ITO 8(2)2, MUMBAI V. LONDON INFOTECH P. LTD, MUMBAI

ITA 6582/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75227 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 30-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Keywords: Business income; Depreciation; Tax effect; Unabsorbed depreciation
• Section: 12; 142(1); 10AA; 115JB; 10B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND N.K.BILLAIYA (AM ) . . , . . , ./I.T.A.NO.6582/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) INCOME TAX OFFICER 8(2) - 2 ROOM NO.212/216A, 2 ND FLOOR, AAYAKAR BHAVAN,M.K.ROAD, MUMBAI-400020 / VS. M/S LONDON INFOTECH PVT. LTD., 403, EVEREST CLASSIQUE, SUBHASH ROAD, VILE PARLE (E), MUMBAI-400057 ./ ./PAN/GIR NO. : AABCL1567F ( ' / APPELLANT) .. ( ( ' / RESPONDENT) ' / APPELLANT BY : SHRI M.L.PERUMAL ( ' * /RESPONDENT BY NONE * - / DATE OF HEARING : 1.1.2014 * - /DATE OF PRONOUNCEMENT : 1.1.2014 / O R D E R PER B.R.MITTAL, JM THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSME NT YEAR 2009-10 AGAINST ORDER OF LD. CIT(A) DATED 14.08.2012 ON FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) ERRED IN ALLOWING DEDUCTION U/S 10AA WITHOU T SETTING OFF THE BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION WITHOUT APPRECIATING THAT IN VIEW OF THE AMENDMENT W.E.F. 1.4.2001, S.10A/10B PROVIDES FOR DEDUCTION AND NOT EXEMPTION AND HENCE, THE INCOME OF THE A SSESSEE HAS TO BE COMPUTED AS STIPULATED IN S 2 (45) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) ERRED IN ALLOWING DEDUCTION U/S 10AA WITHOU T SETTING OFF THE BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION BY PLACING RELIANCE UPON THE DECISION OF KARNATAKA HIGH COURT IN THE CASE O F CIT V/S YAKOGAWA INDIA P LTD (KAR) 341 ITR 385 IGNORING THE FACT THAT THE DE PARTMENT HAS NOT ACCEPTED THE RATIO LAID DOWN IN THE SAID CASE AND PREFERRED A SLP AGAINST THE SAID DECISION; 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) ERRED IN ALLOWING DEDUCTION U/S 10AA WITHOU T SETTING OFF THE BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION BY PLACING RELIANCE UPON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT V/S BLACK AND VEATCH CONSULTING P.LTD 20 TAXMANN.COM 727 (BOM) IGNORING THE FACT THAT THE I.T.A.NO.6582/MUM/2012 2 DEPARTMENT HAS NOT ACCEPTED THE RATIO LAID DOWN IN THE SAID CASE, THOUGH NO SLP HAS BEEN PREFERRED DUE TO LOW TAX EFFECT 2. DESPITE NOTICE OF HEARING, NONE APPEARED ON BEHA LF OF THE ASSESSEE. THEREFORE, WE DECIDED TO DISPOSE OF THIS APPEAL EX-PARTE QUA T HE ASSESSEE ON MERITS AFTER GOING THROUGH THE RECORD AVAILABLE BEFORE US. 3. FACTS GIVING RISE TO THIS APPEAL ARE THAT THE AS SESSEE DURING THE YEAR ENGAGED IN THE BUSINESS OF IT ENABLED SERVICES AND BPO, FILED RETURN OF INCOME ON 24.9.2009 DECLARING TOTAL INCOME AT RS.NIL UNDER THE NORMAL PROVISIONS AND UNDER BOOK PROFIT OF RS.2,89,51,992/- U/S 115JB OF THE INCOME TAX ACT, 1 961. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. PROCEEDINGS UNDER SECTION 143(2 ) AND 142(1) WERE INITIATED ALONG WITH QUESTIONNAIRE. THE AO OBSERVED THAT THE ASSE SSEE HAS SHOWN BUSINESS INCOME OF RS.2,87,81,987/- AND CLAIMED EXEMPTION U/S 10A OF T HE ACT. THE ASSESSEE HAS ALSO SHOWN AN AMOUNT OF RS.13,31,461/- AS INCOME UNDER T HE HEAD INCOME FROM OTHER SOURCES. THE ASSESSEE HAS SET OFF BROUGHT FORWARD UNABSORBED DEPRECIATION OF RS.17,16,763/- AGAINST THE INCOME OF RS.13,31,461/ -. AO ASKED THE ASSESSEE AS TO WHY THE UNABSORBED DEPRECIATION HAS NOT BEEN SET OFF AGAINST THE BUSINESS INCOME. THE ASSESSEE HAS OBJECTED TO THE QUERY RAISED BY AO AN D RELIED ON THE FORM NO.ITR-6 AND STATED THAT ALLOWANCE U/S 10A HAS TO BE GIVEN BEFO RE SETTING OFF BROUGHT FORWARD LOSSES OR UNABSORBED DEPRECIATION. THE AO DID NOT FIND F AVOUR WITH THE ASSESSEES EXPLANATION AND RELYING ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S HINDUSTAN UNILEVER LTD V/S DCIT 1(1) DATED 1.4.2010 OBSERVED THAT AFTER AMENDMENT IN 2000, THE NATURE OF BENEFIT U/S 10B IS DEDUCTION AND NOT EXEMPTION. HE ALSO MENTIONED THAT THE DECISION OF HONBLE KARNATAKA HI GH COURT IN THE CASE OF YOKOGAWA INDIA LTD IS NOT APPLICABLE TO THE FACTS OF PRESENT CASE. AFTER REFERRING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF C IT V/S HIMATASINGIKE SEIDE LTD (286 ITR 255) (2006), AND THE DECISION OF THE HONBLE KE RALA HIGH COURT IN THE CASE OF CIT V/S PATSPIN INDIA LTD (2011) 245 CTR (KER) 97) HELD THAT BUSINESS PROFIT IS TO BE COMPUTED AFTER SETTING OFF UNABSORBED DEPRECIATION AND THEREAFTER DEDUCTION UNDER SECTION 10A HAS TO BE COMPUTED. BEING AGGRIEVED, T HE ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. BEFORE THE LD. CIT(A), THE ASSESSEE AFTER NARRAT ING THE FACTS OF THE CASE SUBMITTED THAT THE ISSUE IS NOW COVERED, ON MERITS , IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE KARANTAKA HIGH COURT IN T HE CASE OF CIT VS YOKOGAWA INDIA LTD (204 TAXMAN 305) AND THE DECISIO N OF JURISDICTIONAL HIGH I.T.A.NO.6582/MUM/2012 3 COURT IN THE CASE OF M/S HINDUSTAN UNILEVER LTD V/ S DCIT (250 ITR 338). THE ASSESSEE ALSO RELIED ON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF CAPGEMINI INDIA P. LTD IN ITA NO.7729/MUM/2010. 5. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSION S OF BOTH PARTIES, DECISIONS RELIED UPON BY THE ASSESSEE AND THE RELEVANT PROVISIONS OF SECTION 10A OF THE ACT, DECISION IN THE CASE OF SCIENTIFIC ATLANTA INDIA TECHNOLOGY (P ) LTD V/S ACIT (2010) 38 SOT 252 (CHENNAI) (SB), OBSERVED AND HELD THAT SECTION 10A DEDUCTION HAS TO BE COMPUTED BEFORE COMPUTING THE GROSS TOTAL INCOME. THEREFORE, BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION CANNOT BE SET OFF AGAINST T HE TOTAL INCOME WHILE COMPUTING THE DEDUCTION U/S 10A. ACCORDINGLY, THE LD. CIT(A) ALLO WED THE CLAIM OF ASSESSEE. BEING AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEFORE US. 6. THE LD. DR CONTENDED THE FACTS OF THE CASE AND R ELIED ON THE ORDER OF AO. ON THE CONTRARY THE LD. AR SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH THE PARTIES AND GONE THROUG H THE CASE LAWS RELIED UPON BY THE RESPECTIVE PARTIES. ON PERUSAL OF THE RECORD, WE F IND THAT THE ISSUE RAISED IN THIS APPEAL STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFO REMENTIONED DECISIONS AS RELIED UPON BY THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY IN FIRMITY IN THE ORDER OF LD. CIT(A). ACCORDINGLY, WE CONFIRM THE ORDER OF LD. CIT(A) BY DISMISSING THE APPEAL OF THE DEPARTMENT. 8. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST DAY OF JANUARY, 2014 * 1 2 1 ST DAY OF JANUARY, 2014 * SD SD ( . . /N.K.BILLAIYA ) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. ( ' / THE RESPONDENT. 3. > ( ) / THE CIT(A)- I.T.A.NO.6582/MUM/2012 4 4. > / CIT 5. ? (A , - A , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) - A , /ITAT, MUMBAI