DCIT, Bangalore V. M/s Nous Info Systems Pvt. Ltd., Bangalore

ITA 63/BANG/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3747 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 22-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: UJWAL TIWARI
• Keywords: Depreciation; Carry forward of business losses; Question of law; Revised return; Reassessment proceedings
• Section: 10B; 148; 10

Judgement Text

ITA.63/BANG/2016 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'C', BENGALURU BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI. S. JAYARAMAN, ACCOUNTANT MEMBER I.T.A NO.63/BANG/2016 (ASSESSMENT YEAR : 2007-08) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE -5(1)(1), BENGALURU .. APPELLANT V. M/S. NOUS INFO SYSTEMS P. LTD, NO.1, 1 ST MAIN, 1 ST BLOCK, KORAMANGALA, BENGALURU 560 004 .. RESPONDENT PAN : AAACN4584B ASSESSEE BY : SHRI. UJWAL TIWARI, CA REVENUE BY : SHRI. VIJAYKUMAR N, ADDL. CIT HEARD ON : 14.09.2016 PRONOUNCED ON : 11 .11.2016 O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT (A)-5, BENGALURU, DT.9.10.2015, FOR THE ASSESSMENT YEAR 2007-08. ITA.63/BANG/2016 PAGE - 2 2. THE FACTS IN BRIEF ARE THAT NOUS INFO SYSTEMS PRIVA TE LIMITED, THE ASSESSEE , IS A COMPANY ENGAGED IN THE BUSINESS OF COMPUTER SOFTWARE AND INFORMATION SYSTEMS. IT HAS F OUR FOREIGN BRANCHES IN USA, UK, AUSTRALIA AND GERMANY AND TWO STPI UNITS, ONE IN BANGALORE AND THE OTHER AT COIMBATORE. DURI NG A Y 2007-08, THE STPI UNIT IN BANGALORE HAD EXHAUSTED ITS TAX H OLIDAY BENEFIT WHILE THE STPI UNIT AT COIMBATORE WAS ON TAX HOLIDA Y REGIME. IT FILED ITS ORIGINAL RETURN FOR A Y 2007-08 ON 30 OCTOBER 2007 DECLARING A TOTAL INCOME OF RS.65,064,654/- AFTER CONSIDERING BROUGHT FORWARD LOSSES OF RS.13,070,289/- AND AFTER CLAIMING DEDUCT ION UNDER SECTION 10A AT RS.3,590,789/- . 2.1 THEREAFTER, IT FILED A REVISED RETURN ON 23 RD MARCH 2009 DECLARING TOTAL INCOME OF RS.65,354,148/- AFTER CON SIDERING BROUGHT FORWARD LOSSES OF RS.12,378,310/- AND AFTER CLAIMIN G DEDUCTION UNDER SECTION 10A AT RS.3,993,274/- , WHICH WAS PROCESS ED UNDER SECTION 143(1) VIDE INTIMATION DATED 26 MARCH 2010 GRANTING A REFUND OF RS.1,466,480/-. THE ASSESSEE FILED A RECTIFICATION APPLICATION UNDER SECTION 155(11A) AGAINST THIS INTIMATION VIDE LETTER DATED 14 FEBRUARY 2012 (ACKNOWLEDGEMENT OF APPLICATION DA TED 21 FEBRUARY 2012) AS THE EXPORT PROCEEDS AMOUNTING TO RS.1,75,839/- WERE REALISED AND BROUGHT INTO INDIA AS PER SECTION 10A OF THE ACT. ITA.63/BANG/2016 PAGE - 3 2.2 SUBSEQUENTLY, A NOTICE UNDER SECTION 148 DATED 26 TH MARCH 2014 WAS ISSUED. IN RESPONSE , REVISED RETURN OF IN COME WAS FILED ON 24 APRIL 2014 DECLARING TOTAL INCOME OF RS.65,354,1 48/- AFTER CONSIDERING BROUGHT FORWARD LOSSES OF RS.12,378,310 /- AND AFTER CLAIMING DEDUCTION UNDER SECTION 10A AT RS.3,993 ,274/- . IN THE REASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ('A O') MADE, INTER ALIA, THE FOLLOWING ADJUSTMENTS: DEDUCTION UNDER SECTION 10A AT RS.3,590,789/- HAS B EEN CONSIDERED BASED ON ORIGINAL RETURN OF INCOME, INST EAD OF THE CLAIM MADE AT RS.3,993,274/- AS PER REVISED RETURN OF INCOME. CARRY FORWARD OF BUSINESS LOSSES AT RS.12,378,310/ - HAS NOT BEEN CONSIDERED. 2.3. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A)-5, BENGALURU . THE CIT(A) , INTER ALIA, RELYING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE ASSESSEE S CASE IN ITA NOS 1099 &109 OF 2008 & 2009 FOR AY S 2003-04 & 2005-06 , RESPECTIVELY, AND IN THE CASE OF CIT V YOKOGAWA INDIA LTD (2002) 341 ITR 385 HAS ALLOWED THE APPEAL. THEREAFTER, THE REVENUE FILED THIS APPEAL WITH THE FOLLOWING GROUNDS: ITA.63/BANG/2016 PAGE - 4 3. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED RELE VANT ORDERS. THE RELEVANT PORTION OF THE JUDGMENT FROM THE JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT V YOKOGAWA INDIA LTD (2002) 341 IT R 385 IS EXTRACTED AS UNDER : 29. FORM NO 1 READ WITH RULE 12 OF THE INCOME TAX RULES 1962 PROVIDES FOR RETURN OF INCOME AND RETURN OF FR INGE BENEFITS 30 IN SCHEDULE NO 9 AT CO1MN NO 9 IT IS CLEARLY MEN TIONED THE AMOUNT CLAIMED /DEDUCTIBLE UNDER SECTION 10- A /10-AA/10-B OR 10- BA. DEALING WITH THE SCHEME OF THE FORM IT IS STATE D THAT THE SCHEME OF THIS FORM FOLLOWS THE SCHEME OF THE LAW AS OUTLI NED ABOVE IN ITS BASIC FORM AND WITH REFERENCE TO SCHEDULE 1, 9, 3 A ND 13 IT IS STATED THAT FILL OUT SCHEDULE-9 IF YOU ARE CLAIMING DEDU CTION UNDER SECTION 10 A, 10 AA, 10B OR 10 BA IN RESPECT OF SOME SPECIFIC BUSINESS. ITEM 7 OF SCHEDULE 1 IS TO ELIMINATE SUCH INCOME FROM COMP UTATION OF PROFITS AND LOSS AND NO SEPARATE DECLARATION UNDER SECTION 10-A(8) OR 10- B(8) IF ANY IS REQUIRED TO BE MADE. 31. AFTER MAKING ALL SUCH COMPUTATIONS THE ASSESSEE WOULD BE ITA.63/BANG/2016 PAGE - 5 ENTITLED TO THE BENEFIT OF SET OFF OR CARRY FORWARD OF LOSS AS PROVIDED UNDER SECTION 72 OF THE ACT. THAT IS THE BENEFIT WH ICH IS GIVEN TO THE ASSESSEE UNDER THE ACT IRRESPECTIVE (IF THE NATURE OF BUSINESS WHICH HE IS CARRYING ON. THE SAID BENEFIT IS AVAILABLE EV EN TO UNDERTAKINGS UNDER SECTION 10-B OF THE ACT. THE EXP RESSION DEDUCTION OF SUCH PROFITS AND GAINS AS DERIVED BY A N UNDERTAKING SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSES SEE HAS TO BE UNDERSTOOD IN THE CONTEXT WITH WHICH THE SAID PROVI SION IS INSERTED IN CHAPTER-III OF THE ACT SUB-SECTION (4) OF SECTIO N 10-A CLARIFIES THIS POSITION. IT PROVIDES THAT THE PROFITS DERIVE D FROM EXPORT OF ARTICLES OR THINGS FROM COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS OF THE UNDERTA KING, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUC H ARTICLES OR THINGS OR COMPUTER SOFT-WARE BEARS TO THE TOTAL TUR NOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING. THEREFORE IT IS CLEAR THAT THOUGH THE ASSESSEE MAY BE HAVING MORE THAN ONE UND ERTAKING FOR THE PURPOSE OF SECTION 10-A IT IS THE PROFIT, D ERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE F ROM THE BUSINESS OF THE UNDERTAKING ALONE THAT HAS TO BE TA KEN INTO CONSIDERATION AND SUCH PROFIT IS NOT TO BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. IT IS ONLY AFTER THE DEDUCTION OF TH E SAID PROFITS AND GAINS THE INCOME OF THE ASSESSEE HAS TO BE COMPUTED . 32 THE PROVISIONS OF THIS SUB-SECTION 11 APPLY EVEN IN THE CASE WHERE AN ASSESSEE HAS OPTED OUT OF SECTION 10-A BY EXERCISING HIS OPTION UNDER SUB-SECTION (8). AS DISCUSSED IT IS PERMISSI BLE FOR AN ASSESSEE TO OPT IN AND OPT OUT OF SECTION 10- A. IN THE YEAR WHEN THE ASSESSEE HAS OPTED OUT THE NORMAL PROVISIONS OF THE ACT WOULD APPLY. THE PROFITS DERIVED BY HIM FROM THE STP UNDE RTAKING WOULD SUFFER TAX IN THE NORMAL COURSE SUBJECT TO VA RIOUS PROVISIONS OF THE ACT INCLUDING THOSE OF CHAPTER VI A. IF IN SUCH A YEAR, THE ASSESSEE HAS SUFFERED LOSSES SUCH LOSSES WOULD BE SUBJECT TO INTER SOURCE AND INTER HEAD SET OFF. THE BALANCE IF ANY THEREAFTER CAN BE CARRIED FORWARD FOR BEING SET OFF AGAINST ITA.63/BANG/2016 PAGE - 6 PROFITS OF THE SUBSEQUENT ASSESSMENT YEARS IN THE N ORMAL COURSE. UNABSORBED DEPRECATION ALSO MERITS A SIMILA R TREATMENT. 33. AS THE INCOME OF 10-A UNIT HAS TO BE EXCLUDED A T SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL INCOME, THE LOSS OF NON 10-A UNIT CANNOT BE SET OFF AGAINST THE INCOME OF 10-A UNIT U NDER SECTION 72. THE LOSS INCURRED BY THE ASSESSEE UNDER THE HEAD PR OFITS AND GAINS OF BUSINESS OR PROFESSION HAS TO BE SET OFF A GAINST THE PROFITS AND GAINS IF ANY, OF ANY BUSINESS OR PROFESSION CAR RIED ON BY SUCH ASSESSEE. THEREFORE AS THE PROFITS AND GAINS UNDER SECTION 10 A IS NOT BE INCLUDED IN THE INCOME OF THE ASSESSEE AT ALL TH E QUESTION OF SETTING OFF THE LOSS OF THE ASSESSEE OF ANY PROFITS AND GAINS OF BUSINESS AGAINST SUCH PROFIT AID GAINS OF THE UNDER TAKING WOULD NOT ARISE. SIMILARLY, AS PER SECTION 72(2) UNABSOR BED BUSINESS LOSS IS TO BE FIRST SET OFF AND THEREAFTER UNABSORB ED DEPRECIATION TREATED AS CURRENT YEARS DEPRECIATION UNDER SECTION 32(2) I S TO BE SET OFF. AS DEDUCTION UNDER SECTION 10-A HAS TO BE EXCLUDED FROM THE TOTAL INCOME OF THE ASSESSEE, THE QUESTION OF UNABSORBED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFIT AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. IN THAT VIEW OF THE MATTER. THE APPROACH OF THE ASSESSING AUTHORITY WAS QUITE CONTRARY TO THE AFORE SAID STATUTORY PROVISIONS AND THE APPELLATE COMMISSIONER AS WELL A S THE TRIBUNAL WERE FULLY JUSTIFIED IN SETTING ASIDE THE SAID ASSE SSMENT ORDER AND GRANTING THE BENEFIT OF SECTION 10-A TO THE ASS ESSEE. HENCE, THE MAIN SUBSTANTIAL QUESTION OF LAW IS ANSW ERED IN FAVOUR OF THE ASSESSEES AND AGAINST THE REVENUE. 34. IN VIEW , OF THE FACT THAT THE MAIN SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE SSESSEE . 4. WE FIND THAT THE CIT(A) RESPECTFULLY FOLLOWIN G THE ABOVE DECISION , HAS ALLOWED THE ASSESSEES APPEAL WITH WHICH WE ARE IN AGREEMENT. ITA.63/BANG/2016 PAGE - 7 5. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 11TH NOVEMB ER, 2016. SD/- SD/- (VIJAY PAL RAO) (S. JAYARAMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME TAX 4. THE COMMISSIONER OF INCOME TAX (A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR