THE COMMISSIONER OF INCOME TAX V. M/S AMERICAN DATA SOLUTIONS INDIA PVT LTD

ITA/587/2007

AI Insights

The case involves two appeals by the Revenue against M/s. American Data Solutions India Pvt. Ltd., concerning the denial of a deduction under Section 10-A of the Income Tax Act for the assessment years 2001-2002 and 2003-2004. The primary issue was the non-submission of Form No.56-F, required for claiming the deduction, at the time of filing the income tax return. The first appellate authority accepted the form when it was submitted later and granted the deduction, a decision upheld by the Tribunal. The Revenue's appeals to the High Court challenged these decisions, arguing that the deduction should not be granted without the form being submitted initially. The High Court, referencing similar cases and legal precedents, upheld the lower authorities' decisions, emphasizing the continuity of the assessment process and the practical difficulties faced by assessees.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 738580 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 18-12-2013
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income-Tax And Another \\vs\\ Ace Multitaxes Systems Pvt.Ltd. (2009) 317 ITR 207 (Karn)
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: C P AYAPPA
• Assessee Lawyers: K V ARAVIND
• Keywords: Audit report; Deduction; Income Tax; Software Development; Form No.56-F
• Section: 10(a); 288; 260-A

Judgement Text

" - 1 - IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 18TH DAY OF DECEMBER 2013 PRESENT THE HON’BLE MR.JUSTICE N.KUMAR AND THE HON’BLE MRS..JUSTICE RATHNAKALA INCOME TAX APPEAL NO.587 OF 2007 C/W INCOME TAX APPEAL NO.232 OF 2008 BETWEEN: 1. The Commissioner of Income-tax, Central Circle, C.R Building, Queens Road, Bangalore. 2. The Income-Tax Officer, Ward- 11(1), C.R Building, Queens Road, Bangalore. ..APPELLANTS (common in both appeals) (By Sri K.V. Aravind, Adv.) AND: IN ITA NO.587 OF 2007 M/s. American Data Solutions India Pvt. Ltd., The Estate, 3rd Floor, Eastwing, No.121, Dickenson Road, Bangalore. - 2 - IN ITA NO.232 OF 2008 M/s. American Data Solutions India Pvt. Ltd., No.149, Rathna Avenue, Richmond Road, Bangalore – 560 042. ..RESPONDENTS (By Sri C.P. Ayappa for M/s. Trilegal, Adv.) I.T.A.No.587/2007 is filed under Section 260-A of the I.T. Act 1961 arising out of order dated 09-03-2007 passed in ITA No.1460/BANG/2005, for the Assessment Period 2001- 2002, praying that this Hon'ble Court may be pleased to: i. formulate the substantial questions of law stated therein, ii. allow the appeal and set aside the order passed by the ITAT, Bangalore in ITA No.1460/BANG/2005 dated 09- 03-2007 confirming the order passed by the Appellate Commissioner and confirm the order passed by the Income Tax Officer, Ward-11(1), Bangalore in the interest of justice and equity. I.T.A.No.232/2008 is filed under Section 260-A of I.T.Act, 1961 arising out of Order dated 01-11-2007 passed in ITA No.951/BNG/2006, for the Assessment year 2003-04, praying that this Hon'ble Court may be pleased to: iii. formulate the substantial questions of law stated therein, iv. allow the appeal and set aside the order passed by the ITAT Bangalore in ITA No.951/BNG/2006, dated 01- 11-2007 confirm the orders of the Appellate Commissioner and Income Tax Officer, Ward – 11(1), Bangalore. These Appeals coming on for Hearing this day, KUMAR J., delivered the following: - 3 - J U D G M E N T These two appeals are preferred by the Revenue against two separate orders passed by the Tribunal holding that, the assessee is entitled to deduction under Section 10-A of the Income Tax Act (for short hereinafter referred to as ‘the Act’), though the report of an accountant as defined in the Explanation to sub-section (2) of Section 288 of the Act was not filed along with the return of income, as it was filed subsequently. The assessee is a Company engaged in Software development. While filing the return of income, the assessee claimed deduction under Section 10-A of the Act. As the said return was not accompanied by Form No.56-F, the relief under Section 10-A of the Act was denied to the assessee. However, the assessee produced the Form No.56F at the appellate stage. The first Appellate Authority having accepted the said Form No.56-F, after giving opportunity to the assessee, granted the benefit under Section 10-A of the Act. Aggrieved by the said order, Revenue preferred an appeal before the Tribunal. The Tribunal was of the view that there is no illegality committed by the first Appellate Authority in - 4 - extending the benefit and therefore, denied to entertain the appeal. Aggrieved by the said order, the present appeals are filed. These appeals are admitted to consider the following substantial questions of law: In I.T.A.No.587/2007 “Whether the Commissioner of Appeals was justified in allowing the appeal on the ground that the Assessing Officer has not looked into Form No.56(g), when such form was actually not produced by the assessee before the Assessing Officer? In I.T.A.No.232/2008 “Whether the Tribunal was correct in holding that the certificate required u/s.10A(5) of the Act having not been filed along with the return will not disentitle the assessee to claim relief u/s.10A of the Act as the assessee had filed Form No.56F before the Assessing Officer in assessment proceedings? This Court in the case of Commissioner of Income-Tax And Another –vs- Ace Multitaxes Systems Pvt.Ltd. reported in (2009) 317 ITR 207 (Karn) held that, sub-section (7) of Section 80-IA of the Act does not cast any obligation on the assessee that the return must be accompanied by the audit report. It appears to be proper reasoning as to why in all - 5 - cases it cannot be accompanied by audit report. For meeting the practical difficulties of the assessee, it is not necessary that in all cases, it must be accompanied by the audit report. In fact, the provision on which reliance is placed by the Assessing Authority to deny the benefit is similar under Section 10A(5) also. Therefore, the Appellate Authorities after referring to three judgments of different High Courts, who have also taken the same view while dealing with the case under Section 10-A itself, has granted the benefit. The proceedings before the first Appellate Authority is continuation of the assessing process and admittedly, this audit report is produced at that stage. Even though it was not produced before the Assessing Authority, the lower Appellate Authority was duty bound to take note of the said audit report and grant benefit, if the assessee is entitled to. That is precisely what the lower Appellate Authority has done. In that view of the matter, the order of the Tribunal, declining to interfere with the order of the Appellate Authority is valid. In view of the same, the substantial questions of law raised in these appeals are answered in favour of the assessee and against the Revenue. - 6 - Hence, both the appeals are dismissed. Sd/- JUDGE Sd/- JUDGE KNM/- "