ACIT, Pune V. Patni Computer Systems Ltd., Pune

MA 6/PUN/2013

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 2451 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-11-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 18-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P L PATHADE
• Section: 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER MA NO.06/PN/2013 (ARISING OUT OF ITA NO.1087/PN/2008) (ASSESSMENT YEAR : 2004-05) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE- 4, PUNE. . APPELLANT VS. PATNI COMPUTERS SYSTEMS LTD., S.NO.1A, IRANI MARKET COMPOUND, YERAWADA, PUNE 411 006. PAN : AABCP6219N . RESPONDENT DEPARTMENT BY : MR. C. H. NANIWADEKAR RESPONDENT BY : MR. P. L. PATHADE ORDER PER G. S. PANNU, AM THE CAPTIONED MISCELLANEOUS APPLICATION HAS BEEN FI LED BY THE REVENUE IN RESPECT OF THE ORDER OF THE TRIBUNAL DAT ED 12.06.2012 WHEREBY THE CROSS-APPEALS OF THE ASSESSEE AND THE REVENUE VIDE ITA NO.476/PN/2008 AND ITA NO.1087/PN/2008 RESPECTIVELY PERTAINING TO ASSESSMENT YEAR 2004- 05 WERE DISPOSED-OFF. THE MISCELLANEOUS APPLICATIO N HAS BEEN PREFERRED BY THE REVENUE PRIMARILY IN RELATION TO THE ISSUE RAIS ED IN THE APPEAL OF THE REVENUE IN ITA NO.1087/PN/2008 PERTAINING TO GROUND S OF APPEAL NOS. 1, 2, 3 & 4, WHICH READ AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN HOLDING THAT THERE WAS NO S PLITTING OF THE EXISTING BUSINESS AND THE BUSINESS IS NOT INTEGRAL PART OF T HE ORIGINAL UNDERTAKING SINCE 1980, COMMONALITY OF BUSINESS UTI LIZATION OF CERTAIN RESOURCES AND ALLOCATION OF COMMON EXPENSES ETC. DOES NOT, IN ANY WAY, COME IN THE WAY TO DECIDE THE ELIGIBILI TY OF DEDUCTION U/S 10A AND THEREFORE ALL THE UNDERTAKINGS OF THE ASSES SEE ARE ELIGIBLE FOR CLAIM OF DEDUCTION U/S 10A OF THE INCOME TAX AC T, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE THREE UNIT S AT CHINCHWAD, AKRUTI AND MILLENIUM BUSINESS PARK FULFILL THE CONDITIONS LAID DOWN U/S 10A(2) OF THE INCOME TAX ACT, 1961 WHEN THE ASSESSE E THEMSELVES HAD IN THEIR APPLICATION TO STPI STATED THESE AS EX PANSION OF STPI HAD APPROVED THE SAME AS EXPANSION OF EXISTING UNITS. MA NO.06/PN/2013 ITA NO. A.Y. 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN CONCLUDING THAT CHINCHWAD U NIT, AKRUTI UNIT AND MILLENIUM BUSINESS PARK UNIT WAS NOT FORMED BY SPLI TTING OR RECONSTRUCTION OF THE EXISTING BUSINESS AND THEREFO RE, THESE ARE NEW UNITS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN HOLDING THAT APEX COURT DEC ISION IN THE CASE OF TEXTILE MACHINERY CORP. LTD VS. CIT [107 ITR 195] W HICH WAS IN RESPECT OF SECTION 15C OF THE INCOME TAX ACT WAS AP PLICABLE TO THE FACTS OF THE ASSESSEE'S CASE. 2. IN ORDER TO UNDERSTAND THE DISPUTE RAISED IN THE PRESENT MISCELLANEOUS APPLICATION, IT WOULD BE RELEVANT TO NOTE THAT THE ISSUE BEFORE THE TRIBUNAL RELATED TO ASSESSEES CLAIM FOR DEDUCTION U/S 10A O F THE ACT IN RELATION TO PROFITS DERIVED FROM DEVELOPMENT AND EXPORT OF COMP UTER SOFTWARE. THE ASSESSEE WAS FOUND TO HAVE BEEN INCREASING IN ITS B USINESS OVER THE YEARS AND THE BUSINESS WAS EXPANDED BY ESTABLISHING NEW U NDERTAKINGS AT DIFFERENT LOCATIONS. AS PER THE ASSESSING OFFICER, THE THREE UNITS LOCATED AT CHINCHWAD, AKRUTI AND MILLENIUM BUSINESS PARK WERE MERE EXPANS ION OF THE EXISTING UNITS ON THE BASIS OF THE APPROVAL LETTER RECEIVED FROM S OFTWARE TECHNOLOGY PARK OF INDIA (IN SHORT STPI) AND THEREFORE, AS PER THE A SSESSING OFFICER THE PROFITS OF THE AFORESAID THREE UNITS WERE NOT LIABLE TO BE IND EPENDENTLY ELIGIBLE FOR THE DEDUCTION U/S 10A OF THE ACT. THE TRIBUNAL NOTED T HAT SIMILAR ISSUE HAD COME UP IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2002-03 AND 2003-04 WHEREBY VIDE ORDER IN ITA NOS.426/PN/2006 & OTHERS DATED 30 TH JUNE, 2011, THE CLAIM OF THE ASSESSEE WAS AFFIRMED. NOTABLY, I N ASSESSMENT YEAR UNDER CONSIDERATION, THE CIT(A) HAD FOLLOWED ITS EARLIER DECISION IN ASSESSMENT YEARS 2002-03 AND 2003-04 IN ALLOWING THE CLAIM OF THE AS SESSEE, WHICH HAD SINCE BEEN AFFIRMED BY THE TRIBUNAL VIDE ORDER DATED 30 TH JUNE, 2011 (SUPRA). 3. IN TERMS OF THE PRESENT MISCELLANEOUS APPLICATIO N, THE CLAIM MADE OUT BY THE REVENUE IS THAT ASSESSEES CLAIM FOR DEDUCTI ON U/S 10A OF THE ACT HAS BEEN ALLOWED WITHOUT ADJUDICATING THE GROUND OF APP EAL NO.1 (REPRODUCED EARLIER BY US). AS PER THE REVENUE THOUGH THE TRIB UNAL HAD GIVEN ITS DECISION IN RESPECT OF THE CLAIM OF DEDUCTION U/S 10A OF THE ACT RELATING TO THREE UNITS OF MA NO.06/PN/2013 ITA NO. A.Y. 2 CHINCHWAD, AKRUTI AND MILLENIUM BUSINESS PARK WHERE AS THE AFORESTATED GROUND OF APPEAL NO.1 RELATING TO ALL THE UNDERTAKI NGS HAVE NOT BEEN ADJUDICATED. IN THIS MANNER, IT HAS BEEN SOUGHT TO BE CANVASSED THAT AN ERROR HAS CREPT IN THE ORDER OF THE TRIBUNAL BY NON-ADJUD ICATION OF THE AFORESTATED GROUND OF APPEAL NO.1. THEREFORE, IT IS CONTENDED THAT NON-ADJUDICATION OF SUCH GROUND IS A MISTAKE APPARENT FROM THE RECORD W ITHIN THE MEANING OF SECTION 254(2) OF THE ACT AND THEREFORE, IT IS PRAY ED THAT THE ORDER OF THE TRIBUNAL DATED 12.06.2012 (SUPRA) BE RECALLED AND G ROUND OF APPEAL NO.1 BE DECIDED AFRESH. 4. AT THE TIME OF HEARING, THE LEARNED DEPARTMENTAL REPRESENTATIVE APPEARING FOR THE REVENUE HAS RELIED ON THE CONTENT S OF THE MISCELLANEOUS APPLICATION, WHICH WE HAVE ADVERTED TO IN THE EARLI ER PARAGRAPH, AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 5. IN CONTRAST, THE LEARNED COUNSEL FOR THE RESPOND ENT-ASSESSEE VEHEMENTLY POINTED OUT THAT NO INTERFERENCE U/S 254 (2) OF THE ACT WAS CALLED FOR AT THIS STAGE BY THE TRIBUNAL IN ITS ORDER DATE D 12.06.2012 (SUPRA). FIRSTLY, IT IS POINTED OUT THAT SUBSEQUENT TO THE ORDER OF THE TRIBUNAL DATED 12.06.2012 (SUPRA), THE DEPARTMENT PREFERRED AN APPEAL BEFORE THE HONBLE BOMBAY HIGH COURT U/S 260A OF THE ACT, WHICH HAS SINCE BEEN DIS MISSED VIDE ORDER DATED 28.02.2013 IN INCOME TAX APPEAL (L) NO.1820 OF 2012 , A COPY OF WHICH HAS BEEN PLACED ON RECORD. IT IS SUBMITTED THAT THE OR DER OF THE TRIBUNAL HAS SINCE MERGED WITH THE ORDER OF THE HONBLE HIGH COURT AND THUS THERE IS NO QUESTION OF APPLYING SECTION 254(2) OF THE ACT FOR RECTIFICA TION OF ANY MISTAKE AT PRESENT AND FOR THE SAID PROPOSITION RELIANCE HAS BEEN PLAC ED ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V S. PADAM PRAKASH (HUF) (2009) 117 ITD 129 (DEL) (SB). MA NO.06/PN/2013 ITA NO. A.Y. 2 6. SECONDLY, IT HAS BEEN POINTED OUT THAT SO FAR AS THE THREE UNITS OF CHINCHWAD, AKRUTI AND MILLENIUM BUSINESS PARK ARE C ONCERNED THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2004-05 WA S NOT THE INITIAL YEAR OF CLAIM OF DEDUCTION U/S 10A OF THE ACT. IT IS POINT ED OUT THAT THE CLAIM OF DEDUCTION U/S 10A OF THE ACT IN RELATION TO CHINCHW AD, AKRUTI AND MILLENIUM BUSINESS PARK WAS PERTAINING TO FIFTH AND THIRD YEA R RESPECTIVELY. THE LEARNED COUNSEL POINTED OUT THAT SIMILAR CLAIM WAS BEFORE T HE TRIBUNAL IN ASSESSMENT YEARS 2002-03 AND 2003-04 WHICH HAS SINCE BEEN ALLO WED IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 30 TH JUNE, 2011 (SUPRA). IN THIS CONTEXT, IT WAS POINTED OUT THAT THE PLEA NOW SOUGHT TO BE RAISED, BASED ON GROUND OF APPEAL NO.1, NAMELY, THAT THE DIFFERENT UNDERTAKINGS OF TH E ASSESSEE WAS NOT INDEPENDENT BUT INVOLVED SPLITTING-UP OF EXISTING B USINESSES, ETC. WAS NOT RAISED EITHER IN ASSESSMENT YEARS 2002-03 AND 2003- 04. THE LEARNED COUNSEL POINTED OUT THAT EVEN THE APPEAL FILED BY THE REVEN UE AGAINST THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2002-03 DATED 30 TH JUNE, 2011 (SUPRA) BEFORE THE HONBLE BOMBAY HIGH COURT DID NOT CONTAIN SUCH AN OBJECTION. IN THIS CONTEXT, THE LEARNED COUNSEL HAS REFERRED TO A COPY OF THE ORDER OF THE HONBLE BOMBAY HIGH COURT IN THE ASSESSEES OWN CASE FOR AS SESSMENT YEAR 2002-03 IN INCOME TAX APPEAL NO.1148 OF 2012 DATED 28.02.20 13. IN SUM AND SUBSTANCE, THE PLEA OF THE LEARNED COUNSEL IS THAT THE ISSUE NOW BEING SOUGHT TO BE RAISED WAS NOT RAISED BY THE REVENUE EVEN IN THE PAST YEARS AND IN ANY CASE THE INSTANT ASSESSMENT YEAR IS NOT INITIAL YEA R OF CLAIM SO AS TO IMPART ANY RELEVANCE TO THE IMPUGNED ISSUE, WHICH OSTENSIBLY C AN ONLY BE RAISED IN THE INITIAL YEAR OF THE CLAIM. 7. BEFORE PROCEEDING FURTHER, IT MAY BE RELEVANT TO OBSERVE THAT THE OBJECTIONS OF THE REVENUE THAT THE NEW UNDERTAKINGS HAVE BEEN FORMED BY SPLITTING-UP OR RECONSTRUCTION OF EXISTING BUSINESS IS QUITE IRRELEVANT IN THE CONTEXT OF THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2004-05. FACTUALLY SPEAKING, THE PLEA OF THE ASSESSEE ON THIS COUNT IS JUSTIFIED. QUITE CLEARLY, SO MA NO.06/PN/2013 ITA NO. A.Y. 2 FAR AS ASSESSMENT YEAR 2004-05 IS CONCERNED IT DOES NOT INVOLVE CLAIM OF DEDUCTION U/ 10A OF THE ACT IN ANY OF THE UNITS IN RESPECT OF THEIR INITIAL ASSESSMENT YEARS. THEREFORE, THE VIOLATION OF THE RESTRICTION CONTAINED IN SECTION 10A(2)(II) OF THE ACT QUA THE ASSESSEES CL AIM FOR DEDUCTION U/S 10A OF THE ACT IN THE INSTANT ASSESSMENT YEAR IS NOT RELEV ANT. QUITE CLEARLY, THE RESTRICTION TO THE EFFECT THAT THE NEW UNITS COULD NOT BE FORMED BY SPLITTING-UP OR RECONSTRUCTION OF A BUSINESS ALREADY EXISTENCE IS N OT APPLICABLE IN THIS ASSESSMENT YEAR BECAUSE THE SAME IS RELEVANT ONLY I N THE YEAR OF FORMATION OF THE UNITS, AND THE INSTANT ASSESSMENT YEAR IS NOT T HE YEAR OF FORMATION OF UNITS. 8. APART THEREFROM, IN OUR VIEW IT HAS BEEN RIGHTLY ASSERTED BY THE LEARNED COUNSEL ON THE BASIS OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF PADAM PRAKASH (HUF) (SUPRA) THAT SINCE THE ORDER OF THE TRIBUNAL HAS MERGED WITH THE ORDER OF THE HONBLE BOMBAY HIGH CO URT, THERE IS NO QUESTION OF RECTIFICATION OF ANY MISTAKE AT PRESENT WITHIN T HE MEANING OF SECTION 254(2) OF THE ACT ESPECIALLY WHEN THE ORDER IN WHICH THE R ECTIFICATION IS SOUGHT BY THE REVENUE STANDS MERGED IN THE ORDER OF THE HONBLE B OMBAY HIGH COURT DATED 28.02.2013 (SUPRA). 9. FOR ALL THE ABOVE REASONS, WE THEREFORE FIND NO JUSTIFICATION EITHER IN LAW OR ON FACTS IN THE INSTANT PETITION OF THE REVENUE U/S 254(2) OF THE ACT. ACCORDINGLY, REVENUE HAS TO FAIL ON THIS ASPECT. 10. IN THE RESULT, THE MISCELLANEOUS APPLICATION OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD SEPTEMBER, 2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE, DATED: 03 RD SEPTEMBER, 2014 SUJEET MA NO.06/PN/2013 ITA NO. A.Y. 2 COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, PUNE; 4) THE CIT-II, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE