Macquarie Global Services Pvt. Ltd., New Delhi V. DCIT, Circle- 16(1), New Delhi

ITA 6551/DEL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2686 (ITAT-DELHI)
• Duration Of Justice: 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Appeal Filed On: 12-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Section: 143(3); 10AA; 10B; 80IA; 6

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI FRIDAY E BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER, AND MS. SUCHITRA KAMBLE , JUDICIAL MEMBER SA NO. 72 9 /DEL/201 8 & ITA NO. 6551 /DEL/201 8 [A.Y 20 1 4 - 1 5] MACQUARIE GLOBAL SERVICES PVT LTD VS. THE D. C.I.T UNIT NO. 216, 2 ND FLOOR SQUARE ONE CIRCLE 16(1) DISTRICT CENTRE, SAKET NEW DELHI NEW DELHI PAN : AA FCM 0180 K [APPELLANT] [RESPONDENT] DATE OF HEARING : 0 2 . 1 1 .201 8 DATE OF PRONOUNCEMENT : 0 5 . 1 1 .2018 ASSESSEE BY : MS. ANANYA KAPOOR , ADV REVENUE BY : MS. NAINA SOIN KAPIL, SR. DR ORDER PER N.K. BILLAIYA , ACCOUNTANT MEMBER, T H IS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST ORDER DATED NIL FRAMED U/S 143(3) R.W.S 144C(5) OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT]' PERTAINING TO A.Y 2014 - 15. 2 2. THE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE IS THAT THE ASSESSING OFFICER ERRED IN COMPUTING THE TOTAL INCOME BY MAKING AN ADDITION OF RS. 15,45,14,588/ - TO THE RETURNED INCOME BY WAY OF DISALLOWING THE DEDUCTION CLAIMED U/S 10AA OF THE ACT IN RESPECT OF EXP ORT PROFITS OF SEZ UNIT. 3. AT THE VERY OUTSET, THE LD. AR STATED THAT THE ISSUE NOW STANDS FULLY DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE TRIBUNAL FOR A.Y 2013 - 14. 4. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND FORCE IN THE CONTENTION OF THE LD. AR. WHILE FRAMING THE IMPUGNED ASSESSMENT ORDER, THE ASSESSING OFFICER OBSERVED, FURTHER, ON VERIFICATION OF THE CLAIM MADE BY THE ASSESSEE U/S 10AA OF THE ACT VIDE ORDER SHEET NOTING DATED 10.11.2017, THE ASS ESSEE WAS ASKED TO SHOW CAUSE WHY THE AMOUNT OF RS. 15,45,14,588/ - SHOULD NOT BE DISALLOWED AS DISCUSSED IN THE ASSESSMENT ORDER FOR A.Y 2013 - 14 AS THE FACTS ARE IDENTICAL . 3 5. AFTER CONSIDERING THE DETAILED REPLY OF THE ASSESSEE, THE ASSESSING OFFICER CO NCLUDED BY HOLDING THIS ISS U E HAS ALREADY BEEN DISCUSSED IN DETAIL IN ASSESSEES OWN CASE IN A.Y 2013 - 14 . ACCORDINGLY, THE CLAIM OF DEDUCTION WAS DENIED. 6. WE FIND THAT THE COORDINATE BENCH IN ITA NO. 6794/DEL/2017 FOR A.Y 2013 - 14 VIDE ORDER DATED 23.01.2018 HAS CONSIDERED THE CLAIM OF DEDUCTION U/S 10AA OF THE ACT AND ALLOWED THE APPEAL OF THE ASSESSEE. THE RELEVANT FINDINGS READ AS UNDER: 13. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE RELEVANT MATERIAL REFERRED TO AT THE TIME OF HEARING AND ALSO THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER. THE ASSESSEE IN THE YEAR 2007 HAD SET UP AN EXPORT ORIENTED UNIT FOR WHICH IT WAS ELIGIBLE FOR DEDUCTION U/S 10A / 10B. IN THE FINANCIAL YEAR 2010 - 11 ANOTHER 'SEZ UNIT' WAS SET UP WHICH STARTED ITS OP ERATION IN THE ASSESSMENT YEAR 2011 - 12. IT IS AN UNDISPUTED FACT THAT IN THE FIRST YEAR OF OPERATION THE ASSESSEE HAS CLAIMED THE DEDUCTION U/S 10AA WHICH WAS DULY SUPPORTED BY AN AUDIT REPORT IN FORM 56F AND SUCH A CLAIM HAS BEEN ALLOWED BY THE AO IN SCRU TINY PROCEEDINGS AFTER COMPLETING THE ASSESSMENT U/S 143(3). NOT ONLY THAT, IN THE SUBSEQUENT ASSESSMENT YEAR ALSO, I.E., IN THE ASSESSMENT YEAR 2012 - 13, 4 SIMILAR CLAIM FOR DEDUCTION U/S 10AA HAS BEEN ALLOWED BY THE AO IN THE ORDER PASSED U/S 143(3). ALL TH ESE DETAILS OF THE ASSESSMENT ORDER AS WELL AS FORM 56F HAS BEEN DULY SUBMITTED BEFORE US IN THE PAPER BOOK. NOW IN THE THIRD YEAR OF THE OPERATIONS, LD. AO SEEKS TO DISTURB THE SAID ELIGIBILITY OF CLAIM OF DEDUCTION ON THE GROUND THAT THERE IS SOME KIND O F SPLITTING UP OR RECONSTRUCTION OF THE OLD BUSINESS IN TERMS OF CLAUSE (II) OF SUB SECTION (4) SECTION 10AA . THE CONDITIONS LAID DOWN IN SECTION 10AA (4) HAS TO BE SEEN ON THE DATE OF FORMATION, WHETHER THE UNDERTAKING HAS VIOLATED ANY CONDITIONS PRESCRIBED THEREIN OR NOT. IF THE CONDITIONS STIPULATED IN THE SECTION HAS BEEN ACCEPTED, THAT IS, ONCE THE ELIGIBILITY OF DEDUCTION U/S 10A OR 10B OR 10AA HAS BE EN ACCEPTED IN THE INITIAL ASSESSMENT YEAR, THEN IT CANNOT BE WITHDRAWN IN THE SUBSEQUENT YEARS FOR A BREACH OF CERTAIN CONDITIONS WHICH ARE REQUIRED TO BE SEEN OR EXAMINED IN THE FIRST YEAR OF CLAIM. NOW IT IS A WELL SETTLED PROPOSITIONS LAID DOWN IN VARI OUS JUDGMENTS OF THE HON'BLE HIGH COURTS INCLUDING THAT OF THE JURISDICTIONAL HIGH COURTS AS REFERRED BY THE LD. COUNSEL. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. WESTERN OUTDOOR INTERACTIVE PVT. LTD. (SUPRA) HAS HELD THAT WHETHER A BENEFIT ITA NO. 6794/ DEL/2017 MACQUARIE GLOBAL SERVICES PVT. LTD. VS. DCIT OF DEDUCTION IS AVAILABLE FOR A PARTICULAR NUMBER OF YEARS ON SATISFACTION OF CERTAIN CONDITIONS AND UNDER THE PROVISION OF ACT, THEN WITH OUT WITHDRAWING OR SETTING ASIDE THE RELIEF GRANTED FOR 5 THE FIRST ASSESSMENT YEAR IN WHICH CLAIM WAS MADE AND ACCEPTED, THE AO CANNOT WITHDRAW THE RELIEF FOR SUBSEQUENT ASSESSMENT YEARS. THIS RATIO WAS LAID DOWN IN THE CONTEXT OF SECTION 10A . ONCE THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE FROM THE EARLIER YEARS FROM THE INITIAL YEAR WHEN THE CLAIM HAS BEEN ACCEPTED, THEN OSTENSIBLY DEDUCTION CANNOT BE DISALLOWED OR DENIED IN THE SUBSEQU ENT YEARS OF CLAIM THIS PRINCIPLE HAS BEEN REITERATED AGAIN IN THE CASE OF CIT VS. ARTS & CRAFTS EXPORTS (BOMBAY ) (SUPRA); AND CIT VS. MACBROUT ENGINEERING (P) LTD . (SUPRA) BY THE HON'BLE BOMBAY HIGH COURT. HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TATA COMMUNICATION INTERNET SERVICES LTD . (SUPRA) IN THE CONTEXT OF 80IA(3), CONCL UDED THAT BAR AS PROVIDED U/S 80IA(3) IS TO BE CONSIDERED ONLY FOR THE FIRST YEAR OF CLAIM FOR DEDUCTION U/S 80IA AND NOT IN THE SUBSEQUENT YEARS. HERE ALSO IN THE CASE BEFORE THE HON'BLE HIGH COURT, THE AO HAS RAKED UP THE ISSUE OF SPLITTING UP OR RECONST RUCTION OF ALREADY EXISTING BUSINESS IN THE SUBSEQUENT YEAR, WHEN IN THE FIRST YEAR OF CLAIM THIS ISSUE WAS NOT DISTURBED. LASTLY, IN THE CASE OF CIT VS. HEARTLAND DELHI TRANSCRIPTION SERVICES (P .) LTD. (DELHI HC) (270 CTR 373), THE HON'BLE DELHI HIGH COURT IN THE CONTEXT OF SECTION 10B HAD LAID DOWN THE SIMILAR PROPOSITION. RELEVANT OBSERVATION OF THE HON'BLE HIGH COURT READS AS UNDER: - 6 '10. SUB - SECTION (1) REFERS TO DEDUCTION OF PROFIT AND GAINS OF AN UNDERTAKING. THE DEDUCTION IS TO BE ALLOWED FOR A PERIOD OF 10 YEARS FROM THE YEAR IN WHICH UNDERTAKING BEGINS TO MANUFACTURE, PRODUCE ETC. ARTICLES, THINGS OR COMPUTER SOFTWARE. THE BEGINNING AND END POIN TS FOR CLAIMING THE DEDUCTION ARE STIPULATED. THESE HAVE REFERENCE TO THE ELIGIBLE UNDERTAKING. SUB - CLAUSE (II) TO SECTION 10B(2) INCORPORATES A NEGATIVE CONDITION AND STATES THAT THE UNDERTAKING MUST NOT BE FORMED ITA NO. 6794/ DEL/2017 MACQUARIE GLOBAL SERVICES PVT. LTD. VS. DCIT BY SPLITTING UP OR RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE. CLAUSE (II) REFERS TO THE DATE ON WHICH THE UNDERTAKING MENTIONED IN SUB - SECTION (1) IS CREATED OR FORMED. O N THE DATE OF FORMATION, THE UNDERTAKING SHOULD NOT VIOLATE THE CONDITION STIPULATED IN CLAUSE (II) I.E. THAT IT SHOULD NOT BE CREATED BY SPLITTING UP OR RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE. CLAUSE (II) DOES NOT HAVE ANY REFERENCE TO THE PERI OD OF 10 YEARS STIPULATED IN SUB - SECTION (1) TO SECTION 10B, AFTER AN UNDERTAKING IS FORMED OR CREATED WITHOUT VIOLATION OF CLAUSE (II) TO SECTION 10B(2). CLAUSE (II) TO SECTION 10B(2) DOES NOT APPLY TO THE PERIOD, POST FORMATION OF THE UNDERTAKING, COVER ED UNDER SUB - SECTION (1), WHEN THE UNDERTAKING WHICH AT THE TIME OF FORMATION MEETS THE REQUIREMENTS OF CLAUSE (II) TO SECTION 10B(2). THE UNDERTAKING, OF COURSE MEET THE REQUIREMENTS AND FULFIL THE CONDITION THAT IT MANUFACTURES OR PRODUCES ARTICLES, THI NGS OR COMPUTER SOFTWARE DURING THE ASSESSMENT YEAR. THE PROVISO 7 EQUALLY SUPPORTS THE SAID INTERPRETATION AS IT ALSO REFERS TO THE DATE OF FORMATION OF THE UNDERTAKING, FOR SEEKING BENEFIT UNDER SECTION 10B(I). THE REQUIREMENTS UNDER CLAUSES (II) AND (III) IN THIS MANNER DO NOT RELATE TO THE SUBSEQUENT PERIOD, I.E. POST OR AFTER FORMATION. 11. WE HAVE ALREADY NOTED THE FACTUAL POSITION. IT IS AN ACCEPTED AND ADMITTED FACT THAT THE UNDERTAKING WAS FORMED OR CREATED BY HICS AND THERE IS NO ALLEGATION OR FINDI NG BY THE ASSESSING OFFICER THAT ON THE DATE OF FORMATION OF THE UNDERTAKING, THERE WAS VIOLATION OF CLAUSE (II) AND (III) TO SECTION 10B(2). THE UNDERTAKING, WHEN IT WAS FORMED, SATISFIED AND DULY FULFILLED THE REQUIREMENTS OF THE SAID CLAUSES, AS IT WAS NOT FORMED BY SPLITTING UP OR RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE. IT WAS A NEW UNDERTAKING AND THERE IS NO FACTUAL FINDING THAT AT THE TIME OR ESTABLISHMENT OR FORMATION OF THE UNDERTAKING, BUSINESS ALREADY IN EXISTENCE WAS SPLITTED OR RECON STRUCTED. IT IS ACCEPTED THAT THE PLANT AND MACHINERY PROCURED AT THE TIME OF FORMATION WAS NEW.' 15. FOLLOWING THE AFORESAID PROPOSITION AND THE RATIO LAID DOWN BY THE HON'BLE HIGH COURTS INCLUDING THAT OF JURISDICTIONAL HIGH COURT, WE HOLD THAT, ONCE THE CLAIM OF DEDUCTION U/S 10AA HAS BEEN ACCEPTED IN THE FIRST YEAR OF THE OPERATIONS AND ALSO IN THE SECOND YEAR, THEN IN THE THIRD YEAR SAME CANNOT BE WITHDRAWN BY EXAMINING THE FACTORS WHICH WERE 8 REQUIRED TO BE SEEN IN THE FIRST YEAR OF THE CLAIM. THUS, ON THIS ITA NO. 6794/ DEL/2017 MACQUARIE GLOBAL SERVICES PVT. LTD. VS. DCIT GROUND ALONE, WE HOLD THAT THE AO CANNOT DENY THE CLAIM OF DEDUCTION U/S 10AA WITH THE ASSESSEE IN THIS YEAR AND HENCE IS DIRECTE D TO ALLOW THE SAME. 16. EVEN ON THE MERITS, WE FIND THAT NONE OF THE ALLEGATION WHICH HAS BEEN MADE BY THE AO APPEARS TO BE CORRECT, BECAUSE IF HE SEE THE EXPANSION AND GROWTH OF REVENUE OF EOU UNIT AND THE REVENUE OF THE SEZ UNIT, AS INCORPORATED ABOVE, WE FIND THAT THERE HAS BEEN SUBSTANTIAL INCREASE IN THE REVENUE IN THE EOU UNIT ALSO FROM THE FINANCIAL YEAR 2011 - 12 TO FINANCIAL YEAR 2016 - 17. THUS, IT CANNOT BE HELD THAT AFTER THE SUN SET PERIOD THE REVENUE OF THE EOU HAS GONE DOWN. THE CHART AS SUBMITT ED BY THE LD. COUNSEL CLEARLY VITIATES THE OBSERVATION AND THE FINDING OF THE AO; AND HENCE ON THE POINT THAT THERE IS A LESS GROWTH OF REVENUE IN EOU UNIT AND THEREFORE, PRESUMPTION CAN BE DRAWN FOR SPLITTING UP OR RECONSTRUCTION OF EOU UNIT IS INCORRECT AND CANNOT BE UPHELD. FURTHER WE FIND THAT THE ASSESSEE CONTINUED TO MAKE ADDITION TO THE FIXED ASSETS IN THE SEZ UNIT INDEPENDENTLY AND THERE IS NO IOTA OF ANY MATERIAL TO SHOW THAT THE ADDITIONS TO THE FIXED ASSETS HAS BEEN BY WAY OF TRANSFER FROM EOU UN ITS. LIKEWISE FROM THE PERUSAL OF THE LIST OF TECHNICAL MAN POWER, WE FIND THAT EXCEPT FOR TWO OR THREE EMPLOYEES OUT OF 30 EMPLOYEES ARE NEWLY HIRED AND THEREFORE, IT IS NOT A CASE WHERE THE OLD 9 EMPLOYEES OF EOU UNIT HAVE BEEN ENTIRELY SHIFTED TO SEZ UNIT WHICH SEEMS TO BE THE ALLEGATION OF THE AO. THUS, ALL THE ISSUES RAISED BY THE AO DOES NOT HOLD GROUND ON THE FACTS AND MATERIAL PLACED BEFORE US AND HENCE ON FACTUAL MATRIX ALSO WE HOLD THAT ASSESSEE HAS NOT VIOLATED ANY OF THE CONDITIONS PRESCRIBED IN SECTION 10AA AND THEREFORE, IT IS ENTITLED FOR CLAIM OF DEDUCTION U/S 10AA IN THIS YEAR. 7. RESPECTFULLY FOLLOWING THE FINDINGS OF THE COORDINATE BENCH [SUPRA], WE DIRECT THE ASSESSING OFFICER TO ALLOW TH E CLAIM OF DEDUCTION U/S 10AA OF THE ACT. 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 6551/DEL/2018 IS ALLOWED WHEREAS THE STAY PETITION SA NO. 729/DEL/18 BECOMES OTIOSE. THE ORDER IS PRON OUNCED IN THE OPEN COURT ON 0 5 . 1 1 .2018. S D / - S D / - [ SUCHITRA KAMBLE ] [ N.K. BILLAIYA ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 5 T H NOVEMBER , 2018 10 VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER