SONATA SOFTWATE LTD, MUMBAI V. ASST CIT RG 7(2), MUMBAI

ITA 8032/MUM/2011

• Counselvise Citation: 803219914 RSA 2011
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 07-10-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 30-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Business income; Depreciation; Tangible material; Difference of opinion; Unabsorbed depreciation; Change of opinion; Reassessment proceedings
• Section: 147; 148; 10; 80C; 143(3)

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI . . , ! ' #'' '$ , % ! & BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : 8032 / / 2011 A.Y. 2005-2006 ITA NO. : 8032/MUM/2011 (ASSESSMENT YEAR: 2005-2006) M/S SONATA SOFTWARE LTD., 208, T.V. INDUSTRIAL ESTATE, S.K. AHIRE MARG, WORLI, MUMBAI -400 025 VS ASST. COMMISSIONER OF INCOME TAX -7(2), ROOM NO. 624, M.K. RD., MUMBAI -400 020 (APPELLANT) (RESPONDENT) . : 7739 / / 2011 A.Y. 2005-2006 ITA NO. : 7739/MUM/2011 (ASSESSMENT YEAR: 2005-2006) ASST. COMMISSIONER OF INCOME TAX -7(2), MUMBAI -400 020 VS M/S SONATA SOFTWARE LTD., MUMBAI -400 025 .: PAN: AABCS 8459 D (APPELLANT) (RESPONDENT) APPELLANT- REVENUE BY : SHRI PITAMBAR DAS RESPONDENT- ASSESSEE BY : SHRI VIJAY MEHTA /DATE OF HEARING : 07-10-2013 !' / DATE OF PRONOUNCEMENT : 11-10-2013 * O R D E R #'' '$ , : PER VIVEK VARMA, JM: THE CROSS APPEALS FILED BY THE ASSESSEE & THE REVENUE ARE AGAINST THE ORDER OF CIT(A) 13, MUMBAI, DATED 13.07.2011. ITA 8032/MUM/2011 ( ASSESSEES APPEAL, AY 2005-06) : THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE STAND OF THE LEARNED ASSESSING M/S SONATA SOFTWARE LTD. ITA 8032/MUM/2011 ITA 7739/MUM/2011 2 OFFICER (A.O.)S IN REOPENING OF THE ASSESSMENT UND ER SECTION 147 OF THE ACT. THE APPELLANT PRAYS THAT THE REOPENING OF ASSE SSMENT UNDER SECTION 147 OF THE ACT MAY BE DECLARED AS BAD IN LA W AND REASSESSMENT ORDER MAY PLEASE BE CANCELLED. 2. WITHOUT PREJUDICE TO GROUND NO. 1, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE LOSS OF AN UNIT ELIGIBLE TO CLAIM DEDUCTION UNDER SECTIO N 10A OF THE ACT AMOUNTING TO RS. 43,88,484/- CANNOT BE SET OFF AGAI NST OTHER BUSINESS OF THE ASSESSEE EACH OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJ UDICE TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, OMIT OR ALTER GR OUNDS OF APPEAL BEFORE OR DURING THE HEARING OF THE APPEAL. 2. GROUND NO. 2 PERTAINS TO NON ALLOWANCE OF SET OFF OF LOSS INCURRED BY UNIT ELIGIBLE UNDER SECTION 10A AGAINST NORMAL BUSINESS PROFIT. 3. THE FACTS ARE THAT ORIGINAL ASSESSMENT WAS FRAMED UND ER SECTION 143(3) ON 30.12.2008. 4. IN THE RETURN FILED ORIGINALLY, THE ASSESSEE COMPANY HA D SHOWN 9 ELIGIBLE UNITS FOR THE CLAIM OF EXEMPTION UNDER SECTION 10A. OU T OF THESE EIGHT UNITS HAD SHOWN PROFIT OF RS. 18,41,22,738/- AND ONE UNIT DECLARED A LOSS OF RS. 43,88,484/-. IN EFFECT, THE ASSESSEE D ECLARED INCOME AT RS. 17,97,34,255/-. THE ASSESSEE, IN ITS COMPUTATIO N ADJUSTED THE LOSS OF ELIGIBLE UNIT AGAINST THE PROFIT OF NON ELIGIBLE UNIT SHOWN AT RS. 53,31,913/-, THEREBY SHOWN A NET BUSINESS P ROFIT / INCOME AT RS. 9,43,428/-. 5. IN THE ASSESSMENT PROCEEDINGS THE CORRECTNESS OF T HE CLAIM WAS SOUGHT FOR BY THE AO. THE ASSESSEE GAVE A DETAILED REP LY ON THE CORRECTNESS OF THE CLAIM THAT IT HAD RIGHTLY SET OFF LOSS O N ELIGIBLE UNIT AGAINST THE PROFIT OF NON ELIGIBLE UNIT. THE ASSESSEE IN ITS SU BMISSIONS (AS REPRODUCED IN THE ASSESSMENT ORDER) CITED THE CASE OF TATA CONSULTANCY SERVICES LTD. VS. ACIT IN ITA NO. 590/BANG/20 08, WHEREIN, DECISION IN THE CASE OF ACIT VS. YOKOGAWA INDIA LT D., REPORTED IN 111 TTJ 548 (BANG) WAS CITED AND REPRODUCED IN THE AS SESSMENT ORDER, WHEREIN IT WAS HELD, SECTION 1OA OF THE ACT MENTIONS THE DEDUCTION OF S UCH PROFITS AND GAINS AS DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS M/S SONATA SOFTWARE LTD. ITA 8032/MUM/2011 ITA 7739/MUM/2011 3 OR COMPUTER SOFTWARE. THIS SECTION DOES NOT REFER T HAT SUCH PROFITS AND GAINS DERIVED BY THE UNDERTAKING FROM THE EXPORT WI LL NOT BE INCLUDED IN THE TOTAL INCOME. UNDER SECTION 10, THE OPERATIVE P ART OF THE SECTION IS THAT ANY INCOME FALLING WITHIN THE CLAUSE IN SECTIO N 10 SHALL NOT BE INCLUDED IN COMPUTING THE TOTAL INCOME. FROM WORDIN G OF SECTIONS 10 AND 10A, IT IS CLEAR THAT THE LEGISLATURE WAS FULLY AWARE OF THE MEANING OF THE WORDS AMOUNT NOT TO BE INCLUDED AND THE DED UCTION TO BE ALLOWED. HENCE, THE CONTENTION THAT SUBSTITUTED SE CTION 1OA SHOULD ALSO BE INTERPRETED TO MEAN THAT PROFITS IS MENTION ED UNDER SECTION 1OA SHOULD NOT BE INCLUDED IN THE TOTAL INCOME CANNOT B E ACCEPTED. SECTION 1OA SPECIFICALLY STATES THAT A DEDUCTION IS TO BE G IVEN. THE DEDUCTION IS IN RESPECT OF PROFITS AND GAINS AND THE WORD SUCH M ENTIONED BEFORE THE PROFITS AND GAINS REFERS TO THE PROFITS AND GAINS O F THE UNDERTAKING, WHICH IS ENGAGED IN THE EXPORT OF ARTICLES OR THING S OR COMPUTER SOFTWARE. BEFORE THE WORD UNDERTAKING, IT IS QUAL IFIED BY THE WORD AN. IT MEANS THAT IT REFERS TO A SINGLE UNDERTAKING. TH E WORDS PROFITS AND GAINS AND ITS COMPUTATION ARE MENTIONED UNDER SECT ION 29. AS PER SECTION 29, PROFITS AND GAINS OF BUSINESS OR PROFES SION ARE TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINE D UNDER SECTIONS 30 TO 43D. SECTION 70 GOVERNS THE SETTING OFF A LOS S FROM ONE SOURCE AGAINST INCOME FROM ANOTHER SOURCE UNDER THE SAME H EAD OF INCOME. SECTION 1OA IS NOT PART OF THE SECTION MENTIONED IN SECTION 29. HENCE, BUSINESS LOSSES OF THE UNDERTAKING WHOSE INCOME IS NOT EXEMPT UNDER SECTION 10A CANNOT HE SET OFF TO ASCERTAIN THE PROF ITS AND GAINS DERIVED BY AN UNDERTAKING FROM THE EXPORT OF COMPUTER SOFTW ARE. HENCE, BUSINESS LOSSES OF OTHER UNITS WILL NOT BE SET OFF AGAINST THE PROFITS OF THE UNDERTAKING ENGAGED IN EXPORT OF COMPUTER SOFT WARE FOR THE PURPOSES OF DETERMINING THE ALLOWABLE DEDUCTION UND ER SECTION 1OA. UNABSORBED BUSINESS LOSS IS TO BE SET OFF UNDER SEC TION 72 AND THE SAME IS NOT MENTIONED UNDER SECTION 29. HENCE, UNAB SORBED BUSINESS LOSSES WILL NOT BE SET OFF AGAINST THE PROFITS OF T HE UNDERTAKING ENGAGED IN THE EXPORT OF COMPUTER SOFTWARE FOR THE PURPOSES OF ASCERTAINING THE DEDUCTION ADMISSIBLE UNDER SECTION 1OA. AS UNABSORB ED BUSINESS LOSSES OF OTHER UNITS CANNOT BE SET OFF AND THEREFO RE UNABSORBED DEPRECIATION WHICH IS TO HE SET OFF AFTER THE UNABS ORBED BUSINESS LOSS AS PER SECTION 72(2,) ALSO CANNOT BE SET OFF FOR AS CERTAINING THE DEDUCTION UNDER SECTION 10A. 6. THE ASSESSEE ALSO CITED CBDT CIRCULAR 308 DATED 29.06 .1981. THESE ARGUMENTS DID NOT FIND FAVOUR OF THE AO, WHO HELD T HAT LOSS IN ELIGIBLE UNIT HAD TO BE ADJUSTED AGAINST THE PROFIT OF ELIGIBLE UNITS AND, HE THEREFORE, RECOMPUTED THE BUSINESS PROFIT AT RS. 53,31,9 13/-, I.E. PROFITS PERTAINING TO OTHER/NON ELIGIBLE UNITS. 7. THE ASSESSEE APPROACHED THE CIT(A), WHO AFTER CONSIDE RING THE DETAILED SUBMISSIONS OF THE ASSESSEE, MODIFIED THE WORKING O F THE AO AND EXCLUDED THE LOSS IN ELIGIBLE UNIT AT RS. 43,88,484/-, AND ALLOWED THE SAME TO BE CARRIED FORWARD IN THE NEXT YEAR. M/S SONATA SOFTWARE LTD. ITA 8032/MUM/2011 ITA 7739/MUM/2011 4 8. AGGRIEVED BY THE ORDERS OF THE REVENUE AUTHORITIES, TH E ASSESSEE IS NOW BEFORE THE ITAT. 9. BEFORE US, THE AR SUBMITTED A FACT SHEET TO EXPLAIN THE THREE DIFFERENT VERSIONS OF WORKING, AMOUNTS IN INR AS PER SR. NO. PARTICULARS ASSESSEE ASSESSING OFFICER CIT(A) 1 TOTAL PROFITS OF 8 UNITS ELIGIBLE UNDER SECTION 10A 17,87,90,827 17,87,90,827 17,87,90,827 2 LOSS OF HYDERABAD UNIT ELIGIBLE UNDER SECTION 10A (43,88,484) (43,88,484) 3 PROFIT FROM NON-10A UNIT 53,31,913 53,31,913 53,31,913 4 TOTAL BUSINESS INCOME 17,97,34,256 17,97,34,256 18,41,22,740 5 10A DEDUCTION CLAIMED/ALLOWED 17,87,90,827 17,44,02,343 (17,87,90,827- 43,88,484 17,87,90,827 6 BUSINESS INCOME 9,43,428 53,31,913 53,31,913 7 LOSS TO BE CARRIED FORWARD (43,88,484) 10. THE AR, THEREFORE, SUBMITTED THAT THE CLAIM OF THE ASSE SSEE AS PER THE WORKING WAS CORRECT AND THAT THE REVENUE AUT HORITIES ERRED IN INTERPRETING THE LAW, AS SUCH AND VARIOUS JUDICIAL DECISIONS CITED BY THE ASSESSEE BEFORE THE REVENUE AUTHORITIES, WHICH CLEARL Y HELD THAT EXEMPTION PROVISIONS UNDER SECTION 10, 10A ETC. ARE TO BE TREATED SEPARATELY THEN THE PROVISIONS DEALING WITH COMPUTATION. T HE AR REFERRED TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN T HE CASE OF CIT VS BLACK AND VEATCH CONTROLLING PVT. LTD. REPORTED IN 348 ITR 72 (BOM), WHEREIN IT WAS HELD, SECTION 10A OF THE INCOME-TAX ACT, 1961, IS A PROV ISION WHICH IS IN THE NATURE OF A DEDUCTION AND NOT AN EXEMPTION. THE DED UCTION UNDER SECTION 10A HAS TO BE GIVEN EFFECT TO AT THE STAGE OF COMPUTING THE PROFITS AND GAINS OF BUSINESS. THIS IS ANTERIOR TO THE APPLICATION OF THE PROVISIONS OF SECTION 72 WHICH DEALS WITH THE CARRY FORWARD AND SET OFF OF BUSINESS LOSSES. A DISTINCTION HAS BEEN MADE BY THE LEGISLATURE WHILE INCORPORATING THE PROVISIONS OF CHAPTER VI-A. SECTION 80A(1) STIPULATES THAT IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE, THERE SHALL BE ALLOWED FROM HIS GROSS TOTAL INCOME, IN ACCORDAN CE WITH AND SUBJECT TO THE PROVISIONS OF THE CHAPTER, THE DEDUCTIONS SP ECIFIED IN SECTIONS 80C TO 80U. SECTION 80B(5) DEFINES FOR THE PURPOSES OF CHAPTER VI-A 'GROSS TOTAL INCOME' TO MEAN THE TOTAL INCOME COMPU TED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, BEFORE MAKING ANY D EDUCTION UNDER THE CHAPTER. THEREFORE, THE DEDUCTION UNDER SECTION 10A HAS TO BE GIVEN AT THE STAGE WHEN THE PROFITS AND GAINS OF BUSINESS AR E COMPUTED IN THE FIRST INSTANCE. THE TRIBUNAL WAS RIGHT IN HOLDING T HAT THE DEDUCTION UNDER SECTION 10A IN RESPECT OF THE ALLOWABLE UNIT UNDER SECTION 10A HAS TO BE ALLOWED BEFORE SETTING OFF BROUGHT FORWAR DED LOSSES OF A NON- SECTION 10A UNIT M/S SONATA SOFTWARE LTD. ITA 8032/MUM/2011 ITA 7739/MUM/2011 5 11. HE ALSO REFERRED TO THE DECISION OF HINDUSTAN UNILEVER LTD. VS DCIT REPORTED IN 325 ITR 102, WHEREIN HONBLE BOMBAY H IGH COURT HELD, (IV) THAT THE ASSESSING OFFICER WAS PLAINLY IN ER ROR IN PROCEEDING ON THE BASIS THAT BECAUSE THE INCOME WAS EXEMPTED, THE LOS S WAS NOT ALLOWABLE. ALL THE FOUR UNITS OF THE ASSESSEE WERE ELIGIBLE UNDER SECTION 10B. THREE UNITS HAD RETURNED A PROFIT DURING THE C OURSE OF THE ASSESSMENT YEAR, WHILE THE CRAB SICK UNIT HAD RETUR NED A LOSS. THE ASSESSEE WAS ENTITLED TO A DEDUCTION IN RESPECT OF THE PROFITS OF THE THREE ELIGIBLE UNITS WHILE THE LOSS SUSTAINED BY TH E FOURTH UNIT COULD BE SET OFF AGAINST THE NORMAL BUSINESS INCOME. IN THES E CIRCUMSTANCES, THE BASIS ON WHICH THE ASSESSMENT IS SOUGHT TO BE REOPE NED WAS CONTRARY TO THE PLAIN LANGUAGE OF SECTION 10B. THE REASSESSM ENT PROCEEDINGS WERE NOT VALID AND WERE LIABLE TO BE QUASHED. 12. THE AR SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISIONS, AS CITED. 13. THE DR PLACED RELIANCE ON THE DECISIONS OF THE REVENUE AUTHORITIES. 14. WE HAVE HEARD THE RIVAL ARGUMENTS AND HAVE PERUSED THE DETAILS SUBMITTED AND CASES CITED BEFORE US. THE ISSUE BEFORE US IS QUITE CLEAR, I.E. WHETHER THE LOSS MAKING ELIGIBLE UNIT IS TO BE ADJUSTED AGAINST HE INCOMES OF THE ELIGIBLE UNITS OR NON ELIGIBLE UNITS. THIS ISSUE H AS BEEN DEALT WITH BY THE VARIOUS FORA, DECISIONS AS REPRODUCED BY THE AO IN ASSESSMENT ORDER AND THE CASES CITED BEFORE US. WE MAY MENTION THAT THE AO ERRED IN IMPORTING THE PROVISIONS OF SECTIONS 70 & 71, BECAUSE, THIS WAS NOT THE CASE, WHERE THERE WAS INTRA HEAD SET OFF OR INTER HEAD SET OFF. THIS WAS THE CASE OF COMPUTATION OF BUSINESS INCOME . THE DISTRIBUTION BEING DRAWN IN UNITS ELIGIBLE OF EXEMPTION UNDER SECTION 10A ETC., WHEREIN THE PROFITS AND GAINS ARE DERIVED BY AN UND ERTAKING FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTW ARE . THE VARIOUS COURTS HAVE EXPLAINED THAT PROFITS AND GAINS OF ASSESSEE S UNDERTAKING HAS TO BE TAKEN INTO CONSIDERATION. THEREFORE, IF THERE IS A LOSS THEN IT HAS TO BE REMOVED. THIS IS EXACTLY, WHAT THE DECISIONS O F BANGALORE ITAT IN THE CASE OF TATA CONSULTANCY SERVICES LTD ( SUPRA ) AND THE M/S SONATA SOFTWARE LTD. ITA 8032/MUM/2011 ITA 7739/MUM/2011 6 HONBLE BOMBAY HIGH COURT IN THE CASE OF BLACK AND VEAT CH ( SUPRA ) AND HINDUSTAN UNILEVER LTD. (SUPRA) HAS TAKEN. 15. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF THE COORDINATE BENCH AT BANGALORE AND HONBLE BOMBAY HIGH C OURT, REVERSE THE ORDERS OF THE REVENUE AUTHORITIES AND DIRE CT THE AO TO ALLOW THE CLAIM UNDER SECTION 10A AS COMPUTED BY THE ASSESSEE. GROUND NO. 2 IS ALLOWED. 16. GROUND NO. 1 PERTAINS TO REOPENING OF THE REGULAR A SSESSMENT FRAMED UNDER SECTION 143(3). 17. THE FACTS ARE THAT THE REGULAR ASSESSMENT UNDER S ECTION 143(3) WAS FRAMED ON 30.12.2008. THE AO INITIATED REASSESSMENT P ROCEEDINGS BY THE ISSUE OF NOTICE UNDER SECTION 148 ON 29.03.2010, WH ICH WAS SERVED ON THE ASSESSEE ON 30.03.2010. AS A PRELUDE TO T HE INITIATION, THE AO RECORDED THE FOLLOWING REASONS: 2.2 THE REASONS FOR RE-OPENING THE ASSESSMENT UNDE R SECTION. 147 ARE AS UNDER: ASSESSEE HAS CLAIMED EXEMPTION /DEDUCTION UNDER SE CTION. 1OA OF RS. 17,87,90,827/- AND IT HAS SHOWN INCOME FROM BUSINES S AT RS. 17,97,34,255/-. SECTION 1CA ALLOWS FOR DEDUCTION OF PROFIT & GAINS FROM THE TOTAL INCOME OF THE ASSESSEE. FOR COMPUTING TOT AL INCOME THE GROSS TOTAL INCOME IS TO BE COMPUTED FIST. FOR COMPUTING GROSS TOTAL INCOME THE INCOME UNDER EACH HEAD IS TO BE COMPUTED FIRST. THEN EFFECT OF SECTION 70 & 71 IS TO BE GIVEN FOR INTRA HEAD AND I NTER HEAD SET OFF OF LOSSES BEFORE COMPUTING THE TOTAL INCOME. THE ASSESSEE HAS CLAIMED 9 UNITS ELIGIBLE FOR DEDUC TION UNDER SECTION. 10A. OUT OF THESE 9 UNITS 8 UNITS HAVE MADE PROFIT OF RS. 18,41,22,738/- AS PER THE PROVISIONS OF I.T. ACT WH ILE REMAINING 1 UNIT HAS INCURRED A LOSS OF RS. 43,88,484/-. THE ASSESSE E HAS NOT SET OFF THE LOSS OF 1 UNIT AGAINST THE PROFIT OF 9 UNITS FOR WO RKING OUT OF ITS CLAIM OF DEDUCTION UNDER SECTION 10A. SECTION 10A PROVIDES F OR DEDUCTION OF PROFITS AN GAINS OF ELIGIBLE UNDERTAKINGS. SINCE TH E PROFIT INCLUDES LOSSES, THE INCOME OF ALL ELIGIBLE UNDERTAKINGS ARE TO BE AGGREGATED TO ARRIVE AT THE ELIGIBLE DEDUCTION. HOWEVER, THE ASSE SSEE HAS SET OFF THE LOSSES OF UNITS ELIGIBLE FOR DEDUCTION UNDER SECTIO N. 1OA AGAINST ITS OTHER TAXABLE PROFITS RATHER THAN PROFIT OF 1OA UNITS, TH EREBY CLAIMING A BENEFIT NOT INTENDED OR PROVIDED UNDER THE ACT. ACCORDINGLY ELIGIBLE DEDUCTION UNDER SECTION. 1OA W OULD BE AS UNDER: DEDUCTION CLAIMED UNDER SECTION. 1OA RS. 17,87,90,827/- LESS: LOSS OF 1 ELIGIBLE UNIT RS. 43,88,484 /- ELIGIBLE DEDUCTION UNDER SECTION 1OA RS. 17,44,02 ,343/- M/S SONATA SOFTWARE LTD. ITA 8032/MUM/2011 ITA 7739/MUM/2011 7 =============== THUS THE ASSESSEE SHOULD HAVE REDUCED THE LOSS OF T HE ELIGIBLE UNIT FROM THE DEDUCTION CLAIMED UNDER SECTION. 10A FOR THE 8 PROFIT MAKING ELIGIBLE UNITS. EVEN OTHERWISE, SINCE THE LOSS HAS INCURRED IN THE UNIT WHICH IS ELIGIBLE FOR EXEMPTION UNDER SECTION. 1OA AND INCOM E INCLUDES BOTH PROFITS AS WELL AS LOSS THE SAME CAN NOT HE SET OFF AGAINST THE TAXABLE BUSINESS INCOME. THE SAME ISSUE HAS BEEN EXAMINED I N DETAIL DURING THE ASSESSMENT PROCEEDINGS FOR A.Y. 2006-07 AFTER E XAMINING THE UNIT- WISE ACCOUNTS THE CLAIM OF THE ASSESSEE HAS NOT BEE N ALLOWED. 18. BEFORE THE AO, THE ASSESSEE SUBMITTED ITS OBJECTIONS , WHICH WERE REJECTED. BEFORE THE CIT(A), THE ASSESSEE REITERATED ITS S UBMISSIONS AND SUBMITTED THAT ALL THE MATERIAL FACTS WERE AVAILABLE ON RECO RD AND THAT THE AO HAS NOT BROUGHT ANY TANGIBLE MATERIAL TO JUSTIFY THE FORMATION OF BELIEF LEADING TO REASONS TO BELIEVE THAT THERE WAS ANY ESCAPEMENT OF INCOME, RATHER, IT WAS MERELY A CHANGE OF OPINION ON THE FACTS ALREADY ON RECORD. 19. THE ASSESSEE PLACED RELIANCE ON VARIOUS DECISIONS BEFOR E THE REVENUE AUTHORITIES, WHICH WERE REJECTED AND IT WAS HELD THAT THERE WAS NEITHER ANYTHING NEW OR THE CHANGE IN LAW OR CHANGE IN LAW OR CHANGE IN JUDICIAL DECISIONS CONTRARY TO THE ALREADY EXISTIN G DECISIONS, WHICH WOULD JUSTIFY THE INITIATION OF REASSESSMENT PROCEEDINGS. 20. THE DR RELIED ON THE ORDERS OF THE AO AND JUSTIFIED TH E REOPENING. 20. WE HAVE HEARD THE RIVAL ARGUMENTS AND HEAVE PERUS ED THE VARIOUS CASE LAWS CITED. THE FIRST AND FOREMOST REASON WHICH JUSTIFIES THE INITIATION IS FAILURE ON THE PART OF THE ASSESSEE TO FU LLY AND TRULY DISCLOSE MATERIAL FACTS. THIS CANNOT BE THE FACT WITH THE AO , BECAUSE, THE ASSESSEE HAD COMPUTED ITS INCOME FOLLOWING THE RATIO O F THE DECISIONS RENDERED BY VARIOUS FORA, AND AS PER LAW. 21. THE FACT IS ALSO PRONOUNCED IN THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN UNILEVER LTD (SUPRA), WHERE THERE WERE IDENTICAL FACTS AND THE HONBLE BOMBAY HIGH COURT QU ASHED THE REASSESSMENT PROCEEDINGS M/S SONATA SOFTWARE LTD. ITA 8032/MUM/2011 ITA 7739/MUM/2011 8 (IV) THAT THE ASSESSING OFFICER WAS PLAINLY IN ER ROR IN PROCEEDING ON THE BASIS THAT BECAUSE THE INCOME WAS EXEMPTED, THE LOS S WAS NOT ALLOWABLE. ALL THE FOUR UNITS OF THE ASSESSEE WERE ELIGIBLE UNDER SECTION 10B. THREE UNITS HAD RETURNED A PROFIT DURING THE C OURSE OF THE ASSESSMENT YEAR, WHILE THE CRAB SICK UNIT HAD RETUR NED A LOSS. THE ASSESSEE WAS ENTITLED TO A DEDUCTION IN RESPECT OF THE PROFITS OF THE THREE ELIGIBLE UNITS WHILE THE LOSS SUSTAINED BY TH E FOURTH UNIT COULD BE SET OFF AGAINST THE NORMAL BUSINESS INCOME. IN T HESE CIRCUMSTANCES, THE BASIS ON WHICH THE ASSESSMENT IS SOUGHT TO BE REOPENED WAS CONTRARY TO THE PLAIN LANGUAGE OF SECT ION 10B. THE REASSESSMENT PROCEEDINGS WERE NOT VALID AND WERE LI ABLE TO BE QUASHED. 22. WE, THEREFORE, RESPECTFULLY FOLLOWING THE PLETHORA OF DEC ISIONS AS CITED IN THE SUBMISSIONS BEFORE THE CIT(A), WHICH WE HAVE P ERUSED AND TAKEN INTO CONSIDERATION, AND FOLLOWING DECISION IN THE CASE OF HINDUSTAN UNILEVER LTD., QUASH THE INITIATION AND REASSESSME NT PROCEEDINGS. 23. SINCE THE REASSESSMENT PROCEEDINGS HAVE BEEN QUAS HED, ALL SUBSEQUENT AND CONSEQUENT PROCEEDINGS ARE ANNULLED. 24. GROUND NO. 1 IS THEREFORE, ALLOWED. 25. IN THE RESULT, THE APPEAL AS FILED BY THE ASSESSEE IS ALLOWED. ITA 7739/MUM/2011 (REVENUES APPEAL, AY 2005-06) : 26. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE SET OFF LO SS OF RS. 43,88,484/- OF ONE 10A UNITS AGAINST THE PROFIT OF OTHER 10A UNITS IGNORING THE FACT THAT SECTION 10A OF THE ACT ALLOWS DEDUCTION OF PROFITS AND GAIN FROM THE TOTAL INCOME OF THE ASSESSEE AND BEFORE COMPUTING THE TOT AL INCOME, THE EFFECTS OF SECTIONS 70 & 71 OF THE ACT IS TO BE GIV EN FOR SET OFF OF LOSSES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) WAS NOT JUSTIFIED IN RECORDING THE FACT THAT SECTION 10A IS NOT A PART OF VI AND SO PROVISIONS OF SECTION 70/71 SHALL NOT GOVERN THE PROVISION OF SECTION 10A IGNORING THE FACTS THAT FR OM APRIL, 2000 ONWARDS, SECTION 10A PROVIDED TO A ASSESSEE THE TAX HOLIDAY BY WAY OF DEDUCTION AND DEDUCTION IS GRANTED TO ANY PROFITS A ND GAINS FROM THE TOTAL INCOME AFTER SETTING OFF LOSSES OF THE OTHER UNITS 27. THE ABOVE MENTIONED GROUNDS WERE ALREADY DEALT WITH ADJUDICATED AND DECIDED BY US IN FAVOUR OF THE ASSESSEE IN ASSESSEES APPEAL IN ITA NO. 8032 OF 2011 FOR THE AY 2005-2006 AND OUR DECISION M/S SONATA SOFTWARE LTD. ITA 8032/MUM/2011 ITA 7739/MUM/2011 9 IS GIVEN IN THE PRE-PARAGRAPHS OF THIS ORDER. MOREOVER, AS REASSESSMENT PROCEEDINGS HAVE BEEN QUASHED, AND ANNULLED, THE INSTANT APPEAL FILED BY THE DEPARTMENT BECOMES INFRUCTUOUS, WE, THEREFORE, REJ ECT THE GROUNDS RAISED BY THE REVENUE. ACCORDINGLY, GROUNDS RAI SED BY THE REVENUE ARE DISMISSED. RESULTANTLY, REVENUES APPEAL STANDS DISMISSED. SUM-UP: ASSESSEES APPEAL IN ITA 8032 OF 2011 STANDS ALLOWED REVENUES APPEAL IN ITA 7739 OF 2011 STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH OCTOBER, 2013. SD/- SD/- ( . . ) ( #'' '$ ) ! ! (P.M. JAGTAP) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 11 TH OCTOBER, 2013 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) & &' ( ) - 13 MUMBAI / THE CIT (A)-13, MUMBAI. 4) & &' 7, MUMBAI / THE CIT -7, MUMBAI, 5) )*+ , & , & , , -. / THE D.R. I BENCH, MUMBAI. 6) +/ 0 COPY TO GUARD FILE. &12 / BY ORDER / / TRUE COPY / / [ 3 / 4 5 & , , -. DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *784 . . * CHAVAN, SR. PS