DCIT, New Delhi v. M/s. Interra Information Technologies India (P) Ltd., Delhi

ITA 3920/DEL/2010 | 2004-2005
Pronouncement Date: 14-01-2010 | Result: Dismissed

Appeal Details

RSA Number 392020114 RSA 2010
Assessee PAN AAACL2351P
Bench Delhi
Appeal Number ITA 3920/DEL/2010
Appellant DCIT, New Delhi
Respondent M/s. Interra Information Technologies India (P) Ltd., Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 14-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 14-01-2010
Date Of Final Hearing 23-12-2010
Next Hearing Date 23-12-2010
Assessment Year 2004-2005
Appeal Filed On 20-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI A.D. JAIN JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER ITA NO.3920/DEL./2010 (ASSESSMENT YEAR : 2004-05) DCIT CIR.11(1) VS. M/S INTERRA INFORMATION NEW DELHI. TECHNOLOGIES INDIA (P) LTD. 5/207 GUPTA ARCADE LSC SHRESHTA VIHAR DELHI. (PAN/GIR NO.- AAACL2351P) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ROHIT JAIN CA REVENUE BY : SMT. MONA MOHANTY SR.DR ORDER PER A.D. JAIN JM THIS IS DEPARTMENTS APPEAL FOR AY 2004-05 TAKING THE FOLLOWING GROUNDS: 1. THE ORDER OF CIT(A) IS WRONG PERVERSE ILLEGAL A ND AGAINST THE PROVISION OF LAW LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE AMOUNTI NG TO `2 32 11 019 ON ACCOUNT OF DEDUCTION U/S 10A IN RESPE CT OF PROFITS OF NOIDA UNIT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF `3 23 37 842 PERTAINS TO PROFITS OF THE JAPAN BRANCH. 4. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEND AND GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING . 2. GROUND NOS.1 AND 4 ARE GENERAL. ITA NO.3920/DEL./10 (AY : 2004-05) 2 3. REGARDING GROUND NO.2 AS PER THE ASSESSMENT ORDER IN AYS 2002-03 AND 03-04 I.E. THE TWO IMMEDIATELY PRECEDI NG ASSESSMENT YEARS THE CLAIM OF THE ASSESSEE LIMITED COMPANY IN RESP ECT OF ITS NOIDA UNIT U/S 10A OF THE I.T. ACT WAS NOT ALLOWED BY THE AO. THE CIT(A) DIRECTED THE AO TO ALLOW THE CLAIM OF THE ASSE SSEE. THE DEPARTMENT HOWEVER FILED AN APPEAL AGAINST THE SAID ORDER OF THE CIT(A) BEFORE THE TRIBUNAL. FOR THE YEAR UNDER CON SIDERATION THE AO CONSIDERING THESE FACTS DISALLOWED THE ASSESSEES CLAIM OF DEDUCTION OF `20456074 U/S 10A OF THE ACT. 4. THE CIT(A) HOWEVER ALLOWED THE ASSESSEES CLAIM U/S 10A OF THE ACT FOLLOWING THE TRIBUNAL DECISION IN THE ASSESSEES OW N CASE FOR AYS 2002-03 AND 03-04 RENDERED IN ITA NO.3846/DEL./06 ON 27.6.08 IN DCIT VS. INTERRA SOFTWARE INDIA PVT. LTD.. 5. THE LD.DR HAS CONTENDED THAT THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE ON ACCOUNT OF DEDUCTION U/S 10A OF T HE ACT IN RESPECT OF PROFITS OF THE NOIDA UNIT OF THE ASSESSEE LIMITED COM PANY IGNORING THAT THE CLAIM COULD NOT HAVE BEEN MADE SINCE THE A SSESSEE HAD CLAIMED DEDUCTION U/S 80HHC OF THE ACT. 6. THE LD.COUNSEL FOR THE ASSESSEE ON THE OTHER HAND H AS STRONGLY RELIED ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDED THAT AY 1997-98 WAS THE FIRST YEAR OF THE ASSESSEE COMPANY; THAT IN AY 19 98-99 THE ASSESSEE MADE PROFIT FOR THE FIRST TIME; THAT DEDUCTION U/S 80HHE WAS CLAIMED FOR AYS 1999-2000 TO 2001-02; THAT DEDUCTION U/S 10A OF THE ACT WAS CLAIMED AND WAS DEEMED ALLOWED AS NO SCRUTINY WAS DONE; THAT FOR AY 2002-03 THE AO OBSERVED THAT THE CLAIM OF DEDUCTION U/S 10A WAS DEBARRED AS THE DEDUCTION HAD BEEN CLAIMED U /S 80HHE IN AY 1998-99; THAT THE TRIBUNAL VIDE ITS ORDER DATED 07. 09.2007 IN ITA NO.3832/DEL./05 IN THE ASSESSEES OWN CASE FOR AY 2002-0 3 IN THE DEPARTMENTS APPEAL IN DCIT CIR.11(1) NEW DELHI V S. M/S INTERRA SOFTWARE (INDIA) PVT. LTD. (COPY AT PAGES 90-98 OF THE ASSESSEES PAPER BOOK) WHICH ORDER WAS FOLLOWED BY THE TRIBUNAL FOR AY 2003-04 VIDE ITA NO.3920/DEL./10 (AY : 2004-05) 3 ITS ORDER DATED 27.06.2008 IN ITA NO.3846/DEL./06 ( AUTHORED BY ONE OF US THE LD.AM) (COPY AT PAGES 99-104 OF THE ASSESSEES PA PER BOOK) HAS HELD THE ASSESSEE ENTITLED TO EXEMPTION U/S 10A OF T HE ACT. 7. HAVING CONSIDERED THE MATTER WE FIND THAT THE ISSU E HAS BEEN EFFECTIVELY DEALT WITH AT LENGTH BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR AY 2002-03 (SUPRA). THE TRIBUNAL OBSERVED TH AT THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND EXPORT OF COMPUTER SOFTWARE; THAT FOR AY 2002-03 IT HAD CLAIM ED EXEMPTION OF `14748225 U/S 10A OF THE ACT WHICH HAD BEEN DISALLOW ED BY THE AO ON THE BASIS THAT SINCE THE ASSESSEE HAD BEEN ALLOWED EXEMPTI ON U/S 80HHE OF THE ACT FOR AY 1998-99 NO OTHER PROVISION OF THE ACT WAS AVAILABLE TO THE ASSESSEE FOR ANY OTHER ASSESSMENT YEAR; TH AT THE CIT(A) ALLOWED THE ASSESSEES CLAIM ON THE BASIS OF THE DE CISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF LEGATO S YSTEMS VS. ITO 93 TTJ 828; THAT THE DEPARTMENT HAD RELIED ON IN SECTI ON 80HHE(5) OF THE ACT TO CONTEND THAT ONCE THE ASSESSEE OPTS TO CLAIM U/S 8 0HHE EXEMPTION IN OTHER PROVISIONS OF THE ACT IS NOT AVAILA BLE TO THE ASSESSEE; THAT THE ASSESSEE ON THE OTHER HAND HAD PLACED RELIANCE ON THE DELHI HIGH COURT DECISION IN THE CASE OF CIT V. L EGATO SYSTEMS 203 CTR 101(DEL.) THE ORDER OF THE TRIBUNAL OF THE TRI BUNAL IN JINDAL EXPORTS PVT. LTD. VS. ACIT 31 ITD 217 (DEL.) AND TH E ORDER OF THE DELHI TRIBUNAL IN ITO VS. DEMCO SOLUTIONS P. LTD. IN ITA N O.3915/DEL./04 DATED 23.03.07; THAT THE STAND MAINTAINED BY THE ASSESSE E WAS THAT IT WAS ELIGIBLE FOR THE EXEMPTION U/S 10A OF THE ACT SIN CE IT HAD SATISFIED ALL THE CONDITIONS PRECEDENT FOR CLAIMING SUCH EXEMPT ION; THAT IT WAS THE ASSESSEES CASE THAT THE PROVISIONS OF SECTION 80HHE(5) OF THE ACT MERELY PROVIDE THAT NO DEDUCTION UNDER ANY OTHER PR OVISION OF THE ACT SHALL BE AVAILABLE TO SUCH PROFITS ON WHICH DEDUCTION HAS BEEN CLAIMED U/S 80HHE OF THE ACT AND THAT THE EMPHASIS UNDER SECTIO N 80HHE(5) OF THE ACT IS IN RELATION TO PROVIDES WHICH ARE SUBJECT M ATTER OF DEDUCTION AND THAT THE SECTION 80HHE(5) MERELY PROFITS FOR NOT ALLOWING OF DOUBLE ITA NO.3920/DEL./10 (AY : 2004-05) 4 DEDUCTION ON THE SAME PROFITS; THAT IN THE ASSESSEES CASE IN THE INITIAL ASSESSMENT YEAR I.E. AY 1997-98 THE ASSESSEE SUFFERED A L OSS IN ITS NEPZ UNIT WHICH WAS THE REASON WHY THE ASSESSEE HAD NOT CLAIMED DEDUCTION U/S 10A OF THE ACT; THAT FROM THE SECOND YE AR I.E. AY 1999- 00 ONWARDS IT CLAIMED EXEMPTION U/S 10A OF THE ACT O N PROFITS FROM ITS NEPZ UNIT; THAT IN THE ASSESSMENT YEAR UNDER CONSIDERATI ON FOR THE FIRST TIME THE CLAIM OF EXEMPTION U/S 10A HAD BEEN D ENIED OSTENSIBLY ON THE STRENGTH OF THE PROVISIONS OF SECTION 80HHE(5) O F THE ACT; THAT PRIOR TO THE AMENDMENT MADE TO IT BY THE INCOME TAX (2 ND AMENDMENT) ACT 1998 SECTION 10A OF THE ACT PROVIDE D FOR EXEMPTION UP TO AY 1998-99 FOR A PERIOD OF FIVE CONSECUTIVE Y EARS FALLING WITHIN A PERIOD OF EIGHT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGAN TO MANUFACTURE OR PRODUCE ARTICLES; THAT W.E.F. AY 1999-00 THE PROVISI ONS OF SECTION 10A OF THE ACT WERE AMENDED BY VIRTUE OF WHICH AMENDME NT THE EXEMPTION WAS MADE AVAILABLE FOR TEN CONSECUTIVE YEAR S BEGINNING WITH ASSESSMENT YEAR IN WHICH THE INDUSTRIAL UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS; THAT AS PER THE PROVISIONS OF THE ACT APPLICABLE TO THE YEAR UNDER CONSIDERATION THE ASSESSEE WAS ENTITLED TO CLAIM EXEMPTION U/S 10A OF THE ACT FOR T EN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE INITIAL YEAR I.E. AY 1997-98 IN WHICH THE ASSESSEE COMPANY STARTED MANUFACTURE; THAT TH E BASIC ELIGIBILITY FOR THE ASSESSEE FOR EXEMPTION U/S 10A OF TH E ACT HAD NOT BEEN HIT; THAT SECTION 80HHE(5) OF THE ACT SEEKS TO PL UG A SITUATION WHERE DOUBLE DEDUCTION IS CLAIMED WITH REFERENCE TO THE SAME INCOME ONCE THE ASSESSEE HAD CLAIMED EXEMPTION U/S 80HHE OF THE ACT IN RESPECT OF BUSINESS NO DEDUCTION SHALL BE ALLOWED UNDER ANY OTHER PROVISION OF THE ACT EITHER FOR THE SAME OR FOR ANY OTHER ASSESSMENT YEAR IN RELATION TO THE PROFITS OF SUCH BUSINESS; THAT T HIS POSITION DOES NOT EMERGE FROM SECTION 80HHE(5); THAT SECTION 80HHE (5) MERELY PROVIDES THAT WHERE DEDUCTION U/S 80HHE HAS BEEN CLAIM ED AND ITA NO.3920/DEL./10 (AY : 2004-05) 5 ALLOWED IN RESPECT OF PROFITS OF AN ELIGIBLE BUSINESS N O DEDUCTION IN RELATION TO SUCH PROFITS CAN BE ALLOWED UNDER ANY OTH ER PROVISION OF THE ACT EITHER FOR THE SAME OR FOR ANY OTHER ASSESSMENT YE AR; THAT SECTION 80HHE(5) TALKS OF SUCH PROFITS; THAT IT SEEKS TO RESTRI CT SUBJECTING PROFITS WHICH HAVE ALREADY BEEN SUBJECTED TO DEDUCTIO N U/S 80HHE TO ANY OTHER DEDUCTION WHICH THE ASSESSEE MADE OTHERWISE BE ENTITLED TO CLAIM EITHER FOR THE SAME OR IN ANY ASSESSMENT YEAR; T HAT SECTION 80HHE(5) CANNOT BE READ SO AS TO MEAN THAT THE ASSESSEE HAVING ONCE CLAIMED DEDUCTION U/S 80HHE IN RESPECT OF PROFIT S OF AN ELIGIBLE BUSINESS WOULD BE DEBARRED FOR ALL TIMES TO CLAIM DEDU CTION UNDER ANY OTHER PROVISION OF THE ACT IN RESPECT OF THE PROFITS O F SUCH BUSINESS FOR ANY OTHER ASSESSMENT YEAR; THAT IN LEGATO SYSTEMS (SUPRA ) THE TRIBUNAL OBSERVED THAT SECTION 80HHE(5) WAS ENTITLED T O AVOID DOUBLE DEDUCTION IN AS MUCH AS THE PROFIT CALCULATED IN ACCO RDANCE WITH SECTION 80HHE FOR A PARTICULAR ASSESSMENT YEAR CANNOT BE CLAIMED AS DEDUCTION EITHER FOR THE SAME OR ANY OTHER ASSESSMENT Y EAR; THAT THE REASONING ADOPTED IN JINDAL EXPORTS PVT. LTD.(SUPRA) WAS SIMILAR HOLDING THAT DEDUCTIONS U/S 80HHE CANNOT BE DENIED TO THE ASSESSEE SIMPLY BECAUSE THE ASSESSEE ENJOYED EXEMPTION U/S 10A OF T HE ACT; AND THAT THEREFORE THE CLAIM OF THE ASSESSEE HAD BEEN RIGHTLY ALLOWED BY THE CIT(A). 8. IN VIEW OF THE ABOVE DETAILED DISCUSSION BY THE TRI BUNAL IN THE ASSESSEES CASE FOR AY 2002-03 WHICH WAS FOLLOWED BY THE TRIBUNAL IN THE ASSESSEES CASE FOR AY 2003-04 AND WHICH ORDERS OF THE TRIBUNAL HAVE NOT BEEN SHOWN TO HAVE BEEN SET ASIDE OR CANCELLE D OR EVEN STAYED BY THE HONBLE HIGH COURT RESPECTIVELY FOLLOW ING THE SAID DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE GROUN D NO.2 RAISED BY THE DEPARTMENT IS REJECTED. 9. GROUND NO.3 CONTENDS THAT THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF `3 23 37 842 PERTAINING TO PROFITS O F THE ASSESSEES JAPAN BRANCH. ITA NO.3920/DEL./10 (AY : 2004-05) 6 10. THE AO OBSERVED THAT THE ASSESSEE COMPANY VIDE LETT ER DATED 22.11.06 MADE A FRESH CLAIM U/S 80 HHE OF THE ACT AND FILED AUDITORS CERTIFICATE IN FORM NO.10 FOR ENTERTAINING THE CLAI M; AND THAT WHILE COMPUTING THE DEDUCTION U/S 80HHE THE ASSESSEE U/S 10CC AF HAD CONSIDERED THE TURNOVER OF ITS JAPAN BRANCH OF `3 23 37 842. THE ASSESSEE WAS ASKED AS TO WHY THIS CLAIM BE NOT DISALLOWED AS THE PROFITS HAD NOT BEEN RECEIVED IN INDIA. IN RESPONSE THE ASSESSEE HAD PLACED RELIANCE ON THE ORDER OF THE CIT(A) FOR AYS 2 002-03 AND 03-04 WHEREBY THE CIT(A) HAD DIRECTED THE AO TO CONSIDER THE EXPORT OF THE ASSESSEES JAPAN BRANCH AS EXEMPT. THE AO HOWEVER WENT ON TO DISALLOW THE ASSESSEES CLAIM ON THE BASIS THAT THE CIT(A) S SAID ORDERS HAD NOT BEEN ACCEPTED BY THE DEPARTMENT AND APPEALS HAD BEEN FILED BEFORE THE ITAT. 11. THE CIT(A) ALLOWED THE ASSESSEES CLAIM FOLLOWING TH E AFORESAID TRIBUNAL ORDERS. 12. THE LD.DR HAS CONTENDED THAT THE PROVISIONS OF SECT ION 10A OF THE ACT DO NOT COVER THE PROFITS OF A FOREIGN BRANCH OF THE ASSESSEE. 13. THE LD.COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER IN THIS REGARD. IT HAS BEEN CONTENDED THAT IN ALLOWING THE CLAIM OF THE ASSESSEE T HE CIT(A) HAS CORRECTLY FOLLOWED THE TRIBUNALS DECISIONS IN THE ASSESSE ES OWN CASE FOR AYS 2002-03 & 03-04. 14. IN THIS REGARD THE TRIBUNAL IN THE ASSESSEES OWN C ASE FOR AY 2002-03 HAS UPHELD THE CIT(A)S ACTION IN ALLOWING T HE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 10A OF THE ACT. THERE THE C IT(A) HAD ALLOWED THE CLAIM ON THE BASIS OF EXPLANATION (3) TO SECTION 10A OF THE ACT AS PER WHICH THE PROFITS AND GAINS DERIVED FROM ONSITE DEVELOPMENT OF COMPUTER SOFTWARE INCLUDING SERVICES OF DEVELOPMENT OF SOFTWARE OUTSIDE INDIA IS DEEMED TO BE PROFITS AND G AINS DERIVED FROM THE EXPORT OF COMPUTERS SOFTWARE OUTSIDE INDIA W .E.F. 1.4.2001. THERE WAS NO DISPUTE THAT THE JAPAN BRANCH OF THE ASSESSE E WAS TO ITA NO.3920/DEL./10 (AY : 2004-05) 7 PROVIDE ONSITE DEVELOPMENT SERVICE. THE PROFITS DERIV ED BY THE JAPAN BRANCH OF THE ASSESSEE WERE FOUND TO QUALIFY FOR EXEMPT ION 10A OF THE ACT. 15. THE FACTS SITUATION REGARDING THIS ISSUE REMAINED MU CH THE SAME FOR AY 2003-04 FOR WHICH YEAR ALSO THE TRIBUNALS O RDER (SUPRA) ALLOWED THE ASSESSEES CLAIM. IN THE YEAR UNDER CONSIDER ATION ALSO THE FACTS CONTINUED TO REMAIN THE SAME. AS SUCH RESPECTFUL LY FOLLOWING THE SAID TRIBUNALS ORDERS THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. GROUND NO.3 IS THEREFORE REJECTED. 16. IN THE RESULT THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. 17. ORDER PRONOUNCED IN THE OPEN COURT 14.01.2010. SD/- SD/- (K.G. BANSAL) (K.G. BANSAL) (K.G. BANSAL) (K.G. BANSAL) (A.D. JAIN) (A.D. JAIN) (A.D. JAIN) (A.D. JAIN) ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED: JAN. DATED: JAN. DATED: JAN. DATED: JAN. 14 2011. 14 2011. 14 2011. 14 2011. *SKB* *SKB* *SKB* *SKB* COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO:- -- - 1. 1.1. 1. THE ASSESSEE THE ASSESSEE THE ASSESSEE THE ASSESSEE 2. 2.2. 2. THE REVENUE THE REVENUE THE REVENUE THE REVENUE 3. 3.3. 3. THE CIT THE CIT THE CIT THE CIT 4. 4.4. 4. THE CIT (A) THE CIT (A) THE CIT (A) THE CIT (A)- -- -XII DELHI. XII DELHI. XII DELHI. XII DELHI. 5. 5.5. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DE LHI. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. ASSTT. REGISTRAR ASSTT. REGISTRAR ASSTT. REGISTRAR ASSTT. REGISTRAR INCOME INCOME INCOME INCOME- -- -TAX APPELLATE TRIBUNAL TAX APPELLATE TRIBUNAL TAX APPELLATE TRIBUNAL TAX APPELLATE TRIBUNAL NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. ITA NO.3920/DEL./10 (AY : 2004-05) 8