DCIT 11(2)(1), MUMBAI V. SITEL INDIA P.LTD, MANGALORE

ITA 4340/MUM/2016

AI Insights

The case revolves around the dispute concerning the set-off of business losses incurred by M/s. Sitel India Pvt. Ltd. in its Chennai and Gurgaon units against the profits earned by its Mumbai and Hyderabad units for the Assessment Year 2007-08. The AO initially disallowed this set-off in the final assessment order, which was later directed to be allowed by the CIT(A) based on judicial precedents. The AO's subsequent rectification order, which reversed the set-off decision, was contested by the assessee, leading to the appeal before the Tribunal. The Tribunal's decision favored the assessee, reinforcing the CIT(A)'s order and dismissing the AO's appeal.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 299675 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 31-08-2022
• Assessment Year: misc
• Appeal Filed On: 22-01-2022
• Other Referred Cases: Hindustan Unilever Limited vs. CIT, Patni Computers Systems Limited vs. CIT, Galaxy vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing
• Section: 143(3); 191; 72; 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI SANDEEP SINGH KARHAIL, JM ITA No. 4340/MUM /2016 (Asse ssment Year 2007-08) DCIT-11( 2)( 1) Room No.477, Aaya kar Bhavan, M.K. Marg, Mumbai-400 020 Vs. M/s. Sitel India P vt . Ltd., 501, Boomeran g, Chandivali Farm Ro ad, Andheri (East), Mu mbai (Appellant) (Respondent) CO No. 2/MUM /2018 Arisi ng Out o f I TA No. 4340/MUM/20 16 (Asse ssment Year 2007-08) M/s. Sitel India P vt . Ltd., 501, Boomeran g, Chandivali Farm Ro ad, Andheri (East), Mu mbai Vs. DCIT-11( 2)( 1) Room No.477, Aaya kar Bhavan, M.K. Marg, Mumbai-400 020 (Appellant) (Respondent) PAN No. AAFCS1297M Assessee by : Shri. Sidhhe sh Cho ughule Revenue by : Shri. Vat sala Jha C IT DR Dat e o f heari ng: 01.09. 2022 Date of pronouncement : 29.11. 2022 O R D E R PER PRASHANT MAHARISHI, AM: 1. This appeal is filed by the DCIT 11(2)(1)1 Mumbai [ the ld AO ] against the Appellate order passed by The CIT(A)-58 [the ld. CIT(A)] for A.Y. 2007-08 allowing appeal of the assessee against rectification order passed u//s 154 of The Income Tax Act , 1961 [The Act] by the ld AO Page | 2 ITA No.4340/MUM/2016 & C O N o . 2 / M U M / 2 0 1 8 M/s. Sitel India Private Limited.; A.Y.2007-08 in appeal effect order pursuant to the Appellate Order passed by the ld CIT ( A) holding that there is no error in the order giving appeal effect passed by ld AO and hence appeal of assessee was allowed . 2. Ld AO preferred appeal raising following grounds: ITA No. 4340/MUM /2016 (Asse ssment Year 2007-08) “1. Whether on the facts and in the circumstances of the case, the Ld CIT(A) was correct in directing the assessing officer to adjust the losses of 10A Unit against the adjustment u/s 92CA of the Act and 40(a)(i) of the ACT without appreciating the fact that TP adjustment and the disallowance is question in altogether a separate adjustment/disallowance, which cannot be apportioned to a specific unit.? 2. Whether in law, facts and circumstances of the case, the Ld CIT(A) was justified in directing the assessing officer to allow set off of losses which is contrary to his own earlier decision directing to carry forward of losses in the order dt.16.12.2011 effect to which was given by the assessing officer.? 3. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the A.O. be restored.” 3. The assessee also filed CO No. 2/MUM/2018 raising following grounds of appeal: “ 1. On the facts, and in the circumstance of the case, and the directions issued by the learned Commissioner of Page | 3 ITA No.4340/MUM/2016 & C O N o . 2 / M U M / 2 0 1 8 M/s. Sitel India Private Limited.; A.Y.2007-08 Income-tax (Appeals)-58 [„CIT(A)‟] to allow the set off of losses of 10A units against the adjustments made under Section 92CA of the Act and Section 40(a)(i) of the Act, are in accordance with provisions for set-off of looses under Section 70 of the Act. 2. On the facts, and in the circumstances of the case, and in law, the directions of the learned CIT(A) to allow the set- off of losses of 10A units against the adjustments made to total income was not contrary to the learned CIT(A)'s order dated 16 December 2011, in as much as the ground of appeal referred to and adjudicated in the said order dated 16 December 2011 pertained to set off of loses of 10A units against profits of other 10A units while computing the deduction under Section 10A of the Act and not carry forward/ set off of losses as per Sections 70 to 72 of the Act.” 4. The brief facts of the case shows that, assessee is engaged in the business of call centre and IT enabled services providing contact centre services to the customer of its associated enterprises. The assessee has 4 different units in STPI Software Technology Park in Mumbai, Hyderabad, Chennai and Gurgaon. These undertakings are eligible for deductions u/s. 10A of the Act. 5. For A.Y. 2007-08 Assessee filed its return of income on 31.10.2007 declaring net loss of ₹ 8,22,97,184/-. The computation shows that assessee earned profit from its Mumbai and Hyderabad undertaking however, it suffered losses in Chennai and Gurgaon undertakings. With respect to the undertakings, where it earned profit, assessee claimed deduction u/s. 10A of the Act. Where assessee incurred losses, same were carried forward for set off of such loss against future business income. Page | 4 ITA No.4340/MUM/2016 & C O N o . 2 / M U M / 2 0 1 8 M/s. Sitel India Private Limited.; A.Y.2007-08 6. The AO after referring matter to the learned TPO and on several other issues passed the final assessment order u/s. 143(3) of the Act on 05.01.2011 wherein setting off of the losses was disallowed. 7. The assessee preferred appeal before the CIT(A) who passed an order on 16.12.2011 wherein he directed the AO to not to set off losses of Chennai and Gurgaon unit against profits of Mumbai and Hyderabad units. The assessee filed application on 01.03.2012 for passing an appeal effect order pursuant to the direction of learned CIT(A). The learned AO passed such order on 05.03.2012. 8. Subsequently, the learned AO issued notice u/s. 154 on 16.10.2013 holding that the set off of business loss of ₹ 08,22,97,184/- being the loss of Chennai and Gurgoan undertakings, which was directed by the learned CIT(A) to be set off, resulted into business loss being set off against the income from other sources and therefore, there is a mistake apparent from the record which needs to be rectified. 9. The assessee filed reply on 26.10.2013 that the set up of the losses of 10A units is against transfer pricing adjustment and disallowances confirmed by the learned CIT(A) in order giving effect and same is in accordance with the provisions of Section 70 and 71 of the Act. 10. The learned Assessing Officer rejected plea of assessee and rectified the order giving effect dated 05.03.2012 by passing the order u/s. 154 of the Act on 12.11.2013 disallowing the set off of losses of 10A units against other income. 11. The assessee aggrieved with that, preferred an appeal before the learned CIT(A). The learned CIT(A) passed an order on 14.03.2016 following the decision of the Hon’ble Bombay High Court in case of Hindustan Unilever Limited 191 taxmann 119, CIT Versus Patni Computers Systems Limited and Galaxy CIT Versus Galaxy Surfectants Ltd held that the loss of eligible units are held to be business loss. Such losses are to be allowed to be set off against the other business income of the assessee and if same are not sufficient, it could also be set off against othetr income. Further, there is no prohibition that Page | 5 ITA No.4340/MUM/2016 & C O N o . 2 / M U M / 2 0 1 8 M/s. Sitel India Private Limited.; A.Y.2007-08 adjustment of transfer pricing resulting into income, not available for such set off. Thus, CIT(A) allowed the appeal of the assessee. 12. The Assessing Officer preferred the appeal before us. The learned Departmental Representative supported the order of the ld. AO the learned AR supported the order of the ld. CIT(A). 13. We have carefully considered the rival contentions and orders of the lower authorities. Fact shows that order giving effect to the order of the ld.CIT(A) was passed on 08.03.2012. According to that order, the loss incurred by the assessee of ₹ 08,22,97,184/- was set off against other business income of ₹10,54,26,341/-. Therefore, in fact the business loss incurred by the assessee is set off against the business income of the assessee for the same year. The ld. CIT(A) has a followed three decisions of Hon’ble jurisdiction of High Court. The learned DR could not show us any reason why the provisions of section 70 cannot be given effect to and how the order of the ld. CIT(A) is erroneous. 14. In view of this, we confirm the order of the ld. CIT(A) and dismiss the appeal of the ld. Assessing Officer. 15. Accordingly, ITA No. 4340/MUM/2016 filed by the AO is dismissed. The CO filed by the assessee is merely supportive in nature and therefore same is dismissed. 16. In the result, appeal of the AO and CO of the assessee are dismissed. Order pronounced in the open court on 29.11.2022. Sd/- Sd/- (SANDEEP SINGH KARHAIL) (PRASHANT MAHARI SHI) (JUDICI AL ME MBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 29.11.2022 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) Page | 6 ITA No.4340/MUM/2016 & C O N o . 2 / M U M / 2 0 1 8 M/s. Sitel India Private Limited.; A.Y.2007-08 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai