DCIT, CHENNAI V. Sutherland Global Services Pvt. Ltd., CHENNAI

ITA 658/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7783 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 18-03-2016
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Capital receipt
• Section: 143(3); 10B; 148

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I T.A. NO. 658 /MDS/201 6 / ASSESSMENT YEAR :20 05 - 06 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6 ( 2 ) , AAYAKAR BHAVAN, NEW BLOCK, 7 TH FLOOR, 121, M.G. ROAD, CHENNAI 600 034. VS. M/S. SUTHERLAND G LOBAL SERVICES PVT. LTD., 45A, VELACHERRY MAIN ROAD, VELACHERRY, CHENNAI 600 042. [PAN: AAECS8093A ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI S HIVA SRINIVAS , J CIT / RESPONDENT B Y : MS. BHARATHI KRISHNA P RASAD, CA / DATE OF HEARING : 0 8 . 11 .201 6 / DATE OF P RONOUNCEMENT : 28 . 12 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 15 , CHENNAI DATED 17 . 1 2 .201 5 RELEVANT TO THE ASSESSMENT YEAR 20 11 - 12 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICE R TO DELETE THE ADDITION OF .50,49,639/ - . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN BUSINESS PROCESS OUTSOURCING AND IT ENABLED SERVICES. THE ASSESSEE FILED ITS RETURN I.T.A. NO . 658 /M/ 16 2 OF INCOME ON 28.10.2005 DECLARING INCOME OF .1,24,382/ - . THE CASE OF THE ASSESSEE WAS SELE CTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] DATED 20.10.2006 WAS SERVED ON THE ASSESSEE. THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON 31.12.2008. THEREAFTER, THE ASSESSMENT WAS REOPENED BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT ON 16.03.2013 AFTER RECORDING REASONS FOR REOPENING OF THE ASSESSMENT. IN RESPONSE THERETO, THE ASSESSEE FILED ALL DETAILS AS CALLED FOR AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT ON 31.03.2013 BY ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT .51,74,021/ - AFTER MAKING ADDITION OF .50,49,639/ - . 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND RAISED VARIOUS GROUNDS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING THE ORDER OF THE TRIBUNAL, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. BY REITERATING THE GROUNDS RAISED IN THE APPEAL OF THE REVENUE, THE L D. DR PLEADED THAT THE ORDER OF THE LD. CIT(A) ON THIS ISSUE SHOULD BE REVERSED. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THE APPEAL OF THE REVENUE IS SQUARELY COVERED BY I.T.A. NO . 658 /M/ 16 3 THE DECISION OF THE COORDINA TE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 2007 - 08 DATED 08.03.2013. 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THE ASSESSMENT ORDER, THE ASSES SING OFFICER HAS OBSERVED THAT THE INCOME OF .50,49,679/ - , WHICH WAS CREDITED IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD OTHER INCOME WAS TREATED AS PROFIT ON SALE OF FIXED ASSETS AND IT WAS TREATED AS BUSINESS INCOME AND EXEMPTION UNDER SECTION 10B OF THE ACT HAS BEEN CLAIMED. HOWEVER, IN THE FI XED ASSET SCHEDULE - 3 FORMING PART OF THE ACCOUNTS IN NOTE 1(B), IT HAS BEEN MENTIONED THAT THE AMOUNT RECEIVED FROM CUSTOMER TOWARDS COST OF CERTAIN FIXED ASSETS HAD BEEN CREDITED TO PROFIT AND LOSS ACCOUNT UNDER OTHER INCOME. THEREFORE, THE ASSESSING OFFI CER MADE AN ADDITION OF .50,49,639/ - ON THE BASIS THAT THE SAID AMOUNT WAS NOT DUE TO ANY SALE OF FIXED ASSETS EXCLUSIVELY AND THAT IT WAS RECEIVED ONLY DURING THE COURSE OF THE BUSINESS. ON APPEAL, BY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2007 - 08 IN I.T.A. NO. 1342/MDS/2011 DATED 08.03.2013, WHEREIN THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2006 - 07 IN I.T.A. NO. 542/MDS/2011 DATED 26.07.2012 HAS BEEN FOLLOWED, THE LD. CIT(A) DIRECTED THE ASSESSING OF FICER TO DELETE THE ADDITION ON THIS ACCOUNT. WE HAVE PERUSED THE ORDER OF THE TRIBUNAL, WHEREIN IT WAS OBSERVED AND HELD AS UNDER: I.T.A. NO . 658 /M/ 16 4 4. WE HAVE HEARD BOTH SIDES. PERUSED THE MATERIALS ON RECORD AND THE ORDERS OF AUTHORITIES BELOW. THE ASSESSING OFFICER, W HILE COMPLETING THE ASSESSMENT EXCLUDED E27,75,183/ - BEING THE REIMBURSEMENT MADE BY M/S. DEL CORPORATION, USA., TOWARDS PURCHASE AND TRANSFER OF ASSETS BY THE ASSESSEE FROM OUT OF THE PROFITS ELIGIBLE FOR DEDUCTION UNDER SEC.10A OF THE ACT. THE ASSESSING OFFICER TREATED SUCH REIMBURSEMENT RECEIVED BY THE ASSESSEE AS INCOME FROM OTHER SOURCES . ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) AGREED WITH THE VIEW OF THE ASSESSING OFFICER THAT THE REIMBURSEMENT OF EXPENSES ON PURCHASE AND TRANSFER OF ASSETS SHALL HAVE TO BE EXCLUDED WHILE COMPUTING DEDUCTION UNDER SEC.10A OF THE ACT. HOWEVER, THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT SUCH REIMBURSEMENT OF EXPENSES ARE TO BE TREATED AS REIMBURSEMENT OF CAPITAL ASSETS PURCHASED FOR CLIENTS AND N OT TO BE TREATED AS INCOME FROM OTHER SOURCES . 5. WE HAVE PERUSED THE ORDER OF THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR EARLIER ASST. YEAR. THIS TRIBUNAL, IN ITS ORDER HELD THAT THE REIMBURSEMENT FOR ASSETS PURCHASED CANNOT BE CONSIDERED AS PROFITS DER IVED BY THE ASSESSEE FROM ITS EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE AND, THEREFORE, DEDUCTION UNDER SEC.10A OF THE ACT IS NOT ALLOWABLE. THE TRIBUNAL HELD THAT THE COMMISSIONER OF INCOME TAX (APPEALS) WAS ABSOLUTELY CORRECT IN HOLDING THAT THE SUMS RECEIVED FOR REIMBURSEMENT CAN ONLY BE CONSIDERED AS CAPITAL RECEIPTS SINCE THE REIMBURSEMENTS WERE ADMITTEDLY AGAINST CAPITAL ASSETS. FOLLOWING THE ORDER OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL, WE HOLD THAT THE REIMBURSEMENT FOR ASSETS WAS RIGHTLY EXCLUDED FROM THE PROFITS OF BUSINESS OF THE ASSESSEE FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SEC.10A OF THE ACT. WE ALSO FIND THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN HOLDING THAT THE REIMBURSEMENT FOR ASSETS IS CAPITAL REC EIPT IS IN TUNE WITH THE ORDER OF THIS TRIBUNAL. IN THE CIRCUMSTANCES, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE GROUNDS RAISED BY THE DEPARTMENT ON THIS ISSUE ARE REJECTED. THE LD. DR COULD NOT CONT ROVERT THE ABOVE FINDINGS OF THE TRIBUNAL AND FILED ANY HIGHER COURT DECISION HAVING MODIFIED AND REVERSED THE FINDINGS OF THE TRIBUNAL. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE COORDINATE BENCH, I.T.A. NO . 658 /M/ 16 5 WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) AND THUS, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 7 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 28 TH DECEMBER , 2016 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL R EDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 28 . 12 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.