CIT V. FLEXTRONICS SOFTWARE SYSTEM LTD

ITA/545/2011

AI Insights

The case involves multiple appeals by the Revenue against the assessee concerning the assessment years 2003-04, 2004-05, 2005-06, and 2006-07. The primary issues pertained to the nature of project expenses claimed by the assessee and the applicability of deductions under Section 10B and Section 80HHE of the Income Tax Act. The Commissioner of Income Tax had earlier issued a notice under Section 263, questioning the nature of the expenses and the deductions claimed. The ITAT, however, found these issues to be debatable and ruled in favor of the assessee, a decision which was upheld by the High Court.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 720418 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 30-09-2011
• Assessment Year: misc
• Other Referred Cases: Legato System (P) Ltd. Vs. ITO, 93 TTJ 828, Commissioner of Income Tax Vs. Interra Software India Pvt. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Assessment Year; Capital nature; Debatable Issue; Income Tax; Project expenses
• Section: 263; 10B; 80HHE

Judgement Text

"/z -' -@ #16,18 to20 30.9.20rr Present: Advocate for the Mr. N.P. Sahni, Sr' Standing Counsel for the Revenue' Ms. Kavit a Jha, Advocate with Mr' Somnath Shukla' ASSESSEE. i ,o, the reasons stated in this application, delay in re-filing the appeal is condoned' moreso, when the appeal is filed in time in respect of other assessment years and on the same very issue raised in this appeal' CM stands disPosed of' lTA77812011 ITA 1s09/2010 lT A s45l20tr ITA 60s/2011 These four appeals pertaining to the same assessee involved four assessment years' - t ^-^ ^aq s ITA 77812011 which is in respect though the questions raised are common' Lead case il of assessment year 2003-04and the order passed by the Tribunar in this case has been \" ^ E^r 'ould like to take note of the facts followed in other three cases' For this reason' we w {ppearing in ITA 778120t1' Forthisyear,therespondent/assesseefileditsreturndeclaringincomeofRs.ll.ST crores. Assessment was framed after making certain additions at an income of Rs' 12'65 I Digitally Signed By:AMULYA Certify that the digital file and physical file have been compared and the digital data is as per the physical file and no page is missing. Signature Not Verified --I---=------ t bror., vide orders dated 31\" March ,2006' Thereafter' the Commissioner of Income Tax issued notice dated 1lth March, 200g under section 263 0fthe Act on the ground that the assessee had craimed project expenses of Rs. rg,3g,452r- which was capital in nature' TheCommissioneralsostatedinthesaidshowcausenoticethattheassesseehad claimed deduction of Rs.3g,g 3,45,g66r-under section 10B of the Act which was wrongly alrowed by the Assessing officer. The assessee in reply to the said notice contended that ,..,nutur,andinrespectofsecondissueraisedinthe project expenses were revenue il notice it was explained that there was no over-lapping of claims ,made under section ''HHE and 10B of the Act. The commissioner was' however' not convinced with the aforesaid plea of the assessee. Discussing the provisions of section 80HHE (5) of the a oo, the commissioner observed that thq assessee was not entitred to claim the benefit :' under section 10B of the Act. She arso observed that the project€xpenses were capital in nature with respect of these two issues and directed the Assessing officer to decide these two aspects afresh, as per law' after giving opportunity to the assessee' ,. The assessee preferred appeal against this order passed by the comrnissioner pnder Section 263 ofthe Act. The plea of the assessee before the Tribunal was that inrofu, as issue regarding deduction under s\"\"tlon 10B of the Act is concerned' it was debatabre issue, moreso, when the assessee had claimed deduction under Section 80HHE of the Act in the eaflier year as well and was allowed. This plea of the assessee has been accepted by the ITAT relying upon its own o,d., in the case of Legato System (P) Ltd. Vs. ITO,93 TTJ 828' rJ We may also record that the appeal of the Revenue in the case of Legato System (supra) was dismissed by this Court. We may also record that identical issue had arisen in ITA t23312007, ITA 16012009 and ITA 50712008 entitled commissioner of lrtcome ?ax Vs. Interra Software India Pvt. Ltcl. and this Court had disrnissed those appeals of the Revenue upholding the order of the Tribunal. The Revenue had preferred SLPs thereagainst which have also been dismissed by the Suprerne Court vide orders dated 23'd september,2oll. on the aforesaid ground, the order of the Tribunal on these aspects is . without any blemish and needs no interference' , Insofar as expenditure incurred on the development of package software is concerned, the ITAT set aside the order of the Commissioner under Section 263 of the :J' Act on this count as well holding that even this issue was debatable and, therefore, the order of the assessing Officer could not be said to be erroneous and prejudicial to the interest of the Revenue. After reading the order of the Tribunal on this issue, we are in agreement with the view taken by the Tribunal' No question of law arises in these appeals which are accordingly dismissed' SEPTEMBER 30,2011 skb , ^.. a SrDDH^I.RTH MRIDUL,J. "