ITO, Bangalore V. M/s Offshore Analytics India Pvt. Ltd., Bangalore

ITA 737/BANG/2014

• Counselvise Citation: 73721114 RSA 2014
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 30-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 43B; 10

Judgement Text

ITA.737/BANG/2014 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE BEFORE SHRI. N. V. VASUDEVAN, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.737/BANG/2014 (ASSESSMENT YEAR : 2007-08) INCOME-TAX OFFICER, WARD 12(1), BANGALORE ..APPELLANT V. M/S. OFFSHORE ANALYTICS INDIA P. LTD, NO.34/1, PALM MEADOWS, AIRPORT ROAD, WHITEFIELD, BANGALORE 560 066 ..RESPONDENT PAN : AOSPP9579B ASSESSEE BY : SHRI. SACHIN MEHTA, CA REVENUE BY : SHRI.SUNIL KUMAR AGARWALA, JCIT HEARD ON : 05.08.2015 PRONOUNCED ON : 14.08.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY REVENUE, ITS GRIEVANCE IS THAT CIT (A) ALLOWED ENHANCED DEDUCTION U/S.10A OF THE INCOME-TAX ACT, 1 961 (THE ACT IN SHORT), TO THE ASSESSEE RELYING ON THE DECISION OF THE COORDIN ATE BENCH IN THE CASE OF BEARING POINT BUSINESS V. DCIT [MP.NO.45/BANG/2013, DT.05.07.2013). 02. FACTS APROPOS ARE THAT ASSESSEE HAD CLAIMED DED UCTION U/S.10A OF THE ACT WHICH WAS DULY ALLOWED TO IT. HOWEVER, THERE WAS A DISALLOWANCE OF ITA.737/BANG/2014 PAGE - 2 RS.2,60,21,089/-, U/S.40(A)(IA) OF THE ACT. ON SUC H DISALLOWANCE THE AO DID NOT ALLOW DEDUCTION U/S.10A OF THE ACT. 03. AGGRIEVED BY THE DISALLOWANCE AS WELL AS NON-GR ANT OF DEDUCTION U/S.10A ON THE ENHANCED PROFITS, ASSESSEE MOVED IN APPEAL B EFORE THE CIT (A). CIT (A) UPHELD THE ORDER OF THE AO IN SO FAR AS DISALLOWANC E U/S.40(A)(IA) OF THE ACT WAS CONCERNED. VIS-A-VIS CALCULATION OF DEDUCTION U/S. 10A OF THE ACT, CIT (A) HELD THAT SUCH DEDUCTION HAS TO BE GIVEN BASED ON THE EN HANCED PROFIT AFTER THE DISALLOWANCE. FOR COMING TO THIS CONCLUSION CIT (A ) RELIED ON THE DECISION OF COORDINATE BENCH IN THE CASE OF BEARING POINT BUSIN ESS (SUPRA). 04. NOW BEFORE US, LD. DR STRONGLY ASSAILING THE OR DER OF CIT (A), SUBMITTED THAT ENHANCED PROFITS ARISING OUT OF THE DISALLOWAN CE MADE WOULD NOT BE ELIGIBLE FOR CLAIMING DEDUCTION U/S.10A OF THE ACT. 05. PER CONTRA, LD. AR SUBMITTED THAT IN THE CASE O F BEARING POINT BUSINESS (SUPRA), THIS TRIBUNAL HAD CONSIDERED THIS ISSUE AN D ALLOWED SUCH CLAIM RELYING ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GEMPLUS JEWELLERY INDIA PVT. LTD [(2010) 330 ITR 175]. 06. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THIS TRIBUNAL IN THE CASE OF BEARING POINT BUSINESS (SUP RA) HAS HELD AS UNDER AT PARAS 4 TO 9.4 OF ITS ORDER : 4. IT WAS SUBMITTED BY THE LEARNED AR IN THE COURSE OF HEARING OF THIS M.P THAT THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMI SSIONS WITH REGARD TO GRANT OF DEDUCTION UNDER SECTION 1 OA OF THE ACT IN ITA.737/BANG/2014 PAGE - 3 RESPECT OF ADDITIONS/ DISALLOWANCES MADE IN THE ASSESSMENT ORDER AND RELIED ON THE FOLLOWING JUDGMENT/ORDERS OF THE HON'BLE HIGH COURT AND THE TRIBUNAL: I) CIT VS. GEMPLUS JEWELLERY INDIA LTD (2010) 330 ITR 0175 (BOM.) II) ITO VS. SAHASRA ELECTRONICS PVT LTD 2010-TIOL-89-ITAT-DEL III) INTERNATIONAL GOLD CO. LTD VS. I TO ITA NO.597/MUM/2010 DATED 15.09.2010 OF THE MUMBAI ITAT IV) PATNI TELECOM SOLUTIONS PVT LTD VS. DEPTT. OF INCOME TAX DATED 29 TH .JUNE, 2012 (HYDERABAD ITAT). 5. IT WAS FURTHER CONTENDED THAT THE DR IN HIS REPLY TO THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE HAS DISPUTED THE ASSESSEE'S STAND BY GIVING THE FOLLOWING SUBMISSIONS: 'THE ASSESSEE IN ITS WRITTEN SUBMISSIONS BEFORE THE HON'BLE IT AT HAS CONTESTED THAT DEDUCTION UNDER SECTION 10A IS TO BE ALLOWED ON THE ASSESSED INCOME. IN THI S CONNECTION IT IS SUBMITTED THAT AS PER THE PROVISIONS OF THE INCOME TAX ACT, THE DEDUCTION UNDER SECTION 10 A IS TO BE RESTRICTED TO THE MAXIMUM CLAIM MADE BY THE ASSESSEE IN FORM 56F AND IT CANNOT EXCEED THE ACTUAL CLAIM MADE BY THE ASSESSEE AS PER FORM 56F. 6. IT WAS CONTENDED THAT NON CONSIDERATION OF THE W RITTEN SUBMISSION IS A MISTAKE APPARENT FROM THE RECORD AND THE SAME HAS TO BE RECTIFIED. FOR THE ABOVE PROPOSITION THE LEARNED CO UNSEL RELIED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F RAHUL KUMAR BAJAT V. INCOME TAX OFFICER (1999) 69 ITD 1 (NAG TRIBUNAL SB). 7. THE LEARNED DR PRESENT WAS DULY HEARD. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS.AND PERUSED THE MATERIA! ON RECORD. AS RIGHTLY POINTED OUT BY THE LEARNED AR NON CON SIDERATION OF THE WRITTEN SUBMISSION IS A MISTAKE APPARENT FROM THE RECORD AND CAN BE RECTIFIED. MOREOVER AS PER RULE 24 OF THE ITAT RULES 1962 THE TRIBUNAL HAS TO NECESSARILY DISPOSE OF THE APPEAL O N MERITS. IF THE ASSESSEE DOES NOT APPEAR IN PERSON OR THROUGH HIS AUTHORIZED REPRESENTATIVE. THEREFORE, EVEN ASSUMING FOR A WHILE THAT NO ARGUMENT WAS PUT FORTH IN RESPECT OF GROUND NO.21, THE TRIBUNAL OUGHT TO HAVE DISPOSED OF THE GROUND ON MERITS UNLESS THE SAME WAS NOT PRESSED BY THE ASSESSEE. THERE IS NOTHING ON RECORD TO SUGG EST THE ABOVE SAID GROUND WAS NOT PRESSED IN THE COURSE OF HEARING. ITA.737/BANG/2014 PAGE - 4 HENCE WE PROCEED TO DISPOSE OF GROUND NO.21 ON MERITS 9. THE FACTS IN RE SPECT OF THE MERITS ARE AS FOLLOWS. THE ASSESSEE 18 UNIT IS REGISTERED UNDER THE STPI AUTHORITIES. PROFITS OF THE STPI UNITS ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS MADE CERTAIN ADDITIONS/ DISALLOWANCES. DISALLOWANCE SO MADE HAS RESULTED IN THE ENHANCEMENT OF THE INCOME OF THE STPI UNIT. HOWEVER. DEDUCTION UNDER SECTION LOA OF THE ACT WAS NOT ALLOWED IN RESPECT OF THE ADDITIONS MADE IN THE ORDER. WE ARE OF THE VIEW THAT THE DEDUCTIONS UNDER SECTION 10 A OUGHT TO BE ALLOWED IN RESPECT OF THE INCOME ASSESSED IN THE ASSESSMENT ORDER AND THE ABOVE VIEW HAS A SUPPORT OF THE FOLLOWING JUDICIAL DECISIONS: 9.1 IN ITO VA, SAHSRA ELECTRONICS P LTD 2010-TIOL-8 9-ITAT-DEL THE ASSESSING OFFICER DISALLOWED CERTAIN EXPENDITURE. HOWEVER, DEDUCTION UNDER SECTION LOA WAS NOT ALLOWED IN RESPECT OF THE ASSESSED INCOME FOR THE REASON THAT DEDUCTION UNDER SECTION 10 A AS MENTIONED IN FORM 56F CANNOT BE DISTURBED. DEDUCTION UNDER SECTION 10 A WAS THEREFORE, RESTRICTED TO THE EXTENT OF CLAIM AS CERTIFIED IN FORM 56F. ON APPEAL, THE TRIBUNAL HELD THAT DEDUCTION UNDER SECTION 10A SHOULD BE ALLOWED IN RESPECT OF PROFITS AS RECOMPUTED BY THE ASSESSING OFFICER. 9.2 IN CIT VS.G EMPLUS JEWELLERY INDIA LTD (2010 ) ITR 0175 (BOMBAY) ONE OF THE QUESTION RAISED BY THE REVENUE WAS AS UNDER. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE TRIBUNAL TUAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO GRANT THE EXEMPTION UNDER SECTION 10A OF THE ACT ON THE ASSESSED INCOME, WHICH WAS ENHANCED DUE TO DISALLOWANCE OF EMPLOYER'S AS WELL AS EMPLOIJEEE CONTRIBUTION TOWARDS PF/ ESIC . 9.3 IN RESPECT OF THE ABOVE QUESTION, IT WAS HELD : 'AS A MATTER OF FACT THE QUESTION OF LAW WHICH IS FORMULATED BY THE REVENUE PROCEEDS ON THE BASIS THAT THE ASSESSED INC OME WAS ENHANCED DUE TO THE DISALLOWANCE OF THE EMPLOYER'S AS WELL AS THE EMPLOUEE'S CONTRIBUTION. TOWARDS PF/ESIC AND THE ONLY QUESTION WHICH IS CANVASSED ON BEHALF OF THE REVENUE IS WHETHER ON THAT BASIS THE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO GRANT THE EXEMPTION UNDER SECTION 10A. ON THIS POSITION, IN THE PRESENT CASE IT CANNAT BE DISPUTED THAT THE NET CONSEQUENCE OF THE DISALLOWANCE OF THE EMPLOYER'S AND THE EMPLOYEE 1 S ITA.737/BANG/2014 PAGE - 5 CONTRIBUTION IS THAT THE BUSINESS PROFITS HAVE TO T HAT EXTENT BEEN ENHANCED. THERE WAS AS WE HAVE ALREADY NOTED, AN ADD BACK BY THE ASSESSING OFFICER TO THE INCOME. ALL PROFITS OF THE UNIT OF THE ASSESSEE HAVE BEEN DERIVED FROM MANUFACTURING ACTIVITY. THE SALARIES PAID BY THE CSSESSEE, IT HAS NET BEEN DISPUTED, RELATE TO THE MANUFACTURINQ ACTIVITY. THE DISALLOWANCE OF THE PF / ESIC PAYMENTS HAS BEEN MADE BECAUSE OF THE STATUTORY PROVISIONS, SECTION 43B IN THE CASE OF THE EMPLOYERS CONTRIBUT ION AND SECTION 36(V) READ WITH SECTION 2(24)(X) IN THE CAS E OF THE ERNPLOYEE'E CONTRIBUTION WHICH HAS BEEN DEEMED TO B E THE INCOME OF THE ASSESSEE, THE PLAIN CONSEQUENCE OF THE DISALLOWANCE AND THE ADD BACK THAT HAS BEEN MADE BY THE ASSESSING OFFICER IS AN INCREASE IN THE BUSINESS PROFITS OF THE ASSESSEE. THE CANTENTIO N 0/ THE REVENUE THAT IN COMPU.TING THE DEDUCTION UNDER SECTION IDA THE ADDITION MADE 011. ACCOUNT OF THE DISALLOWANCE OJ THE PF/ ESJC PAYMENTS AUGHT TO BE IQNORED CANNOT BE ACCEPTED. NO STATUTORY PROVISION TO THAT EFFECT HAVING BEEN MADE;. THE PLAIN CONSEQUENCE OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER MUST FOLLOU). THE SECOND QUESTION SHALL ACCRORDINGLY STAND ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE'. THE ABOVE DECISION WAS FOLLOWED IN INTERNATIONAL GO LD CO. LTD VS. ITO (ITA NO.597/MUM/2010 DATED 15.09.2010 OF THE MU MBAI ITAT. 9.4 IN VIEW OF THE ABOVE JUDGMENT/ORDERS OF THE HON BLE HIGH COURT, AND THE TRIBUNAL, WE DECIDE GROUND NO.21 RAI SED IN THE APPEAL IN FAVOUR OF THE ASSESSEE. IN THE ESSENCE W E HOLD THAT DEDUCTION UNDER SECTION 10A OF THE ACT IS TO BE ALL OWED ON THE ASSESSED INCOME INSTEAD OF THE INCOME DISCLOSED IN FORM 56F. IT IS ORDERED ACCORDINGLY. 07. IN OUR OPINION, THE ISSUE RAISED IS SQUARELY CO VERED BY THE ABOVE DECISION. CIT (A) WAS JUSTIFIED IN PLACING RELIANCE ON THE AB OVE DECISION FOR GIVING RELIEF TO THE ASSESSEE. WE DO NOT FIND ANY REASON TO INTE RFERE. 08. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 14TH DAY OF A UGUST, 2015. SD/- SD/- (N. V. VASUDEVAN) (ABRAHAM P GEO RGE) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA.737/BANG/2014 PAGE - 6