DCIT RG 8(2), MUMBAI V. LNOWLEDGE WORKS GLOBAL LTD, MUMBAI

ITA 5855/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55795 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2005-2006
• Appeal Filed On: 21-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 14A

Judgement Text

1 M/S KNOWLEDGE WORKS GLOBAL LTD IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI H BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI PRAMOD KUMAR, AM & SHRI VIJAY PAL RAO, JM ITA NO. 5855/MUM/2010 (ASST YEAR 2005-06 ) THE DY COMMR OF INCOME TAX RANGE 8(2), MUMBAI VS M/S KNOWLEDGE WORKS GLOBAL LTD A & B WING 5 TH FLOOR MARWAH CENTRE KRISHNALAL MARWAH MARG ANDHERI (E) MUMBAI 72 (APPELLANT) (RESPONDENT) PAN NO. AACCK0612M ASSESSEE BY SHRI VIJAY MEHTA REVENUE BY SH V V SHASTRI DT.OF HEARING 20 TH OCT 2011 DT OF PRONOUNCEMENT 28 TH , OCT 2011 PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 12.4.2010 OF THE CIT(A) FOR THE AY 2005-06. 2 THE REVENUE HAS RAISED THE ONLY GROUND AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAWS, THE LD CIT(A) ERRED IN HOLDING THAT LOSS OF 10A UNIT IS ALLOWABLE TO BE SET OFF AND CARRIED FORWARD AGAINST PROFIT OF ANOTHER 10A UNIT WITHOUT APP RECIATING THE FACTS OF THE CASE. 3 THE ASSESSEE CLAIMED SET OFF OF LOSS OF 10AUNIT A T CHENNAI AGAINST THE PROFIT OF ANOTHER 10A UNIT AT MUMBAI AND CARRY FORWARD THE RE MAINING LOSS FOR SET OFF IN THE SUBSEQUENT YEAR. THE ASSESSING OFFICER HELD THAT I N VIEW OF SECTION 14A, INSERTED BY FINANCE ACT, FROM 1.4.1962 SECTION 10A BEING PART O F CHAPTER III, LOSS FROM ONE 10A UNIT BEING EXCESS OF EXPENDITURE OVER INCOME IS NO T ENTITLED FOR SET OFF AGAINST ANY 2 M/S KNOWLEDGE WORKS GLOBAL LTD OTHER INCOME. THEREFORE, THE ASSESSING OFFICER DIS ALLOWED THE LOSS OF CHENNAI UNIT TO SET OFF AGAINST THE PROFIT OF MUMBAI UNIT AND ALSO DISALLOWED THE CARRY FORWARD THE SAID LOSS IN THE SUBSEQUENT YEAR. 3.1 ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. 4 WE HAVE HEARD THE LD DR AS WELL AS THE LD AR OF T HE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. IT IS PERTINENT T O NOTE THAT AFTER THE AMENDMENT W.E.F AY 2001-02, SECTION 10A IS NO MORE IS AN EXEM PTION PROVISION BUT IS IN THE NATURE OF DEDUCTION. AS PER THE AMENDED PROVISIONS OF SEC . 10A, A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM THE TOTAL INCOME WHICH VARIES FROM 100% TO 50% DEPENDING UPON THE ASSESSME NT YEAR SUBSEQUENT TO 1.4.2003; THEREFORE, THE BENEFIT U/S 10A IS IN THE NATURE OF DEDUCTION AND NOT EXEMPTION. FURTHER, THE SECTION 10A ITSELF CONTAIN S EXPRESSION A DEDUCTION AND NOT EXEMPTION AND AS PER SUB. SEC. (6) OF SEC. 10A, T HE LOSS RELATES TO THE BUSINESS OF THE UNDERTAKING SHALL BE ALLOWED TO CARRY FORWARD O R SET OFF. ACCORDINGLY, THE PROVISIONS OF SEC. 14A ARE NOT APPLICABLE IN CASE O F THE INCOME ELIGIBLE FOR DEDUCTION U/S 10A. THE CIT(A) HAS DECIDED THE ISSUE IN PARA 5.6 AS UNDER: THE SUBMISSION HAS BEEN CONSIDERED. THE APPELLANT S CONTENTION THAT LOSS CANNOT BE TREATED AS EXPENDITURE AND CONSEQUENTLY SEC 14A CANNOT BE RESORTED TO BY THE ASSESSING OFFICER IS ACCEPTED. IN VIEW OF AMENDMENT TO SEC 10A(4) WHEREIN INSTEAD OF PROFIT OF UNDERTAKING PROFIT OF THE BUSINESS OF THE UNDERTAKING HAS BEEN SUBSTITUTED, THE UNDERTAKIN G IS TO BE CONSIDERED AS CONSISTING OF UNITS PROVIDED THE UNITS ARE ENGAGED IN THE ELIGIBLE ACTIVITY. HENCE, THE CLAIM OF SET OFF OF LOSS OF CHENNAI UNIT AGAINST PROFIT FROM MUMBAI UNIT IS TO BE ALLOWED. IN VIEW OF PROVISIONS OF SEC. 10A(6) BALANCE IS ALLOWED TO BE CARRIED FORWARD. THIS GROUND IS ALLOWED. 5 IT IS CLEAR THAT AS PER THE AMENDED PROVISIONS OF SEC. 10A THE BENEFIT AVAILABLE TO THE UNDERTAKING IS IN THE NATURE OF DEDUCTION AN D NOT EXEMPTION AND MOREOVER WHEN THE SECTION 10A ITSELF PERMITS THE SET OFF AND CARRY FORWARD OF THE LOSS AFTER 3 M/S KNOWLEDGE WORKS GLOBAL LTD 1.4.2001 THEN, THE ACTION OF THE ASSESSING OFFICER IS NOT JUSTIFIED IN DENYING THE CLAIM OF THE ASSESSEE FOR SET OFF AND CARRY FORWARD OF TH E LOSS OF ONE UNIT AGAINST THE PROFIT OF THE ANOTHER UNIT. 6 IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND A NY MERIT OR SUBSTANCE IN THE APPEAL FILED BY THE REVENUE. ACCORDINGLY, THE IMPUG NED ORDER OF THE CIT(A) IS UPHELD. 7 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 28 TH , DAY OF OCT 2011. SD/ SD/- ( PRAMOD KUMAR ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 28 TH ,OCT2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI