Deputy Commissioner of Income-Tax, Bangalore v. M/s Tata Elxsi.Ltd., Bangalore

ITA 1774/BANG/2016 | 2009-2010
Pronouncement Date: 03-11-2017 | Result: Dismissed

Appeal Details

RSA Number 177421114 RSA 2016
Assessee PAN AAACT7872Q
Bench Bangalore
Appeal Number ITA 1774/BANG/2016
Duration Of Justice 1 year(s) 19 day(s)
Appellant Deputy Commissioner of Income-Tax, Bangalore
Respondent M/s Tata Elxsi.Ltd., Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 03-11-2017
Appeal Filed By Department
Tags No record found
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 03-11-2017
Assessment Year 2009-2010
Appeal Filed On 14-10-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B BANGALORE BEFORE SHRI GEORGE GEORGE K JM & SHRI JASON P.BOAZ AM ITA NO.1774/BANG/2016 : ASST.YEAR 2009-2010 DY.COMMISSIONER OF INCOME- TAX CIRCLE 7(1)(1) BANGALORE. M/S.TATA ELXSI LIMITED ITBP HOODY WHITEFIELD BANGALORE 560 048 PAN : AAACT7872Q. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI FARAHAT QURESHI CIT-DR RESPONDENT BY : SHRI P.C.KHINCHA CA DATE OF HEARING : 24.10.2017 DATE OF PRONOUNCEMENT : 03.11.2017 O R D E R PER GEORGE GEORGE K JM THIS APPEAL AT THE INSTANCE OF THE REVENUE IS DIRE CTED AGAINST CIT(A)S ORDER DATED 29.02.2016. THE RELEVA NT ASSESSMENT YEAR IS 2009-2010. 2. THE EFFECTIVE GROUNDS RAISED READ AS FOLLOWS:- 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE CIT(A) WAS JUSTIFIED IN LAW IN PLACING RELIANCE ON THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT (LTU) V. YOKOGAWA INDIA LTD. [(2013) 341 ITR 0385] WHEREIN IT WAS HELD THAT INCOME OF AN UNIT CLAIMING DEDUCTION U/S 10A OF THE ACT HAS TO BE EXCLUDED AT SOURCE ITSELF WHICH HAS NOT REACHED FINALITY SINCE THE DEPARTMENT HAS N OT ACCEPTED AND APPEAL IS PENDING BEFORE THE HONBLE SUPREME COURT OF INDIA? 3. THE CIT(APPEALS) OUGHT TO HAVE CONSIDERED THAT THE EXPENDITURE INCURRED IN FOREIGN CURRENCY TOWARDS T ELECOM CHARGES AND RENDERING TECHNICAL SERVICES OUTSIDE IN DIA TO BE EXCLUDED ONLY FROM EXPORT TURNOVER AND NOT FROM TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTIO N U/S ITA NO.1774/BANG/2016. M/S.TATA ELXSI LIMITED. 2 10A OF THE ACT SINCE SUCH EXCLUSION IS PERMITTED TO ARRIVE AT THE EXPORT TURNOVER ONLY AS PER THE DEFINITIONS GIVEN IN SEC. 10A AND TOTAL TURNOVER HAS NOT BEEN DEFINED IN THE SAME. WE SHALL ADJUDICATE THE ISSUE GROUND-WISE AS UNDER . 3. GROUND NO.2 BRIEF FACTS IN RELATION TO THE ABOVE GROUND ARE AS FOLLOWS:- 3.1 THE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLE TED FOR THE ASSESSMENT YEAR 2009-2010 VIDE ORDER DATED 30.1 1.2011. IN THE ASSESSMENT COMPLETED DEDUCTION U/S 10A WAS RECOMPUTED BY THE ASSESSING OFFICER IN RESPECT OF P ROFITS OF THE STPI UNIT AT BANGALORE. THE LOSS OF STPI UNIT A T MUMBAI WAS SET OFF AGAINST THE PROFITS OF STPI UNIT AT BAN GALORE AND THEREAFTER DEDUCTION U/S 10A WAS COMPUTED. 3.2 AGGRIEVED BY THE SET OFF OF THE LOSS OF STPI UN IT AT MUMBAI AGAINST THE PROFITS OF STPI UNIT AT BANGALOR E ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. 3.3 THE CIT(A) FOLLOWING THE TRIBUNALS ORDER IN AS SESSEES OWN CASE DECIDED THE ISSUE IN FAVOUR OF THE ASSESS EE. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOW:- 5. THE AFORESAID SUBMISSIONS PERTAINING TO THE FAC TS OF THE CASE WERE GIVEN DUE CONSIDERATION. THE DETAILS OF 18 STP UNITS FORMED BY THE APPELLANT ON DIFFERENT DATE S AND THE RESPECTIVE YEARS OF CLAIM OF EXEMPTION U/S.10A W ERE OBTAINED AND EXAMINED. WITH REGARD TO THE LEGAL POS ITION ON THE APPELLANTS CLAIM HAT LOSS INCURRED BY THE S TP UNIT AT MUMBAI SHOULD NOT BE SET OFF AGAINST THE PROFITS OF THE ITA NO.1774/BANG/2016. M/S.TATA ELXSI LIMITED. 3 STP UNIT AT BENGALURU THE HONORABLE ITAT BANGALORE BENCH IN THE CASE OF SAME APPELLANT I.E. TATA ELX SI LTD. VS. ACIT AND VICE VERSA VIDE ITA NO.1074/B/2012 AND ITA NO.1295/B/2012 [DECISION DATED 12.6.2013 FOR TH E AY 2007-08] HELD THAT DEDUCTION UNDER SECTION 10A SHOULD BE ALLOWED IN RESPECT OF PROFITS OF THE STPI UNITS BEFORE SETTING OFF THE LOSSES OF STPI UNIT AT MUMBA I. REVENUES APPEAL AGAINST THE AFORESAID DECISION WAS LATER DISMISSED BY THE HONORABLE KARNATAKA HIGH COU RT VIDE ORDER DATED 25 TH APRIL 2014 IN ITA NO.625/2013. THEREFORE RESPECTFULLY FOLLOWING THE DECISIONS OF THE HONORABLE ITAT BENGALURU BENCH AND JURISDICTIONAL HIGH COURT THE SECOND GROUND OF APPEAL IS ALLOWED. 3.4 AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVEN UE HAS RAISED THIS ISSUE IN APPEAL BEFORE THE TRIBUNAL. 3.5 THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSMENT. THE LEARNED AR ON THE OTH ER HAND SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY CO VERED BY THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT V. YOKOGAWA INDIA LTD. [(2017) 391 ITR 274 (SC)] . 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSING OFFICER HAD ALLOW ED DEDUCTION U/S 10A IN RESPECT OF PROFITS OF STPI UNI T AT BANGALORE AFTER SETTING OFF THE LOSS INCURRED BY ST PI UNIT AT MUMBAI. THE HONBLE APEX COURT IN THE CASE OF YOKOGAWA INDIA LTD. (SUPRA) HAD CATEGORICALLY HELD THAT PROFITS OF THE STPI UNITS IS TO BE COMPUTED ON A STAND ALONE BASIS . IT WAS HELD BY THE HONBLE SUPREME COURT THAT THE LOSSES O F OTHER NON-STP UNITS AND STPI UNITS CANNOT BE SET OFF AGAI NST THE PROFITS OF THE STPI UNIT. THE HONBLE APEX COURT WA S CONSIDERING THE FOLLOWING QUESTION OF LAW:- ITA NO.1774/BANG/2016. M/S.TATA ELXSI LIMITED. 4 WHETHER LOSSES OF OTHER 10A UNITS OR NON 10A UNITS CAN BE SET OFF AGAINST THE PROFITS OF 10A UNITS BEFORE DEDUCTIONS UNDER SECTION 10A ARE EFFECTED? WHETHER BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION OF 10A UNITS OR NON 10A UNI TS CAN BE SET OFF AGAINST THE PROFITS OF ANOTHER 10A UN ITS OF THE ASSESSEE. 5. IN ADJUDICATING THE ABOVE QUESTION OF LAW THE H ONBLE APEX COURT HAD RENDERED THE FOLLOWING FINDINGS :- 16. FROM A READING OF THE RELEVANT PROVISIONS OF S ECTION 10A IT IS MORE THAN CLEAR TO US THAT THE DEDUCTIONS CONTEMPLATED THEREIN IS QUA THE ELIGIBLE UNDERTAKIN G OF AN ASSESSEE STANDING ON ITS OWN AND WITHOUT REFERENCE TO THE OTHER ELIGIBLE OR NON-ELIGIBLE UNITS OR UNDERTAKING S OF THE ASSESSEE. THE BENEFIT OF DEDUCTION IS GIVEN BY THE ACT TO THE INDIVIDUAL UNDERTAKING AND RESULTANTLY FLOWS TO THE ASSESSEE. THIS IS ALSO MORE THAN CLEAR FROM THE CONTEMPORANEOUS CIRCULAR NO.794 DATED 9.8.2000 WHIC H STATES IN PARAGRAPH 15.6 THAT THE EXPORT TURNOVER AND THE TOTAL TURNOVER FOR TH E PURPOSE OF SECTIONS 10A AND 10B SHALL BE OF THE UNDERTAKING LOCATED IN SPECIFIED ZONES OR 100% EXPORT ORIENTED UNDERTAKINGS AS THE CASE MAY BE AND THIS SHALL NOT HAVE ANY MATERIAL RELATIONSHIP WITH THE OTHER BUSINESS OF THE ASSESSEE OUTSIDE THESE ZONES OR UNITS FOR THE PURPOSES OF THIS PROVISION. 17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDES [FIRST PROVISO TO SECTIONS 10A(1); 10A(1A) AND 10A (4)] THAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF D EDUCTION IS THE ELIGIBLE UNDERTAKING AND THAT IS ALSO HOW TH E CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT (NO.794 DATED 09.08.2000) UNDERSTOOD THE SITUATION IT IS O NLY LOGICAL AND NATURAL THAT THE STAGE OF DEDUCTION OF THE ITA NO.1774/BANG/2016. M/S.TATA ELXSI LIMITED. 5 PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND THEREFORE IMMEDIATELY AFTER THE STAGE OF DETERMINA TION OF ITS PROFITS AND GAINS. AT THAT STAGE THE AGGREGATE OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SE T OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70 72 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION 10A THEREFORE WOULD BE PRIO R TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN U NDER CHAPTER VI OF THE ACT FOR ARRIVING AT THE TOTAL INCO ME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION TOTAL INCOME OF T HE ASSESSEE IN SECTION 10A HAS ALREADY BEEN DEALT WIT H EARLIER AND IN THE OVERALL SCENARIO UNFOLDED BY THE PROVISIONS OF SECTION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPRESSION TOTAL I NCOME OF THE ASSESSEE IN SECTION 10A AS `TOTAL INCOME OF THE UNDERTAKING. 6. IN VIEW OF THE ABOVE JUDGEMENT OF THE HONBLE AP EX COURT THE PROFITS OF THE STPI UNITS AT BANGALORE I S TO BE COMPUTED ON A STAND ALONE BASIS AND THEREAFTER DEDU CTION U/S 10A IS TO BE GRANTED. IT IS ORDERED ACCORDINGLY . THEREFORE WE HOLD THAT THE ORDER OF THE CIT(A) IS CORRECT AND IN ACCORDANCE WITH LAW ON THIS ISSUE. HENCE GROUND NO. 2 RAISED BY THE REVENUE IS REJECTED. 7. GROUND NO.3 7.1 THE ASSESSING OFFICER HAD COMPLETED ASSESSMENT U/S 143(3) OF THE ACT BY EXCLUDING A SUM OF RS.83 46 97 000 FROM THE EXPORT TURNOVER WHILE COMPUTING DEDUCTION U/S 1 0A OF THE ACT. ACCORDING TO THE ASSESSING OFFICER THE EXPENS ES INCURRED IN FOREIGN CURRENCY FOR RENDERING OF TECHNICAL SERV ICES OUTSIDE INDIA ARE TO BE EXCLUDED FROM THE EXPORT TURNOVER B Y VIRTUE OF PROVISO TO EXPLANATION 2(IV) OF SEC.10A(8). HOWEVER THE A.O. ITA NO.1774/BANG/2016. M/S.TATA ELXSI LIMITED. 6 DID NOT REDUCE THE SAME FROM THE TOTAL TURNOVER WHI LE COMPUTING DEDUCTION U/S 10A OF THE ACT. 7.2 AGGRIEVED BY THE RE-COMPUTATION OF DEDUCTION U/ S 10A OF THE ACT THE ASSESSEE PREFERRED AN APPEAL BEFORE TH E FIRST APPELLATE AUTHORITY. 7.3 THE CIT(A) HELD THAT WHEN THE EXPENSES ARE REDU CED FROM THE EXPORT TURNOVER SAME ALSO NEEDS TO BE RED UCED FROM THE TOTAL TURNOVER WHILE COMPUTING DEDUCTION U/S 10 A OF THE ACT. THE RELEVANT FINDING OF THE CIT(A) READS AS FO LLOW:- FURTHER ON THE ALTERNATIVE GROUND TAKEN BY THE AP PELLANT THAT EXPENSES REDUCED FROM EXPORT TURNOVER SHOULD A LSO BE REDUCED FROM TOTAL TURNOVER IN COMPUTING EXEMPTI ON UNDER SECTION 10A THE HONORABLE KARNATAKA HIGH COUR T IN APPELLANTS OWN CASE I.E. CIT V. TATA ELXSI LT D. AND OTHER GROUP OF CASES VIDE THEIR ORDER DATED 30 TH AUGUST 2011 REPORTED IN 349 ITR 98 HELD THAT EXPENSES REDUC ED FROM EXPORT TURNOVER SHOULD ALSO BE REDUCED FROM TH E TOTAL TURNOVER WHILE COMPUTING EXEMPTION UNDER SECTION 10 A. THEREFORE RESPECTFULLY FOLLOWING THE CITED DECISIO NS OF THE HONORABLE ITAT BENGALURU BENCH AND THAT OF THE JURISDICTIONAL HIGH COURT THE FIFTH AND SIXTH GROU NDS OF APPEAL ARE ALLOWED. 7.4 THE REVENUE BEING AGGRIEVED HAS RAISED THIS IS SUE IN APPEAL BEFORE THE TRIBUNAL. 7.5 AT THE VERY OUTSET THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY CO VERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONB LE HIGH COURT IN ASSESSEES OWN CASE REPORTED IN 349 ITR 98 . ITA NO.1774/BANG/2016. M/S.TATA ELXSI LIMITED. 7 7.6 THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND WAS UNABLE TO CONTROVERT THE ABOVE SUBMISSION OF THE LEARNED AR. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THE HONBLE HIGH COURT IN ASSES SEES OWN CASE (SUPRA) HAD HELD WHILE COMPUTING THE DEDUCTION U/S 10A OF THE ACT IF THE EXPORT TURNOVER IN THE NUMERATOR IS ARRIVED AT AFTER EXCLUDING CERTAIN EXPENSES THE SAID EXPEN SES OUGHT TO BE EXCLUDED ALSO FROM THE TOTAL TURNOVER IN THE DENOMINATOR. IN VIEW OF THE ABOVE JUDGMENT OF THE H ONBLE HIGH COURT IN ASSESSEES OWN CASE WE HOLD THAT THE CIT(A) IS JUSTIFIED IN TAKING THE VIEW THAT EXPENSES REDUCED FROM EXPORT TURNOVER ARE ALSO TO BE REDUCED FROM THE TOT AL TURNOVER WHILE COMPUTING DEDUCTION U/S 10A OF THE ACT. IT IS ORDERED ACCORDINGLY. HENCE GROUND NO.4 RAISED BY THE REVEN UE IS REJECTED. 9. IN THE RESULT THE APPEAL BY THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON THIS 03 RD DAY OF NOVEMBER 2017. SD/- SD/- (JASON P.BOAZ) (GEORGE GEORGE K.) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE ; DATED : 03 RD NOVEMBER 2017. DEVDAS* ITA NO.1774/BANG/2016. M/S.TATA ELXSI LIMITED. 8 COPY OF THE ORDER FORWARDED TO : TRUE COPY BY ORDER (ASSTT. REGISTRAR) ITAT BANGALORE 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT BENGALURU. 4. CIT(A)-2 BENGALURU 5. DR ITAT BANGALORE 6. GUARD FILE.