D.C.I.T., Bangalore V. M/s i Gate Global Solutions Ltd.,

MA 2/BANG/2014

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 2262 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 19-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return
• Section: 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER M.P.NO.2/BANG/2014 (IN ITA NO. 427/BANG/2012) ASSESSMENT YEAR : 2004-05 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(4), BANGALORE. VS. M/S. IGATE GLOBAL SOLUTIONS LTD., NO.158-162 & 165-170, EPIP PHASE II, WHITEFIELD, BANGALORE 560 066. PAN : AABCM 4573E APPLICANT RESPONDENT APPLICANT BY : SHRI FARAHAT HUSSAIN QURESHI, CIT-II(DR) RESPONDENT BY : SHRI SUDHEENDRA, C.A. DATE OF HEARING : 25.07.2014 DATE OF PRONOUNCEMENT : 08.08.2014 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS O F DEVELOPMENT AND EXPORT OF SOFTWARE. THE ASSESSEE FILED RETURN OF INCOME FOR THE A.Y. 2004-05 ON 30.10.2004 I.E., WITHIN THE DUE DATE U/S. 139(1). M.P. NO.2/BANG/2014 PAGE 2 OF 7 THE ASSESSEE DECLARED TOTAL INCOME OF RS.1,66,35,49 4. SUBSEQUENTLY THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 24.03. 2006 DECLARING A LOSS OF RS.10,15,02,275. THE ASSESSEE HAD FIVE STP UNITS. IN THE ORIGINAL RETURN, THE ASSESSEE CLAIMED DEDUCTION U/S. 10A OF THE ACT IN RESPECT OF THE PROFITS OF THREE STP UNITS. THERE WAS A LOSS IN THE OTHER TWO STP UNITS. THE LOSS IN THE OTHER TWO STP UNITS WAS NOT SET OFF AGAINST THE PROFITS OF THE THREE STP UNITS WHICH MADE PROFITS. THE LOSS IN THE TWO STP UNITS WAS SET OFF AGAINST THE OTHER INCOME AND THE ASSESSEE CLAIMED A RIGHT TO CARRY FORWARD THE REMAINING UNABSORBED LOSSES. THIS WAS THE REAS ON WHY A REVISED RETURN OF INCOME WAS FILED BY THE ASSESSEE. THE A O REJECTED THE CLAIM OF THE ASSESSEE AS MADE IN THE REVISED RETURN OF INCOM E. 2. ON APPEAL BY THE ASSESSEE, THE CIT(A) HOWEVER NO TICED THAT IN A.Y. 2003-04, SIMILAR ISSUE HAD COME UP FOR CONSIDERATIO N BEFORE THE ITAT BANGALORE IN THE CASE OF THE ASSESSEE IN ITA NO.248 TO 249/BANG/2009. THE TRIBUNAL CONSIDERED SIMILAR ISSUE WHEREIN LOSS OF ONE STP UNIT WAS SOUGHT TO BE SET OFF FROM PROFITS OF OTHER STP UNIT S BEFORE ALLOWING DEDUCTION UNDER SECTION 10A. THE ASSESSEE COMPANY W AS HAVING THREE STP(I) UNITS LOCATED AT BANGALORE, CHENNAI, AND PUN E. FROM PUNE UNIT, THE ASSESSEE HAD SHOWN LOSS. THE AO HAS SET OFF LOSS FR OM PUNE UNIT FROM THE PROFITS OF BANGALORE AND CHENNAI UNITS AND ALLOWED DEDUCTION ON THE RESULTANT PROFIT. THE CIT(A) UPHELD THE ACTION OF T HE AO. ON FURTHER APPEAL THE TRIBUNAL HOWEVER REVERSED THE ORDER CIT(A). T HE TRIBUNAL NOTICED THAT SECTION 10A(4) HAS ALSO BEEN AMENDED WITH EFFECT FR OM 1-4-2001, WHEREBY M.P. NO.2/BANG/2014 PAGE 3 OF 7 INSTEAD OF THE EXPRESSION PROFITS OF THE BUSINESS , THE WORDS 'PROFIT OF THE BUSINESS OF THE UNDERTAKING HAVE BEEN SUBSTITUTED. THE TRIBUNAL THEREAFTER EXAMINED THE MEANING OF THE TERM 'UNDERTAKING' AND CAME TO THE CONCLUSION THAT AN INDUSTRIAL UNDERTAKING WOULD NO RMALLY BE IN ITS ORDINARY ACCEPTATION SOME INDUSTRIAL CONCERN OR ENTERPRISE F OR ADVENTURE WHICH IS UNDERTAKING TO BE DONE BY THE PERSON CONCERNED, CAR RIED ON IN ONE OR MORE FACTORIES BY ANY PERSON OR AUTHORITY INCLUDING GOVE RNMENT AND THAT ITS MEANING IS NOT RESTRICTED TO ONE UNIT. THE UNDERTA KING IS TO BE CONSIDERED AS CONSISTING OF A NUMBER OF UNITS PROVIDED ALL THE UNITS ARE ENGAGED IN ANY OF THE ACTIVITIES . THEREAFTER THE TRIBUNAL HELD THAT IT WAS NOT CLEAR AS TO WHETHER PUNE UNIT IS AN INDEPENDENT UNIT AND IS IN NO WAY RELATED WITH THE ACTIVITIES CARRIED OUT AT BANGALORE OR CHENNAI UNIT . THE TRIBUNAL HELD THAT IF PUNE UNIT WAS AN INDEPENDENT UNDERTAKING ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT, WHICH WAS IN NO WAY RELATED T O THE SOFTWARE DEVELOPMENT DONE AT BANGALORE OR CHENNAI UNIT. THEN LOSS FROM SUCH UNIT IS TO BE INDEPENDENTLY CALCULATED. AFTER THE ORDER OF THE TRIBUNAL FOR AY 03- 04, THE AO IN THE ORDER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL ACCEPTED THE FACT THAT PUNE UNIT WAS AN INDEPENDENT UNDERTA KING ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT, WHICH WAS IN NO W AY RELATED TO THE SOFTWARE DEVELOPMENT DONE AT BANGALORE OR CHENNAI U NIT. THE CLAIM OF THE ASSESSEE AS MADE IN THE REVISED RETURN WAS ACCORDIN GLY ACCEPTED BY THE AO. M.P. NO.2/BANG/2014 PAGE 4 OF 7 3. THE CIT(A) IN THE APPEAL FOR AY 04-05 WITH WHICH WE ARE CONCERNED IN THE PRESENT M.A., AFTER NOTICING THE TRIBUNALS DIRECTION IN A.Y. 2003-04 AND ORDER OF AO GIVING EFFECT TO THE ORDER OF THE T RIBUNAL, WAS OF THE VIEW THAT AO IN THE ORDER GIVING EFFECT TO THE ORDER OF TRIBUNAL FOR AY 03-04 HAD WRONGLY ACCEPTED THE CLAIM OF THE ASSESSEE. HE HEL D AS FOLLOWS:- 4.5 THE ABOVE SHOWS THAT THE A.O. HAS FAILED TO THE ACT OF VERIFICATION IN THE LETTER AND SPIRIT OF THE JUDICI AL DIRECTION GIVEN BY THE LEARNED ITAT AND HAD GIVEN THE EFFECT MECHANICALLY WITHOUT GOING DEEP INTO THE CONTENTS O F THE ORDER. HENCE, THE EFFECT GIVEN TO SUCH ORDER SUFFE RS AND CAN BE DECLARED AS VOID . IN FACT THE ASSESSEE HAS ALL ALONG CONSIDERED ALL THESE THREE UNITS AS PART AND PARCEL OF ONE UND ERTAKING AND THEREFORE HAD SHOWN PROFIT ORIGINALLY BY SETTING OF F THE LOSS OF TWO UNITS WITH THE PROFITS OF ONE UNIT EVEN SHOWN A S SUCH IN THE ORIGINAL RETURN DATED 30-10-2004. HOWEVER, IT BECA ME WISE IN THE LIGHT OF DISCUSSIONS MADE IN ITAT DURING HEARIN G STAGE AND CHANGED ITS STAND AND ACTED PROMPTLY TO FILE THE RE VISED RETURN CLAIMING LOSS. HOWEVER, THE AOS STAND OF NOT ACCEP TING REVISED RETURN OF LOSS IS UPHELD. EVEN IF A.O. HAS FAILED TO CARRY OUT THE VERIFICATION AS PER THE DIRECTION OF THE HONBLE IT AT WHICH THE A.O. CAN DO NOW BECAUSE NO TIME LIMIT IS PRESCRIBED IN THE ACT FOR GIVING EFFECT TO A JUDICIAL DIRECTION. THE RE VISED LOSS RETURN IS NOT CONSIDERED A VALID RETURN BECAUSE SUCH HAS NOT BEEN FILED VOLUNTARILY BUT ONLY BEING POINTED OUT BY THE A.O. RETURN U/S. 139(5) OF THE ACT CAN BE HELD VALID ONLY WHEN THE A SSESSEE HIMSELF DISCOVERS MISTAKE OR OMISSION WHICH IS NOT THE CASE HERE. THUS, IT IS HELD AS AN INVALID RETURN. EVEN OTHERW ISE, THE LOSS RETURN NOT BEING FILED WITHIN THE TIME LIMIT PRESCR IBED U/S. 139(3) THE LOSSES SHOWN THEREIN IS NOT ELIGIBLE FOR CARRY FORWARD TO BE SET OFF AGAINST THE PROFITS OF SUBSEQUENT YEAR/S. HENC E, THIS ISSUE IS DECIDED AGAINST THE APPELLANT. (EMPHASIS SUPPLIED) M.P. NO.2/BANG/2014 PAGE 5 OF 7 4. THE ASSESSEE CHALLENGED THE AFORESAID ORDER OF T HE CIT(A) BEFORE THE TRIBUNAL IN GROUND NOS.3.1 TO 3.3 OF THE GROUND S OF APPEAL. 5. THE TRIBUNAL ON THE SAID ISSUE RAISED IN GR.NO.3 .1. TO 3.3 HELD AS FOLLOWS: 26. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE CONCLUSIONS OF THE CIT(APPEALS) REGARDING ORDER GIV ING EFFECT PASSED BY THE AO PURSUANT TO THE DIRECTIONS OF THE ITAT IN A.Y. 2003-04. AS RIGHTLY POINTED OUT BY THE LD. COUNSEL FOR THE ASSE SSEE, THE AO HAS AFTER OBTAINING ALL THE DETAILS ACCEPTED THE CLAIM OF THE ASSESSEE. APART FROM THE ABOVE, THE CIT(A) IN AN APPEAL FOR T HE A.Y. 2004-05 CANNOT DOUBT OR CHALLENGE THE CORRECTNESS OF THE OR DER OF THE AO GIVING EFFECT TO THE ORDER OF ITAT FOR ANOTHER ASSE SSMENT YEAR VIZ., A.Y. 2003-04. THAT ORDER CAN BE CHALLENGED BY THE REVENUE ONLY IN A MANNER PROVIDED FOR UNDER THE ACT AND NOT BY THE CIT(A) IN AN APPEAL FILED BY THE ASSESSEE AGAINST AN ORDER OF AO IN AT 04-05. WE THEREFORE HOLD THAT THE CONCLUSIONS OF THE CIT(A ) ON THE ISSUE ARE ERRONEOUS AND THEREFORE THE THREE UNITS AT PUNE , CHENNAI AND BANGALORE WERE INDEPENDENT UNDERTAKINGS. 6. IN THIS MISCELLANEOUS APPLICATION, THE REVENUE HAS CONTENDED THAT THE TRIBUNAL SHOULD NOT HAVE FOLLOWED THE FINDINGS OF THE AO IN THE ORDER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL FOR AY 0 3-04 AND OUGHT TO HAVE REMANDED THE ISSUE TO THE AO FOR FRESH CONSIDERATIO N. IT HAS BEEN AVERRED THAT THE TRIBUNAL IN PARA-26 OF THE ORDER HAS OBSER VED THAT THE CIT(A) IN AN APPEAL FOR THE A.Y. 2004-05 CANNOT DOUBT OR CHALLEN GE THE CORRECTNESS OF THE ORDER OF THE AO GIVING EFFECT TO THE ORDER OF I TAT FOR ANOTHER ASSESSMENT YEAR VIZ., A.Y. 2003-04. THAT ORDER CAN BE CHALLENGED BY THE REVENUE ONLY IN A MANNER PROVIDED FOR UNDER THE ACT AND NOT BY THE CIT(A) IN AN APPEAL FILED BY THE ASSESSEE AGAINST AN ORDER OF AO IN AY 04-05. M.P. NO.2/BANG/2014 PAGE 6 OF 7 ON THE SAME ANALOGY, THE TRIBUNAL SHOULD NOT RELY O N THE FINDINGS OF THE AO IN AY 03-04. 7. THE LEARNED DR REITERATED SUBMISSIONS AS WERE MA DE IN THE M.A. WE HAVE CONSIDERED THE AVERMENTS AND THE CONTENTION OF THE LEARNED DR BEFORE US AND ARE OF THE VIEW THAT THE M.A. IS DEVO ID OF ANY MERIT. WHEN THE AO HAS IN PURSUANCE OF THE ORDER OF THE TRIBUNA L EXAMINED FACTS AND COME TO A CONCLUSION IN AY 03-04 THAT THE PUNE AND THE OTHER TWO UNITS WERE SEPARATE UNITS, FACTS CANNOT BE DIFFERENT IN A Y 04-05. THE CIT(A) IN APPEAL AGAINST AN ORDER OF ASSESSMENT FOR AY 04-05 CANNOT SIT IN JUDGMENT OVER THE ORDER GIVING EFFECT PASSED BY THE AO IN AY 03-04. THAT ORDER CAN BE REVISED ONLY IN A MANNER KNOWN TO LAW. THE EXIS TENCE OF SUCH ORDER GIVING EFFECT TO ORDER OF TRIBUNAL IS NOT DOUBTED O R DISPUTED BY THE CIT(A) IT IS ONLY THE CORRECTNESS OF THE SAID ORDER THAT WAS DISPUTED BY THE CIT(A). THE TRIBUNAL HAS RIGHTLY REJECTED SUCH A CLAIM BY T HE REVENUE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS BEFORE US SUBM ITTED THAT THE AO HAD CALLED FOR ALL DETAILS AND EXAMINED ISSUE IN GREAT DETAIL AND THE AVERMENT TO THE CONTRARY IN THE IMPUGNED ORDER CIT(A) ARE CONTR ARY TO FACTS. WE ARE OF THE VIEW THAT THE CONTENTIONS IN THE M.A. AS WELL A S THE SUBMISSIONS MADE BEFORE US ARE VIRTUALLY A PRAYER FOR REVIEW OF THE ORDER OF THE TRIBUNAL. THE TRIBUNAL DOES NOT HAVE POWER TO REVIEW ITS OWN ORDE R AND THE POWER U/S.254(2) OF THE ACT IS RESTRICTED ONLY TO RECTIFY ING MISTAKES APPARENT ON THE FACE OF THE ORDER OF THE TRIBUNAL. THE ISSUE SOUGH T TO BE RAISED IN THE M.A. M.P. NO.2/BANG/2014 PAGE 7 OF 7 CANNOT BE SAID TO BE MISTAKES APPARENT ON THE FACE OF THE ORDER OF THE TRIBUNAL. WE THEREFORE REJECT THE M.A. FILED BY TH E REVENUE. 8. IN THE RESULT THE M.A. IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF AUGUST , 2014 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 8 TH AUGUST , 2014 . /D S/ COPY TO: 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.