27-1 - 2010, ALLOWED THE CLAIM OF THE ASSESSEE. 4. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE CIT(A) WAS JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE BEC AUSE ASSESSEE WAS ELIGIBLE FOR ADDITIONAL CLAIM U/S 10A OF THE ACT DUE TO ENHANCEMENT OF INCOME ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT. MOREOVER, T HIS CONCLUSION IS JUSTIFIED BY DECISION OF HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF GEM PLUS JEWELLERY INDIA LTD (SUPRA). WE THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON TH IS ISSUE. IN VIEW OF THE ABOVE, ISSUE RAISED BY WAY OF APPLICABILITY OF RULE 27 OF ITAT RULES GOES ACADEMI C. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER 2012. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED:31 ST OCTOBER 2012 ANKAM COPY TO:- 1. ASSESSEE 2. DEPARTMENT 3. THE CIT (A) II PUNE 4. THE CIT II PUNE 5. THE D.R. B BENCH, I.T.A.T., PUNE. BY ORDER //TRUE COPY// SR. P.S. I.T.A.T., PUNE 4 ITA NO 40/PN/11 NTRANC E CUSTOMER A.Y. 2007-08