ITO, New Delhi V. M/s. M.L. Outsourcing P. Ltd., New Delhi

ITA 6292/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91218 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 12-06-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 27-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA SENIOR
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO.6292/DEL./2013 (ASSESSMENT YEAR : 2010-11) ITO, WARD 6 (1), VS. M/S. M.L. OUTSOURCING P. LT D., NEW DELHI. B 137/1, EAST OF KAILASH, NEW DELHI 110 048. (PAN : AADCM9508K) (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. ADITI GUPTA, CA REVENUE BY : SHRI P. DAM KANUNJNA, SENIOR DR DATE OF HEARING : 12.06.2015 DATE OF PRONOUNCEMENT : 17.06.2015 O R D E R PER GEORGE GEORGE K., JUDICIAL MEMBER : THIS APPEAL, AT THE STANCE OF THE REVENUE, WAS FILE D AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-IX, NEW DELHI DATED 30.09.2013. THE RELEVANT ASSESSMENT YEAR IS 2010-11 . 2. THE LD. COUNSEL FOR THE ASSESSEE FILED AN APPLIC ATION FOR ADJOURNMENT WHICH WAS REJECTED. 2 ITA NO.6292/DEL/20113 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVEL OPMENT AND MAINTENANCE OF COMPUTER SOFTWARE AND IT ENABLED SERVICES AND IS A 100% EXPORT ORIENTED UNIT UNDER STPI, BANGALORE. FOR THE RELEVANT YEAR, THE RETURN OF INCOME WAS FILED ON 24.09.2010 DECLARING AN INCOME OF RS.1,31,790/-. T HE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 AT THE RETURNED INCOME. THE ASSESSMENT WAS TAKEN UP FOR SCRUTINY BY ISSUANCE OF NOTICE U/S 143 (2) OF THE ACT AND SCRUTINY ASSESSMENT U/S 143(3) WAS COMPLETED VIDE ORDER DATE D 24.05.2012 ASSESSING TOTAL INCOME AT RS.66,60,310/-. THE ASSESSING OFFICER RE DUCED THE CLAIM OF DEDUCTION U/S 10B BY RS.63,75,900/-. THE ASSESSING OFFICER A LSO ADDED A SUM OF RS.1,52,619/- U/S 2(24)(X) READ WITH SECTION 36(I)( VA) OF THE ACT.. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE FIRST APPELLATE AUTHORITY. THE LD. CIT (A) ALLOWED THE APPEAL ON B OTH THE ISSUES. 5. THE ASSESSEE, BEING AGGRIEVED, IS IN APPEAL BEFO RE US. 6. IN THE GROUND NO.1, THE REVENUE HAS CHALLENGED W HETHER THE CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.63,75,900/ - U/S 10B WITHOUT APPRECIATING THE FACT THAT ASSESSEE IS NOT ELIGIBLE FOR DEDUCTIO N ON ENTIRE RECEIPTS. 7. THE AO NOTICED THAT DURING THE RELEVANT FINANCIA L YEAR, THE ASSESSEE HAD INCLUDED IN ITS EXPORT TURNOVER THE FOLLOWING AMOUN TS :- 3 ITA NO.6292/DEL/20113 (I) SOFTWARE DEVELOPMENT AND MAINTENANCE SERVICE RS.5, 90,55,954/- (II) INTERNATIONAL RECRUITMENT SERVICE RS.2,67,53,551/ - THE ASSESSING OFFICER HELD THAT THESE WERE TWO DIFF ERENT ACTIVITIES. THE ASSESSING OFFICER, RELYING ON THE ASSESSMENT ORDER FOR ASSESS MENT YEAR 2007-08, REDUCED THE CLAIM U/S 10B BY THE AMOUNT RELATED TO INTERNATION AL RECRUITMENT SERVICE. THE REASONING OF THE ASSESSING OFFICER FOR ASSESSMENT Y EAR 2007-08, WHICH IS INCORPORATED IN THE IMPUGNED ASSESSMENT ORDER, IS REPRODUCED BEL OW FOR READY REFERENCE : 'THE ASSESSEE WAS SIMPLY A RECRUITMENT AGENT INVOLV ED IN RENDERING SERVICES OF AN EMPLOYMENT CONSULTANT. THE USE OF COMPUTERS IN THE GAMUT OF SERVICES RENDERED BY THE ASSESSEE, POINTS TO THE FACT THAT USE OF COMPUTERS WAS MINIMA L. THE EXTENT OF COMPUTERS AND IT ENABLED TOOLS WERE JUST NOT ENO UGH TO EARN ASSESSEE THE TAG OF BEING INVOLVED IN IT ENABLED BU SINESS SO AS TO MAKE IT ELIGIBLE FOR A SPECIAL INCENTIVE, AS ENVISA GED U/S 10A. HOWEVER, THE BENEFIT U/S 10A WAS NOT ENVISAGED FOR SUCH KIND OF MIDDLEMAN ACTIVITY. THE INTENTION OF THE LEGISLATUR E FOR GRANT OF SPECIAL BENEFIT U/S 10A GRANTING TAX HOLIDAY FOR A PERIOD OF 10 YEARS, PRE EMPTED THE FACT THAT ASSESSEE WOULD PUT IN PLACE A COMPREHENSIVE INFRASTRUCTURE WHICH WOULD ENABLE THA T ASSESSEE TO EARN FOREIGN EXCHANGE ON A CONSISTENT BASIS FOR A L ONG PERIOD OF TIME AND ALSO FURTHER THE REPUTATION OF THE COUNTRY IN THE FIELD OF INFORMATION TECHNOLOGY ENABLES SERVICES (ITES). SUC H A TAX HOLIDAY CANNOT BE EXTENDED TO ANY OTHER ASSESSEE WH OSE COMMITMENT TO THE LINE OF BUSINESS IS RATHER SHALLO W AND MAY NOT REFLECT ITS INTENTION TO CONTINUE IN THE FIELD BEYO ND THE PERIOD OF TAX HOLIDAY. IT STANDS ESTABLISHED, BOTH FACTUALLY AND LEGALLY, THAT THE BUSINESS OF THE ASSESSEE CANNOT BE HELD TO BE OFFER ING IT ENABLES 4 ITA NO.6292/DEL/20113 SERVICES, SO AS TO MAKE IT ELIGIBLE FOR EXEMPTION U /S 10A. CONSEQUENTLY, THE OPERATIONS CONDUCTED FROM STPI, N OIDA ARE HELD TO BE INELIGIBLE FOR BENEFIT OF DEDUCTION U/S 10A. 8. ON APPEAL, THE LD. CIT (A) OBSERVED THAT FOR THE ASSESSMENT YEAR 2007-08, THE TRIBUNAL HAD ALLOWED THE CLAIM OF THE ASSESSEE U/S 10B IN FULL AND INCLUDED IN THE EXPORT TURNOVER, THE RECEIPT FROM INTERNATIONAL RECRUITMENT SERVICE. THE LD. CIT (A) ALSO NOTICED THAT THE TRIBUNAL OBSERVED, AS PER SECTION 10A EXPLANATION 2 CLAUSE (B), ANY CUSTOMIZE ELECTRONIC DATA IS QUALIF IED FOR TREATMENT AS A COMPUTER SOFTWARE ON WHOSE EXPORT DEDUCTION WOULD BE ADMISSI BLE TO AN ASSESSEE AND THIS SUB-CLAUSE FURTHER CLASSIFY THAT ANY OTHER SERVICE IF NOTIFIED BY THE BOARD THEN THOSE SERVICES WOULD ALSO QUALIFY FOR TREATMENT AS COMPUT ER SOFTWARE. THE LD. CIT (A) ALSO OBSERVED THAT HIS PREDECESSOR IN ASSESSEES OW N CASE FOR ASSESSMENT YEAR 2009-10 HAD ALLOWED THE CLAIM U/S 10B OF THE ACT FO LLOWING THE TRIBUNAL ORDER FOR ASSESSMENT YEAR 2007-08. THE LD. CIT (A), FOLLOWIN G THE AFORESAID DECISION IN ASSESSEES OWN CASE, ALLOWED THE GROUND OF THE ASSE SSEE AND DIRECTED THE AO TO RE- COMPUTE THE DEDUCTION U/S 10B. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AFTER GOING THROUGH THE ORDER OF THE CIT (A), WE FI ND THAT THIS ISSUE IS ALREADY DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL I N ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 AND THE SAME WAS FOLLOWED B Y THE CIT (A) IN ASSESSMENT YEAR 2009-10 AND IN THIS RELEVANT ASSESSMENT YEAR. IN THIS VIEW OF THE MATTER, WE 5 ITA NO.6292/DEL/20113 DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT ( A) AND WE UPHOLD THE SAME. IT IS ORDERED ACCORDINGLY. GROUND NO.1 IS REJECTED. 10. GROUND NO. 2 OF THE REVENUE READS AS UNDER :- 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE & IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE O F RS.1,52,619/- MADE BY THE A.O. ON ACCOUNT OF DELAY IN PAYMENT OF EMPLOYEES' CONTRIBUTION TO EPF/ESI AS PER THE PROVISION OF SEC TION 36(1 )(VA) READ WITH 2(24 )(X), BY FOLLOWING THE JUDGEMENT OF HON'BLE DELHI HIGH COURT (AIMIL LTD.) AND IGNORING THE FACT THAT SAME IS PENDING WITH THE HON'BLE SUPREME COURT AND ALSO THE FACT THAT THE HON'BLE ITAT, MUMBAI AFTER HAVING DISCUSSION OF THE ABOVE JUDGEMENT OF THE HON'BLE HIGH COURT (AIMIL LTD.) IN THE CASE OF ITO V. LKP SECURITIES (ITA 1093/MUM/20 12) HAS TAKE N A DIFFERENT VIEW? 11. THE AO MADE DISALLOWANCE OF RS.1,52,619 U/S 36( 1)(VA) BEING DEPOSIT OF RECEIPT FROM EMPLOYEES TOWARDS CONTRIBUTION TO ESIC AND EPF BEYOND THE DUE DATE PRESCRIBED BY THE RELEVANT ACT. BEFORE THE CIT (A) , THE ASSESSEE SUBMITTED THAT THE AMOUNT WAS PAID BEFORE THE DUE DATE FOR FILING OF R ETURN OF INCOME AND HENCE, DEDUCTION IS TO BE ALLOWED. THE ASSESSEE RELIED ON FOLLOWING JUDICIAL PRONOUNCEMENTS :- (I) CIT VS. ALOM EXTRUSIONS LIMITED (2009) 319 I TR 306 (SC); (II) CIT VS. VINAY CEMENT LTD. (2007) 213 CTR (S C) 268; (III) CIT VS. AIMIL & ORS. DELHI HIGH COURT 229 CTR (DE L.) 418. 6 ITA NO.6292/DEL/20113 THE CIT (A), RELYING ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. AIMIL REPORTED IN 321 ITR 508 ( DEL.), DELETED THE DISALLOWANCE, AS THE ASSESSEE HAS MADE THE PAYMENTS BEFORE THE DUE DATE OF FILING THE INCOME TAX RETURN. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE AS SESSEE BY THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. AI MIL LIMITED, CITED SUPRA, AND ALSO THE HON'BLE SUPREME COURT IN THE CASE OF CIT V S. VINAY CEMENTS LIMITED REPORTED IN 213 CTR 286 (SC). THE HON'BLE JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT VS. AIMIL LIMITED, CITED SUPRA, HAS HELD AS UNDER :- AS SOON AS EMPLOYEES' CONTRIBUTION TOWARDS PF OR E SI IS RECEIVED BY THE ASSESSEE BY WAY OF DEDUCTION OR OTHERWISE FR OM THE SALARY/WAGES OF THE EMPLOYEES, IT WILL BE TREATED A S 'INCOME' AT THE HANDS OF THE ASSESSEE. IT CLEARLY FOLLOWS THEREFROM THAT IF THE ASSESSEE DOES NOT DEPOSIT THIS CONTRIBUTION WITH PF /ESI AUTHORITIES, IT WILL BE TAXED AS INCOME AT THE HANDS OF THE ASSE SSEE. HOWEVER, ON MAKING DEPOSIT WITH THE CONCERNED AUTHORITIES, THE ASSESSEE BECOMES ENTITLED TO DEDUCTION UNDER THE PROVISIONS OF S. 36(1)(VA). SEC. 43B(B), HOWEVER, STIPULATES THAT SUCH DEDUCTIO N WOULD BE PERMISSIBLE ONLY ON ACTUAL PAYMENT. THIS IS THE SCH EME OF THE ACT FOR MAKING AN ASSESSEE ENTITLED TO GET DEDUCTION FR OM INCOME INSOFAR AS EMPLOYEES' CONTRIBUTION IS CONCERNED. DE LETION OF THE SECOND PROVISO HAS BEEN TREATED AS RETROSPECTIVE IN NATURE AND WOULD NOT APPLY AT ALL. THE CASE IS TO BE GOVERNED WITH THE APPLICATION OF THE FIRST PROVISO. IF THE EMPLOYEES' CONTRIBUTION IS NOT DEPOSITED BY THE DUE DATE PRESCRIBED UNDER THE RELE VANT ACTS AND IS DEPOSITED LATE, THE EMPLOYER NOT ONLY PAYS INTEREST ON DELAYED PAYMENT BUT CAN INCUR PENALTIES ALSO, FOR WHICH SPE CIFIC PROVISIONS 7 ITA NO.6292/DEL/20113 ARE MADE IN THE PROVIDENT FUND ACT AS WELL AS THE E SI ACT. THEREFORE, THE ACTS PERMIT THE EMPLOYER TO MAKE THE DEPOSIT WITH SOME DELAYS, SUBJECT TO THE AFORESAID SEQUENCES. IN SOFAR AS THE IT ACT IS CONCERNED, THE ASSESSEE CAN GET THE BENEFIT IF THE ACTUAL PAYMENT IS MADE BEFORE THE RETURN IS FILED. CIT VS .VINAY CEMENT LTD., (2007) 213 CTR (SC) 268, CIT VS. DHARMENDRA S HARMA (2007) 213 CTR (DEL) 609 : (2008) 297 ITR 320 (DEL) AND CIT VS. P.M. ELECTRONICS LTD. (2008) 220 CTR (DEL) 635 : (2 008) 15 DTR (DEL) 258 FOLLOWED. IN VIEW OF THE AFORESAID DECISION, THE DEDUCTION OF PAYMENT OF EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND AND ESI CANNOT BE DISALLOWED UNDER SECTION 43B, IF PAID BEFORE THE DUE DATE OF FILING THE RETU RN. IN VIEW OF THIS FACT, WE REJECT THIS GROUND. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 17 TH DAY OF JUNE, 2015. SD/- SD/- (S.V. MEHROTRA) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 17 TH DAY OF JUNE, 2015 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-IX, NEW DELHI 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.