Virtusa (India) Ltd., Hyderabad V. DCIT, Circle-3(3), Hyderabad

MA 26/HYD/2012

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 8702 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 02-07-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 25-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Keywords: Business income; Transfer pricing; Charitable institution
• Section: 43B; 80HHC; 10B; 28; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER M.A. NO. 26/HYD/2012 IN ITA NO. 1502/HYD/2010 ASSESSMENT YEAR: 2004-05 M/S. VIRTUSA (INDIA) LTD., HYDERABAD. (PAN: AABCV4077E) VS. DCIT, CIRCLE-3(3), HYDERABAD. (APPLICANT) (RESPONDENT) ASSESSEE BY: SHRI RAVI BHARADWAJ REVENUE BY: SHRI V. SRINIVAS DATE OF HEARING: 18.05.2012 DATE OF PRONOUNCEMENT: 02.07.2012 O R D E R PER CHANDRA POOJARI, AM: BY THIS MISCELLANEOUS APPLICATION, THE ASSESSEE SEEKS RECTIFICATION IN THE ORDER OF THE TRIBUNAL DA TED 26 TH DECEMBER, 2011. 2. THE LEARNED AR SUBMITTED THAT THE ASSESSEE RAISE D THE GROUNDS IN ITS APPEAL THAT WHETHER STATUTORY DISALLOWANCE U/S. 43B OF THE INCOME-TAX ACT, 1961 H AS TO BE CONSIDERED FOR THE PURPOSE OF WORKING OUT THE ELIGIBLE PROFIT FOR COMPUTATION OF DEDUCTION U/S. 1 0A OF THE ACT. WHILE ARGUING THIS CASE BEFORE THE TRIBUN AL, THE ASSESSEE RELIED ON THE ORDER OF THE CO-ORDINATE BEN CH IN THE CASE OF M/S. PLANT ONLINE PVT. LTD. IN ITA NO. 1016/HYD/07 DATED 29 TH AUGUST, 2008, SPECIFICALLY ON PARA 11 OF THAT ORDER WHICH READS AS FOLLOWS: MA NO. 26/HYD/2012 M/S. VIRTUSA (INDIA) PVT. LTD. L.L ========================= 2 'AS FOR THE DEDUCTION UNDER SECTION 10B IN RELATION TO THE EXPENSES DISALLOWED UNDER SECTION 43B, THE LEARNED CIT (A) HAS DECIDED THESE ISSUES VIDE 'PARA 6 OF HIS ORDER IN THE FOLLOWING MANNER: '6. ... IN THE SECOND PROVISO TO SECTION 10B WHICH HAS BEEN INSERTED BY THE FINANCE ACT 2002 W.E.F. 01.04.2003, IT HAS BEEN MADE CLEAR THAT THE DEDUCTION UNDER SUB SECTION (L) TO SECTION 10B SHALL BE 90 % OF THE PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM EXPORT OF SUCH ARTICLE OR THINGS OR COMPUTER SOFTWARE. 'PROFIT AND GAINS OF BUSINESS' IS DEFINED IN SECTION 28 AND AS PER SECTION 29 INCOME REFERRED TO IN SECTION 28 SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 30 TO 43D. FROM THE ABOVE PROVISIONS IN THE STATUTE, IT IS THUS CLEAR THAT THE PROFIT OF THE UNDERTAKING IN THE CASE OF THE APPELLANT HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 30 TO 43D, I.E. INCLUDING THE PROVISIONS OF SECTION 43B OF THE ACT. IN VIEW OF THE ABOVE LEGAL POSITIONS, IN MY CONSIDERED VIEW, EXEMPTION U/S 10 B HAS TO BE COMPUTED ON THE PROFITS DETERMINED AFTER TAKING INTO ACCOUNT THE DISALLOWANCES TO BE MADE U/S 43B OF THE ACT' 3. HOWEVER, THE TRIBUNAL INADVERTENTLY NOT CONSIDER ED THIS ORDER OF THE TRIBUNAL. INSTEAD THE TRIBUNAL R ELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF PATNI TELE COM PVT. LTD. VS. ITO (120 ITD 105) (HYD) WHEREIN THE I SSUE CONSIDERED BY THE TRIBUNAL IS WHETHER UNPAID EMPLOY EES' CONTRIBUTION TO PF IS TAXABLE AS BUSINESS INCOME OR INCOME FROM OTHER SOURCES. ACCORDING TO THE LEARNE D AR, THE TRIBUNAL COMMITTED A MISTAKE BY RELYING ON THIS DECISION INSTEAD OF DIRECT DECISION CITED BY THE PA RTY IN THE CASE OF PLANT ONLINE PVT. LTD. IN SUPPORT OF T HE CLAIM OF THE ASSESSEE, THE AR RELIED ON THE JUDGEME NT OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS MA NO. 26/HYD/2012 M/S. VIRTUSA (INDIA) PVT. LTD. L.L ========================= 3 JEWELLERY (INDIA) LTD. (330 ITR 175) WHEREIN IT WAS HELD THAT THE ASSESSEE IS ENTITLED TO EXEMPTION U/S. 10A WITH REFERENCE TO ADDITION OF DISALLOWANCE OF PF/ESIC PAYMENT AS THE PLAIN CONSEQUENCE OF THE DISALLOWANC E AND THE ADD BACK MADE BY THE ASSESSING OFFICER IS A N INCREASE IN THE BUSINESS PROFITS OF THE ASSESSEE. 4. THE AR SUBMITTED THAT THE TRIBUNAL IS DUTY BOUND TO RECTIFY ITS ORDER WHERE THE TRIBUNAL THROUGH OVE RSIGHT NOT CONSIDERED THE DECISION OF CO-ORDINATE BENCH AN D IT IS OPEN TO THE TRIBUNAL TO RECTIFY THE SAME. HE RE LIED ON THE JUDGEMENT OF THE SUPREME COURT IN THE CASE OF HONDA SIEL POWER PRODUCTS LTD. VS. CIT (295 ITR 466 ) FOR THIS PROPOSITION. 5. ON THE OTHER HAND, THE LEARNED DR, WHILE SUPPORTING THE ORDER OF THE TRIBUNAL, SUBMITTED THA T IT MAY BE AN ERROR OF JUDGEMENT AND CANNOT BE A MISTAK E APPARENT ON RECORD TO RECALL THE ORDER OF THE TRIBU NAL. FOR THIS PURPOSE, HE RELIED ON THE ORDER OF THIS TR IBUNAL IN THE CASE OF SHRI MATHURADASJI AYODHYABAI RATHI CHARITABLE TRUST VS. THE DIT (EXEMPTIONS) DATED 15 TH JULY, 2011 VIDE MA NO. 191/HYD/2010. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE IMPUGNED ORDER OF THE TRIBUNAL. THE TRIBUNAL HAS T AKEN INTO CONSIDERATION ALL THE RELEVANT FACTS WHILE DEL IVERING THE ORDER AND NOT CONSIDERED ANY ERRONEOUS FACTS. THE ISSUE RAISED BY THE ASSESSEE BEFORE US IN ITS MISCELLANEOUS APPLICATION IS A DEBATABLE ISSUE WHIC H CANNOT BE CONSIDERED IN THE PROCEEDINGS U/S. 254(2) OF MA NO. 26/HYD/2012 M/S. VIRTUSA (INDIA) PVT. LTD. L.L ========================= 4 THE ACT. IT MAY BE AN ERROR OF JUDGEMENT AND IT CA NNOT BE SAID THAT IS A MISTAKE APPARENT ON RECORD TO REC ALL THE ORDER OF THE TRIBUNAL. THE SCOPE AND AMBIT OF APPLICATION OF PROVISIONS OF SECTION 254(2) IS AS F OLLOWS: '13. THUS THE SCOPE AND AMBIT OF APPLICATION U/S. 2 54(2) IS AS FOLLOWS: (A) FIRSTLY, THE SCOPE AND AMBIT OF APPLICATION OF S. 254(2) OF IT ACT IS RESTRICTED TO RECTIFICATION OF THE MISTAKES APPARENT FROM THE RECORD. (B) SECONDLY, THAT NO PARTY APPEARING BEFORE THE TRIBUNAL SHOULD SUFFER ON ACCOUNT OF ANY MISTAKE COMMITTED BY THE TRIBUNAL AND IF THE PREJUDICE HAS RESULTED TO THE PARTY, WHICH PREJUDICE IS ATTRIBUTABLE TO THE TRIBUNAL'S MISTAKE/ERROR OR OMISSION, AND WHICH AN ERROR IS A MANIFEST ERROR, THEN THE TRIBUNAL WOULD BE JUSTIFIED IN RECTIFYING ITS MISTAKE. THE 'RULE OF PRECEDENT' IS AN IMPORTANT ASPECT OF LEGAL CERTAINTY IN THE RULE OF LAW AND THAT PRINCIPLE IS NOT OBLITERATED BY S. 254(2) OF THE ACT AND NON-CONSIDERATION OF PRECEDENT BY THE TRIBUNAL CAUSES A PREJUDICE TO THE ASSESSEE.\ (C) THIRDLY, POWER TO RECTIFY A MISTAKE IS NOT EQUIVALENT TO A POWER TO REVIEW OR RECALL THE ORDER SOUGHT TO BE RECTIFIED. (D) FOURTHLY, UNDER S. 254(2) AN OVERSIGHT OF A FACT CANNOT CONSTITUTE AN APPARENT MISTAKE RECTIFIABLE UNDER THE SECTION. (E) FIFTHLY, FAILURE ON THE PART OF THE TRIBUNAL TO CONSIDER AN ARGUMENT ADVANCED BY EITHER PARTY FOR ARRIVING AT A CONCLUSION IS NOT AN ERROR APPARENT ON RECORD, ALTHOUGH IT MAY BE AN ERROR OF JUDGEMENT. (F) SIXTHLY, EVEN IF ON THE BASIS OF A WRONG CONCLUSION THE TRIBUNAL HAS NOT ALLOWED A CLAIM OF THE PARTY IT WILL NOT BE A GROUND FOR MOVING AN APPLICATION UNDER S. 254(2) OF THE ACT. (G) LASTLY, IN THE GARB OF AN APPLICATION FOR RECTIFICATION UNDER S. 254(2) THE ASSESSEE CANNOT BE PERMITTED TO REOPEN AND REARGUE THE WHOLE MA NO. 26/HYD/2012 M/S. VIRTUSA (INDIA) PVT. LTD. L.L ========================= 5 MATTER AS THE SAME IS BEYOND THE SCOPE OF S. 254(2) OF THE IT ACT.' 7. KEEPING IN MIND THE ABOVE PARAMETERS, WE ARE OF THE OPINION THAT IT IS A CONSCIOUS DECISION OF THE TRIBUNAL. THE TRIBUNAL AFTER CONSIDERING THE JUDGE MENT CITED BY THE AR CAME TO THE CONCLUSION THAT DISALLO WANCE MADE U/S. 43B OF THE ACT CANNOT BE CONSIDERED IT AS 'INCOME FROM BUSINESS'. ACCORDINGLY, EXEMPTION U/S . 10A IS NOT AVAILABLE. BEFORE US THE ASSESSEE TRIED TO SHOW THAT THERE IS A MISTAKE APPARENT ON RECORD ON ACCOUNT OF FAILURE TO CONSIDER THE EARLIER PRECEDEN TS. IN OUR OPINION, THERE IS NO FAILURE ON THE PART OF THE TRIBUNAL IN CONSIDERING THE EARLIER PRECEDENTS. TH E TRIBUNAL HAS CONSIDERED THE DECISION OF THE CO-ORDI NATE BENCH IN THE CASE OF PATNI TELECOM PVT. LTD. (SUPR A). THE ISSUE INVOLVED HEREIN IS VERY MUCH DEBATABLE. THERE ARE TWO DECISIONS FROM THIS TRIBUNAL ON THE SAME IS SUE ONE IS IN THE CASE OF PATNI TELECOM PVT. LTD. (SUPR A) AND THE OTHER IS IN THE CASE OF PLANT ONLINE PVT. LTD. (SUPRA). MORE SO, THE PUNJAB & HARYANA HIGH COURT IN THE CAS E OF NATIONAL LEGGUARD WORKS VS. CIT & ANR. (207 CTR 581 ) (P&H) HELD THAT MERE SURRENDER OF INCOME BY THE ASSESSEE AT THE TIME OF SURVEY, ON EXCESS STOCK BEI NG FOUND CANNOT REPRESENT THE INCOME FROM EXPORT/BUSINESS. THE ASSESSEE IS NOT ENTITLED FOR SPECIAL DEDUCTION U/S. 80HHC OF THE ACT. WHEN WE JUXTAPOSE THIS JUDGEMENT WITH THE JUDGEMENT OF BOMBAY HIGH COURT IN THE CASE OF GEM PLUS JEWELLERY (INDIA) LTD . (SUPRA), IT IS CLEAR THAT THE ISSUE IS DEBATABLE AN D THERE IS NO UNANIMITY ON THIS ISSUE THAT WHETHER THE INCO ME IS FROM BUSINESS OR FROM OTHER SOURCES. WHEN THERE IS MA NO. 26/HYD/2012 M/S. VIRTUSA (INDIA) PVT. LTD. L.L ========================= 6 DIVERGENT VIEW OF THE ISSUE, WE ARE NOT IN A POSITI ON TO RECALL THE ORDER OF THE TRIBUNAL BY INVOKING THE PROVISIONS OF SECTION 254(2) OF THE ACT. ACCORDING LY, THE GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 8. IN THE RESULT, THE MISCELLANEOUS APPLICATION BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND JULY, 2012 SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 2 ND JULY, 2012 COPY FORWARDED TO: 1. M/S VIRTUSA (INDIA) LTD., 6-3-1192, MY HOME TYCO ON, KUNDAN BAGH, BEGUMPET, HYDERABAD 2. DCIT, CIRCLE-3(3), 7 TH FLOOR, B-BLOCK, IT TOWERS, AC GUARDS, HYDERABAD 3. CIT(A)-III, HYDERABAD 4. CIT (TRANSFER PRICING), HYDERABAD 5. THE DR 'A' BENCH, ITAT, HYDERABAD TPRAO