DCIT, Bangalore V. M/s Danish Steel Cluster Pvt. Ltd., Bangalore

ITA 871/BANG/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0317 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA JT
• Assessee Lawyers: VISHNU MOORTHI
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NOS.1394/BANG/2015, 871 & 872/BANG/2016 ASSESSMENT YEARS : 2007-08, 2008-09 & 2010-11 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(2), BANGALORE. VS. M/S. DANISH STEEL CLUSTER PVT. LTD. NO.46, BOMMASANDRA, JIGANI LINK ROAD, BENGALURU 562 106. PAN: AABCD 0135B APPELLANT RESPONDENT CO NO. 4/BANG/2016 [IN ITA NO.1394/BANG/2015] ASSESSMENT YEAR : 2007-08 M/S. DANISH STEEL CLUSTER PVT. LTD. NO.46, BOMMASANDRA, JIGANI LINK ROAD, BENGALURU 562 106. PAN: AABCD 0135B VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(2), BANGALORE. CROSS OBJECTOR RESPONDENT REVENUE BY : SHRI SUNIL KUMAR AGARWALA, JT. CIT(DR) ASSESSEE BY : SHRI VISHNU MOORTHI, CA DATE OF HEARING : 16.06.2016 DATE OF PRONOUNCEMENT : 24.06.2016 ITA NOS.1394/B/2015, 871 & 872/B/16 & CO 4/B/16 PAGE 2 OF 7 O R D E R PER BENCH THE APPEALS ARE BY THE REVENUE AGAINST THE COMMON ORDER OF THE CIT(APPEALS)-2, BENGALURU DATED 28.04.2015 FOR THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2010-11. THE ASSESSEE HAS FIL ED CROSS OBJECTION AGAINST THE VERY SAME ORDER OF THE CIT(APPEALS) FOR THE ASSESSMENT YEAR 2007-08. THESE APPEALS AND THE CO WERE HEARD TOGE THER AND THEY ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAG ED IN PROVIDING IT ENABLE SERVICES AND FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEARS 2007-08, 2008-09 & 2010-11 ON 30.10.07, 27.09.2008 AND 24.9.2010 RESPECTIVELY DECLARING NIL INCOME FOR ALL THE THREE ASSESSMENT YEARS. INITIALLY THE RETURNS WERE PROCESSED U/S. 143(1) AN D THEN SELECTED FOR SCRUTINY. IN THE ASSESSMENTS CONCLUDED U/S. 143(3) OF THE ACT VIDE ORDERS DATED 31.10.09, 20.12.10 AND 30.12.12, THE TOTAL IN COME HAS BEEN DETERMINED AT NIL FOR THE AY 2007-08, FOR THE AY 20 08-09 MAT INCOME HAS BEEN DETERMINED AT RS.1,76,79,341 AND FOR THE AY 20 10-11 AT RS.9,59,428 UNDER THE NORMAL PROVISIONS OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEALS FOR ALL THE THREE ASSESSMENT YEAR S BEFORE THE ITA NOS.1394/B/2015, 871 & 872/B/16 & CO 4/B/16 PAGE 3 OF 7 CIT(APPEALS). SINCE THE ISSUES INVOLVED WERE COMMO N, THE CIT(A) HAS PASSED A COMMON ORDER. 4. WITH RESPECT TO DEDUCTION U/S. 10B, THE FACTS AR E THAT THE AO FOR THE RESPECTIVE ASSESSMENT YEARS NOTED THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S. 10B OF THE ACT BEFORE COMPUTING THE BROUGHT FORWARD LOSSES/UNABSORBED DEPRECIATION FOR ALL THE THREE AS SESSMENT YEARS. THEREFORE, THE AO DEDUCTED THE BROUGHT FORWARD LOSS ES OF RS.63,90,092, 86,81,801 AND RS.15,83,375 FOR THE AYS 2007-08, 200 8-09 & 2010-11 RESPECTIVELY TO RESTRICT THE DEDUCTION U/S. 10B OF THE ACT. 5. AS FOR THE AY 2010-11, IN ADDITION TO DEDUCTION OF BROUGHT FORWARD LOSSES FROM THE PROFITS, THE AO REDUCED THE INCIDEN TAL EXPENSES SUCH AS FREIGHT AND INSURANCE AMOUNTING TO RS.94,56,501 AND RS.61,896 AGGREGATING TO RS.95,18,397 ONLY FROM THE EXPORT TU RNOVER AND RESTRICTED THE DEDUCTION AVAILABLE U/S. 10B IN ADDITION TO THE DEDUCTION OF RS.15,83,375 FROM THE PROFITS FOR CALCULATING THE D EDUCTION U/S. 10B OF THE ACT. 6. THE CIT(APPEALS) AFTER CONSIDERING THE SUBMISSIO NS MADE BY THE LD. AR FOR THE ASSESSEE, HELD AS REGARDS SETTING OFF OF BROUGHT FORWARD LOSSES THAT THE ISSUE IS COVERED BY THE DECISION OF THE HO NBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. YOKOGAWA INDIA LTD., 341 ITR 389 (KAR) . THE CIT(A) FURTHER HELD THAT THE RULING IS APPLICAB LE WITH EQUAL FORCE IN RESPECT OF SET OFF OF UNABSORBED DEPRECIATION. THE REFORE, THE CIT(A) ITA NOS.1394/B/2015, 871 & 872/B/16 & CO 4/B/16 PAGE 4 OF 7 DIRECTED THE AO TO WORK OUT THE DEDUCTION U/S. 10B OF THE ACT BEFORE SET OFF OF BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATI ON. 7. AS REGARDS THE DEDUCTION OF INCIDENTAL EXPENSES FROM TOTAL TURNOVER, THE CIT(APPEALS) RELIED ON THE DECISION OF HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF TATA ELXSI LTD. V. ACIT, 349 ITR 98 WHEREIN IT HAS BEEN HELD THAT WHERE CERTAIN EXPENSES ARE EXCLUDED FROM THE E XPORT TURNOVER FOR THE PURPOSE OF CALCULATING DEDUCTION ADMISSIBLE UNDER T HE ACT, SUCH EXPENSES SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER, AS THE EXPORT TURNOVER FORMS PART OF THE TOTAL TURNOVER. THE CIT(A) ALSO RELIED ON THE SUBSEQUENT DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT & DCIT V. MOTOR INDUSTRIES CO. LTD. [ITA NO.776/2007 C/W I TA NO.1172/2006, ITA NO.1171/2006, 744/2007 AND 1155/2006 DATED 13.6.201 4] . 8. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND HENCE NOT SUSTAINABLE . 2. THE CIT(A) HAS ERRED IN RELYING ON THE DE CISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M/S.YOKOGAWA LTD., TO GIVE RELIEF TO THE ASSESSEE F OR DEDUCTION U/S. 10B. 3. THE CIT(A) HAS ERRED IN DIRECTING THE AO TO EXCLUDE THE EXPENDITURE INCURRED IN FOREIGN CURRENCY FROM BOTH EXPORT TURNOVER AS WELL AS FROM TOTAL TURNOVER BY PLACING ITS RELIANCE ON THE CASE OF TATA ELXSI LIMITED V. ACIT ((349 ITR 98 ) ) WITHOUT APPRECIATING THAT THERE IS NO PROVISION IN SECTION 10B THAT SUCH EXPENSES SHOULD BE REDUCED FROM THE TOTAL TURNOVER, AS CLAUSE (IV) ITA NOS.1394/B/2015, 871 & 872/B/16 & CO 4/B/16 PAGE 5 OF 7 OF THE EXPLANATION TO SECTION 10A PROVIDES THAT SUC H EXPENSES ARE TO BE REDUCED ONLY FROM THE EXPORT TURNOVER. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE U RGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT( A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND TH AT OF THE ASSESSING OFFICER MAY BE RESTORED. , 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR DELETE ANT OF THE GROUNDS MENTIONED ABOVE. 9. THE ASSESSEE HAS FILED THE CROSS OBJECTIONS IN C O NO.4/BANG/2016 WHICH IS MERELY SUPPORTIVE OF THE ORDER OF THE CIT( APPEALS). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND ALSO CONSIDERED THE DECISION OF HON'BLE HIGH COURT OF KARNATAKA IN CIT V. YOKOGAWA INDIA LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT RELIEF U/S. 10A OF THE ACT IS TO BE COMPUTED P RIOR TO GIVING EFFECT TO CARRY FORWARD AND SET OFF PROVISIONS OF THE ACT. THE HON BLE HIGH COURT IN PARAS 10 TO 20 OF ITS JUDGMENT DEALT WITH THIS ISSUE AND NOTICED THAT SECTION 10A(1) OF THE ACT IS IN PARI MATERIA WITH SECTION 10B OF THE ACT. HENCE, WE ARE CONVINCED THAT THE CIT(APPEALS) WAS RIGHT IN HI S DECISION AND HIS ORDER DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, W E DIMISS THE REVENUES APPEAL ON THIS ISSUE. 11. THE NEXT ISSUE IS WITH REGARD TO EXCLUSION OF E XPENSES FROM EXPORT TURNOVER VIS--VIS TOTAL TURNOVER FOR THE PURPOSE O F CALCULATING DEDUCTION U/S. 10B OF THE ACT. ITA NOS.1394/B/2015, 871 & 872/B/16 & CO 4/B/16 PAGE 6 OF 7 12. THE CIT(APPEALS) HAS RELIED UPON THE DECISION O F THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI LTD. V. ACIT, 349 ITR 98 AND THE SUBSEQUENT DECISION IN CIT & DCIT V. MOTOR INDUSTRIES CO. LTD. (SUPRA) AND DIRECTED THE AO TO ALLOW THE ASSESSEES CLAIM FOR REDUCING THE EXPENDITURE INCURRED IN FOREIGN CURRENCY NOT ONLY F ROM THE EXPORT TURNOVER, BUT ALSO FROM THE TOTAL TURNOVER. 13. IT TRANSPIRES THAT THE REVENUE IS IN APPEAL BEF ORE US ONLY TO KEEP THE ISSUE ALIVE SINCE IT HAS NOT ACCEPTED THE DECISION OF HON'BLE HIGH COURT OF KARNATAKA. HOWEVER, NOTHING WAS BROUGHT ON RECORD BEFORE US TO THE EFFECT THAT THE DECISION OF THE HON'BLE HIGH COURT OF KARN ATAKA HAS BEEN REVERSED /MODIFIED BY THE HONBLE SUPREME COURT, EVEN THOUGH IT IS CLAIMED THAT SLP HAS BEEN RECOMMENDED TO BE FILED BY BEFORE THE HONBLE SUPREME COURT. IN SUCH FACTS AND CIRCUMSTANCES, THE TRIBUN AL AND OTHER AUTHORITIES UNDER THE JURISDICTION OF THE HON'BLE HIGH COURT OF KARNATAKA ARE BOUND BY ITS DECISION. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(APPEALS), WHEREIN HE HAS FOLLOWED THE HON'BLE J URISDICTIONAL HIGH COURT DECISION IN THE CASE OF TATA ELXSI LTD. (SUPRA) . HENCE WE DIMISS THE DEPARTMENTAL APPEAL ON THIS ISSUE. 14. THE ASSESSEES CO BEING ONLY SUPPORTIVE OF THE ORDER OF THE CIT(APPEALS) IS ACADEMIC AND HENCE DISMISSED AS SUC H. ITA NOS.1394/B/2015, 871 & 872/B/16 & CO 4/B/16 PAGE 7 OF 7 15. IN THE RESULT, THE APPEALS BY THE DEPARTMENT AS WELL AS THE CO BY THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF JUNE, 2016. SD/- SD/- ( INTURI RAMA RAO ) (ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 24 TH JUNE, 2016. /D S/ COPY TO: 1. REVENUE 2. ASSESSEE 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.