M/s Progress Software Development Private Limited, Hyderabad v. ITO, Hyderabad

ITA 397/HYD/2010 | 2006-2007
Pronouncement Date: 30-09-2010 | Result: Allowed

Appeal Details

RSA Number 39722514 RSA 2010
Bench Hyderabad
Appeal Number ITA 397/HYD/2010
Duration Of Justice 6 month(s) 13 day(s)
Appellant M/s Progress Software Development Private Limited, Hyderabad
Respondent ITO, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 30-09-2010
Date Of Final Hearing 31-08-2010
Next Hearing Date 31-08-2010
Assessment Year 2006-2007
Appeal Filed On 17-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI N.R.S. GANSAN JUDICIAL MEMBER AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA.397/HYD/2010 ASSESSMENT YEAR 2006-07 M/S PROGRESS SOFTWARE DEVELOPMENT (P) LTD. HYDERABAD (PAN AAD CP 4833 ) VS ITO WARD 16(2) HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MAHAVEER C. JAIN RESPONDENT BY : SMT. V. MADHUVANI DR O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECT ED AGAINST THE ORDER PASSED BY THE CIT(A) V HYDERABAD DATED 24.1 2.2009 AND PERTAINS TO THE ASSESSMENT YEAR 2006-07. 2. THE MAIN GROUND RAISED BY THE ASSESSEE IN ITS APPEAL IS WITH REGARD TO ADDING BACK OF EXPENSES AMOUNTING TO RS.6 3 48 012/- BY INVOKING THE PROVISIONS OF SEC.40(A)(IA) OF THE INC OME TAX ACT 1961 AND DENYING THE EXEMPTION U/S 10A OF THE ACT ON THIS AM OUNT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS DEBITED INTEREST TO PROFIT AND LOSS ACCOUNT AT RS.63 48 012 /- SINCE NO TDS HAS BEEN EFFECTED ON THE PAYMENT OF INTEREST THE ASSES SING OFFICER DISALLOWED THE EXPENDITURE AND ADDED TO THE INCOME OF THE ASSE SSEE IN VIEW OF THE PROVISIONS OF SEC.40(A)(IA) OF THE IT ACT. CONSEQU ENTLY DEDUCTION U/S 10A EXEMPTION IS DENIED. ON APPEAL THE CIT(A) CONFIRM ED THE SAME. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.397/HYD/2010 M/S PROGRESS SOFTWARE DEVELOPMENT HYD. 2 2 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. ADMITTEDLY IN THIS CASE THE ASSESSEE COMPANY IS A SUBSIDIARY OF PROGRESS SOFTWARE CORPORATION USA AN D IS AN UNDERTAKING ENTITLED FOR EXEMPTION U/S 10A. DEDUCTION U/S 10A OF THE ACT HAS TO BE CLAIMED ON DETERMINATION OF THE INCOME OF THE ASSES SEE. THE INCOME OF THE ASSESSEE IS TO BE DETERMINED AS PER PROVISIONS OF S EC.29 OF THE ACT AFTER GIVING EFFECT TO THE PROVISION OF SEC.30 TO 43D OF THE IT ACT. THE INCOME WAS INCREASED BY THE ASSESSING OFFICER ON ACCOUNT O F INVOKING THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT. THE INCOME SO INCREASED CANNOT BE SAID TO BE DERIVED OTHER THAN FROM EXPORT OF ARTICL ES OR THINGS OR COMPUTER SOFTWARE. IN OTHER WORDS THE INCOME SO INFLATED I S SAID TO BE DERIVED FROM SAME ORIGINAL SOURCE OF INCOME ON WHICH THE ASSESSE E CLAIMED DEDUCTION U/S 10A OF THE ACT. IN OUR HUMBLE OPINION THE DIS ALLOWANCE U/S 40(A)(IA) DOES NOT CHANGE THE CHARACTER OR SOURCE OF THE INCO ME. THE ORIGINAL SOURCE OF INCOME REMAINS THE SAME I.E. EXPORT OF AR TICLES THINGS OR COMPUTER SOFTWARE. WHEN THE ASSESSEE IS ENTITLED F OR EXEMPTION U/S 10A THE SAME IS TO BE GRANTED EVEN AFTER INVOKING THE P ROVISIONS OF SECTION 40(A)(IA). FOR THIS INCOME DIFFERENT YARDSTICK CA NNOT BE MADE AVAILABLE. PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER THE CHAPTER IV D COMPRISES OF S.28 TO S.44D AND DEALS WITH THE COMPU TATION OF INCOME UNDER THIS HEAD. IT STATES THAT THE INCOME REFERRE D TO IN SECTION 28 SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTA INED IN SS.30 TO 43D. IT THEREFORE BECOMES AMPLY CLEAR THAT THE INCOME UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION IS ONE WHICH I S DETERMINED AFTER MAKING ALL DEDUCTIONS AND DISALLOWANCES ETC. THAT ARE ENSHRINED U/S 30 TO 43D. THIS SECTION 40 (A) (IA) FALL WITHIN THIS CHA PTER AND HENCE THE DISALLOWANCE ARE THE SUBJECT MATTER OF COMPUTATION OF INCOME U/S 29. IT IS THEREFORE EASILY DEDUCIBLE THAT IN THE PRESENT CONTEXT THE INCOME DETERMINED AFTER THESE ADDITIONS/DISALLOWANCES IS T HE INCOME FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION. GOING BACK TO S.10A THE DEDUCTION IS ITA NO.397/HYD/2010 M/S PROGRESS SOFTWARE DEVELOPMENT HYD. 3 3 ADMISSIBLE ON THE WHOLE OF THE AMOUNT OF PROFITS A ND GAINS OF BUSINESS ATTRIBUTABLE TO THE CHARGING ON EXPORT BUSINESS. T HAT BEING THE POSITION IT BECOMES ABUNDANTLY CLEAR THAT THE BUSINESS INCOME AFTER MAKING THE ABOVE SAID DISALLOWANCE ULTIMATELY CONSTITUTES THE PROFITS AND GAINS OF BUSINESS AND THE WHOLE OF THAT AMOUNT IS ELIGIBLE FOR DEDUCTION U/S 10A. IT IS TRUE THAT THE NON OBSTANTE CLAUSE IS CONTAINE D IN SEC.40 BUT THE SAME IS REQUIRED TO BE READ HARMONIOUSLY WITH THE WORDS FOLLOWING IT. WHEN SO READ THE LANGUAGE OF THE SECTION TURNS OUT TO BE NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 30 TO 38 THE FOLLOWING AMOUNT SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION . A BARE PERUSAL OF THE RELEVANT PORTION OF THE SECTION REVEALS THAT THE NON OBSTANTE CLAUSE IS APPLICABLE ONLY QUA THE DEDUCTIONS WHICH ARE OTHERWISE ALLOWABLE UNDER THE ACT IN RESPECT OF ANY SUM PAYABLE BY THE ASSESSEE AS MENTIONED IN SECTION 40. BUT IT CANNOT CHANGE THE SOURCE/HEAD OF INCOME. 5. IN OUR VIEW THE ASSESSEE IS ENTITLED FOR EXEM PTION/DEDUCTION U/S 10A ON THE ADDITION TO INCOME MADE BY THE ASSES SING OFFICER ON ACCOUNT OF PROVISIONS OF SEC.40(A)(IA). 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 30. 9.2010 SD/- SD/- N.R.S. GANESAN CHANDRA POOJARI JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 30 TH SEPTEMBER 2010 ITA NO.397/HYD/2010 M/S PROGRESS SOFTWARE DEVELOPMENT HYD. 4 4 COPY FORWARDED TO: 1. M/S PROGRESS SOFTWARE DEVELOPMENT (P) LTD. ILAB S CENTRE 4 TH FLOOR NO.18 SOFTWARE UNITS LAYOUT MADHAPUR HYDE RABAD. 2. ITO WARD 16(2) HYDERABAD 3. CIT(A)-V HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP