ECLERX SERVICES LTD., MUMBAI V. ACIT - 2(1)(2), MUMBAI

ITA 5252/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7401 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 24-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNITA BILLA
• Section: 10AA; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE S/SHRI B.R. BASKARAN (AM) & AMARJIT SINGH ( JM) I.T.A. NO. 5252/MUM/2016 (ASSESSMENT YEAR 2011-12) ECLERX SERVICES LIMITED SONAWALA BUILDING 29, BANK STREET,1 ST FLOOR FORT, MUMBAI-400 023. P AN : AAACE7932L VS. ACIT 2(1)(2) 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020 ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI BIREN GABHAWALA DEPARTMENT BY MISS. SUNITA BILLA DATE OF HEARING 1 . 5 . 201 8 DATE OF PRONOUNCEMENT 1.5.2018 O R D E R PER B.R. BASKARAN (AM) :- THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING TH E ORDER DATED 13.06.2016 PASSED BY LD CIT(A)-4, MUMBAI AND IT REL ATES TO THE ASSESSMENT YEAR 2011-12. THE ONLY ISSUE URGED IN THIS APPEAL IS WHETHER THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE ACTION OF THE AO IN REDUCING THE AMOUNT OF DEDUCTION U/S 10AA OF THE ACT FOR THE PURPOSE OF CO MPUTING BOOK PROFIT U/S 115JB OF THE ACT. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE PROVIDED A SUM OF RS.12 6.77 MILLIONS TOWARDS DIMINUTION IN THE VALUE OF INVESTMENTS MADE IN THE SUBSIDIARY COMPANIES. THE ASSESSEE WAS HAVING BOTH SEZ UNITS AND NON-SEZ UNIT S. THE ASSESSEE CHARGED ENTIRE AMOUNT OF PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS AGAINST THE NON-SEZ UNITS. THE REASON ING GIVEN BY THE ASSESSEE WAS THAT THESE INVESTMENTS WERE MADE BY IT MUCH PRI OR TO THE COMMENCEMENT OF SEZ UNITS. THE ASSESSEE WAS CLAIMING DEDUCTION U/S 10AA OF THE ACT AGAINST THE PROFITS ARISING FROM SEZ UNITS. ECLERX SERVICES LIMITED 2 3. THE AO DID NOT ACCEPT THE EXPLANATIONS OF THE ASSESSEE AND ACCORDINGLY ALLOCATED A SUM OF RS.52.28 MILLIONS TO THE SEZ UNI T. IT IS PERTINENT TO NOTE THAT THE AO HAS ALLOCATED THE ABOVE SAID AMOUNT ONL Y FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB OF THE ACT AND ACCO RDINGLY ADDED THE ABOVE SAID AMOUNT TO THE BOOK PROFIT, I.E., HE REDUCED TH E ELIGIBLE AMOUNT OF DEDUCTION U/S 10AA OF THE ACT BY RS.52.28 MILLIONS WHILE COMPUTING BOOK PROFIT. IT IS ALSO PERTINENT TO NOTE THAT THE AO D ID NOT MAKE SUCH ADJUSTMENT WHILE COMPUTING INCOME UNDER NORMAL PROVISIONS OF T HE ACT, I.E., HE ALLOWED DEDUCTION U/S 10AA OF THE ACT AS CLAIMED BY THE ASS ESSEE WHILE COMPUTING TOTAL INCOME UNDER NORMAL PROVISIONS OF THE ACT. 4. THE LD CIT(A) CONFIRMED THE ORDER OF THE AO AND HENCE THE ASSESSEE HAS FILED THIS APPEAL. 5. THE MAIN CONTENTION OF THE LD A.R IS THAT TH E EXPENDITURE DEBITED TO THE PROFIT AND LOSS ACCOUNT TOWARDS PROVISION FOR DIMI NUTION IN THE VALUE OF INVESTMENTS IS NOT RELATED TO SEZ UNIT, SINCE THE INVESTMENTS WERE MADE MUCH PRIOR TO THE COMMENCEMENT OF THE SEZ UNIT. IN THE ALTERNATIVE, HE SUBMITTED THAT THE AO, AFTER HAVING ACCEPTED THE AM OUNT OF DEDUCTION U/S 10AA OF THE ACT FOR THE PURPOSE OF COMPUTING TOTAL INCOME, CANNOT ADOPT DIFFERENT FIGURE FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. 6. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT T HE EXPENDITURE CLAIMED TOWARDS PROVISION FOR DIMINUTION IN THE VALUE OF I NVESTMENTS IS A COMMON EXPENDITURE IN VIEW OF INTERLACING OF FUNDS BETWEEN SEZ UNITS AND NON-SEZ UNITS. ACCORDINGLY SHE SUBMITTED THAT THE LD CIT(A ) WAS JUSTIFIED IN CONFIRMING THE ORDER OF THE AO. WITH REGARD TO NON -MAKING OF SIMILAR ADJUSTMENT FOR THE PURPOSE OF COMPUTING TOTAL INCOM E UNDER NORMAL PROVISIONS OF THE ACT, THE LD D.R SUBMITTED THAT THIS MISTAKE OF THE AO REQUIRES RECTIFICATION AT HIS END. 7. HAVING HEARD RIVAL CONTENTIONS, WE ARE OF TH E VIEW THAT THERE IS MERIT IN THE CONTENTIONS OF THE LD A.R ON THE ALTERNATIVE PL EA. SINCE THE AO HAS ECLERX SERVICES LIMITED 3 ACCEPTED THE DEDUCTION U/S 10AA OF THE ACT COMPUTED BY THE ASSESSEE FOR THE PURPOSE OF COMPUTING TOTAL INCOME UNDER NORMAL PROV ISIONS OF THE ACT, IN OUR VIEW, THE VERY SAME AMOUNT HAS TO BE EXCLUDED FROM NET PROFIT FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. IN T HIS VIEW OF THE MATTER, THE ADJUSTMENT MADE BY THE AO IS NOT SUSTAINABLE. ACCO RDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE IMPUGNED ADJUSTMENT MADE BY HIM FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER HAS BEEN PRONOUNCED IN THE COURT ON 1.5.2 018. SD/- SD/- (AMARJIT SINGH) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 1/5/2018 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR PRIVATE SECRETARY) PS ITAT, MUMBAI