DCIT, New Delhi V. M/s. NIIT Ltd., New Delhi

ITA 908/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3613 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 19-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 17-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ROHIT JAIN SHRI BHAVITA KUMAR
• Section: 80HHC; 10B

Judgement Text

ITA NO. 908 /DEL./201 4 ASSESSMENT Y EAR: 2009 - 10 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E BENCH NEW DELHI) BEFORE SHRI N.K. SAINI ACCOUNTANT MEMBER & SHRI AMIT SHUKLA , JUDICIAL MEMB E R ITA NO. 908 / DEL./20 1 4 ASSESSMENT YEAR: 20 09 - 1 0 DCIT CENTRAL CIRCLE - 16, NEW DELHI VS. NIIT LTD. 8, BALAJI ESTATE, 1 ST FLOOR, GURU RAVI DAS MARG, KALKAJI NEW DELHI (APPLICANT) (RESPONDENT) (PAN: A A A C N0085D ) REVENUE BY: SH RI RAJESH KUMAR, SR. DR ASSESSEE BY: SH RI ROHIT JAIN, ADVOCATE SHRI BHAVITA KUMAR, ADVOCATE DATE OF HEARING 1 9 / 0 4 /201 7 DATE OF PRONOUNCEMENT 2 5 / 0 4 /201 7 ORDER PER AMIT SHUKLA, JUDICIAL MEMBER : TH E AFORESAID APPEAL HA S BEEN FILED BY THE REVENUE AGAINST IMPUGNED ORDER DATED 2 0 . 12 .201 3 , PASSED BY THE LD. CIT (A PPEALS ) - 32, NEW DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 1 4 3 (3) FOR THE A.Y. 20 09 - 1 0 . IN THE GROUNDS OF APPEAL T HE REVENUE HAS RAISED FOLLOWING GROUNDS: - 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF PAGE 2 OF 7 RS.7,33,82,804/ - MADE BY AO ON ACCOUNT OF EXEMPTION U/S 10B OF THE I.T. ACT, 1961. 2. (A) THE ORDER OF THE CIT(A) IS ERRONEOUS AND NOT TENABLE IN LAW AND ON FACTS. (B) THE APPELLANT CRAVE S LEAVE TO ADD, ALTER OR AMEND ANY FALL OF THE GROUND OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 2. THE BRIEF FACTS QUA ISSUE INVOLVED ARE THAT, THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF INFORMATION TECHNOLOGY EDUCATION AND KNOWLEDGE S OLUTIONS . THE LD. ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS INCURRED LO SS OF RS. 7,33,82,084/ - IN RESPECT OF FOLLOWING TWO UNITS WHICH WERE ELIGIBLE FOR DEDUCTION U/S 10B. SI. LOCATION LOSS OF THE ELIG IBLE NO. NAME OF UNIT UNIT (RS.) 1. NIIT - KTWO MINERVA, 8, BALAJI, ESTATE, SUDARSHAN MUNJAL MARG, KALKAJI, NEW DELHI 110019 3,88,10,882/ - 2. NIIT - ITES 8, BALAJI, ESTATE, SUDARSHAN MUNJAL MARG, KALKAJI, 3,45,71,202/ - TOTAL 7,33,82,084/ - THE AFORESAID LO SS W AS ADJUSTED BY THE PROFITS OF OTHER NON ELIGIBLE UNITS WHILE COMPUTING THE CONSOLIDATED PROFIT OF THE BUSINESS , A S PER THE PROVISIONS OF SECTION 70 . T HE ASSESSING OFFICER AFTER CONSIDERING THE REPLY/OBJECTIONS FILED BY THE ASSESSEE, HELD THAT THE ASSESSEE HAS WRONGLY ADJUSTED THE LO S S OF ELIGIBLE UNITS U/S 10B AGAINST THE PROFITS OF NON ELIGIBLE UNITS. HE HELD THAT THE PROVISIONS PAGE 3 OF 7 OF SECTION 10B ARE IN T HE NATURE OF EXEMPTIONS , INSTEAD OF DEDUCTION . SINCE THE PROFIT OF EXEMPT UNIT IS INCLUDED IN THE TAXABLE INCOME , THEREFORE , THE LOANS OF EXEMPT UNIT CANN OT BE SET OFF FROM THE INCOME OF NON EXEMPT UNIT. HE ALSO REFERRED TO THE DECISION OF HON BLE KARN ATAKA HIGH COURT IN TH E CA S E OF CIT VS. YOKOGAWA INDIA LTD, REPORTED IN 341 ITR 385 AS RELIED UPON BY THE ASSESSEE AND TRIED TO INTERPRET THE SAID DECISION IN HIS OWN MANNER FOR COMING TO A CONCLUSION THAT THE PROVISION S OF SECTION 10B ARE IN THE NATURE OF EXEMPTION. HE ALSO OBSERVED THAT THE SAID PROVISION IS IN LINE WITH THE FORM OF INCOME TAX RETURN THAT REFLECTS THE LEGISLATIVE INTEN T AND THAT IS WHY, IT HAS BEEN KEPT IN CHAPTER III OF I.T. ACT WHICH DEAL S WITH THE EX EMPT INCOME. THIS INTER ALIA MEANS THAT THE INCOME OF ELIGIBLE UNIT IS DEDUCTED AT SOURCE BEFORE ARRIVING AT GROSS TOTAL INCOME AND THEREFORE , THE INCOME ELIGIBLE FOR EXEMPTION UNDER SECTION KEPT IN CHAPTER III WOULD NOT FORM PART OF COMPUTATION AT ALL . TH US, THE LO S S ARISING FROM ELIGIBLE UNITS IS NOT AVAILABLE FOR SET OFF AGAINST THE INCOME OF NON ELIGIBLE UNITS. HE ALSO TRIED TO DRAW SUPPORT FROM THE CBDT S CIRCULAR NO. 7 OF 2003 AND DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN UNILIVER LTD. VS. DCIT REPORTED IN 325 ITR 102. HE ACCORDINGLY , DISALLOWED THE ADJUSTMENT OF LO S S OF ELIGIBLE UNITS FROM THE PROFIT OF NON ELIGIBLE UNITS. 3. BEFORE THE LEARNED CIT(APPEALS) A DETAILED SUBMISSION WERE MADE BY THE ASSESSEE EXPLAINING THE ENTIRE PROVISION OF SECTION 10B AND AS TO WHY IT IS NOT AN EXEMPTION PROVISION BUT DEALING WITH THE DEDUCTIONS ELIGIBLE FOR A N ASSESSEE. THE ASSESSEE S DETAILED SUBMISSIONS HAVE BEEN INCORPORATED BY THE LD . CIT (APPEALS) FROM PAGES 6 TO 26 OF THE IMPUGNED ORDER. THE LD . CIT (APPEALS) FOLLOWING PAGE 4 OF 7 THE DECISION OF ASSESSEE S OWN CASE FOR THE A.Y. 2008 - 09 , W HEREIN THE L D. CIT (APPEALS) HAS ALLOWED THE ADJUSTMENT FOLLOWI NG THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD (SUPRA) AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 4 . BEFORE US IT HAS BEEN ADMITTED BY BOTH THE PARTIES THAT NOW THIS IS QUESTION HAS BEEN ANSWERED/DECIDED IN FAVOUR OF THE ASSESSEE BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD REPORTED IN (2017) 391 ITR 274 , WHEREIN THE DECISION OF HON BLE KARNATAKA HIGH COURT HAS BEEN AFFIRMED ON THIS POINT. 5 . AFTER CONS IDERING THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER AS WELL AS THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD (SUPRA) , WE FIND THAT THE ISSUE , WHETHER THE BENEFIT GIVEN U/S 10A/10B IS AN EXEMPTION PROVISION OR NOT OR I T IS DEALING WITH THE DEDUCTION. HERE THE CASE OF THE AO IS THAT , SINCE THE PROVISION OF SECTION 10B IS IN THE NATURE OF EXEMPTION AND NOT DEDUCTION , THEREFORE , THE PROFIT OF THE EXEMPT UNIT CANNOT NOT TO BE INCLUDED IN THE TAXABLE INCOME AND ACCORDINGLY , THE LO S S OF EXEMPT UNIT CANNOT BE SET OFF FROM INCOME OF THE NON EXEMPT UNIT. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD INCURRED LOSSES FROM ITS TWO UNITS WHICH WERE ELIGIBLE FOR DEDUCTION U/S 10B AND THE SAID LOSS ES HAVE BEEN ADJUSTED AGAINST THE PR OFIT OF NON - ELIGIBLE UNITS. WE FIND THAT THIS PRECISE ISSUE HAS BEEN DEALT WITH BY THE HON'BLE SUPREME COURT AFTER DETAILED DISCUSSION AND ANALYZING THE PROVISIONS OF SECTION 10A (SIMILAR TO SECTION 10B) AS IT STOOD PRIOR TO THE AMENDMENT BY FINANCE ACT 20 00 AND ALSO AFTER THE AMENDMENT W.E.F. 1.4.2001 . THE RELEVANT OBSERVATION AND THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT READS AS UNDER: - PAGE 5 OF 7 THE RETENTION OF SECTION 10A IN CHAPTER III OF THE ACT AFTER THE AMEND MENT MADE BY THE FINANCE ACT, 2000 WOULD BE MERELY SUGGESTIVE AND NOT DETERMINATIVE OF WHAT IS PROVIDED BY THE SECTION AS AMENDED, IN CONTRAST TO WHAT WAS PROVIDED - BY THE UN - AMENDED SE CTION. THE TRUE AND CORRECT PUR PORT AND EFFECT OF THE AMENDED SECTION WILL HAVE TO BE CONSTRUED FROM THE LANGUA GE, USED AND HOT MERELY FROM THE FACT THAT IT HAS BEEN RETAINED IN - CHAPTER III: THE INTRODUCTION 'OF THE WORD 'DEDUCTION' IN SECTION 10A BY THE - AMENDMENT, IN THE ABSENCE OF ANY CONTRA RY MATERIAL, AND IN VIEW OF THE , SCOPE OF THE DEDUCTIONS CONTEMPLATED BY SECTION 10A AS ALREADY DISCUSSED, IT HAS TO BE UNDERSTOOD THAT THE SECTION EMBODIES A CLEAR ENUNCIATION - OF THE LEGISLATIVE DECISION - TO ALTER ITS - NATURE FROM ONE PROVIDING FOR EXEMPTION TO ONE PROVIDING FOR DEDUCTIONS . THE DIFFERENCE BETWEEN THE TWO EXPRESSIONS 'EXEMPTION' AND 'DEDUCTION THOUGH BROADLY MAY APPEAR TO BE THE SAME I.E. IMMUNITY FROM TA XATION, THE PRAC TICAL EFFECT O F IT IN THE LIGHT OF THE SPECIFIC PROVISIONS CON TA INED IN DIFFERENT PARTS OF THE ACT WOULD BE WHOLLY DIFFERENT. THE ABOVE IM PLICATIONS CANNOT BE MORE OBVIOUS - THAN FROM - THE CASE OF 'CIVIL APPEAL NOS. - '8563 - OF 2013 AND 8564 OF 2013 AND CIVIL APPEAL ARISING OUT OF SLP(C) NO. 18157 OF 2015, WH ICH HAVE BEEN FILED BY LOSS MAKING ELIGIBLE UNITS AND/OR BY NON - ELIGIBLE' 'ASSESSEES SEEKI NG THE BENEFIT OF ADJUSTMENT OF LO SSES AGAINST PROFI T S MA DE BY ELIGIBLE UNITS. CHAPTER VI OF THE ACT. THE RETENTION OF THE SAID PROVISIONS OF THE ACT, I.E., SECTIONS 80HHC - .AND '80HHE, DESPITE THE PAGE 6 OF 7 AMENDMENT OF SECTION IOA, IN OUR - VIEW, INDICATES THAT SOME ADDITIONAL BENEFITS TO ELIGIBLE SECTION 10A UNITS, NOT CONTEMPLATED BY SECTIONS 80HHC ARID 80HHE, WAS INTENDED BY THE LEGISLATURE. SUCH A BENEFIT CAN ONLY BE UNDERSTOOD BY A LEGISLATIVE MANDATE TO UNDERSTAND THAT THE STAGES FOR WORKING OUT THE DEDUCTION'S S ECTIONS 10 A AND 80HHC AND 80HHE ARE SUBSTANTIALLY DIFFERENT, THE NEXT ASPECT OF THE CASE WHICH WE WOULD NOW LIKE TO TURN TO. IN VIEW OF THE AFORESAID LAW SETTLED BY THE HON'BLE SUPREME COURT, THE REASONS GIVEN BY THE LD. ASSESSING OFFICER TO DISALLOW THE ADJUSTMENT OF LOSS OF ELIGIBLE UNITS FROM A PROFIT OF OTHER ELIGIBLE UNITS CANNOT HOLD GROUND AND CONSEQUENTLY IS SET ASIDE ; A ND THE CLAIM OF THE ASSESSEE TO ALLOW THE ADJUSTMENT OF LOSSES OF ELIGIBLE UNITS WITH THE PROFITS OF NON - ELIGIBLE UNITS IS DIRECTED TO BE ALLOWED. ACCORDINGLY , THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. ORDER P RONOUNCED IN THE OPEN COURT ON 2 5 . 0 4 .201 7. ( N.K. SAINI ) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 2 5 . 0 4 .2017 NARENDER COPY FORWARDED TO: 1) APPELLANT PAGE 7 OF 7 2) RESPONDENT 3) CIT 4) CIT (APPEALS) 5) DR: ITAT ASSISTANT REGISTRAR DATE DRAFT DICTATED ON 21 .0 4 .2017 DRAFT PLACED BEFORE AUTHOR 24 .0 4 .2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 2 5 .4 .2017 KEPT FOR PRONOUNCEMENT ON FILE SENT TO THE BENCH CLERK 2 5 . 4 .2017 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.