STATE STREET SYNTEL SERVICES P.LTD, MUMBAI V. DCIT RG 8(3), MUMBAI

ITA 6912/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2947 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 13-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DINESH VYAS
• Keywords: Business income; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NO. 6912/MUM/2014 (ASSESSMENT YEAR:2010-11) STATE STREET SYNTEL SERVICES PRIVATE LIMITED (FORMERLY KNOWN AS SYNTEL SOURCING PVT. LTD.), B-101 TO 104, DELPHI, HIRANANDANI BUSINESS PARK, POWAI, MUMBAI 400 076 APPELLAN T VS. DY. COMMISSIONER OF INCOME-TAX, RANGE 8(3), MUMBAI RESPONDENT PAN: AAICS0964Q /BY APPELLANT : SHRI DINESH VYAS, A.R. /BY RESPONDENT : SHRI VACHASPATI TRIPATHI, D.R. /DATE OF HEARING : 08.06.2016 /DATE OF PRONOUNCEMENT : 24.06.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-18, MUMBAI, DA TED 22.08.2014 FOR A.Y. 2010-11 ON FOLLOWING GROUNDS: ITA NO.6912/MUM/14 A.Y. 10-11 [STATE STREET SYNTEL SERVICES P. LTD. VS. DCIT] PAGE 2 I ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) XVIII, MUMBAI (THE CIT(A)) HAS ERRED IN UPHOLDING/ CONFIRMING THE ORDER OF THE ASSISTANT COMMISSIONER OF INCOME TAX RANGE 8(3), MUMBAI (THE ACIT) OF NOT CONSIDERING THE APPELLANT COMPANYS CLAIM, THAT THE INTEREST INCOME AGGREGATING TO RS.12,86,93,787/- IS IN THE NATURE OF BUSINESS INCOME AND IS DERIVED FROM T HE INDUSTRIAL UNDERTAKING AND NOT ALLOWING DEDUCTION U /S 10A OF THE ACT IN RESPECT OF THE SAID INTEREST INCO ME. 2. THE ONLY ISSUE IS BEFORE US REGARDING THE CLAIM THAT INTEREST INCOME OF RS.12,86,93,787/- EARNED BY ASSE SSEE IS DERIVED FROM INDUSTRIAL UNDERTAKING AS BUSINESS INC OME AND NOT ALLOWING DEDUCTION U/S.10A OF THE ACT IN RESPEC T OF SAID INTEREST. IT WAS POINTED OUT THAT SIMILAR ISSUE AR OSE IN ASSESSEES OWN CASE IN EARLIER YEAR I.E. A.Y. 2009- 10 IN ITA NO.6026/MUM./2013, WHEREIN ISSUE HAS BEEN DECIDED I N FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT ICED THAT IDENTICAL DISPUTE INVOLVING ALLOWANCE OF ASSESSEE'S CLAIM OF DEDUCTION UNDER SECTION 10A IN RESPECT OF INTEREST INCOME WAS SUBJECT MATTER OF APPEAL BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2007-08 AND 2008-09. IN THE LATEST ORDER IN ITA NO.3743/MUM./2013, DATED 29TH FEBRUARY 2016, FOR ASSESSMENT YEAR 2008-09, THE TRIBUNAL HAS FOLLOWED ITS OWN DECISION FOR ASSESSMENT YEAR 2007-08 IN ITA NO.7610/MUM./2011 DATED 6TH JANUARY 2016, AND ALLOW ED ASSESSEE'S CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT IN RESPECT OF INTEREST INCOME. THE RELEVANT OBSERVA TIONS OF THE TRIBUNAL IN THIS REGARD ARE REPRODUCED BELOW:- '6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE ITA NO.6912/MUM/14 A.Y. 10-11 [STATE STREET SYNTEL SERVICES P. LTD. VS. DCIT] PAGE 3 MATERIAL AVAILABLE ON RECORD. SOLITARY ISSUE ARISIN G FOR CONSIDERATION IS WHETHER THE ASSESSEE IS ELIGIBLE F OR CLAIMING OF EXEMPTION UNDER SECTION 10A, IN RESPECT OF INTEREST INCOME EARNED BY IT. WHILE THE ASSESSEE HA S CLAIMED EXEMPTION UNDER SECTION 10A ON THE INTEREST INCOME OF RS.1,17,23,280, ON THE REASONING THAT IT WAS DERIVED FROM THE BUSINESS OF UNDERTAKING. PER- CONT RA, IT IS THE STAND OF THE DEPARTMENT THAT THE INTEREST INCOME HAVING NOT BEEN DERIVED FROM THE BUSINESS OF THE UNDERTAKING, IT IS TO BE ASSESSED AS INCOME FRO M OTHER SOURCES AND ASSESSEE IS NOT ELIGIBLE FOR CLAI MING DEDUCTION UNDER SECTION 10A. HOWEVER, AS COULD BE SEEN, SIMILAR ISSUE AROSE IN CASE OF ASSESSEE'S SIS TER CONCERN M/S. SYNTEL LTD. FOR THE ASSESSMENT YEARS 1997-98, 1998-99 AND 2001-02. THE TRIBUNAL, WHILE DECIDING THE ISSUE ACCEPTED ASSESSEE'S CLAIM BY ALLOWING DEDUCTION UNDER SECTION 10A, IN RESPECT OF INTEREST INCOME AS WELL AS SOME OTHER INCOME SUCH A S EXCHANGE FLUCTUATION GAIN AND REVERSAL OF PROVISION S. AGAINST SUCH ORDER OF THE TRIBUNAL, THE DEPARTMENT PREFERRED APPEAL BEFORE THE HIGH COURT VIDE INCOME TAX APPEALS NO.1974, 1976 AND 1978 OF 1009. THE HIGH COURT IN ORDER DATED 15 TH DECEMBER 2009, DISMISSED THE APPEAL OF THE DEPARTMENT REJECTING TH E CONTENTION THAT THE ISSUE IS COVERED BY THE DECISIO N OF THE HON'BLE SUPREME COURT IN LIBERTY INDIA LTD. V/S CIT. WHILE DOING SO, THE HON'BLE HIGH COURT OBSERVE D THAT NO SUBSTANTIAL QUESTION OF LAW ARISE OUT OF TH E APPEALS PREFERRED BY THE DEPARTMENT. AS COULD BE SEEN, FOLLOWING ORDERS OF THE CO-ORDINATE BENCH AND HIGH COURT IN CASE OF M/S. SYNTEL LTD. AS AFORESAID , THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 IN ITA NO.7610/MUM./2011 DATED 6TH JANUARY 2016, HAS ALLOWED DEDUCTION UNDER SECTION 10A, OBSERVING AS UNDER:- '3.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON ITA NO.6912/MUM/14 A.Y. 10-11 [STATE STREET SYNTEL SERVICES P. LTD. VS. DCIT] PAGE 4 RECORD; INCLUDING THE JUDICIAL DECISIONS CITED. WE FIND THAT THE VERY SAME ISSUE AS THE ISSUE BEFORE US HAS BEEN CONSIDERED AND DECIDED BY A CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF THE ASSESSEE'S SISTER CONCERN, M/S. SYNTEL LIMITED, IN ITA NO.3413/MUM/ 2007 DATED 31/08/2015 AT PARA 5 AND 5.1 THEREOF. THE CO-ORDINATE BENCH HAS HELD THAT INTEREST INCOME EARNED BY THE ASSESSEE HAS A DIRECT NEXUS AND WAS DERIVED FROM THE ASSESSEE'S BUSINESS AND WAS, THEREFORE, ENTITLED TO BE CONSIDERED FOR DEDUCTION U/S.10A OF THE ACT. FOLLOWING THE AFORESAID DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF M/S. SYNTEL LIMIT (SUPRA), WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) IN DIRECTING THE ASSESSING OFFICER T O CONSIDER THE INTEREST INCOME OF RS.53,23,340/- EARNED BY THE ASSESSEE IN THE RELEVANT PERIOD AS HAVING A DIRECT NEXUS WITH AND BEING DERIVED FROM ITS ITES BUSINESS AND, THEREFORE, TO INCLUDE IT WHILE COMPUTING THE ELIGIBLE DEDUCTION U/S.10A OF THE ACT. IT IS ACCORDINGLY ORDERED. CONSEQUENTLY, THE GROUNDS OF APPEAL RAISED BY REVENUE ARE DISMISSED.' 7. NO MATERIAL DIFFERENCE IN FACT FOR THE IMPUGNED ASSESSMENT YEAR HAS BEEN BROUGHT TO OUR NOTICE BY T HE LEARNED DEPARTMENTAL REPRESENTATIVE. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH RENDERED IN ASSESSEE'S OWN CASE REFERRED TO ABOVE, WE ALLOW ASSESSEE'S CLAIM OF DEDUCTION UNDER SECTION 10A. HOWEVER, IT IS OBSERVED THAT THE ASSESSING OFFICER HAD DISALLOWED CLAIM OF DEDUCTION UNDER SECTION 10A FOR AN AMOUNT OF RS.1,17,23,282, BEING THE INTEREST INCOME, WHEREAS, AS PER THE GROU ND OF APPEAL RAISED BEFORE US AND THE ORDER OF THE LEA RNED COMMISSIONER (APPEALS), THE INTEREST INCOME REFERRE D TO THEREIN IS RS.1,70,23,282. THE ASSESSING OFFICER IS DIRECTED TO ALLOW ASSESSEE'S CLAIM OF EXEMPTION ITA NO.6912/MUM/14 A.Y. 10-11 [STATE STREET SYNTEL SERVICES P. LTD. VS. DCIT] PAGE 5 UNDER SECTION 10A AFTER VERIFYING THE EXACT AMOUNT OF INTEREST INCOME.' THERE BEING NO MATERIAL DIFFERENCE IN FACTS BROUGHT TO OUR NOTICE BY THE LEARNED DEPARTMENTAL REPRESENTATI VE, RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE T RIBUNAL IN ASSESSEE'S OWN CASE, WE ALLOW ASSESSEE'S CLAIM OF D EDUCTION UNDER SECTION 10A IN RESPECT OF INTEREST INCOME OF RS.4,46,09,912. GROUND RAISED BY THE ASSESSEE IS AL LOWED. 2.1 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE O N BEHALF OF REVENUE. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING, WE ALLOW THE ASSESSEES CLAIM OF DEDUCTION U/S.10A OF THE ACT IN RESPECT OF INTEREST INCOME AS RAISED BY ASSESSEE . 3. AS A RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS THE 24 TH DAY OF JUNE, 2016. SD/- SD/- ( RAJESH KUMAR ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI: DATED 24/06/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. %&%'( ) / CONCERNED CIT 4. )- / CIT (A) 5.-./00'(, '( , %& / DR, ITAT, MUMBAI 6./4567 / GUARD FILE. BY ORDER / , / % , '( , %&