M/s Shoghi Communications Ltd., Shimla V. DCIT, Shimla

ITA 506/CHANDI/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2357 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2004-2005
• Appeal Filed On: 20-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHANDER KANTA SR DR
• Keywords: Revision of order
• Section: 80IB; 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH SMC CHANDIGARH !', # ! . %.. . & , '( BEFORE: SMT. DIVA SINGH, JM & DR. B.R.R.KUMAR, AM ./ ITA NO. 506/CHD/2017 / ASSESSMENT YEAR : 2004-05 SHOGHI COMMUNICATIONS LTD., 74-75, SHOGHI INDUSTRIAL AREA, SHOGHI.. VS THE DCIT, CIRCLE , SHIMLA. ./ PAN NO: AAFCS2554R / APPELLANT / RESPONDENT ! ' / ASSESSEE BY : SHRI ASHWANI KUMAR # ! ' / REVENUE BY : SMT. CHANDERKANTA, SR.DR $ % ! &/ DATE OF HEARING : 28.08.2018 '()* ! &/ D ATE OF PRONOUNCEMENT : 30.10. 2018 ')/ ORDER PER DIVA SINGH THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE ASSA ILING THE CORRECTNESS OF THE ORDER DATED 17/01/2017 OF CIT(A) F ARIDABAD PERTAINING TO 200405 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS : 1. THAT ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 BY THE LD. COMMISSIONER OF INCOME TAX, FARIDABAD IS AGAINST LA W AND FACTS ON THE FILE IN AS MUCH HE WAS NOT JUSTIFIED TO ARBITRARILY UPHOLD ACT ION OF THE LD. ASSESSING OFFICER IN RESTRICTING THE CLAIM OF DEDUCTION U/S 8 0-IB TO RS. 13,47,105/- AS AGAINST CLAIMED AT RS. 27,09, 074/-. 2. THAT HE WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF T HE LD. ASSESSING OFFICER IN RECOMPUTING THE GROSS TOTAL INCOME AT RS. 44,19,351 /- AS AGAINST THE ENTIRE PROFIT OF RS. 90,30,248/- FOR THE PURPOSE OF WORKING OUT T HE AMOUNT OF DEDUCTION U/S 80-IB 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE DEDUCT ION ALLOWED UNDER SECTION 80 IB @ 30% OF THE NET PROFIT OF RS. 90,30,248 WAS CONSIDERED BY THE CIT SHIMLA IN PROCEEDINGS UNDER SECTION 263. IT WAS N OTICED THAT DEDUCTION UNDER SECTION 80 IB SHOULD HAVE BEEN ALLOWED W ITH REFERENCE TO THE GROSS TOTAL INCOME, WHICH WOULD BE ARRIVED AT AFTER SE TTING OFF THE LOSSES OF THE TRADING AS WELL AS TRAINING ACTIVITIES AGAINST P ROFITABLY ALLEGED MANUFACTURING ACTIVITY. THUS THE DEDUCTION SHOULD HAVE BEE N ALLOWED AT 30% OF RS. 44,19,251/- WHICH WOULD WORK OUT TO RS. 13,47,105 /- AS AGAINST RS.27,97,074/- ALLOWED TO THE ASSESSEE. CONSEQUEN TLY ACIT, ITA 506/CHD/2017 A.Y.2004-05 PAGE 2 OF 3 SHIMLA PASSED ORDER UNDER SECTION 263 DATED 27/03/2009 HOLDING AS UNDER : 'IN VIEW OF THE CLEAR POSITION OF LAW LAID DOWN BY THE HON'BLE SUPREME COURT AND REITERATED BY THE JURISDICTIONAL HIGH COURT IN THEIR VERY RECENT JUDGEMENT DATED 12.08.2008, IT IS HELD THAT THE ACTION OF THE AO IN NOT RESTRICTING THE DEDUCTION U/S 80IB TO 30% OF THE GROSS TOTAL INCOME OF RS.44,19,351/- CONSTITUTED PATENT ERROR OF LAW. SINCE, THE ACTIO N OF THE-AO WAS NOT AT ALL IN ACCORDANCE, WITH THE LAW LAID DOWN BY THE SUPREME. COURT AND RESULTED IN A LOSS OF LEGITIMATE REVENUE, THE ERROR WAS ALSO PREJ UDICIAL TO THE INTERESTS OF REVENUE. THE ORDER ASSED BY THE AO ON 22.12.2006 A ND 21.03.2007 IN THE ASSESSES CASE FOR A.Y. 2004-05 ARE THEREFORE, SET A SIDE U/S 263 ON THIS LIMITED ISSUE. THE AO IS DIRECTED TO RECOMPUTED THE INCOME AFTER ALLOWING DEDUCTION 80'IB ONLY AT 30% OF THE NET RESULTANT PROFIT AND G ROSS TOTAL INCOME OF RS. 44,19,351/-.' 3. IT IS SEEN THAT THE AO IN PURSUANCE TO THE ABOVE D IRECTION AFTER HEARING THE ASSESSEE REJECTED THE ASSESSEES SUBMISSIO NS WHO HAD ARGUED THAT THE DECISION OF THE APEX COURT IN THE CASE OF IPCA LABORATORIES LTD. VERSUS CIT 266 ITR 521 (SC) WAS NOT APPLICABLE. THE ASSES SING OFFICER RELYING UPON THE MANDATE OF THE ABOVE DECISION HELD THAT SECTION 80AB HAS AN OVERRIDING EFFECT OVER ALL PROVISIONS CONTAINED IN CHA PTER-VI INCLUDING SECTION 80IB. THUS, AS A RESULT THEREOF THE EXCES S DEDUCTION OF RS. 13,47,105/- WAS DISALLOWED AND ADDED BACK TO THE INCOM E OF THE ASSESSEE. 4. THE ASSESSEE CARRIED THE ISSUE IN APPEAL BEFORE THE C IT(APPEALS). THE CIT(A) UPHELD THE ASSESSMENT ORDER. PURSUANT TO THE DISMISSAL OF THE SAID APPEAL, THE PRESENT APPEAL HAS BEEN FILED. 5. THE LD. AR REITERATED THE SUBMISSIONS ADVANCED BEFORE THE TAX AUTHORITIES STATING THAT HE WOULD LIKE TO KEEP THE ISSUE A LIVE, HOWEVER ON FACTS, IT WAS CONCEDED THAT THERE IS NO DISPUTE. THE LD. S R.DR RELIES UPON THE IMPUGNED ORDER. 6. WE HAVE HEARD THE SUBMISSIONS AND PERUSED THE MATER IAL AVAILABLE ON RECORD. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE HAS SHOWN PROFITS OF RS. 90,30,248/- FROM DEVELOPMENT OF SOFT WARE (MANUFACTURING ACTIVITY) AND LOSSES OF RS. 35,77,715/- & RS. 9,62, 182/- FROM TRADING ACTIVITY & FROM TRAINING ACTIVITY RESPECTIVELY. HOWEVER, WHIL E CLAIMING DEDUCTION U/S 80-IB, THE ASSESSEE DIDN'T TAKE INTO CONSIDERATION ITS LOSSES AND CLAIMED DEDUCTION @ 30% ON THE ENTIRE PROFIT OF RS. 90,30,248/-. HENCE, THE BASIC ISSUE WHICH BOILS DOWN IS WHETHER THE DEDUCTION U/S 80-IB IS TO BE ALLOWED ON THE GROSS TOTAL INCOME AFTER FACTORING IN ALL TH E LOSSES NOTWITHSTANDING WHETHER DERIVED FROM MANUFACTURING ACTIVITIES OR NO N-MANUFACTURING ACTIVITIES. IN THE INSTANT CASE, THE AO HAS RELIED UPON THE JUDGMENT OF ITA 506/CHD/2017 A.Y.2004-05 PAGE 3 OF 3 THE APEX COURT IN THE CASE OF M/S IPCA LABORATORY LTD . VS. CIT( 266 ITR 521) WHEREIN IT WAS HELD THAT AS PER SECTION 80-AB, D EDUCTION UNDER CHAPTER VI-A OF THE IT ACT ARE TO BE ALLOWED FROM THE PROFITS AS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT . IT IS SEEN THAT WHILE AFFIRMING THE VIEW THE CIT-A BE DISMISSED WITH REFERENCE TO M/S JE YAR CONSULTANT & INVT PVT. LTD. IN CIVIL APPEAL NO. 8912 OF 2003. RELIANCE WAS ALSO PLACED UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF HIM TECHNOFORGE LTD 256 CTR 393. ON GOING THROUGH THE MATE RIAL AVAILABLE ON RECORD, THE DECISIONS CITED AND THE PROVISIONS OF THE ACT AS THEY STAND, WE FIND NO INFIRMITY IN THE ORDERS PASSED. BEING SATISFIED WITH THE REASONING AND FINDING, THE IMPUGNED ORDER IS CONFIRMED. THE APPEAL OF T HE ASSESSEE IS DISMISSED. SAID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.10. 2018. SD/- SD/- ( . %.. . & ) ( !' ) (DR. B.R.R. KUMAR) (DIVA SINGH) '( / ACCOUNTANT MEMBER # / JUDICIAL MEMBER + , (+ ! ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT - 2. / THE RESPONDENT - 3. $ / / CIT 4. $ / ()/ THE CIT(A) 5. -23 4, & 4, 67839/ DR, ITAT, CHANDIGARH 6. 38 :%/ GUARD FILE (+ $ / BY ORDER, ; #/ ASSISTANT REGISTRAR ITAT,CHANDIGARH.