The Income Tax Officer, Ward-16(2), Hyderabad V. M/s, Power.Com Technologies Pvt.Ltd., Guntur

ITA 594/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66135 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 24-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPTA
• Section: 10B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 593/HYD/2012 ASSESSMENT YEAR 2001-02 ITA NO. 594/HYD/2012 ASSESSMENT YEAR 2003-04 THE INCOME TAX OFFICER WARD-16(2) HYDERABAD VS. M/S. POWER.COM TECHNOLOGIES PVT. LTD., GUNTUR PAN: AABCP9314N APPELLANT RESPONDENT APPELLANT BY: MS. AMISHA S. GUPTA RESPONDENT BY: NONE DATE OF HEARING: 24 . 07 .201 2 DATE OF PRONOUNCEMENT: 10.08. 2012 O R D E R PER CHANDRA POOJARI, AM: THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAI NST DIFFERENT ORDERS OF THE CIT(A)-V, HYDERABAD DATED 1 6.2.2012 FOR A.YS. 2001-02 AND 2003-04. 2. THE GRIEVANCE OF THE DEPARTMENT IN THESE APPEALS IS WITH REGARD TO THE DIRECTION OF THE CIT(A) TO EXAMINE TH E CLAIM OF THE ASSESSEE U/S. 80HHE AND ALLOW THE SAME IF IT IS ALL OWABLE AS PER LAW AS PER THE PROVISIONS OF SECTION 250 AND 251 OF THE IT ACT, 1961. 3. BRIEF FACTS OF THE CASE RELATING TO ASSESSMENT YEAR 2001-02 AS NARRATED IN THE ORDER OF THE CIT(A) ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND OTHER RELATED ACTIVITIES. FOR THE ASSESSMENT YEAR IN QUESTION, THE ASSESSEE FILED RETURN DECLARING 'N IL' INCOME SINCE THE PROFITS WERE CLAIMED AS EXEMPTED UNDER SECTION 10B OF THE ACT. ITA NOS. 593 & 594 /HYD/2012 M/S. POWER.COM TECHNOLOGIES PVT. LTD. ============================ 2 DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER EXAMINED THE CLAIM U/S. 10B OF THE ACT AND FOUND TH AT THE ASSESSEE COMPANY HAD BEEN FORMED BY THE TRANSFER OF PLANT & MACHINERY BEYOND THE PERCENTAGE PERMITTED UNDER THE PROVISIONS OF THE LAW. HE FURTHER FOUND THAT SOME OF THE PURC HASES WERE BOGUS AND CONSEQUENTLY DISALLOWED THE CLAIM UNDER S ECTION 10B OF THE ACT. THE ASSESSEE COMPANY WENT IN APPEAL BEFOR E THE CIT(APPEAL) WHO UPHELD THE ADDITIONS. IN THE ITAT, VIDE ITA NOS. 713/HYD/2005 FOR THE AY 2001-02 AND 728/HYD/2007 FO R THE A.Y. 2003-04 DATED 29.01.2010, IT WAS HELD THAT MA CHINERY AMOUNTING TO RS. 8,44,107 HAS THE FOLLOWING BREAKUP : I) PURCHASED BY FROM M/S. VEN SOFT SOLUTIONS (P) LT D. EPSON PRINTERS RS. 6,415 MONITORS RS. 64,800 AIR CONDITIONER RS. 21,000 ALLYWIN FRIDGE RS. 9,000 EXCIDE BATTERIES RS. 28,170 RS. 1,29,385 II) NEW PLANT & MACHINERY PURCHASED BY ASSESSEE NOT PUT TO USE EARLIER ELECTRICAL INSTALLATIONS RS. 63,267 MONITORS RS. 35,200 CPU RS. 74,640 CPU RS. 38,950 PHILIPHS TV RS. 28,700 MISCELLANEOUS ITEMS RS. 15,807 RS. 2,56,564 III) MACHINERIES ALREADY PUT TO USE: (FURNITURE& FITTINGS) XEROX MACHINE RS. 60,000 COMPUTER PRINTERS RS. 1,50,000 RS. 2,10,000 IV) AIR CONDITION INSTALLED AT GUNTUR 6 NOS. RS. 2,48,000 TOTAL RS. 8,44,107 ITA NOS. 593 & 594 /HYD/2012 M/S. POWER.COM TECHNOLOGIES PVT. LTD. ============================ 3 4. THE ITAT DIRECTED THE ASSESSEE TO PROVE THE PURCHAS E OF THE AFOREMENTIONED EQUIPMENT WORTH RS. 1,29,385 FROM M/ S VEN SOFT SOLUTIONS PVT. LTD AND FURTHER TO PROVE THAT THIS I S FIRST HAND MACHINERY AND NEVER PUT TO USE BY ANY OTHER PERSON. THE FOLLOWING ARE THE OPERATIVE PORTIONS OF THE DIRECTI ONS OF THE ITAT: '10. THE ASSESSEE COUNSEL CONTENDED THAT ENTIRE VAL UE OF RS. 8,44,107 WHICH ARE SAID TO BE ACTUALLY ACQUIRED BY THE ASSESSEE CANNOT BE CONSIDERED IN THE CATEGORY OF PLANT AND M ACHINERY AND ONLY ACTUAL PLANT AND MACHINERY INSTALLED IN THE IN DUSTRIAL UNDERTAKING TO BE CONSIDERED FOR THE PURPOSE OF FUL FILMENT OF CONDITION PRESCRIBED IN CLAUSE (2) OF SECTION 10B. THE PLANT AND MACHINERY PURCHASED FROM VEN SOFT SOLUTIONS (P) LTD . AT RS. 1.29,385 WAS NOT AT ALL USED BY M/S. VEN SOFT SOLUT IONS (P) LTD., AND THEY WERE PURCHASED IN THE NAME M/S V EN SOFT SOLUTIONS (P) LTD. SINCE ON THE DATE OF PURCHASE THE ASSESSEE WAS UNDER INCORPORATION UNDER COMPANY ACT 1956 AND FOR THE PU RPOSE OF CONVENIENCE, IT WAS PURCHASED IN THE NAME OF THE M/S V EN SOFT SOLUTIONS (P) LTD. AND THESE PLANT AND MACHINERIES WERE FIRST TIME PUT INTO USE BY THE ASSESSEE ITSELF. WE HAVE G ONE THROUGH THE REMAND REPORT ON THIS ISSUE AND ORDER OF CIT(A) . THE MAIN CONTENTION OF THE REVENUE IS THAT THERE IS NO EVIDE NCE REGARDING PURCHASE OF THESE ITEMS FROM M/S V EN SOFT SOLUTIONS (P) LTD. BY THE ASSESSEE AND THE ASSESSEE HAS JUST TAKEN THESE EQUIPMENTS ON ITS RECORD. THE ASSESSEE IS REQUIRED TO PROVE THE PURCHASE OF THESE EQUIPMENTS FROM M/S VEN SOFT SOLUTIONS (P) LTD., AND ALSO REQUIRED TO PROVE THESE ARE FIRS T HAND MACHINERY AND NEVER PUT INTO USE BY ANY OTHER PARTY . ACCORDINGLY, WE DIRECT THE ASSESSEE TO PROVE THE FA CTS. IN THE EVENT, ASSESSEE ABLE TO PROVE THAT THE PLANT AND MA CHINERY PURCHASED FROM M/S V EN SOFT SOLUTIONS (P) LTD. IS NEVER PUT TO USE EARLIER, THEN THE ASSESSING OFFICER CONSIDER TH E SAME AS NEW MACHINERY. SINCE THE CLAUSE (2) OF S. 10B PRESC RIBED THAT THE BENEFIT U/S 10 B IS AVAILABLE TO AN UNDERTAKING, IF IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINE RY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. IF THE MACHI NERY ACQUIRED FROM M/S V EN SOFT SOLUTIONS (P) LTD., IS NOT PREVIOUSLY USED BY ANY PERSON, THEN IT WILL BE CONS IDERED AS NEW MACHINERY. 11. REGARDING THE PLANT AND MACHINERY AT RS. 2,56,5 64 THERE IS NO DISPUTE AND THESE ARE MACHINERIES NOT PUT IN USE EARLIER BY ANY PERSON AND TO BE TREATED AS NEW MACHINERY FO R THE PURPOSE OF GRANTING DEDUCTION U/S 10 B. ................................................... ................................................. ................................................... ............... 11.3. AS SEEN FROM THE ABOVE PARA OF THE REMAND REP ORT SUBMITTED BY THE ASSESSING OFFICER, IT IS ADMITTED FACT THAT AIR ITA NOS. 593 & 594 /HYD/2012 M/S. POWER.COM TECHNOLOGIES PVT. LTD. ============================ 4 CONDITIONS ARE NOT AT ALL INSTALLED AT THE PREMISES OF EXPORT ORIENTED UNDERTAKING AND IT WAS INSTALLED AT THE PR EMISES OF SHRI K VENKATESWARALU F/O. CEO SHRI M. LEEDHARA RAO OFFICE AT GUNTUR. HENCE IT CANNOT BE CONSIDERED AS PLANT A ND MACHINERY FOR THE PURPOSE OF APPLICABILITY OF SECTI ON 10B(2) OF THE IT ACT IN THE HANDS OF THE ASSESSEE AND SAME TO BE EXCLUDED FOR THE PURPOSE OF COMPUTATION GROSS VALUE OF PLANT AND MACHINERY. 11.4. IN THE LIGHT OF THE ABOVE, THE FINDINGS OF CIT(A) T HAT THE PLANT AND MACHINERY VALUING AT RS. 5,87,547/- OUT O F RS. 8,44,107/- HAS BEEN PREVIOUSLY USED BY OTHER UNDERTAKINGS IS NOT CORRECT AND IT REQUIRED TO BE REWORKED BY ASSES SING OFFICER AND THEREAFTER HE HAS TO EXAMINE THE ALLOWABILITY O F DEDUCTION U/S 10B OF THE IT ACT. 12. NOW COMING TO THE SECOND GROUND OF THE ASSESSEE REGARDING DEDUCTION U/S 80HHE THIS GROUND AS BEEN R AISED BY THE ASSESSEE BEFORE THE CIT(A). THE SAME WAS REJECT ED ON THE REASON THAT THE ASSESSEE IS CHANGING ITS STANCES, T IME AND AGAIN TO SUIT ITS CONVENIENCE. THE ASSESSING OFFICE R AS WELL AS THE CIT(A) DOUBTED THE BONA FIDE BEHAVIOUR OF THE A SSESSEE AND ASSESSEE MADE A CLAIM OF 80HHE WHEN IT WAS CAUG HT IN THE FALSEHOOD OF ITS OWN SHIFTING STANCES. WE HAVE GONE THROUGH THE FACTS OF THE CASE. ORIGINALLY THE ASSES SEE MADE A CLAIM U/S 10B. THIS EXEMPTION WAS DENIED BY THE ASS ESSING OFFICER ON THE REASON THAT THE ASSESSEE NOT FULFILL ED THE CONDITIONS LAID DOWN IN THE SECTION 10B(2) OF THE I T ACT. ALTERNATIVELY ASSESSEE MADE A CLAIM U/S 80HHE OF TH E 11 ACT BEFORE THE CIT(A}. WE DO NOT FIND ANY INFIRMITY IN THIS CLAIM OF THE ASSESSEE, SINCE WHEN THE ASSESSEE'S ORIGINAL CLAIM U/S 10 B WAS DENIED, THE ASSESSEE IS AT LIBERTY TO MAKE AN ALTERNATIVE CLAIM. WE FIND NO JUSTIFICATION IN THE ORDER OF THE CIT(A) IN STATING THAT THE BEHAVIOUR OF THE ASSESSE E IS NOT BONA FIDE. BY TAKING INTO CONSIDERATION OF THE FACT UAL SITUATION AND THE CIRCUMSTANCES CASE, IN OUR VIEW, THERE WAS A SUFFICIENT CAUSE ON THE PART OF THE ASSESSEE FOR NOT MAKING T HE CLAIM U/S 80HHE IN ITS ORIGINAL RETURN AND FILING THE PRESCRI BED FORM BEFORE ASSESSING OFFICER. MOREOVER, WHEN THERE IS C ONFLICT BETWEEN SUBSTANTIAL CAUSE AND TECHNICALITY, IN OUR VIEW SUBSTANTIAL CAUSE HAS TO BE PREFERRED RATHER THAN T HE TECHNICALITIES. THEREFORE, IN OUR VIEW, IF THE ASS ESSING OFFICER FINDS THAT ASSESSEE NOT ENTITLED DEDUCTION U/S. 10B , THE ALTERNATIVE CLAIM OF THE ASSESSEE U/S. 80HHE TO BE CONSIDERED BY THE ASSESSING OFFICER IN ACCORDANCE WITH LAW. T HE ISSUES RAISED BY ASSESSEE IN THIS APPEAL ARE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION IN THE LI GHT OF ABOVE OBSERVATIONS.' ITA NOS. 593 & 594 /HYD/2012 M/S. POWER.COM TECHNOLOGIES PVT. LTD. ============================ 5 5. WHILE PASSING THE CONSEQUENTIAL ORDER, THE ASSESSIN G OFFICER OBSERVED THAT THE ASSESSEE COULD NOT PROVE THE GENU INENESS OF PURCHASES FROM M/S. VEN SOFT SOLUTIONS PVT. LTD. A CCORDINGLY, THE ASSESSING OFFICER DENIED THE EXEMPTION U/S. 10B OF THE ACT FOR THIS ASSESSMENT YEAR. AGAINST THIS, THE ASSESSEE WENT I N APPEAL BEFORE THE CIT(A) RAISING THE GROUND WITH REGARD TO DENYIN G EXEMPTION U/S. 10B ACT AND LEVY OF INTEREST U/S. 234 OF THE A CT. THE CIT(A) REJECTED THE CLAIM OF THE ASSESSEE U/S. 10B OF THE ACT. HOWEVER, HE HAD GIVEN DIRECTION TO THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE U/S. 80HHE. 6. WE HAVE HEARD THE LEARNED DR. NONE APPEARED FOR THE ASSESSEE. AS SEEN FROM THE GROUNDS RAISED BY THE A SSESSEE BEFORE THE CIT(A), THERE IS NO GROUND BY THE ASSESSEE REG ARDING THE CLAIM OF DEDUCTION U/S. 80HHE. BEING SO, THE CIT(A) TRAVE LLED BEYOND THE GROUNDS RAISED BEFORE HIM WHICH IS BAD IN LAW. ACCORDINGLY, WE ARE INCLINED TO ALLOW THE GROUND RAISED BY THE R EVENUE. MORE SO, FROM THE AMENDMENT TO SECTION 251 W.E.F. 1.6.20 01 BY FINANCE ACT, 2001, THE CIT(A) HAS NO POWER TO REMIT THE ISS UE BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION. 7. THE GROUNDS IN ITA NO. 594/HYD/12 FOR A.Y. 2003-04 BY REVENUE ARE IDENTICAL. BEING SO, ON THE SAME REASO NS STATED IN THE EARLIER PARAS, WE ARE INCLINED TO ALLOW THE APP EAL OF THE REVENUE. 8. IN THE RESULT, BOTH THE APPEALS BY THE REVENUE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2012. SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 10 TH AUGUST, 2012 ITA NOS. 593 & 594 /HYD/2012 M/S. POWER.COM TECHNOLOGIES PVT. LTD. ============================ 6 COPY FORWARDED TO: 1. THE INCOME TAX OFFICER, WARD - 16(2), ROOM NO. 614, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD-500 0 04. 2. M/S. POWER.COM TECHNOLOGIES PVT. LTD., 1 ST FLOOR, 101, VENKATASAI TOWERS, 4 TH LINE, BRUNDAVAN GARDENS, GUNTUR. 3. THE CIT(A) - V, HYDERABAD. 4. THE CIT - IV, HYDERABAD. 5 . THE DR B BENCH, ITAT, HYDERABAD. TPRAO `