DDIT, New Delhi v. M/s. Virage Logic International, Noida

ITA 494/DEL/2010 | 2006-2007
Pronouncement Date: 01-04-2010 | Result: Dismissed

Appeal Details

RSA Number 49420114 RSA 2010
Bench Delhi
Appeal Number ITA 494/DEL/2010
Duration Of Justice 1 month(s) 28 day(s)
Appellant DDIT, New Delhi
Respondent M/s. Virage Logic International, Noida
Appeal Type Income Tax Appeal
Pronouncement Date 01-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted H
Tribunal Order Date 01-04-2010
Date Of Final Hearing 01-04-2010
Next Hearing Date 01-04-2010
Assessment Year 2006-2007
Appeal Filed On 03-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H DELHI) BEFORE SHRI A.D. JAIN AND SHRI A.K. GARODIA ITA NO. 494(DEL)2010 ASSESSMENT YEAR: 2006-07 DY. DIRECTOR OF INCOME TAX M/S. VIRAGE LOGI C INTERNATIONAL(INDIA CIRCLE 2(2) NEW DELHI. V. BRANCH OFFICE) A-75 SEC. 57 NOIDA UP. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ASHWANI KUMAR MAHAJAN CIT/DR RESPONDENT BY: SHRI S.K . AGGARWAL CA ORDER PER A.D. JAIN J.M. THIS IS DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 2006-07 TAKING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S 10 A TO THE ASS ESSEE BY NOT DISTINGUISHING BETWEEN ACTUAL EXPORT AND MERE TRANS FER TO HEAD OFFICE AS THE ASSESSEE HAS MERELY TRANSMITTED THE SOFTWARE TO ITS HEAD OFFICE WHICH CANNOT BE TERMED AS EXPORT IN THE SENSE AS USED IN SEC. 10A OF THE INCOME TAX ACT 1961 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD . CIT(A) ERRED IN INTERPRETING THE TRUE INTENTION OF LEGISLATURE F OR BRINGING PROVISIONS OF SEC. 10 A(3) TO THE STATUTE WHICH STI PULATES BRINGING IN OF PRECIOUS FOREIGN EXCHANGE INTO THE C OUNTRY WHEREAS IN CASE OF THE ASSESSEE BEING A FOREIGN COM PANY THE ITA 494(DEL)10 2 SALE PROCEEDS WOULD NOT BE RETAINED IN INDIA BUT ON LY THE TAX ON A FRACTION OF THE PROFIT WHICH IS ATTRIBUTABLE TO I NDIAN BRANCH OF THE FOREIGN COMPANY WOULD BE RETAINED IN INDIA. 2. THE ASSESSEE IS A NON RESIDENT COMPANY HAVING A PE IN INDIA . THE INCOME OF THE PE IS TAXABLE IN TERMS OF THE INDO UK DTAA. FOR ASSESSMENT YEAR 2001-02 THE ASSESSEE CLAIMED EXEMP TION U/S 10 A OF THE INCOME TAX ACT WHICH WAS DISALLOWED. THE TRIBUNA L IN THE SECOND ROUND HELD THE ASSESSEE TO BE ENTITLED THE EXEMPTION SO C LAIMED. FOR ASSESSMENT YEAR 2002-03 AGAIN THE TRIBUNAL HELD THE ASSESSEE ELIGIBLE FOR EXEMPTION U/S 10A OF THE ACT. FOR ASSESSMENT YEARS 2003-04 TO 2005-06 THE LD. CIT(A) ALLOWED THE EXEMPTION TO THE ASSESSEE FOLLOW ING THE TRIBUNAL ORDERS FOR ASSESSMENT YEAR 2001-02 AND 2002-03. THE DEPA RTMENTS APPEAL WAS DISMISSED BY THE TRIBUNAL. THUS THE TRIBUNAL HAS HELD THE ASSESSEE TO BE ENTITLED FOR EXEMPTION U/S 10 A OF THE ACT RIGHT FR OM THE ASSESSMENT YEAR 2001-02 TO ASSESSMENT YEAR 2005-06. 3. FOR THE YEAR UNDER CONSIDERATION I.E. ASSESSME NT YEAR 2006-07 AGAIN THE AO DISALLOWED THE ASSESSEES CLAIM FOR EXEMPTIO N U/S 10 A OF THE ACT. THE LEARNED CIT(A) HAS AGAIN HELD THE ASSESSEE ENTI TLED TO THE EXEMPTION CLAIMED. THIS BRINGS THE DEPARTMENT IN APPEAL BEF ORE US. ITA 494(DEL)10 3 4. THE LD. DR HAS CONTENDED CHALLENGING THE IMPUGN ED ORDER THAT THE LD. CIT(A) HAS ERRED IN ALLOWING EXEMPTION TO THE A SSESSEE U/S 10A OF THE ACT; THAT IN DOING SO THE LD. CIT(A) HAS FAILED TO DISTINGUISH BETWEEN THE ACTUAL EXPORT AND MERE TRANSFER TO THE HEAD OFFICE; THAT THE ASSESSEE HAD MERELY TRANSMITTED THE SOFTWARE TO ITS HEAD OFFICE WHICH CANNOT IN ANY MANNER BE STATED TO BE EXEMPT SO AS TO ENTITLE THE ASSESSEE EXEMPTION U/S 10A OF THE ACT; THAT THE LD. CIT(A) HAS GONE WRONG IN NOT CONSIDERING THAT SECTION 10 A(3) OF THE ACT STIPULATES BRINGING IN O F FOREIGN EXCHANGE INTO INDIA; THAT SINCE THE ASSESSEE IS A FOREIGN COMPANY THERE IS NO QUESTION OF ITS SALE PROCEEDS TO BE RETAINED IN INDIA; THAT ONLY TH E TAX ON A FRACTION OF THE PROFIT PAYABLE TO THE INDIAN BRANCH OF THE FOREIGN COMPANY CAN BE RETAINED IN INDIA; THAT IN THESE FACTS THE ORDER OF THE LD. CI T(A) IS LIABLE TO BE SET ASIDE WHILE REVIVING THAT OF THE AO. 5. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTH ER HAND HAS STRONGLY RELIED ON THE ORDER UNDER APPEAL. IT HAS BEEN SUBM ITTED THAT RIGHT FROM ASSESSMENT YEAR 2001-02 TO A.Y. 2005-06 THE TRIBUN AL HAS HELD THE ASSESSEE TO BE ENTITLED TO EXEMPTION U/S 10 A OF THE ACT; TH AT SUCH REPEATED DECISION OF THE TRIBUNAL HAS ATTAINED FINALITY; THAT THE LD. CIT(A) HAS CORRECTLY FOLLOWED THE SAID TRIBUNAL DECISION TO HOLD THE ASS ESSEE ENTITLED TO THE ITA 494(DEL)10 4 EXEMPTION CLAIMED; AND THAT THEREFORE THERE BEING NO MERIT IN THE APPEAL FILED BY THE DEPARTMENT THE SAME BE DISMISSED OUTR IGHT. 6. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE THE LD. CIT(A) HAS HELD AS FOLLOWS:- 5. FROM THE ABOVE IT IS SEEN THAT THE ITAT HAS AL READY DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT FOR ASSESSMENT YEA RS 2001-02 TO 2005- 06. ON GOING THROUGH THE ASSESSMENT ORDER OF THE YEAR UNDER CONSIDERATION IT IS SEEN THAT THE REASONS FOR DISAL LOWANCE OF EXEMPTION U/S 10A ARE SIMILAR TO THOSE OF THE EARLIER YEARS A LREADY DECIDED BY THE ITAT. THEREFORE RESPECTFULLY FOLLOWING THE O RDER OF THE ITAT FOR ASSESSMENT YEARS 2001-02 TO 2005-06 AND ALSO IN VIE W OF THE FACT THAT NO DISTINCTION OF FACTS HAS BEEN BROUGHT ON RECORD IT IS HELD THAT THE APPELLANT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 1 0A OF THE ACT SUBJECT TO FULFILLMENT OF OTHER CONDITIONS AS LAID DOWN E.G. SUB SECTION (3) ETC. 7. THE TRIBUNAL WHILE DECIDING THE ASSESSEE TO BE ENTITLED TO EXEMPTION U/S 10A OF THE ACT FOR ASSESSMENT YEAR 2002-03 HAS HELD THAT THE ASSESSEE HAD DEVELOPED THE COMPUTER SOFTWARE AND HAD TRANSMI TTED IT ELECTRONICALLY TO ITS HEAD OFFICE; THAT THE ASSESSEE WAS AN APPROVED 100% EXPORT ORIENTED UNIT FOR DEVELOPMENT OF COMPUTER SOFTWARE DULY APP ROVED BY THE STP OF INDIA; THAT THE EXPORT OF SOFTWARE DURING THE PREVI OUS YEAR WAS EVIDENCED BY THE SOFTEXT FORM DULY CERTIFIED BY THE COMPETENT OF FICER OF STPI; THAT THE CONSIDERATION HAD BEEN RECEIVED BY THE ASSESSEE IN THE FORM OF CONVERTIBLE FOREIGN EXCHANGE; THAT THE EXEMPTION U/S 10 A OF TH E ACT HAD BEEN DENIED TO ITA 494(DEL)10 5 THE ASSESSEE FOR THE REASON THAT THERE HAD BEEN NO EXPORT SALE BY THE ASSESSEE SINCE THE COMPUTER SOFTWARE WAS TRANSMITTED TO ITS HEAD OFFICE AND SINCE THE ASSESSEE AND ITS HEAD OFFICE WERE ONE ENTITY AND TH ERE WAS NO SALE DEED TO ANY THIRD PARTY; THAT THIS APPROACH OF THE REVENUE WAS INCORRECT IN VIEW OF THE PROVISIONS OF SECTION 10A(7) OF THE ACT; THAT T HE LEGAL FICTION OF TREATING AN ASSESSEE AS A SEPARATE ENTITY VIS--VIS SALE BY IT AND TRANSFER BY IT FROM AN ELIGIBLE BUSINESS OR TO AN ELIGIBLE BUSINESS IS REC OGNIZED U/SS 10A(7) AND 80 IA(8) OF THE ACT WHICH WHEN READ TOGETHER REVEAL STATUTORY RECOGNITION OF THIS LEGAL FICTION; THAT IN THE ASSESSEES CASE TH ERE COULD NOT BE ANY DOUBT ABOUT THE MARKET PRICE ALSO SINCE THE TRANSFER PRI CING OFFICER HAD ALREADY HELD THAT THE PRICE AT WHICH THE ASSESSEE TRANSMITT ED THE COMPUTER SOFTWARE TO ITS HEAD OFFICE WAS AT AN ARMS LENGTH PRICE; AN D THAT ON THIS BASIS THE CLAIM OF THE ASSESSEE DESERVED TO BE ACCEPTED. 8. FOR THE OTHER ASSESSMENT YEARS AS REFERRED TO A BOVE TOO A SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL. 9. AS SUCH NO DIFFERENCE IN FACTS FROM THE SAID EA RLIER ASSESSMENT YEARS HAVING BEEN BROUGHT TO OUR NOTICE WE FIND NO REASO N TO INTERFERE WITH THE LD. CIT(A)S ORDER FOR THE YEAR UNDER CONSIDERATION. THE LD. CIT(A) HAS THE FACTS REMAINING THE SAME CORRECTLY FOLLOWED THE AF ORESAID TRIBUNAL ORDERS IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 20 01-02 TO 2005-06. ITA 494(DEL)10 6 10. IN VIEW OF THE ABOVE FINDING NO MERIT IN THE G RIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT BY WAY OF GROUND NOS. 1 AN D 2 THESE GROUNDS ARE REJECTED. 11. IN THE RESULT THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.04.2010. SD/- SD/- (A.K. GARODIA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 01.04.2010 *RM COPY FORWARDED TO: 1. DY. DIRECTOR OF INCOME TAX CIRCLE 2(2) NEW DELHI. 2. M/S. VIRAGE LOGIC INTERNATIONAL(INDIA BRANCH OFFICE) A-75 SEC. 57 NOIDA UP. 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR