DCIT, New Delhi V. M/s. ST Microelectronics Pvt. Ltd., Greater Noida

ITA 5531/DEL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1300 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 01-01-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 01-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S VIRK
• Keywords: Rectification of order
• Section: 143(3); 10B; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : G NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY, AM AND SHRI C.M. GARG, JM ITA NO. 5531/DEL/2012 ASSESSMENT YEAR : 2003-04 DCIT, CIRCLE 9(1) VS. ST MICROELECTRONICS P. LTD. NEW DELHI PLOT NO.1, KNOWLEDGE PARK III GREATER NOIDA 201 308 PAN:AAACS 3406M (APPELLANT) (RESPONDENT) APPELLANT BY:- SH. G.S.VIRK, SR. D.R. RESPONDENT BY:- SH.SALIL KAPOOR & SH.VIKAS JAIN, ADV. O R D E R PER J.SUDHAKAR REDDY, AM THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED A GAINST THE ORDER OF THE CIT(A)-XXIX, NEW DELHI DATED 28.8.2012 PERT AINING TO THE ASSESSMENT YEAR 2003-04 ON THE FOLLOWING GROUND. 1. THE LD.CIT(A) ERRED ON FACTS AND IN LAW TO APP RECIATE THAT INSTEAD OF DEDUCTING LOSS FROM 10B UNIT AMOUNTING TO RS.1,52,3 0,409/- IN ORDER TO COMPUTE THE PROFITS OF THE BUSINESS, THE LOSS WAS A DDED WHICH RESULTED IN EXCESS ALLOWANCE OF DEDUCTION UNDER SECTION 80 HHC OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVEL OPMENT OF INTEGRATED CIRCUIT DESIGN, COMPUTER AIDED DESIGN TO OLS AND COMPUTER SOFTWARE. THE ASSESSEE ALSO PROVIDES LOCAL MARKETI NG INFORMATION SERVICE SUPPORT. THE ISSUE THAT ARISES FOR OUR CONSIDERATI ON IS WHETHER THE FIRST ITA 5531/DEL/2012 PAGE 2 OF 4 ASSESSMENT YEAR 2003-04 DCIT VS. ST MICROELECTRONICS P.LTD. APPELLATE AUTHORITY WAS RIGHT IN HOLDING THAT THE A SSESSING OFFICER WAS RIGHT IN PASSING AN ORDER UNDER SECTION 154 OF THE INCOME TAX ACT, 1961 DT. 2.3.2010, RECTIFYING HIS ORDER UNDER SECTION 14 3(3) OF THE INCOME TAX ACT, 1961 DT. 30 TH MARCH, 2006. THE ASSESSING OFFICER PASSED THE RECTIFICATION ORDER BY OBSERVING AS FOLLOWS. ASSESSMENT IN THIS CASE WAS COMPLETED UNDER SECTIO N 143(3) ON 30.3.2006 AT AN INCOME OF RS.21,55,32,317/-. THE T OTAL INCOME WAS REVISED AT RS.19,24,01,852/- VIDE ORDER DT. 5.9.200 8 PASSED UNDER SECTION 250/143(3). IN THE ASSESSMENT ORDER DT. 30.3.2006 THE ASSESSEE WAS ALLOWED DEDUCTION UNDER SECTION 80 HHE AT RS.11,90, 65,024/-. SUBSEQUENTLY, IT WAS NOTICED FROM THE ORDER DATED 3 0.3.2006 THAT WHILE ARRIVING AT THE DEDUCTION UNDER SECTION 80HHE, INST EAD OF DEDUCTING THE LOSS FROM 10B UNIT AMOUNTING TO RS.1,52,30,409/-, T HE LOSS WAS ADDED RESULTING IN EXCESS ALLOWANCE OF DEDUCTION UNDER SE CTION 80HHE. THIS WAS A MISTAKE APPARENT FROM RECORD. IN ORDER TO RE CTIFY THE SAME, THE ASSESSEE WAS ISSUED A NOTICE UNDER SECTION 154 VIDE THIS OFFICE LETTER NO. 2323 DT. 19.2.2010 POINTING OUT THE MISTAKE. THE A SSESSEE WAS ASKED TO FILE REPLY/EXPLANATION ON OR BEFORE 26.2.2010 AND I T WAS FURTHER INTIMATED THAT IN CASE OF FAILURE IN MAKING ANY COMPLIANCE IT WILL BE PRESUMED THAT THE ASSESSEE HAS NOTHING TO SAY IN THE MATTER AND T HE ISSUE WILL BE DECIDED ON MERITS. TILL THE FIXED DATE OF 26.2.201 0, NEITHER ANYBODY APPEARED NOR ANY REPLY HAVE BEEN FILED BY THE ASSES SEE. HENCE, IT IS PRESUMED THAT THE ASSESSEE HAS NO OBJECTION ON THE PROPOSED RECTIFICATION. ACCORDINGLY, THE MISTAKE BEING APPARENT FROM RECORD IS RECTIFIED. 3. AFTER HEARING RIVAL CONTENTIONS, WE ARE OF THE C ONSIDERED OPINION THAT THE ORDER OF THE FIRST APPELLATE AUTHORITY HAS TO BE UPHELD. AT PARA 5 OF HIS ORDER THE COMMISSIONER OF INCOME TAX (APPE ALS) HAS HELD AS FOLLOWS. 5.1. I HAVE CAREFULLY CONSIDERED SUBMISSIONS OF TH E APPELLANT AND OTHER MATERIAL PLACED ON RECORD. THE ISSUE INVOLVED IS R EGARDING METHOD OF COMPUTATION OF DEDUCTION AVAILABLE UNDER SECTION 80 HHE WHEN THE APPELLANT IS ALSO HAVING OTHER UNITS NOT ELIGIBLE F OR SUCH DEDUCTION. THE SCHEME OF COMPUTATION OF DEDUCTION AVAILABLE UNDER SECTION 80HHE CAN BE INFERRED FROM S.80A(4)/10B(6) AND THERE IS NO DISPU TE THAT NO DOUBLE DEDUCTION CAN BE ALLOWED UNDER DIFFERENT SECTIONS O N PROFIT OF ONE ELIGIBLE UNIT. THE APPELLANT HAS CONSIDERED THE PROFITS OF EOU-I ON SEPARATE BASIS ITA 5531/DEL/2012 PAGE 3 OF 4 ASSESSMENT YEAR 2003-04 DCIT VS. ST MICROELECTRONICS P.LTD. FOR WORKING OUT DEDUCTION UNDER SECTION 80HHE WITHO UT CLUBBING WITH PROFIT/LOSS FROM EOU-II AND S&M UNIT. THE APPELLAN T AHS FOLLOWED THIS APPROACH FOR SUBSEQUENT YEARS ALSO. THIS APPROACH OF THE APPELLANT IS CORRECT BECAUSE PROFITS FROM EOU-II ARE ELIGIBLE FO R DEDUCTION UNDER SECTION 10B AND SAME PROFITS CAN NOT AGAIN BE CONSIDERED FO R DEDUCTION UNDER SECTION 80HHE. THEREFORE, SINCE CONSOLIDATED PROFI T FROM EOU-I, EOU-II AND S&M UNIT HAVE BEEN RETURNED BY THE APPELLANT, E LIGIBLE PROFITS FROM EOU-I HAVE TO BE WORKED OUT BY TAKING OUT PROFIT/LO SS FROM EOU-II AND S&M UNIT FROM CONSOLIDATED PROFIT. IN PRESENT CASE , THERE IS LOSS IN EOU-II AND THIS LOSS HAS GONE TO REDUCE FIGURE OF CONSOLID ATED PROFIT. NOW, WHEN THIS LOSS OF EOU-II IS TO BE TAKEN OUT FROM CONSOLI DATED FIGURE, THE FIGURE OF LOSS HAS TO BE ADDED SO AS TO INCREASE THE CONSOLID ATED PROFIT TO THAT EXTENT. THIS IS WHAT HAS BEEN DONE BY THE ASSESSIN G OFFICER IN ORDER UNDER SECTION 143 AND IT IS MATHEMATICAL CORRECT AP PROACH. IN ORDER UNDER SECTION 154, THE ASSESSING OFFICER HAS FURTHER REDU CED THE FIGURE OF LOSS OF EOU-II FROM CONSOLIDATED PROFIT. THIS IS A MATHEMA TICAL MISTAKE AS MINUS OF MINUS FIGURE MAKES IT A PLUS FIGURE. IN ORDER U NDER SECTION 143 OR 154, THE ASSESSING OFFICER HAS NO WHERE SAID THAT PROFIT /LOSS OF ALL THE UNITS IS TO BE CLUBBED FOR PURPOSE OF COMPUTING DEDUCTION UN DER SECTION 80HHE. THIS APPROACH OF ASSESSING OFFICER IS CORRECT BECAU SE IN A SITUATION WHERE THERE IS PROFIT IN EOU-II AND IF IT IS TO BE CLUBBE D WITH PROFIT OF EOU-I, THEN PROFIT OF EOU-II SHALL GET DOUBLE DEDUCTION UNDER S ECTION 10B AND 80 HHE WHICH IS NOT AS PER SCHEME OF THE INCOME TAX ACT, 1 961. THEREFORE, IT CAN BE SEEN THAT ASSESSING OFFICER HAS JUST COMMITTED A MATHEMATICAL MISTAKE AND HE NEVER INTENDED TO CLUB PROFIT/LOSS OF ALL TH E UNITS. 5.2. FOR ARGUMENT SAKE, EVEN IF IT IS ASSUMED THAT PROFIT/LOSS OF ALL UNITS NEEDS TO BE CLUBBED, IT WILL BE A DEBATABLE ISSUE A S THERE ARE SEVERAL JUDICIAL DECISIONS AGAINST THIS APPROACH. ON THIS GROUND ALSO, ACTION OF ASSESSING OFFICER TO PASS ORDER UNDER SECTION 154 C ANNOT BE UPHELD. 5.3. IN VIEW OF DISCUSSION SUPRA, I HOLD THAT THE A SSESSING OFFICER HAS WRONGLY COMPUTED DEDUCTION UNDER SECTION 80 HHE BY SUBTRACTING FIGURE OF LOSS FROM CONSOLIDATED PROFIT. THE CORRECT WAY IS TO ADD THE FIGURE OF LOSS TO CONSOLIDATED FIGURE AND IT HAS BEEN RIGHTLY DONE SO IN ASSESSMENT ORDER UNDER SECTION 143(3). ACCORDINGLY, THE IMPUGNED OR DER UNDER SECTION 154 IS QUASHED. 4. WE FIND NO REASON TO INTERFERE IN HIS WELL REASO NED ORDER OF THE FIRST APPELLATE AUTHORITY. THE ASSESSING OFFICER H AS DONE A CALCULATION ITA 5531/DEL/2012 PAGE 4 OF 4 ASSESSMENT YEAR 2003-04 DCIT VS. ST MICROELECTRONICS P.LTD. MISTAKE WHILE PASSING HIS ORDER UNDER SECTION 154 O F THE INCOME TAX ACT, 1961. 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JANUARY, 2013. SD/- SD/- (C.M.GARG) (J.SUDHAKA R REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBE R DATED: THE 4 TH JANUARY, 2013 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5.DR; 6.GUARD FILE BY ORDER DY. REGISTRAR