ACIT, CHENNAI v. M/s. Quintegra Solutions Pvt. Ltd., CHENNAI

ITA 1249/CHNY/2011 | 2005-2006
Pronouncement Date: 21-09-2011 | Result: Dismissed

Appeal Details

RSA Number 124921714 RSA 2011
Assessee PAN AAACS7016B
Bench Chennai
Appeal Number ITA 1249/CHNY/2011
Duration Of Justice 2 month(s) 15 day(s)
Appellant ACIT, CHENNAI
Respondent M/s. Quintegra Solutions Pvt. Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 21-09-2011
Date Of Final Hearing 14-09-2011
Next Hearing Date 14-09-2011
Assessment Year 2005-2006
Appeal Filed On 06-07-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH CHENNAI BEFORE DR. O.K.NARAYANAN VICE-PRESIDENT AND SHRI HARI OM MARATHA JUDICIAL MEMBER ITA NOS.1263 TO 1266 & 1629(MDS)/2010 (ASST. YEARS: 2002-03 2003-04 2003-04 2006-07 & 2007-08) M/S. QUINTEGRA SOLUTIONS LTD. 168-ELDAMS ROAD CHENNAI-600 018. PAN AAACS7016B. VS. THE INCOME-TAX OFFICER COMPANY CIRCLE V(2) CHENNAI. (APPELLANT) (RESPONDENT) A ND ITA NOS.1526 TO 1530 & 2056(MDS)/2010 & ITA NOS.1249 TO 1251(MDS)/2011 (ASST.YEARS: 2002-03 2003-04 2003-04 2005-06 20 06-07 2007-08 AND 2005-06 2007-08 & 2008-09) THE ASSISTANT COMMISSIONER M/S.QUINTEGRA SOLUTIONS PVT. OF INCOME-TAX COMPANY VS. LTD. ELDAMS ROAD CLE. V(2) CHENNAI. CHEN NAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.SRIDHAR ADVOCATE DEPARTMENT BY : SHRI SANJAY V.R.DESHMUKH I RS JCIT-DR. DATE OF HEARING : 14 TH SEPTEMBER 2011 DATE OF PRONOUNCEMENT : 21 ST SEPTEMBER 2011 - - ITA NOS.1263 TO 1266 OF 2010 ETC. 2 O R D E R PER BENCH: THIS IS A BUNCH OF FOURTEEN APPEALS. THE REVENUE HAS FILED NINE APPEALS AND THE ASSESSEE HAS FILED FIVE APPEALS. THE RELEVANT ASSESSMENT YEARS ARE 2002-03 2003-04 200 5-06 2006-07 2007-08 AND 2008-09. 2. FIRST WE SHALL CONSIDER THE APPEALS FILED BY TH E REVENUE. 3. THE APPEAL IN ITA NO.1526(MDS)/2010 IS FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2002-03. 3.1. THE FIRST GROUND RAISED BY THE REVENUE IS THA T THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DI RECTING THE ASSESSING OFFICER TO RECOMPUTE THE EXEMPTION UNDER SECTION 10A BY EXCLUDING LOSS ON FIRE ACCIDENT TO THE EXTENT OF ` 10.69 LAKHS BOTH IN THE NUMERATOR AND DENOMINATOR IN THE LIGHT OF THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF SAK S OFT LTD. 121 TTJ 865. - - ITA NOS.1263 TO 1266 OF 2010 ETC. 3 3.2. THE ISSUE WAS CONSIDERED BY THE SPECIAL BENCH OF THE TRIBUNAL CHENNAI IN THE CONTEXT OF SECTION 10A AND IT WAS HELD THAT SUCH ADJUSTMENT MADE IN THE EXPORT TURNOV ER MUST BE MADE IN THE TOTAL TURNOVER AS WELL FOR IT IS ESSEN TIAL TO MAINTAIN PARITY OF VARIABLES. THE COMMISSIONER OF INCOME-TA X(APPEALS) HAS ACCEPTED THE CLAIM OF THE ASSESSEE PLACING REL IANCE ON THE ABOVE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL WHICH IS BINDING ON HIM. WE DO NOT FIND ANY MERIT IN THE CO NTENTION RAISED BY THE REVENUE ON THIS ISSUE. THIS GROUND IS REJEC TED. 3.3. THE NEXT GROUND IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DIRECTING THE ASSE SSING OFFICER TO DELETE THE DISALLOWANCE OF MANAGERIAL REMUNERATI ON OF 1% MADE ON WORK IN PROGRESS ON THE GROUND THAT THE AS SESSEE SHOULD BE GIVEN CREDIT FOR DISALLOWANCES IN SUBSEQ UENT YEARS. THE ASSESSEE BILLS FOR THE WORK IN PROGRESS AFTER T HE APPROVAL OF THE CLIENTS AND AS A CONSEQUENCE REVERSES THE EARLI ER ENTRY PASSED IN ITS BOOKS OF ACCOUNT. IT IS IN ADDITION TO THE ABOVE REVERSAL THAT THE ASSESSEE IS SUFFERING FROM THE DI SALLOWANCE MADE BY THE ASSESSING AUTHORITY YEAR AFTER YEAR. IT IS IN ORDER TO AVOID THE ABOVE DOUBLE JEOPARDY THAT THE COMMISSION ER OF - - ITA NOS.1263 TO 1266 OF 2010 ETC. 4 INCOME-TAX(APPEALS) HAS DIRECTED THE DISALLOWANCE O F 1% MADE BY THE ASSESSING OFFICER . WE FIND THAT THE DIRECT ION OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IS SUPPORTED BY REASON. THE RELEVANT GROUND OF THE REVENUE IS REJECTED. 3.4. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DE LETING THE LEVY OF INTEREST UNDER SECTION 234D OF ` 1 61 774/-. THE SPECIAL BENCH OF THE TRIBUNAL(DELHI) IN THEIR DECISION IN T HE CASE OF EKTA PROMOTERS LTD. 113 ITD 719 HAS HELD THAT THE PROVI SIONS OF SECTION 234D WOULD BE APPLICABLE ONLY WITH EFFECT F ROM THE ASSESSMENT YEAR 2004-05 AND IT DOES NOT HAVE ANY RE TROSPECTIVE EFFECT. IT IS ON THE BASIS OF THE ABOVE SAID DECIS ION THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS DELETED THE LEVY OF INTEREST UNDER SECTION 234D. WE FIND THAT THE ORDE R OF THE COMMISSIONER OF INCOME-TAX(APPEALS) ON THIS POINT I S SUSTAINABLE IN LAW. THIS GROUND ALSO FAILS. 3.5. THE APPEAL FILED BY THE REVENUE FOR THE ASSES SMENT YEAR 2002-03 IS LIABLE TO BE DISMISSED. 4. THE NEXT IS THE APPEAL FOR THE ASSESSMENT YEAR 2003-04 IN ITA NO.1527(MDS)/2010. - - ITA NOS.1263 TO 1266 OF 2010 ETC. 5 4.1. THE ONLY GROUND RAISED IN THIS APPEAL IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DE LETING THE ADDITION OF ` 35 98 25 190/- TREATED AS INCOME BY THE ASSESSING OFFICER AS GOODWILL TAXABLE UNDER SECTION 28(IV) OF THE INCOME-TAX ACT 1961. 4.2. THE ASSESSEE COMPANY IS A PRODUCT OF AMALGAMATION OF M/S.TRANSYS TECHNOLOGIES PVT. LTD. AND M/S. SOPHIA SOFTWARE LTD. THE EXCESS OF COST OF AC QUISITION OVER THE CARRYING VALUE OF THE NET ASSET ON THE DATE OF MERGER HAS BEEN BROUGHT IN THE FINANCIAL STATEMENT OF THE ASSE SSEE COMPANY AS GOODWILL. THE ASSESSEE HAS ADOPTED THIS METHOD ON THE PRINCIPLE THAT THE CARRYING VALUE OF THE GOO DWILL IS SUSCEPTIBLE TO THE EVENTS AND CHANGES TAKING PLACE IN THE SURROUNDING CIRCUMSTANCES. THIS ACCOUNTING ENTRY T O ADJUST FOR THE BALANCING FIGURE HAS BEEN TREATED BY THE ASSESS ING AUTHORITY AS RECEIPT OF ` 35 98 25 190/- IN THE EVENT OF THE MERGER OF M/S.TRANSYS TECHNOLOGIES PVT. LTD. WITH THE ASSESSE E COMPANY. THE ASSESSING AUTHORITY TREATED THE SAME AS INCOME UNDER THE PROVISIONS OF SECTION 28(IV) OF THE INCOME-TAX ACT 1961. WHEN THIS MATTER WAS CONSIDERED IN FIRST APPEAL THE ASS ESSEE ARGUED - - ITA NOS.1263 TO 1266 OF 2010 ETC. 6 AT LENGTH THAT THE FINDING OF THE ASSESSING OFFICER IS ERRONEOUS IN THE FACTS OF THE CASE AND THERE IS NOTHING TO BE TA KEN INTO CONSIDERATION UNDER SECTION 28(IV). AFTER HEARING THE DETAILED SUBMISSIONS OF THE ASSESSEE COMPANY THE COMMISSION ER OF INCOME-TAX(APPEALS) REMANDED THE MATTER TO THE ASSE SSING OFFICER TO WHICH A REMAND REPORT WAS FURNISHED BY THE ASSESSING OFFICER. IN THE REMAND REPORT DATED 28-1 -2010 THE ASSESSING AUTHORITY HIMSELF HAS STATED THAT WHERE A MALGAMATION IS AUTHORISED BY THE HIGH COURT THE BALANCING FIGU RE ON THE ASSET SIDE OF THE BALANCE SHEET TAKES THE CHARACTER OF GO ODWILL WHICH CANNOT BE TAXED. ALL THE DETAILS RELATING TO THE C OMPUTATION OF THE FIGURE LIKE THE HIGH COURT ORDER THE WAY THE GOOD WILL WAS ARRIVED AT AND THE DETAILS OF OTHER ITEMS OF BALANC E-SHEETS OF BOTH AMALGAMATING AND AMALGAMATED COMPANIES WERE PLACED BOTH BEFORE THE ASSESSING AUTHORITY AND THE COMMISSIONER OF INCOME- TAX(APPEALS). IN THE LIGHT OF THE ABOVE STATED REM AND REPORT THE COMMISSIONER OF INCOME-TAX(APPEALS) DELETED THE ADD ITION. 4.3. WE DO NOT FIND ANY MERIT IN THE GROUND RAISED BY THE REVENUE IN THE PRESENT APPEAL. THERE IS NO DOUBT T HAT THE AMALGAMATION WAS AUTHORISED BY THE HIGH COURT. THE RELEVANT - - ITA NOS.1263 TO 1266 OF 2010 ETC. 7 PARTICULARS WERE FILED BEFORE THE LOWER AUTHORITIES . THE BALANCING FIGURE HAS BEEN CORRECTLY WORKED OUT. THE ASSESSIN G AUTHORITY HIMSELF HAS FAIRLY ADMITTED IN HIS REMAND REPORT TH AT THE SAID BALANCING FIGURE CANNOT BE TREATED AS INCOME TAXABL E UNDER SECTION 28(IV). WE FIND THAT THERE IS NO MERIT IN THE GROUND RAISED BY THE REVENUE. 4.4. THE APPEAL FOR THE ASSESSMENT YEAR 2003-04 IN ITA NO.1527(MDS)/2010 IS LIABLE TO BE DISMISSED. 5. NEXT WE SHALL CONSIDER THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2003-04 IN ITA NO.1528(MDS)/2010. 5.1. THE FIRST GROUND IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DELETING THE DISAL LOWANCE OF INTEREST ON ACCOUNT OF DIVERSION OF INTEREST-BEARIN G ADVANCES AMOUNTING TO ` 66 28 224/-. ON EXAMINATION OF THE FACTS OF THE CASE THE COMMISSIONER OF INCOME-TAX(APPEALS) HELD THAT THE ASSESSEE HAD PROVIDED FUNDS TO ITS SISTER CONCERN I N THE INTEREST OF ITS OWN BUSINESS AND THEREFORE THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF S.A.BUILDERS 288 ITR 1 APPLIED. HE ACCORDINGLY DELETED THE DISALLOWANCE OF ` 66 28 224/-. - - ITA NOS.1263 TO 1266 OF 2010 ETC. 8 5.2. WE CONSIDERED THE ISSUE. THE ASSESSEE AS WEL L AS ITS SISTER CONCERN BOTH ARE OPERATING IN THE SAME F IELD AND THE INVOLVEMENT AND PARTICIPATION OF THE SISTER CONCERN IS VERY ESSENTIAL FOR THE ASSESSEE TO CARRY ON ITS BUSINESS ACTIVITIES SUCCESSFULLY. IT IS IN SUCH CIRCUMSTANCES OF BUSIN ESS EXIGENCIES THAT THE ASSESSEE COMPANY HAS PROVIDED FUNDS TO ITS SISTER CONCERN. THEREFORE IT IS NOT POSSIBLE TO HOLD THA T THE FUNDS PROVIDED BY THE ASSESSEE COMPANY TO ITS SISTER CONC ERN WERE IN THE NATURE OF PERSONAL DIVERSION OF FUNDS. IT IS F OR THE PURPOSE OF THE BUSINESS CARRIED ON BY THE ASSESSEE. ACCORDING LY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF S .A.BUILDERS 288 ITR 1 VERY WELL APPLIES TO THE PRESENT CASE. T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) ON THIS POINT I S SUSTAINABLE IN LAW. 5.3. THE NEXT GROUND IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DELETING THE DISAL LOWANCE OF MANAGERIAL REMUNERATION OF 1% MADE BY THE ASSESSING OFFICER ON WORK-IN-PROGRESS. THE ORDER OF THE COMMISSIONER OF INCOME- TAX(APPEALS) IS CONFIRMED ON THIS POINT IN VIEW OF OUR ORDER - - ITA NOS.1263 TO 1266 OF 2010 ETC. 9 PASSED IN ITA NO.1526(MDS)/2010 FOR THE ASSESSMENT YEAR 2002-03. 5.4. THE NEXT GROUND OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DE LETING THE DISALLOWANCE OF PF CONTRIBUTION BY BOTH EMPLOYER AN D EMPLOYEE ON THE GROUND THAT THE PAYMENTS WERE MADE BEFORE TH E DUE DATE OF FILING THE RETURN OF INCOME. THE HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. P.M.ELEC TRONICS 313 ITR 161 HAS HELD THAT WHERE SUCH PAYMENTS WERE MADE BEFORE THE DUE DATE FOR FILING OF THE RETURN SUCH AMOUNTS ARE DEDUCTIBLE IN COMPUTING THE TAXABLE INCOME. THE CO MMISSIONER OF INCOME-TAX(APPEALS) HAS GRANTED RELIEF RELYING ON THE ABOVE DECISION OF THE HONBLE DELHI HIGH COURT. THE ORDE R OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IS UPHELD. 5.5. THE LAST GROUND RAISED IN THE PRESENT APPEAL IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) DELETING THE INTEREST LEVIED UNDER SECTION 234D OF THE ACT. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS RIGHTLY DEL ETED THE LEVY OF INTEREST IN THE LIGHT OF THE DECISION OF TH E SPECIAL BENCH OF - - ITA NOS.1263 TO 1266 OF 2010 ETC. 10 THE TRIBUNAL IN THE CASE OF M/S. EKTA PROMOTORS LTD . 113 ITD 719. 5.6. THE APPEAL FILED BY THE REVENUE FOR THE ASSES SMENT YEAR 2003-04 IN ITA NO.1528(MDS)/2010 IS LIABLE TO BE DISMISSED. 6. NEXT WE WILL CONSIDER THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO.1529(MDS)/2010. 6.1. THE ONLY GROUND RAISED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN EX CLUDING THE COMMUNICATION EXPENSES AND OTHER EXPENSES INCURRED IN FOREIGN CURRENCY BOTH FROM THE NUMERATOR AND DENOMINATOR F OR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER SECTION 10 A OF THE ACT. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS FO LLOWED THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL (CHEN NAI) IN THE CASE OF SAK SOFT LTD. 121 TTJ 865 WHEREIN THE TRI BUNAL HAS EMPHASISED THE NEED FOR PARITY OF THE VARIABLES INV OLVED IN THE COMPUTATION. THE ORDER OF THE COMMISSIONER OF INCO ME- TAX(APPEALS) IS UPHELD. 6.2. THE REVENUES APPEAL IS LIABLE TO BE DISMISSE D. - - ITA NOS.1263 TO 1266 OF 2010 ETC. 11 7. NEXT WE WILL CONSIDER THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO.1530(MDS)/201 0. 7.1. THE FIRST GROUND RAISED BY THE REVENUE IN THE PRESENT APPEAL IS THAT THE COMMISSIONER OF INCOME-T AX(APPEALS) HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSE SSING OFFICER OF ` 70 54 506/- AGAINST BAD DEBTS WRITTEN OFF. THE MA IN GRIEVANCE OF THE REVENUE IS THAT THE ASSESSEE HAS W RITTEN OFF EVEN THE AMOUNTS RECEIVABLE FROM THE GOVERNMENT OF INDIA. THE ASSESSEE HAS SATISFIED ALL THE CONDITIONS FOR WRITI NG OFF OF THE DEBTS AS PROVIDED UNDER SECTION 36(1) OF THE INCOME -TAX ACT 1961. WHEN THE DEBTS ARE SO WRITTEN OFF IT HAS BE EN HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR O F INCOME- TAX(INTERNATIONAL TAXATION) VS. OMAN INTERNATIONAL BANK 313 ITR 128 THAT THE BAD DEBTS ARE DEDUCTIBLE. THIS JUDGM ENT OF THE HONBLE BOMBAY HIGH COURT HAS BEEN UPHELD BY THE HO NBLE SUPREME COURT BY DISMISSING THE SLP FILED BY THE RE VENUE (313 ITR (ST.) 3). THERE IS NO DISTINCTION BETWEEN PRIV ATE DEBTS AND GOVERNMENT DEBTS FOR THE PURPOSE OF SECTION 36(1) O F THE ACT. SO ALSO THERE IS NO GUARANTEE THAT THE ASSESSEE MAY GET THE - - ITA NOS.1263 TO 1266 OF 2010 ETC. 12 PAYMENT FROM THE GOVERNMENT COMPANIES WITHIN A REAS ONABLE TIME. THEREFORE GOVERNMENT DEBTS AS SUCH DO NOT M AKE ANY DIFFERENCE IN THE PRESENT CASE. THE COMMISSIONER O F INCOME- TAX(APPEALS) HAS RIGHTLY DELETED THE ADDITION. 7.2. THE NEXT GROUND REGARDING THE DISALLOWANCE OF 1% OF THE MANAGERIAL REMUNERATION HAS ALREADY BEEN DEC IDED AGAINST THE REVENUE IN EARLIER APPEALS DISCUSSED AB OVE. 7.3. SO ALSO THE ISSUE RELATING TO THE DISALLOWAN CE OF INTEREST ON DIVERSION OF FUNDS HAS ALREADY BEEN DEC IDED AGAINST THE REVENUE IN APPEALS FOR THE EARLIER ASSESSMENT Y EARS AS DISCUSSED ABOVE. 7.4. THE LAST ISSUE RAISED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN HO LDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTIO N 10A RELYING ON THE ORDERS OF THE TRIBUNAL IN THE CASE OF M/S.SO FIA SOFTWARE LTD. IN ITA NO.2797(MDS)/2005. M/S.SOFIA SOFTWARE LTD. IS THE OLD NAME OF THE ASSESSEE COMPANY. IN ITS OWN CASE THE TRIBUNAL HAS HELD FOR THE ASSESSMENT YEAR 2000-01 THAT THE A SSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 10A. THEREFOR E THIS GROUND RAISED BY THE REVENUE FAILS. - - ITA NOS.1263 TO 1266 OF 2010 ETC. 13 7.5. THIS APPEAL FILED BY THE REVENUE FOR THE ASSE SSMENT YEAR 2006-07 IS LIABLE TO BE DISMISSED. 8. THE NEXT APPEAL TO BE CONSIDERED IS THE ONE FIL ED BY THE REVENUE FOR THE ASSESSMENT YEAR 2007-08 IN ITA NO.2056(MDS)/2010. 8.1. THE FIRST ISSUE IS THAT THE COMMISSIONER OF I NCOME- TAX(APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OF ` 5 61 55 040/- BEING EXPENSES BOOKED ON WORK NOT CO MPLETED. IT IS THE CASE OF THE REVENUE THAT THE COMMISSIONER OF INCOME- TAX(APPEALS) HAS ACTED UPON FRESH EVIDENCE FILED BY THE ASSESSEE FOR THE FIRST TIME BEFORE HIM. IN FACT TH E ASSESSING OFFICER HAS DISALLOWED 1% OF THE PROJECT EXPENSES. THE COMMISSIONER OF INCOME-TAX(APPEALS) HELD THAT DISAL LOWANCE IS NOT JUSTIFIED AS THE FIGURE REFLECTED IN THE BALANC E SHEET RELATED TO WORK-IN-PROGRESS WHICH HAS BEEN VALUED ON SCIENTIF IC BASIS AFTER OBSERVING TO ALLOCATION OF VARIOUS EXPENSES IN PROP ER WAY. THE ABOVE FINDING HAS BEEN ARRIVED AT BY THE COMMISSION ER OF INCOME-TAX(APPEALS) ON THE BASIS OF THE REMAND REPO RT FURNISHED BY THE ASSESSING AUTHORITY HIMSELF. WE DO NOT FIND ANY MERIT IN THE CONTENTION RAISED BY THE REVENUE ON THIS POINT. - - ITA NOS.1263 TO 1266 OF 2010 ETC. 14 8.2. THE NEXT GROUND IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DIRECTING THE ASSE SSING OFFICER TO DELETE THE DISALLOWANCE OF INTEREST EXPENDITURE OF ` 93 19 950/- ATTRIBUTABLE TO THE ADVANCES MADE TO T HE SUBSIDIARY COMPANY. THIS ISSUE HAS ALREADY BEEN CONSIDERED BY US WHILE ADJUDICATING THE APPEAL FILED BY THE REVENUE FOR TH E EARLIER ASSESSMENT YEAR. THE DECISION OF THE HONBLE SUPRE ME COURT IN THE CASE OF S.A.BUILDERS 288 ITR 1 HAS BEEN RIGHTL Y APPLIED BY THE COMMISSIONER OF INCOME-TAX(APPEALS). THIS GROU ND FAILS. 8.3. THE NEXT GROUND IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN HOLDING THAT THE A SSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 10A OF THE INCO ME-TAX ACT 1961. THE TRIBUNAL HAS ALREADY HELD FOR THE AS SESSMENT YEAR 2000-01 IN ASSESSEES OWN CASE WHEN IT WAS KN OWN AS SOFFIA SOFTWARE LTD. THAT THE ASSESSEE IS ENTITLED FOR THE DEDUCTION AVAILABLE UNDER SECTION 10A. THE SAID OR DER HOLDS GOOD FOR THE IMPUGNED ASSESSMENT YEAR AS WELL. THI S GROUND ALSO FAILS. 8.4. THIS APPEAL IS LIABLE TO BE DISMISSED. - - ITA NOS.1263 TO 1266 OF 2010 ETC. 15 9. NEXT WE WILL CONSIDER THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO.1249(MDS)/2011. 9.1. THE ONLY ISSUE RAISED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN HO LDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTIO N 10A. THIS ISSUE HAS BEEN DISCUSSED ABOVE. THE TRIBUNAL HAS H ELD IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2000-01 (WHEN THE ASSESSEE WAS KNOWN AS M/S. SOFFIA SOFTWARE LTD. ) THAT THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF SECTION 10A . THERE IS NO MERIT IN THE GROUND RAISED BY THE REVENUE. 9.2. THIS APPEAL IS LIABLE TO BE DISMISSED. 10. NEXT WE WILL CONSIDER THE APPEAL FOR THE ASSES SMENT YEAR 2007-08 IN ITA NO.1250(MDS)/2011. 10.1. THE ONLY GROUND RAISED BY THE REVENUE IS THA T THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DI RECTING THE ASSESSING AUTHORITY TO RECOMPUTE THE EXEMPTION UNDE R SECTION 10A BY EXCLUDING THE EXPENSES INCURRED IN FOREIGN C URRENCY BOTH IN THE NUMERATOR AND DENOMINATOR FOLLOWING THE DEC ISION OF THE TRIBUNAL IN THE CASE OF SAK SOFT LTD. 121 TTJ 865. THE - - ITA NOS.1263 TO 1266 OF 2010 ETC. 16 COMMISSIONER OF INCOME-TAX(APPEALS) HAS RIGHTLY FOL LOWED THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE ABOVE CASE AND HELD THAT THE ADJUSTMENT MUST BE MADE BOTH IN THE E XPORT TURNOVER AS WELL AS IN THE TOTAL TURNOVER. THERE I S THUS NO MERIT IN THE GROUND RAISED BY THE REVENUE. 10.2. THE APPEAL FILED BY THE REVENUE FAILS. 11. IN THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO.1251(MDS)/2011 TH E FIRST ISSUE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEAL S) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR THE BE NEFIT OF SECTION 10A. THIS ISSUE HAS ALREADY BEEN DECIDED AGAINST T HE REVENUE. HENCE THIS GROUND OF THE REVENUE FAILS. 11.1. THE SECOND GROUND IS AGAINST THE DIRECTION O F THE COMMISSIONER OF INCOME-TAX(APPEALS) TO MAKE ADJUSTM ENTS IN RESPECT OF NUMERATOR AND DENOMINATOR. THIS DECISIO N HAS BEEN TAKEN BY THE COMMISSIONER OF INCOME-TAX(APPEALS) FO LLOWING THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF SAK SOFT LTD. 121 TTJ 865. HENCE THIS GROUND RAISED BY THE REVENUE FAILS. - - ITA NOS.1263 TO 1266 OF 2010 ETC. 17 11.2. THIS APPEAL FILED BY THE REVENUE IS LIABLE T O BE DISMISSED. 12. NOW WE SHALL TAKE UP THE APPEALS FILED BY THE ASSESSEE. 13. FIRST WE WILL TAKE UP THE ASSESSEES APPEAL FO R THE ASSESSMENT YEAR 2002-03 IN ITA NO.1263(MDS)/2010. 13.1. THE FIRST GROUND IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN PARTLY SUSTAINING THE RECOMPUTATION OF THE DEDUCTION UNDER SECTION 10A WI THOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. THE AS SESSEE IS OTHERWISE ENTITLED FOR THE BENEFIT OF SECTION 10A. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS NOT DISCUSS ED IN DETAIL AS TO WHY THERE SHOULD BE A RECOMPUTATION IN RESPECT OF THAT DEDUCTION. THIS ISSUE IS REMITTED BACK TO THE COMMISSIONER OF INCOME-TAX(APPEALS) FOR RE-EXAMINATION. 13.2. THE NEXT GROUND IS AGAINST THE DISALLOWANCE OF MANAGERIAL REMUNERATION OF 1%. THIS ISSUE HAS ALRE ADY BEEN DECIDED BY US IN ASSESSEES FAVOUR. ACCORDINGLY T HE DISALLOWANCE OF 1% IS DELETED. - - ITA NOS.1263 TO 1266 OF 2010 ETC. 18 13.3. THE NEXT ISSUE RELATES TO THE DISALLOWANCE O F DEPRECIATION. THE COMMISSIONER OF INCOME-TAX(APPEA LS)S ORDER DOES NOT SPEAK THE RELEVANT FACTS ON THIS ISSUE. T HIS ISSUE IS ACCORDINGLY REMITTED TO THE COMMISSIONER OF INCOME- TAX(APPEALS) FOR FRESH CONSIDERATION. 13.4. THE ASSESSEE IS PARTLY SUCCESSFUL IN ITS APP EAL FOR THE ASSESSMENT YEAR 2002-03. 14. NEXT WE WILL CONSIDER THE APPEAL FOR THE ASSES SMENT YEAR 2003-04 IN ITA NO.1264(MDS)/2010. 14.1. THE FIRST GROUND IS AGAINST THE CONFIRMATION OF THE DEFERRED REVENUE EXPENDITURE MADE BY THE COMMISSION ER OF INCOME-TAX(APPEALS). THIS ISSUE IS REMITTED BACK T O THE COMMISSIONER OF INCOME-TAX(APPEALS) FOR FRESH CONSI DERATION. 14.2. THE NEXT ISSUE IS REGARDING THE DISALLOWANCE OF 1% OF MANAGERIAL REMUNERATION. THIS DISALLOWANCE IS D ELETED AS HAS BEEN DONE IN THE EARLIER ASSESSMENT YEARS AS S TATED ABOVE IN THIS ORDER. 14.3. THE THIRD ISSUE OF DEPRECIATION IS AGAIN REM ITTED BACK TO THE COMMISSIONER OF INCOME-TAX(APPEALS) FOR FRESH CONSIDERATION. - - ITA NOS.1263 TO 1266 OF 2010 ETC. 19 15. NEXT WE SHALL CONSIDER THE ASSESSEES APPEAL I N ITA NO.1265(MDS)/2010 FOR THE ASSESSMENT YEAR 2003-04. 15.1. ALL THE GROUNDS RAISED BY THE ASSESSEE IN TH E PRESENT APPEAL IS AGAINST THE ORDER OF THE COMMISSI ONER OF INCOME-TAX(APPEALS) CONFIRMING THE REASSESSMENT MAD E UNDER SECTION 143 READ WITH SECTION 147. THE ASSESSEE IS QUESTIONING THE LEGALITY OF THE REOPENING OF THE ASSESSMENT UND ER SECTION 147. THIS ISSUE HAS BEEN CONSIDERED BY THE COMMISS IONER OF INCOME-TAX(APPEALS) IN A DETAILED MANNER IN HIS ORD ER AND WE ARE IN FULL AGREEMENT WITH HIS VIEWS. WE DO NOT FI ND ANY SUBSTANCE IN THE ARGUMENTS ADVANCED BY THE ASSESSEE AGAINST THE ASSESSMENT COMPLETED UNDER SECTION 143 READ WIT H SECTION 147. 15.2. THIS APPEAL FILED BY THE ASSESSEE IS LIABLE TO BE DISMISSED. 16. NEXT WE SHALL CONSIDER THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO.1266(MDS)/2010. 16.1. ONE OF THE GROUNDS RAISED IN THE PRESENT APP EAL IS AGAINST THE DISALLOWANCE OF MANAGERIAL REMUNERATION AT 1%. - - ITA NOS.1263 TO 1266 OF 2010 ETC. 20 THIS ISSUE HAS ALREADY BEEN HELD IN FAVOUR OF THE A SSESSEE IN A CONSISTENT MANNER FOR ALL THE EARLIER ASSESSMENT YE ARS. IN THE LIGHT OF THE ABOVE THIS DISALLOWANCE IS DELETED. 16.2. THE REMAINING GROUNDS ON THE QUESTION OF GRA TUITY DEPRECIATION DONATION AND LOSS ON SALE OF ASSETS A RE ALL REMITTED BACK TO THE COMMISSIONER OF INCOME-TAX(APPEALS) AS RELEVANT FACTS HAVE NOT BEEN BROUGHT ON RECORD. 17. NEXT WE SHALL CONSIDER THE APPEAL OF THE ASSES SEE FOR THE ASSESSMENT YEAR 2007-08 IN ITA NO.1629(MDS) /2010. 17.1. THE ISSUES RAISED IN THE PRESENT APPEAL HAVE ALREADY BEEN REMITTED BACK TO THE COMMISSIONER OF I NCOME- TAX(APPEALS) FOR RECONSIDERATION WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE FOR THE EARLIER ASSESSMENT YEAR. FOLL OWING THOSE ORDERS THE ISSUES RAISED IN THE PRESENT APPEAL ARE ALSO REMITTED BACK TO THE COMMISSIONER OF INCOME-TAX(APPEALS) FOR FRESH CONSIDERATION. 18. IN RESULT THE APPEALS FILED BY THE REVENUE ARE DISMISSED. THE APPEAL FILED BY THE ASSESSEE FOR TH E ASSESSMENT YEAR 2003-04 IN ITA NO.1265(MDS)/2010 IS ALSO DISMI SSED. THE - - ITA NOS.1263 TO 1266 OF 2010 ETC. 21 REMAINING APPEALS FILED BY THE ASSESSEE ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON WEDNESDAY THE 21 ST OF SEPTEMBER 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI DATED THE 21 ST SEPTEMBER 2011. V.A.P. COPY TO: (1) ASSESSEE (2) A.O. (3) CIT (4) CIT(A) (5) D.R. (6) G.F.