ITO, New Delhi V. M/s. Netlink Software Pvt. Ltd., New Delhi

ITA 5935/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3711 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 03-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARUN KUMAR YADAV SENIOR
• Keywords: Additional evidence; Reasonable cause
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5935/DEL./2014 (ASSESSMENT YEAR : 2010-11) ITO, WARD 13 (2), VS. M/S. NETLINK SOFTWARE PVT. L TD., NEW DELHI. G 3, GROUND FLOOR, COMMUNITY CENTRE, C BLOCK, NARAINA VIHAR, DELHI 110 028. (PAN :AACCN4731A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GAGAN KUMAR, ADVOCATE REVENUE BY : SHRI ARUN KUMAR YADAV, SENIOR DR DATE OF HEARING : 23.10.2017 DATE OF ORDER : 23.10.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : AT THE VERY OUTSET, THE LD. SENIOR DR FOR THE REVEN UE SUBMITTED THAT THERE IS A DELAY OF 13 DAYS IN FILIN G THE APPEAL BEFORE THE TRIBUNAL AND SOUGHT TO CONDONE THE DELAY. KEEP ING IN VIEW THE REASONABLE CAUSE GIVEN IN THE APPLICATION, THE DELA Y OF 13 DAYS IN FILING THE PRESENT APPEAL IS HEREBY CONDONED. 2. THE APPELLANT, INCOME-TAX OFFICER, WARD 13 (2), NEW DELHI (HEREINAFTER REFERRED TO AS THE REVENUE) BY FILIN G THE PRESENT ITA NO.5935/DEL./2014 2 APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 28.07.2014 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- XVI, NEW DELHI QUA THE ASSESSMENT YEAR 2010-11 ON THE GROUND S INTER ALIA THAT :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN ALLOWING THE DEDUCTION U/S 10A OF THE ACT OF RS.1,62,92,156/- TO THE ASSESSEE BY N OT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT PURCHASED THE ASSETS (PLANT & MACHINERY AND BUILDIN G) BUT THE SAME HAVE BEEN TAKEN ON LEASE FROM THE COMPANY TO WHICH THE ASSESSEE HAS DIRECT AFFILIATIO N. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT T HAT THE ASSESSEE COULD NOT PROVE THAT THE MATERIAL ASSE TS WERE NEVER PUT TO USE BY THE LESSOR COMPANY THOUGH THE LESSOR COMPANY IS IN SAME BUSINESS AND WAS HAVING CLIENTAGE FOR THE SAME BUSINESS DURING THE FY 2007- 08. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN GIVING RELIEF TO THE ASSESS EE IN THE SHADOW OF CIRCULAR NO. 694 DATED 22.11.1994 WHI CH DEALS WITH QUITE DIFFERENT ISSUES OTHER THAN THOSE MENTIONED IN THE ASSESSMENT ORDER. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A} HAS ERRED IN NOT CONSIDERING THE PROVISI ON OF THE SEC 10A (2)(III) OF THE ACT WHEREIN IT IS ME NTIONED THAT IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSI NESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. ' ALTHOUGH IT HAS BEEN WELL ESTABLISHED BY THE AO THA T THE SAME HAS BEEN USED BY THE LESSOR AND WAS LEASED TO THE ASSESSEE COMPANY WHICH IS A AFFILIATED COMPANY OF T HE LESSOR. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S 10A OF THE ACT ON THE GROUND THAT THE LESSOR HAD NEVER CLAIMED DEDUCTION U/S 10A, THOUGH NEVER SUCH POINT ITA NO.5935/DEL./2014 3 WAS PLACED BY THE ASSESSEE BEFORE THE AO AND NO REP ORT WAS CALLED FOR FROM THE AO U/R 46A WHILE ADMITTING THE ADDITIONAL EVIDENCE. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION BY N OT CONSIDERING THE FACT THAT THE ASSESSEE HAS FAILED T O FILE ANY EVIDENCE WHICH COULD PROVE ITS CLAIM AND THAT BUSINESS OF THE ASSESSEE IS NOT A RECONSTRUCTION OF THE ALREADY EXISTING BUSINESS AND VIOLATED THE PROVISIO NS OF SEC.10B(2}(II) AND (III) OF THE ACT. 3. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICATION OF THE CONTROVERSY AT HAND ARE : ASSESSEE COMPANY BEING IN CORPORATED ON 26.03.2007 IS INTO SECOND YEAR OF ITS WORKING BEING ENGAGED IN THE BUSINESS OF INFORMATION TECHNOLOGY SOFTWARE. ASSES SEE HAS DECLARED TOTAL EXPORT SALES OF SOFTWARE TO THE TUNE OF RS.13,50,00,000/- AND PROFIT BEFORE TAX TO THE TUNE OF RS.1,24,00,000/- AFTER CLAIMING STATUTORY ADJUSTMEN T AND DEDUCTION U/S 10A OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) TO THE TUNE OF RS.1,62,00,000/- AND CONSEQUENTLY SHOWN THE INCOME AT RS.10,92,920/-. ASSESSING OFFICER HAS NOT ACCEPTED THE SUBMISSIONS MADE BY THE ASSESSEE IN VIEW OF THE PRO VISIONS CONTAINED U/S 10B (2)(II) & (III) OF THE ACT. AO A LSO FOLLOWED THE EARLIER YEARS ASSESSMENT ORDER PASSED BY HIS PREDEC ESSORS IN CASE OF THE ASSESSEE AND PROCEEDED TO CONCLUDE THAT SINCE I T IS A CASE OF PREVIOUSLY USED PLANT AND MACHINERY, THE ASSESSEE H AS VIOLATED THE PROVISIONS OF SECTION 10B(III) OF THE ACT AND AS SU CH, IS NOT ELIGIBLE ITA NO.5935/DEL./2014 4 FOR EXEMPTION CLAIMED BY U/S 10A OF THE ACT AND THE REBY DISALLOWED THE DEDUCTION TO THE TUNE OF RS.1,62,92, 156/- CLAIMED BY THE ASSESSEE U/S 10A OF THE ACT. 4. ASSESSEE CARRIED THE MATTER BY WAY OF FILING APP EAL BEFORE THE LD. CIT (A) WHO HAS ALLOWED THE DEDUCTION U/S 1 0A BY ALLOWING THE APPEAL FILED BY THE ASSESSEE BY FOLLOW ING HIS OWN ORDER FOR AY 2009-10. FEELING AGGRIEVED, THE REVEN UE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF CHALLENGING THE IM PUGNED ORDER PASSED BY LD. CIT (A) . 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. UNDISPUTEDLY, ASSESSMENT YEAR 2010-11 IS THE SEC OND YEAR OF WORKING OF THE ASSESSEE COMPANY HAVING BEEN INCORPO RATED ON 26.03.2007 ENGAGED IN THE BUSINESS OF INFORMATION T ECHNOLOGY SOFTWARE. LD. AR FOR THE ASSESSEE COMPANY CONTENDE D THAT IDENTICAL ISSUE HAS COME UP BEFORE THE TRIBUNAL FOR AY 2009-10 AND HAS SINCE BEEN DECIDED IN FAVOUR OF THE ASSESSE E BY REMITTING THE CASE BACK TO THE LD. CIT (A). 7. WHEN IT IS NOT IN DISPUTE THAT NEW STPI UNDERTAK ING CANNOT BE TREATED AS RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE, ITA NO.5935/DEL./2014 5 LEASING OUT OF A PORTION OF ITS ASSETS TO THE ASSES SEE, THE ASSESSEE CANNOT BE SAID TO HAVE DEFEATED THE PROVISIONS STIP ULATED U/S 10A WHICH CREATES A BAR OF DEDUCTION ON THE UNDERTAKING S FORMED BY A RECONSTRUCTION OR BY SPLITTING OUT OF AN EXISTING B USINESS. SO, LD. CIT (A), ON THE BASIS OF MATERIAL PLACED BEFORE HIM , HAS RIGHTLY CAME TO THE CONCLUSION THAT NEW UNDERTAKING OF THE ASSESSEE HAS COMPREHENSIVELY EXPLAINED THAT THERE IS NO TRANSFER TO A NEW BUSINESS OR MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE AND THAT STPI APPROVAL WAS ACCORDED ON 23.04.2008 AND T HE ASSESSEE HAS TAKEN PLANT AND MACHINERY ON LEASE. ALL THESE FACTS HAVE BEEN DULY CONSIDERED BY LD. CIT (A) WHO HAS RELIED UPON THE DECISION RENDERED BY THE COORDINATE MUMBAI BENCH OF THE TRIB UNAL WHEREIN THE WORD RECONSTRUCTION HAS BEEN EXPLAINED. 8. HOWEVER, LD. CIT (A) HAS NOWHERE REFERRED TO THE LEASE DEED VIDE WHICH ASSESSEE COMPANY CLAIMED TO HAVE TOOK PL ANT AND MACHINERY ON LEASE NOR ANY SUCH LEASE DEED HAS BEEN RELIED UPON BY THE ASSESSEE COMPANY DURING ASSESSMENT PROCEEDIN GS BY WAY OF FILING COMPREHENSIVE SUBMISSIONS. SO, WE ARE OF TH E CONSIDERED VIEW THAT AFORESAID FINDINGS GIVEN IN THE PRECEDING PARAS ARE SUBJECT TO THE PRODUCTION OF THE LEASE DEED AND FOL LOWING THE DECISION RENDERED BY THE COORDINATE BENCH OF THE TR IBUNAL IN ASSESSEES OWN CASE FOR AY 2009-10, THIS ISSUE IS R EMITTED BACK TO ITA NO.5935/DEL./2014 6 THE LD. CIT (A) TO EXAMINE THE CLAIM OF THE ASSESSE E IN VIEW OF THE LEASE AGREEMENT STATED TO HAVE BEEN ENTERED INTO BE TWEEN NSGPL AND ASSESSEE. SO, THIS CASE IS REMITTED BACK TO LD . CIT (A) TO DECIDE AFRESH AFTER ASCERTAINING THE ACTUAL NATURE OF TRAN SACTION IN VIEW OF SECTION 10A (II) & (III) OF THE ACT IN THE LIGHT OF LEASE DEED SET UP BY THE ASSESSEE FOR TAKING PLANT AND MACHINERY ON L EASE. CONSEQUENTLY, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 23 RD DAY OF OCTOBER, 2017. SD/- SD/- (R.S. SYAL) (KULDIP SINGH) VICE PRESIDENT JUDICIAL MEMBER DATED THE 23 RD DAY OF OCTOBER, 2017 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XVI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.