M/S TATA INFOTECH LTD. ( AMALGAMATED WITH TATA CONSULTANCY SERVICES LTD W.E.F. 1/4/2005), MUMBAI v. THE ACIT RG 7(3), MUMBAI

ITA 4324/MUM/2008 | misc
Pronouncement Date: 30-09-2010

Appeal Details

RSA Number 432419914 RSA 2008
Assessee PAN AAACT0176F
Bench Mumbai
Appeal Number ITA 4324/MUM/2008
Duration Of Justice 40 year(s) 8 month(s) 29 day(s)
Appellant M/S TATA INFOTECH LTD. ( AMALGAMATED WITH TATA CONSULTANCY SERVICES LTD W.E.F. 1/4/2005), MUMBAI
Respondent THE ACIT RG 7(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2010
Appeal Filed By Assessee
Assessment Year misc
Appeal Filed On 01-01-1970
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI BEFORE SHRI R V EASWAR PRESIDENT AND SHRI R K PANDA ACCOUNTANT MEMBER I T A NO: 4324/MUM/2008 (ASSESSMENT YEAR: 2003-04 TATA INFOTECH LIMITED MUMBAI APPELLANT (AMALGAMATED WITH TATA CONSULTANCY SERVICES LTD.) (PAN: AAACT0176F) VS ASSISTANT COMMISSIONER OF INCOME TAX 7(3) RESPOND ENT MUMBAI APPELLANT BY: MR FIROZE B ANDHYARUJINA RESPONDENT BY: MS KUSUM INGLE O R D E R R V EASWAR PRESIDENT: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER PASSED BY THE COMMISSIONER OF INCOME TAX UNDER SECT ION 263 OF THE INCOME TAX ACT 1961 ON 31.03.2008. 2. THE APPEAL RELATES TO THE ASSESSMENT YEAR 2003-0 4. THE ASSESSMENT OF THE ASSESSEE WAS COMPLETED BY THE ASS ESSING OFFICER ON A TOTAL INCOME OF ` 8 36 338/-. IN THE RETURN THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 10A IN RESPECT OF INCOME ARISING FROM THE INDUSTRIAL UNDERTAKINGS LOCATED AT THE ELECTRONIC HARDWARE TECHNOLOGY PARK (EHTP) AT GOA AND THE SOFT WARE TECHNOLOGY PARKS (STP) SITUATED AT PUNE BANGALORE AND CHENNAI. UNDER THE SECTION AS IT STOOD AT THE RELEVANT TIME THE ASSESSEE WAS ENTITLED TO THE DEDUCTION OF 90% OF THE PROFITS OF THE ABOVE ITA NO: 4324/MUM/2008 2 UNDERTAKINGS. THE ASSESSEE CLAIMED DEDUCTION OF 90 % OF THE PROFITS IN THE FOLLOWING MANNER: - EHTP GOA `10 78 39 621/- STP - PUNE `16 69 51 092/- STP BANGALORE ` 7 76 04 345/- STP CHENNAI ` (- -- -)1 06 428/- ------------------- `35 22 88 630/- ------------------- IN SUPPORT OF THE ABOVE CLAIM FOR DEDUCTION DETAIL ED COMPUTATIONS IN RESPECT OF EACH UNDERTAKING WERE SUBMITTED ALONG WITH THE RETURN. IN THE STATEMENT OF INCOME FROM PROFITS AND GAINS O F THE BUSINESS THE ASSESSEE STARTED THE COMPUTATION OF THE INCOME FROM THE PROFIT FIGURE SHOWN IN THE PROFIT AND LOSS ACCOUNT AND RED UCED THEREFROM THE FIGURE OF ` 35 22 88 630/-. THE ULTIMATE INCOME SHOWN IN THE COMPUTATION WAS A LOSS OF ` 2 96 39 052/-. IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) THE ASSESSING OFFICER ALSO STARTED THE COMPUTATION FROM THE FIGURE OF NET PROFIT AS PER TH E PROFIT AND LOSS ACCOUNT AS WAS DONE BY THE ASSESSEE AND DEDUCTED ` 32 15 58 051/- UNDER SECTION 10A. HOWEVER THERE W AS ONE CHANGE. DUE TO SLIGHT CHANGES IN THE COMPUTATION O F THE PROFITS OF EACH OF THE UNDERTAKINGS THERE WAS A CHANGE ALSO I N THE FIGURE OF 90% OF THE PROFITS OF THE UNDERTAKINGS. AS PER THE COMPUTATION IN THE ASSESSMENT ORDER THE FIGURE OF 90% OF THE PROF ITS OF THE GOA UNIT CAME TO ` 9 97 95 226/- AS AGAINST THE FIGURE OF ` 10 78 39 621/- AS PER THE ASSESSEES COMPUTATION. THERE WERE SIMI LAR CHANGES IN RESPECT OF THE PUNE AND BANGALORE UNITS ALSO. THE RESULT WAS AS AGAINST THE DEDUCTION OF ` 35 22 88 630/- CLAIMED BY THE ASSESSEE ITA NO: 4324/MUM/2008 3 UNDER SECTION 10A THE ASSESSING OFFICER ALLOWED DE DUCTION OF ` 32 15 58 051/-. THE ASSESSING OFFICER DETERMINED T HE TAXABLE INCOME OF THE ASSESSEE AT ` 8 36 338/-. 3. ON 18.03.2008 THE CIT ISSUED NOTICE TO THE ASSES SEE PROPOSING TO REVISE THE ASSESSMENT UNDER SECTION 26 3 OF THE ACT. ACCORDING TO HIM THE ASSESSING OFFICER OUGHT TO HA VE ASSESSED THE DIFFERENCE OF ` 3 07 30 529/- BETWEEN THE CLAIM OF ` 35 22 88 630/- MADE BY THE ASSESSEE UNDER SECTION 10A AND ` 32 15 58 051/- ALLOWED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. SINCE THIS WAS NOT DONE THERE HAS BEEN AN ESCAPEMENT OF INCOME TO THE EXTENT OF ` 2 98 94 191/- WHICH IS THE DIFFERENCE BETWEEN ` 3 07 30 529/- AND ` 8 36 338/-. ACCORDING TO THE CIT THE LOSSES OF THE LOCAL UNITS NOT ELIGIBLE FOR DEDUCTION UNDER SE CTION 10A AMOUNTING TO ` 2 96 94 241/- WAS ADJUSTED AGAINST THE 10% OF THE PROFITS OF THE UNITS ENJOYING DEDUCTION UNDER SECTI ON 10A WHICH WERE TO BE BROUGHT TO TAX. THE CIT ALSO OBSERVED I N THE NOTICE THAT THE ASSESSEE HAS BEEN ALLOWED DEDUCTION OF ` 9 37 546/- UNDER CHAPTER VI-A WHICH WAS NOT ALLOWABLE IN VIEW OF THE LOSS FROM THE NON 10A UNITS AND THIS HAS ALSO RESULTED IN SHORT L EVY OF TAX. 4. THE ASSESSEE OBJECTED TO THE NOTICE AND SUBMITTE D THAT THERE WAS NOTHING IN SECTION 10A WHICH PROHIBITS THE SETT ING OFF OF THE 10% OF THE TAXABLE PROFITS OF THE UNITS ELIGIBLE FO R THE BENEFIT UNDER SECTION 10A AGAINST THE LOSS OF THE LOCAL UNITS WHI CH DO NOT ENJOY ANY BENEFIT UNDER SECTION 10A OF THE ACT. IT WAS P OINTED OUT THAT ONCE THE 10% OF THE PROFITS OF THE UNITS ENJOYING T HE BENEFIT OF SECTION 10A ARE TAXED AS PROFITS AND GAINS OF THE B USINESS THE ITA NO: 4324/MUM/2008 4 PROVISIONS RELATING TO SET OFF OF LOSSES FROM OTHER SOURCES UNDER THE SAME HEAD AND UNDER OTHER HEADS OF INCOME AS PROVI DED IN SECTIONS 70 AND 71 OF THE ACT AUTOMATICALLY COME I NTO PLAY. IN SUPPORT OF THESE SUBMISSIONS THE ASSESSEE RELIED ON THE ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL IN NAVIN BHARAT IN DUSTRIES LTD. VS. DCIT (2004) 90 ITD 1 (MUM) (TM) AND THE BANGALO RE BENCH OF THE TRIBUNAL IN MINDTREE CONSULTING PVT. LTD. VS. A CIT (2006) 102 TTJ (BANG) 691. IT WAS THUS PLEADED THAT THE ASSES SMENT ORDER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERE STS OF THE REVENUE. 5. THE CIT DID NOT ACCEPT THE ASSESSEES SUBMISSION S. ACCORDING TO HIM THE 10% OF THE PROFITS OF THE SECT ION 10A UNDERTAKINGS HAVE TO BE SET APART AND SEPARATELY CO NSIDERED AND BROUGHT TO TAX AND CANNOT BE UTILIZED TO BE ADJUSTE D AGAINST THE LOSSES UNDER THE SAME HEAD OR UNDER OTHER HEADS OF INCOME. HE HELD THAT THE PROFITS COMPUTED UNDER SECTION 10A HA VE TO BE GIVEN SEPARATE TREATMENT AND CANNOT BE MERGED WITH THE PR OFITS COMPUTED UNDER THE REMAINING PROVISIONS OF THE ACT. SECTION 10A HE OPINED WAS A SELF CONTAINED CODE AND NONE OF THE OTHER PRO VISIONS OF THE ACT WILL APPLY. HE ALSO HELD THAT THE INCOME COMPU TED UNDER SECTION 10A WILL NOT CONSTITUTE PART OF THE GROSS T OTAL INCOME AS DEFINED UNDER SECTION 80B AGAINST WHICH ALONE DEDUC TIONS UNDER CHAPTER VI-A ARE ALLOWED. IN ADDITION TO THIS LINE OF REASONING THE CIT ALSO HELD THAT THE ORDERS OF THE MUMBAI AND BAN GALORE BENCHES OF THE TRIBUNAL WERE NOT APPLICABLE AND THA T HE WAS IN RESPECTFUL DISAGREEMENT WITH THOSE ORDERS. IN THIS VIEW OF THE ITA NO: 4324/MUM/2008 5 MATTER HE DIRECTED THE ASSESSING OFFICER TO COMPUT E THE TOTAL INCOME OF SECTION 10A UNDERTAKINGS SEPARATELY WITHO UT ALLOWING ANY SET OFF OF LOSS OR UNABSORBED DEPRECIATION IN RESPE CT OF THE NON 10A UNITS. HE ALSO HELD THAT SINCE THERE WAS A LOSS IN THE NON 10A UNITS THE DEDUCTIONS UNDER SECTIONS 80G AND 80-O WERE INC ORRECTLY ALLOWED AGAINST THE INCOME FROM SECTION 10A UNITS. HE THUS DIRECTED THE ASSESSING OFFICER TO PASS A FRESH ASSE SSMENT ORDER AFTER GIVING THE ASSESSEE PROPER OPPORTUNITY. 6. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRI BUNAL TO CONTEND THAT THE ASSESSMENT ORDER WAS NEITHER ERRON EOUS NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE INASMUC H AS IT WAS IN CONFORMITY WITH THE VIEWS EXPRESSED IN SEVERAL ORDE RS OF THE TRIBUNAL. IT WAS SUBMITTED THAT WHERE THE ASSESSME NT ORDER IS IN ACCORDANCE WITH THE VIEWS EXPRESSED BY A HIGHER JUD ICIAL FORUM IT CANNOT BE TERMED TO BE ERRONEOUS. IT WAS ARGUED TH AT IN ANY CASE THE MATTER RAISED SEVERAL LEGAL QUESTIONS AND WAS H IGHLY DEBATABLE AND JUST BECAUSE THE ASSESSING OFFICER ADOPTED ONE OF THE POSSIBLE LEGAL INTERPRETATIONS OF THE PROVISIONS OF THE STAT UTE IT DOES NOT FOLLOW THAT HIS ORDER IS ERRONEOUS. OUR ATTENTION WAS DRA WN TO SEVERAL ORDERS OF DIFFERENT BENCHES OF THE TRIBUNAL IN WHIC H THE VIEW WAS TAKEN THAT THE 10% PROFITS OF THE SECTION 10A UNIT WHICH ARE BROUGHT TO TAX FOR THE ASSESSMENT YEAR 2003-04 CAN BE UTILI ZED FOR BEING ADJUSTED AGAINST THE BROUGHT FORWARD LOSSES AND THE LOSSES FOR THE SAME YEAR EITHER UNDER THE SAME HEAD OF INCOME BUT FROM A DIFFERENT SOURCE OR UNDER ANOTHER HEAD OF INCOME FO R THE SAME YEAR. ITA NO: 4324/MUM/2008 6 IT WAS THUS SUBMITTED THAT THE ORDER UNDER SECTION 263 WAS BAD IN LAW. 7. THE LEARNED CIT DEPARTMENTAL REPRESENTATIVE STRO NGLY RELIED ON THE ORDER PASSED BY THE CIT AND THE REASONING GI VEN THEREIN. SHE FURTHER SUBMITTED THAT THE ASSESSMENT ORDER WAS CONTRARY TO THE PROVISIONS OF THE STATUTE AND THEREFORE WAS R IGHTLY HELD TO BE ERRONEOUS BY THE CIT. IT WAS HER CONTENTION THAT T HE 10% PROFITS WHICH ARE TAXED UNDER SECTION 10A FOR THE ASSESSMEN T YEAR 2003- 04 CANNOT BE UTILIZED FOR BEING ADJUSTED AGAINST LO SSES FOR THE SAME YEAR UNDER DIFFERENT SOURCES OR HEADS OF INCOME OR AGAINST BROUGHT FORWARD LOSSES. SHE SUBMITTED THAT SUCH PROFITS ST AND ON A SEPARATE FOOTING AND CANNOT BE CONSIDERED TO BE PAR T OF THE PROFITS AND GAINS OF THE BUSINESS AS COMPUTED UNDER SECTION S 29 TO 43 OF THE ACT. 8. ON A CAREFUL CONSIDERATION OF THE RIVAL CONTENTI ONS WE ARE OF THE VIEW THAT THE ASSESSMENT ORDER CANNOT BE SAID T O BE ERRONEOUS SINCE IT IS IN ACCORDANCE WITH THE VIEWS EXPRESSED IN SEVERAL ORDERS OF DIFFERENT BENCHES OF THE TRIBUNAL. IN THE CASE OF MINDTREE CONSULTING PVT. LTD. (SUPRA) IT WAS HELD THAT THE PROFITS WHICH BECAME TAXABLE AFTER AVAILING OF THE EXEMPTION UNDE R SECTION 10B OF THE ACT WERE AVAILABLE TO BE ADJUSTED AGAINST TH E LOSS ASSESSED FOR THE SAME YEAR UNDER THE HEAD INCOME FROM OTHER SOURCES AS PERMITTED UNDER SECTION 71. IT MAY BE CLARIFIED TH AT SECTION 10B IS SUBSTANTIALLY SIMILAR TO SECTION 10A OF THE ACT. I N THE CASE OF NAVIN BHARAT INDUSTRIES LTD. (SUPRA) THE MUMBAI BENCH OF THE TRIBUNAL HELD THAT THE UNITS UNDER SECTION 10A ARE ENTITLED TO SET OFF THEIR ITA NO: 4324/MUM/2008 7 LOSSES AGAINST THE PROFITS FROM NON 10A UNITS OR AG AINST OTHER BUSINESS INCOME FOR THE SAME YEAR. THIS ORDER DEAL S WITH THE REVERSE SITUATION. HOWEVER THE QUESTION IS WHETHE R THE PROVISIONS OF SECTIONS 70 AND 71 ARE APPLICABLE EVEN WITH REGA RD TO THE LOSSES OR PROFITS ASSESSED IN RESPECT OF UNITS ENJOYING TH E BENEFITS OF SECTION 10A. THAT QUESTION WAS DECIDED BY THE TRIB UNAL BY HOLDING IN THE AFFIRMATIVE. IN WIPRO BPO SOLUTIONS LTD. VS . DCIT [2010- TIOL-95-ITAT-BANG] THE BANGALORE BENCH OF THE TRIB UNAL WAS DEALING WITH SECTION 10B. AFTER NOTING THAT 90% OF THE PROFITS WERE DEDUCTIBLE UNDER THE SECTION AND 10% OF THE PROFITS WERE ASSESSABLE FOR THE ASSESSMENT YEAR 2003-04 IT WAS HELD THAT THE BUSINESS LOSS BROUGHT FORWARD FROM THE ASSESSMENT Y EAR 2001-02 CAN BE SET OFF AGAINST THE 10% PROFITS ASSESSED UND ER SECTION 10B FOR THE ASSESSMENT YEAR 2003-04. IN DCIT VS. A V T HOMAS LEATHER & ALLIED PRODUCTS LTD. [2009-TIOL-434-ITAT-MAD] TH E CHENNAI BENCH OF THE TRIBUNAL HELD THAT THE LOSS IN RESPECT OF A UNIT UNDER SECTION 10A CAN BE SET OFF AGAINST THE PROFIT EARNE D FOR THE SAME YEAR BY THE NON 10A UNITS. IN THE CASE OF HONEYWEL L INTERNATIONAL INDIA () LTD. VS. DCIT (2007) 108 TTJ (DEL) 924 TH E DELHI BENCH OF THE TRIBUNAL WAS DEALING WITH THE LOSS OF AN UNIT E LIGIBLE UNDER SECTION 10A FOR THE ASSESSMENT YEAR 2003-04. IT WA S HELD THAT THE LOSS CAN BE SET OFF AGAINST THE PROFITS OF ANY OTHE R UNIT OR BUSINESS UNDER SECTIONS 70 AND 71 OF THE ACT. AGAIN THE MUM BAI BENCH OF THE TRIBUNAL IN THE CASE OF SOVIKA INFOTEK LTD. VS. ITO [2008-TIOL- 343-ITAT-MUM] DEALING WITH SECTION 10B HELD THAT THE PROVISIONS OF SECTIONS 70 AND 71 WERE APPLICABLE AND THE LOSS FROM THE 10A ITA NO: 4324/MUM/2008 8 UNIT CAN BE ADJUSTED AGAINST THE INCOME FROM OTHER SOURCES FOR THE SAME YEAR. 9. THUS THERE IS AMPLE AUTHORITY IN THE FORM OF ORD ERS OF DIFFERENT BENCHES OF THE TRIBUNAL FOR THE PROPOSITI ON THAT THE 10% PROFITS OF AN UNIT UNDER SECTION 10A WHICH IS ASSES SED FOR THE ASSESSMENT YEAR 2003-04 ARE NOT DIFFERENT IN ANY WA Y FROM THE PROFITS OF ANY OTHER BUSINESS CARRIED ON BY THE ASS ESSEE AND THEREFORE ANY LOSSES FOR THE SAME YEAR OR BROUGHT FORWARD FROM AN EARLIER YEAR CAN BE ADJUSTED AGAINST THOSE PROFITS. THE LOSS ARISING IN THE SECTION 10A UNIT IS ALSO ELIGIBLE FOR BEING ADJUSTED AGAINST THE PROFITS OF ANY OTHER BUSINESS FOR THE SAME YEAR OR AGAINST INCOME UNDER OTHER HEADS OF INCOME. AS AGAINST THIS VIEW ADUMBRATED IN THE ORDERS OF THE TRIBUNAL IN ACCORDANCE WITH WHIC H THE ASSESSMENT ORDER IN THE PRESENT CASE HAS BEEN FRAME D THE CIT HAS TAKEN A DIFFERENT VIEW. WE ARE NOT HERE CONCER NED WITH THE CORRECTNESS OF EITHER OF THE VIEWS. IT IS ONLY TO BE NOTED THAT WHERE THE ASSESSMENT ORDER HAS BEEN PASSED ON THE BASIS O F ONE OF THE SEVERAL PLAUSIBLE VIEWS OR INTERPRETATIONS TO BE PL ACED ON THE STATUTORY PROVISIONS IT DOES NOT BECOME ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE MERELY BECAUSE THE CIT PREFERS TO ADOPT ANOTHER VIEW WHICH IS FAVOURABLE FROM THE REV ENUES POINT OF VIEW. THIS IS A WELL SETTLED POSITION FOR WHICH NO AUTHORITY NEEDS TO BE CITED. IN THIS VIEW OF THE MATTER WE HOLD THAT THE ASSESSING OFFICER DID NOT ERR AND THE ASSESSMENT ORDER PASSED BY HIM CANNOT BE SAID TO BE ERRONEOUS BECAUSE THE 10% PROFITS OF THE UNITS ELIGIBLE FOR THE BENEFIT UNDER SECTION 10A HAVE BEEN USED TO ADJUST THE ITA NO: 4324/MUM/2008 9 LOSSES FROM THE LOCAL NON 10A UNITS. THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ACCEPTED AND THE ORDER OF THE CIT PASSE D UNDER SECTION 263 IS SET ASIDE. NO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER 2010. SD/- SD/- (R K PANDA) (R V EASWAR) ACCOUNTANT MEMBER PRESIDENT MUMBAI DATED 30 TH SEPTEMBER 2010 SALDANHA COPY TO: 1. TATA INFOTECH LIMITED 9 TH FLOOR NIRMAL BUILDING NARIMAN POINT MUMBAI 400 021 2. ACIT 7(3) 3. CIT-7 4. CIT(A)- 5. DR J BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI