Patni computers Ltd., Pune v. ACIT,Cir.-4,, Pune

ITA 519/PUN/2007 | 2002-2003
Pronouncement Date: 29-07-2011 | Result: Allowed

Appeal Details

RSA Number 51924514 RSA 2007
Assessee PAN AABCP6219N
Bench Pune
Appeal Number ITA 519/PUN/2007
Duration Of Justice 4 year(s) 3 month(s) 15 day(s)
Appellant Patni computers Ltd., Pune
Respondent ACIT,Cir.-4,, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 29-07-2011
Assessment Year 2002-2003
Appeal Filed On 13-04-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI I C SUDHIR JUD ICIAL MEMBER AND SHRI G S PANNU ACCOUNTANT MEMBER S.NO . ITA NO. ASSTT.YEAR 1. 519/PN/07 2002-03 2. 794/PN/08 2002-03 3. 475/PN/08 2003-04 PATNI COMPUTER SYSTEMS LTD. .. APPELLANT S.NO 1A IRANI MARKET COMPOUND YERWADA PUNE PAN AABCP6219N VS. DY. COMMISSIONER OF INCOME-TAX .. RESPONDENT CIR.4 PUNE AND 4. 1058/PN/08 2002-03 ASSTT. COMMISSIONER OF INCOME-TAX .. APPELLANT CIR.4 PUNE VS. PATNI COMPUTER SYSTEMS P LTD. .. RESPONDENT PUNE ASSESSEE BY : SHRI S N INAMDAR DEPARTMENT BY: SHRI V ANANDRAJ ORDER PER G.S. PANNU AM THE CAPTIONED FOUR APPEALS THREE BY THE ASSESSEE AND ON E BY THE REVENUE PERTAINING TO SAME ASSESSEE WERE HEARD TOGETHE R AND ARE BEING DISPOSED OFF BY A CONSOLIDATED ORDER FOR THE SAKE OF CO NVENIENCE AND BREVITY. 2. WE SHALL FIRST TAKE UP ASSESSEES APPEAL IN ITA NO 519/ PN/2002-03. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX DATED 30.3.2007 PASSED UNDER SECTION 263 OF T HE INCOME-TAX ACT 2 1961 (IN SHORT THE ACT) SETTING ASIDE THE ORDER OF TH E ASSESSING OFFICER PASSED UNDER SECTION 143(3) OF THE ACT PERTAINING TO THE ASSE SSMENT YEAR 2002-03. 3. THE FACTS IN BRIEF ARE THAT IN THIS CASE THE ORIGI NAL ASSESSMENT FOR THE ASSESSMENT YEAR 2002-03 WAS COMPLETED BY THE ASSESSING OFFICE R UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 15.3.2005 ALLOWIN G THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 10A IN RESPECT OF ITS VARIOUS UNIT S ON THE GROUND THAT EACH OF THE UNITS IS A SEPARATE UNDERTAKING ELIGIBLE FO R SUCH DEDUCTION. 4. ON EXAMINATION OF THE RECORD THE COMMISSIONER OF I NCOME-TAX (IN SHORT THE COMMISSIONER) NOTICED THAT IN THE ASSESSMENT YEAR 2 004-05 THE ASSESSING OFFICER HAD DEVIATED FROM THE EARLIER CONCLUSION AND H ELD THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION UNDER SECTION 10A IN RESPECT O F ITS SAME VARIOUS UNITS ON WHICH DEDUCTION UNDER SECTION 10A WAS ALLOWED BY THE ASSESSI NG OFFICER FOR THE ASSESSMENT YEAR IN QUESTION. FURTHER THE COMMISSIONER NOT ICED THAT THE ASSESSEE HAD NOT ADHERED TO THE PRINCIPLES OF SECTION 80AB WHILE COMPUTING ITS CLAIM OF DEDUCTION UNDER SECTION 80HHE IN RESPECT O THE UNITS TREATED BY THE ASSESSEE AS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 10A BUT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHE OF THE ACT. 5. IN VIEW OF THE ABOVE FACTS THE COMMISSIONER CONSIDER ED THAT THE ASSESSMENT COMPLETED BY THE ASSESSING OFFICER UNDER SECTION 1 43(3) FOR THE ASSESSMENT YEAR 2002-03 WAS ERRONEOUS IN SO FAR AS IT WAS PR EJUDICIAL TO THE INTERESTS OF REVENUE AND ACCORDINGLY EXERCISING THE REVI SIONARY POWERS VESTED IN HIM UNDER SECTION 263 OF THE ACT THE COMMISSIONER I NITIATED PROCEEDINGS UNDER THE SAID SECTION. IN RESPONSE TO THE NOTICE ISSUED BY THE COMMISSIONER THE ASSESSEE PRIMARILY SUBMITTED THAT THE IMPUGNED ASPECT R ELATING TO THE CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT FOR VARIOUS UN ITS FOR THE ASSESSMENT YEAR 2002-03 WAS A SUBJECT-MATTER OF APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE FIRST APPELLATE AUTHORITY HAD CONFIRMED THE ORDER OF THE ASSESSING OFFICER AND DECIDED THE ISSUE IN FAVOUR OF TH E ASSESSEE. SIMILARLY THE DEDUCTION UNDER SECTION 80HHE WAS ALSO EXAMINED IN T HE ASSESSMENT 3 PROCEEDINGS BY THE ASSESSING OFFICER AND WAS ALSO SUBJECT MAT TER OF APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS). IT WA S THUS SUBMITTED THAT BOTH THE POINTS WERE ALSO CONSIDERED BOTH BY THE ASSESSI NG OFFICER AND THEREAFTER IN APPEAL BY THE COMMISSIONER OF INCOME-TAX (APPEALS). RELYING ON THE PROVISIONS OF CLAUSE (C) OF EXPLANATION TO SECTION 263 (1) OF THE ACT IT WAS CONTENDED BY THE ASSESSEE THAT BOTH THE ISSUES CANNOT BE A SU BJECT-MATTER OF CONSIDERATION BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT. 6. AFTER CONSIDERING THE OBJECTIONS OF THE ASSESSEE AND THE JUDICIAL PRONOUNCEMENTS THE COMMISSIONER WAS NOT SATISFIED AND HE CONCLUDED THAT THE ASSESSMENT FINALIZED UNDER SECTION 143(3) OF THE ACT FOR THE IMPUGNED ASSESSMENT YEAR WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIA L TO THE INTERESTS OF THE REVENUE. IN THIS VIEW OF THE MATTER THE COMMISSION ER SET ASIDE THE ORDER PASSED BY THE ASSESSING OFFICER WITH DIRECTIONS TO PASS A FRESH ASSESSMENT ORDER DE NOVO AFTER INVESTIGATION ON THE TWO ISSUES RELATING TO THE ELIGIBILITY OF UNITS FOR CLAIM OF DEDUCTION UNDER SECTION10A OF THE ACT AND THE Q UANTUM OF DEDUCTION ELIGIBLE UNDER SECTION 80HHE OF THE ACT. IT IS THIS OR DER OF THE COMMISSIONER PASSED UNDER SECTION 263 OF THE ACT WHICH IS BEING CHALLEN GED BY THE ASSESSEE IN FURTHER APPEAL BEFORE US. 7. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS VEH EMENTLY ARGUED THAT THE COMMISSIONER HAS ERRED IN LAW AND ON FACTS IN A SSUMING JURISDICTION UNDER SECTION 263 OF THE ACT. THE FIRST AND FOREMOST SUBM ISSION PUT-FORTH IS THAT THE COMMISSIONER HAS ERRED IN INVOKING HIS REVISIONARY P OWER UNDER SECTION 263 OF THE ACT IN THE CONTEXT OF THE EXPLANATION (C) TO SECT ION 263(1) OF THE ACT. IT IS SUBMITTED THAT IN TERMS OF EXPLANATION (C) TO SECTION 26 3(1) THE COMMISSIONER WAS NOT ENTITLED TO REVISE THE ASSESSMENT ORDER ON THE I SSUES RELATING TO THE CLAIMS OF DEDUCTION UNDER SECTION 10A AND 80HHE OF THE ACT INASMUCH AS THE SAID CLAIMS WERE CRITICALLY EXAMINED AND PARTIALLY DISALL OWED BY THE ASSESSING OFFICER AND THE SAME WERE SUBJECT-MATTER OF CONSIDERATI ON AND DECISION BY THE COMMISSIONER OF INCOME-TAX (APPEALS) IN THE QUANTUM PR OCEEDINGS. IN THIS 4 REGARD IT HAS BEEN POINTED OUT THAT IN THE ASSESSMENT PROCEEDINGS THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 10A AS ALSO THE QUA NTUM OF DEDUCTION UNDER SECTION 80HHE OF THE ACT WAS MODIFIED AND THE SAME WAS CARRIED IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) WHO VIDE HIS ORDER DATED 23.1.2006 HAS ALLOWED RELIEF TO THE ASSESSEE. IN THESE CIRCUMSTANCES THE COMMISSIONER WAS PRECLUDED FROM EXAMINING THE SAME IN TE RMS OF SECTION 263 OF THE ACT. IN SUPPORT OF THE AFORESAID PROPOSITION R EFERENCE WAS MADE TO THE FOLLOWING DECISIONS: (I) MARICO INDUSTRIES LTD. V. ACIT 5 DTR 263 (MUM ) ( TRIB) 5 DTR 263; (II) CIT V. NIRMA CHEMICALS WORKS P. LTD. 309 ITR 67 (G UJ.); AND (III) CIT V. DESIGN & AUTOMATION ENGINEERS (BOMBAY) P . LTD. 323 ITR 632 (BOM). 8. IT IS BROUGHT OUT BY THE LEARNED COUNSEL IS THAT TH E ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND EXPORT OF SOFTWARE AN D IT HAS BEEN EXPANDING ITS BUSINESS ON A SUBSTANTIAL SCALE OVER THE YEARS. IT IS SUB MITTED THAT FOR OVER A PERIOD OF YEARS THE ASSESSEE HAS ESTABLISHED VARIOUS NEW U NDERTAKINGS AT DIFFERENT LOCATIONS WHICH ARE NOT ONLY PHYSICALLY IDEN TIFIABLE BUT ARE ALSO SEPARATE INDEPENDENT AND SEVERABLE UNITS AND THE ASSESSE E COMPANY HAS BEEN CLAIMING AND WAS ALLOWED EXEMPTION IN RESPECT OF THE P ROFITS OF SUCH INDIVIDUAL UNITS IN TERMS OF SECTION 10A OF THE ACT. IT WAS POINTE D OUT THAT IN SO FAR AS THE ASSESSMENT YEAR 2002-03 IS CONCERNED THE ASSESSEE HAD TEN SEPARATE UNDERTAKINGS ELIGIBLE FOR THE CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT WHICH HAD BEEN SET UP OVER VARIOUS YEARS. THIS ALSO INCLU DED TWO UNDERTAKINGS WHICH WERE SET UP DURING THE YEAR UNDER CONSIDERATION. IT WAS SUBMITTED THAT THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED BY THE ASSESSING OFFICER AFTER EXAMINING ASSESSEES ELIGIBILITY FOR THE CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT AND IN THIS CONTEXT REFERENCE WAS ALSO MADE TO THE DISCUSSION MADE IN THE ASSESSMENT ORDER. IN FACT IT WAS POI NTED OUT UPON VERIFICATION OF ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT THE ASSESSING OFFICER HELD THAT THREE UNITS COULD NOT BE CONSI DERED AS NEW 5 UNDERTAKINGS BUT WERE TO BE CONSIDERED AS PART OF THE CORRESPONDING OLD UNITS AND THEREFORE THERE WAS INTERFERENCE IN THE DEDUCTIO NS CLAIMED BY THE ASSESSEE UNDER SECTION 10A OF THE ACT. THIS ISSUE WAS SUBJECT-MATTER OF APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) WHO VIDE HIS ORDER DATED 21.3.2006 ANALYZED THE CLAIM OF THE ASSESSEE THAT SUCH THREE UNITS ARE NEW INDUSTRIAL UNDERTAKINGS INDEPENDENTLY ELIGIBLE FOR DEDUCTION UNDE R SECTION 10A OF THE ACT AND UPHELD THE STAND OF THE ASSESSEE. SECONDLY IT WAS PO INTED OUT THAT WHILE EXAMINING THE CLAIM OF DEDUCTION UNDER SECTION 10A T HE ASSESSING OFFICER DISALLOWED THE LOSSES OF THE FOLLOWING SIX UNITS BEING UN ITS ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT: 1. SOFTWARE & CONVERSION UNIT AT PUNE 2. GANDHINAGAR UNIT 3. SDF VII UNIT 4. NOIDA 5. MIDC MAROL (SIGMA) UNIT 6. MILLENNIUM BUSINESS PARK UNIT. THIS ASPECT OF THE CLAIM UNDER SECTION 10A WAS ALSO SUBJECT- MATTER OF CONSIDERATION BY THE COMMISSIONER OF INCOME-TAX (APPEALS) . FURTHER IT WAS ALSO CONTENDED THAT DEDUCTION UNDER SECTION 80HHE WAS EXAMINE D DURING THE ASSESSMENT PROCEEDINGS BY THE ASSESSING OFFICER AND WAS SUBJE CT-MATTER APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) WHICH HAS BEEN ADJUDICATED UPON. THUS ON THE AFORESAID BASIS IT HAS BEE N POINTED OUT THAT HAVING REGARD TO EXPLANATION (C) TO SECTION 263(1) OF THE ACT THE COMMISSIONER ERRED IN INVOKING HIS REVISIONARY POWER UNDER SECTION 26 3 OF THE ACT. 9. SECONDLY IT HAS BEEN POINTED OUT THAT IN THE ASSESS MENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2004-05 IT WAS FOR THE FIRST TIME T HE ASSESSING OFFICER TOOK THE VIEW THAT THE NEW UNDERTAKINGS HAVE BEEN FORMED B Y SPLITTING UP OF A BUSINESS ALREADY IN EXISTENCE SINCE 1980 AND THEREFORE T HE NEW UNDERTAKINGS DID NOT CONSTITUTE ANY NEW UNDERTAKING BUT WERE MERELY FORMED BY SPLITTING UP OF BUSINESS ALREADY EXISTING AND THEREFORE IT WAS HELD TH AT IT DID NOT SATISFY THE CONDITIONS OF SECTION 10A(2)(II) OF THE ACT. IT IS ON TH IS BASIS THAT THE 6 COMMISSIONER HAS ISSUED NOTICE UNDER SECTION 263 OF THE ACT FOR THE INSTANT ASSESSMENT YEAR TO CONTEND THAT THE DIFFERENT UNDERTAKING S OF THE ASSESSEE WERE NOT ELIGIBLE FOR CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT. WITHOUT GOING INTO THE MERITS OF THE CLAM IT WAS SUBMITTED THAT THE ACTIO N OF THE COMMISSIONER IN TREATING THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE ON THIS BASIS IS UNTENABLE HAVING REGARD TO T HE FACT THAT SOME OF THE UNITS HAVE BEEN SET UP IN THE EARLIER YEARS AND THE RE LEVANT CLAIM OF DEDUCTION UNDER SECTION 10A STOOD ALLOWED IN THOSE YEARS. IT WAS PO INTED OUT THAT SUCH CLAIMS HAVE NOT BEEN DISTURBED AND THEREFORE THERE W AS NO JUSTIFICATION TO HOLD THAT IT CONSTITUTED AN ERROR WITHIN THE MEANING OF SEC TION 263 OF THE ACT FOR THE YEAR UNDER CONSIDERATION. IN THIS REGARD RELIANCE HAS B EEN PLACED ON THE FOLLOWING JUDGMENTS: (I) CIT V. PAUL BROTHERS 216 ITR 548 (BOM); (II) SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. V. C IT 123 ITR 669 (GUJ); AND (III) EXCEL SOFTECH LTD 175 TAXMAN 257 (P&H). 10. EVEN ON FACTS IT HAS BEEN POINTED OUT THAT THE R EVENUE HAS ADOPTED CONTRARY POSITIONS INASMUCH AS IN THE IMPUGNED ORDER AS PER THE COMMISSIONER THE NEW UNITS HAVE BEEN FORMED BY SPLITTING UP OF THE BUSINESS ALREADY IN EXISTENCE WHEREAS IN THE APPEAL FILED BEFORE THE TRIB UNAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL) DATED 21.3.2006 AR ISING FROM THE ASSESSMENT FRAMED UNDER SECTION 143(3) OF THE ACT IT HAS BEEN SPECIFICALLY AVERRED THAT THE ASSESSING OFFICER HAD NOT CONCLUDED THAT THESE UNITS WERE FORMED BY SPLITTING UP AND THAT THE AO HAD ONLY HELD T HESE AS EXPANSION OF EXISTING BUSINESS. THE RELEVANT GROUND OF APPEAL READS AS UNDER: (II) THE LD CIT(A) II ERRED IN NOT APPRECIATING TH AT THE AO HAD NOT HELD THESE UNITS AS NOT ELIGIBLE FOR EXEMPTION U/S 10A OF THE I.T. ACT AND THAT AO HAD NOT CONCLUDED THAT THESE UNITS WERE FORMED BY SPLITTING UP OR THE RECONSTRUC TION OF THE EXISTING UNITS AND THAT THE AO HAD ONLY HELD THESE AS EXPANSION AND HENCE THE P ERIOD OF EXEMPTION U/S 10A WOULD BE APPLICABLE TO THE ORIGINAL UNIT. THEREFORE ON THIS ASPECT IT WAS POINTED OUT THAT THE REVENUE DOES NOT CONTEND THAT THE UNITS HAVE BEEN FORMED BY RECONSTRUCTION OF T HE EXISTING BUSINESS UNITS 7 WHILE IN THE IMPUGNED ORDER THE COMMISSIONER CONTENDS OTHERWISE. FOR ALL THESE POINTS IT WAS SUBMITTED THAT THE JURISDICTION HAS BEEN W RONGLY ASSUMED. 11. IN THE ALTERNATIVE IT HAS ALSO BEEN POINTED OUT THAT ON THE ISSUES RAISED IN THE IMPUGNED ORDER THE SAME IS BASED ON THE ASSESSMENT F INALIZED UNDER SECTION 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2004-05. THAT SUCH ASSESSMENT FOR THE ASSESSMENT YEAR 2004-05 WAS A SUBJECT-MATTER OF APPEAL BEF ORE THE COMMISSIONER OF INCOME-TAX (APPEALS) WHEREIN THE VIEW OF THE ASSESSING OFFICER HAS BEEN REVERSED. IT WAS THEREFORE CONTENDED THAT THE VIEW ADOPTED BY THE ASSESSING OFFICER IN THE IMPUGNED ORDER IS A POSSIBLE VIEW AS STANDS FORTIFIED BY THE DECISION OF THE COMMISSIONER OF INCOME-TAX (APPEA LS) FOR THE ASSESSMENT YEAR 2004-05. IN A SITUATION WHERE TWO VIEWS ARE POSSIB LE ON AN ISSUE THE SAME IS OUTSIDE THE PURVIEW OF SECTION 263 OF THE ACT AND T HEREFORE IT WAS CONTENDED THAT THE IMPUGNED ORDER PASSED BY THE COMMISSIONER ON SU CH DEBATABLE ISSUE IS WITHOUT JURISDICTION. 12. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REP RESENTATIVE APPEARING FOR THE REVENUE HAS PRIMARILY RELIED UPON THE ORDER OF THE COMMISSIONER IN SUPPORT OF THE CASE OF THE REVENUE. IT HAS BEEN POINTE D OUT THAT DURING THE COURSE OF ASSESSMENT FOR THE ASSESSMENT YEAR 2002-03 THE INVESTIGATIONS CARRIED OUT BY THE ASSESSING OFFICER WERE LIMITED TO THE ELIGIBILITY OF THE ASSESSEES UNITS FOR DEDUCTION UNDER SECTION 10A OF THE ACT A ND IT HAS BEEN POINTED OUT THAT THE FINER ASPECTS OF THE CONDUCT OF THE BUSINESS AND HOW THE BUSINESS IS SPREAD OVER ACROSS THE VARIOUS YEARS WERE NOT IN VESTIGATED WHICH WERE ESSENTIAL TO DETERMINE THE FULFILLMENT OF CONDITI ONS PRESCRIBED UNDER SECTION 10A(2)(II) OF THE ACT WHICH HAS BEEN ADEQUATELY CARRIE D OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2004-05. IT WAS POINTED OUT THAT DURING THE YEAR UNDER CONSIDERATION THE UNITS IN RESPECT OF WHICH THE CLA IMED DEDUCTION UNDER SECTION 10A HAS BEEN ALLOWED BY THE ASSESSING OFFICER HAS B EEN SUBSEQUENTLY INVESTIGATED IN A DETAILED MANNER AND ADJUDICATED UPO N IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2004-05 WHEREIN IT WAS FOUND THAT 8 THE SAME WERE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT. THEREFORE SINCE NECESSARY INVESTIGATION INTO THE RELEVANT FACTS WAS N OT DONE IN THE INSTANT ASSESSMENT YEAR WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT THE COMMISSIONER RIGHTLY ASSUMED JURISDICTION UNDER SECTIO N 263 OF THE ACT AND HELD THE ASSESSMENT TO BE ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF REVENUE. EVEN WITH REGARD TO THE CLAIM OF DEDUCTION UNDER SECTIO N 80HHE OF THE ACT THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT TH E ISSUE RAISED BY THE COMMISSIONER HAS NEITHER BEEN INVESTIGATED INTO NOR ADJ UDICATED UPON BY THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS AND THEREFOR E THE ORDER HAS BEEN CORRECTLY FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE ON THIS ASPECT ALSO. 13. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. S ECTION 263 OF THE ACT EMPOWERS THE COMMISSIONER TO REVISE AN ASSESSMENT ORDER IF HE CONSIDERS THAT SUCH ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE. IN THE INSTANT CASE THE PRELIMINARY ISSUE RAISE D BY THE ASSESSEE IS THAT SUCH A POWER COULD NOT HAVE BEEN INVOKED BY THE COMMISSIO NER HAVING REGARD TO THE EMBARGO CONTAINED IN EXPLANATION (C) TO SECTION 263(1) OF THE ACT. THE RELEVANT PORTION OF SECTION 263(1) AND EXPLANATION (C) THEREOF IS AS UNDER: 263(1): THE COMMISSIONER MAY CALL FOR AND EXAMINE T HE RECORD OF ANY PROCEEDING UNDER THIS ACT AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE HE MAY AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTE R MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY PASS SUCH ORDER THER EON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY INCLUDING AN ORDER ENHANCING OR MODIF YING THE ASSESSMENT OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. EXPLANATION- (A) (B) (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF ANY APPEAL F ILED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE 1988 THE POWERS OF THE COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXT ENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. 14. IN TERMS OF THE SAID EXPLANATION THE POWER CONTAINED IN SECTION 263(1) CANNOT BE EXERCISED BY THE COMMISSIONER IN A CASE WHERE T HE ISSUE IS SUBJECT- MATTER OF CONSIDERATION AND DECISION IN APPEAL. IN FACT IT IS CLEARLY ENVISAGED THAT 9 BEFORE EXERCISING JURISDICTION UNDER SECTION 263 OF THE A CT IT HAS TO BE ASCERTAINED WHETHER THE ORDER IN QUESTION HAS BEEN A SUB JECT-MATTER OF APPEAL AND IF IT IS FOUND SO THEN THE COMMISSIONER IS TO CONFI NE HIS REVISIONAL POWERS ONLY TO SUCH MATTERS WHICH HAS NOT BEEN CONSIDERED AND DECI DED IN SUCH APPEAL. 15. THE CASE SET-UP BY THE ASSESSEE BEFORE US IS THAT THE ASSE SSMENT ORDER DATED 15.3.2005 EXAMINED BY THE COMMISSIONER UNDER SECT ION 263(1) WAS A SUBJECT-MATTER OF APPEAL BEFORE THE COMMISSIONER OF INCO ME-TAX (APPEALS) VIDE ORDER DATED 21.3.2006 AND THEREFORE THE REVISIONAL POWERS OF THE COMMISSIONER ARE AVAILABLE ONLY IF THE IMPUGNED ISSUES HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPELLATE PROCEEDINGS. CONTINUING FURTHER IT IS CANVASSED ON BEHALF OF THE ASSESSEE THAT THE COMMISSIONER HAS FOUND THE ASSESSMENT O RDER DATED 15.3.2005 FIT TO BE REVISED UNDER SECTION 263(1) ON TW O ISSUES I.E. THE CLAIM OF DEDUCTION UNDER SECTION 10A AND QUANTUM OF DEDUCTION U NDER SECTION 80HHE OF THE ACT AND THAT BOTH THESE ASPECTS WERE SUBJECT-MATTER O F THE APPELLATE PROCEEDINGS AND THEREFORE THE SAME COULD NOT HAVE BE EN SUBJECT TO REVISIONAL PROCEEDINGS ENVISAGED UNDER SECTION 263(1) OF THE ACT RE AD WITH EXPLANATION (C) THEREOF. IN THIS BACKGROUND IT WOULD BE NECESSARY TO EX AMINE THE RELEVANT FACTS. IN SO FAR AS THE ISSUE RELATING TO THE CLAIM OF DEDUCTION UNDER SECTION 10A IS CONCERNED THE FACTS REVEAL THAT THE ASSESSEE HAD CLAIMED DEDUCTION IN RESPECT OF VARIOUS 10A ELIGIBLE UNITS. DURING THE ASSESSMENT YEA R UNDER CONSIDERATION THE ASSESSEE COMPANY HAD AS MUCH AS TEN DIFFERENT UNDERTAKI NGS WHICH WERE CLAIMED TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT WITH RESPECT TO THEIR RESPECTIVE PROFITS. IN THE COURSE OF ASSESSMENT PROCE EDINGS THE ASSESSEES CLAIM WAS VERIFIED AND WHILE CONFIRMING THE ELIGIBILIT Y OF DEDUCTION UNDER SECTION 10A OF THE ACT IN PRINCIPLE IN RESPECT OF VARIOUS UNDERT AKINGS OF THE ASSESSEE THE ASSESSING OFFICER CONCLUDED THAT THREE OF THE UNITS NAMEL Y CHINCHWAD UNIT AKRUTI UNIT AND MILLENNIUM BUSINESS PARK UNIT WERE NOT I NDEPENDENT UNDERTAKINGS AND THAT THEY WERE PART OF SOFTWARE AND CONVERSION UNIT SIGMA UNIT AND TTC UNITS RESPECTIVELY. THEREFORE THE ELIGIB ILITY OF SUCH UNITS FOR 10A 10 BENEFITS WAS COUNTED FROM THE YEAR OF SETTING UP OF THE OLDER UNITS. SECONDLY LOSSES OF FOLLOWING SIX UNITS BEING ELIGIBLE FOR DEDUCTIO N UNDER SECTION 10A OF THE ACT WERE DISALLOWED: 1. SOFTWARE & CONVERSION UNIT AT PUNE 2. GANDHINAGAR UNIT 3. SDF VII UNIT 4. NOIDA 5. MIDC MAROL (SIGMA) UNIT 6. MILLENNIUM BUSINESS PARK UNIT. ACCORDINGLY THE DEDUCTION CLAIMED UNDER SECTION 10A OF THE ACT WAS VARIED BY THE ASSESSING OFFICER. 16. BOTH THESE ASPECTS WERE CARRIED IN APPEAL BY THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) WHO DELIBERATED A ND DECIDED UPON THE SAME VIDE HIS ORDER DATED 21.3.2006. IN NUTSHELL IN THIS BACKDROP IT EMERGES THAT THE RELIEF CLAIMED BY THE ASSESSEE UNDER SECTION 10A IN RESPECT OF THE PROFITS OF ITS VARIOUS UNDERTAKINGS WAS RE-WORKED BY THE ASSESSING O FFICER IN THE ASSESSMENT PROCEEDINGS AFTER MAKING CERTAIN ENQUIRIES AND TH E CLAIM WAS PARTIALLY REDUCED. THE ASSESSEE CARRIED THE MATTER IN APP EAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) WHO ALLOWED CERTA IN RELIEFS TO THE ASSESSEE AS CLAIMED. THESE FACTUAL ASPECTS ARE NOT BEING DENI ED BY THE REVENUE BEFORE US AND ALSO BY THE COMMISSIONER IN THE I MPUGNED ORDER. SO HOWEVER IT IS SOUGHT TO BE MADE OUT BY THE COMMISSIONE R IN THE IMPUGNED ORDER THAT ONLY LIMITED ASPECT CONCERNING THE ASSESSEES CLAIM UND ER SECTION 10A HAS BEEN DEALT WITH IN THE ASSESSMENT PROCEEDINGS AND CERTAIN OTHER INVESTIGATIONS WHICH DEPICTED NON-FULFILLMENT OF CONDITIONS PRESCRIBED U NDER SECTION 10A(2)(II) HAVE NEITHER BEEN CONSIDERED AND NOR HAS BEEN DECIDED IN THE APPELLATE PROCEEDINGS. IN OTHER WORDS THE CLAIM SET-UP BY THE CO MMISSIONER IS THAT FULFILLMENT OF THE CONDITIONS STIPULATED BY SECTION 10A( 2)(II) AND THE ASPECTS CONSIDERED IN THE ASSESSMENT AND THEREAFTER BY THE COMMISSI ONER OF INCOME-TAX (APPEALS) ARE TWO INDEPENDENT ASPECTS AND THEREFORE T HE FORMER CANNOT BE SAID TO HAVE BEEN CONSIDERED AND DECIDED IN APPEAL AND THU S LEADING TO THE INFERENCE THAT THE EMBARGO CONTAINED IN EXPLANATION (C) IS NOT ATTRACTED IN THE 11 PRESENT CASE. IN OUR CONSIDERED OPINION THE DISTINCTION SO UGHT TO BE MADE OUT BY THE COMMISSIONER SO AS TO ESCAPE FROM THE EMBARGO PLACED BY EXPLANATION (C) TO SECTION 263(1) IS NOT FACTUALLY TENABLE IN THE PRESEN T CASE. WHEN THE DEDUCTION UNDER SECTION 10A WAS IN PRINCIPLE GRANTED BY THE ASSESSING OFFICER AFTER MAKING A PARTIAL DISALLOWANCE AND WHICH WAS CARRIED IN APPEAL B EFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) IT IS BUT NATURAL THAT THE A PPELLATE AUTHORITY WAS BOUND TO EXAMINE WHETHER THE CLAIM MADE BY THE ASSESSEE WAS IN ACCO RDANCE WITH AND SUBJECT TO PROVISIONS OF SECTION 10A OF THE ACT. IN OTHER WORDS THE REQUIREMENT OF FULFILLMENT OF CONDITIONS STIPULATED BY SECTION 10A(2)(I I) CAN BE SAID TO BE VERY MUCH A SUBJECT-MATTER OF APPEAL IN RELATION TO THE DISA LLOWANCE MADE BY THE ASSESSING OFFICER. IN FACT A PERUSAL OF SECTION 10A ITSELF REVEALS THAT WHILE COMPUTING THE AMOUNT OF ELIGIBLE DEDUCTION THE ASSESSING AUTHORITY IS REQUIRED TO ENSURE THAT ONLY THE PROFITS AND GAINS ELIGIBLE FOR D EDUCTION ARE CONSIDERED AND THAT THE ALLOWANCE HAS TO BE IN ACCORDANCE WITH AND SUBJ ECT TO THE PROVISIONS OF SECTION 10A OF THE ACT. ONCE THE SAME HAS BEEN CONSIDERED A ND ADJUDICATED IT CANNOT BE SAID THAT SECTION 10A(2)(II) HAS TO BE INDEPE NDENTLY CONSIDERED. IN FACT SECTION 10A(1) CONTAINS THE LANGUAGE SUBJECT TO THE PROVISIONS OF THIS SECTION WHICH CLEARLY MEANS THAT THE AMOUNT DEDUCTIBLE IS REQU IRED TO BE ASCERTAINED IN TERMS OF THE PROVISIONS OF SECTION AND THE REFORE THE REQUIREMENTS CONTAINED IN SECTION 10A(2)(II) ARE INCLUDIBLE THEREOF. THEREFORE ONCE THE ASSESSING OFFICER HAS GRANTED THE DEDUCTION AFTER PARTIAL DISALLOWANCE AND IT HAS BEEN THEREAFTER CARRIED IN APPEAL BEFORE THE COMMISSI ONER OF INCOME-TAX (APPEALS) THE ADJUDICATION BY THE APPELLATE AUTHORIT Y IS BOUND TO BE WITHIN THE REALM OF THE CONDITIONS PRESCRIBED UNDER SECTION 10A OF THE ACT. THEREFORE THE CONTENTION OF THE COMMISSIONER THAT THE FULFILLMENT OF CONDITIONS OF SECTION 10A(2)(II) WAS NEVER THE SUBJECT-MATTER OF APPEAL REQ UIRES TO BE REJECTED. IN THIS VIEW OF THE MATTER IN OUR VIEW THE EMBARGO PLACED BY EXPLANATION (C) TO SECTION 263(1) OF THE ACT IS APPLICABLE TO THE PRESENT POSITION. THE CONTENTION ON BEHALF OF THE COMMISSIONER THAT THE ASSESSMENT ORDER DOES NOT REFLE CT ANY APPLICATION OF 12 MIND TOWARDS THE INVESTIGATIONS WHICH WERE SUBSEQUENTLY M ADE OUT IN THE ASSESSMENT PROCEEDINGS RELEVANT TO ASSESSMENT YEAR 2004-05 AND THEREFORE INVOKING OF SECTION 263 IS JUSTIFIED IN THIS YEAR IS MIS-P LACED. IT IS QUITE WELL- SETTLED THAT AN ASSESSMENT ORDER CANNOT INCORPORATE ALL REASONS FOR MAKING/GRANTING DEDUCTION AND ESPECIALLY IN THE PRESEN T CASE WHEREIN THE CLAIM UNDER SECTION 10A WAS A SUBJECT-MATTER OF ENQUIRY AND IN THAT SITUATION IT CANNOT BE SAID THAT THERE IS LACK OF APPLICATION OF MIND ON T HE PART OF THE ASSESSING OFFICER MERELY BECAUSE AS PER THE COMMISSIONER A CERTA IN ASPECT OF THE MATTER HAS NOT BEEN DISCUSSED IN THE ASSESSMENT ORDER. 17. IN NUTSHELL WE FIND AMPLE FORCE IN THE PRELIMINA RY PLEA RAISED BY THE ASSESSEE THAT IN SO FAR AS THE ISSUE RAISED BY THE COMMISSIONE R QUA THE CLAIM OF DEDUCTION UNDER SECTION 10A IS CONCERNED THE SAME IS CLEAR LY HIT BY THE EMBARGO PLACED IN EXPLANATION (C) TO SECTION 263(1) OF THE ACT SINCE IT HAS BEEN CONSIDERED AND DECIDED IN APPEAL. 18. EVEN ON THE ASPECT OF THE COMPUTATION OF ELIGIBL E DEDUCTION UNDER SECTION 80HHE OF THE ACT WE FIND THAT FACTUALLY SPEAKING THE PROPOSITION ADVANCED BY THE ASSESSEE ON THE BASIS OF EXPLANATION (C) TO SECTION 263(1) OF THE ACT IS IN ORDER. THEREFORE WITHOUT DWELLING FURTHER IN OUR VIEW THE TWO ISSUES RAISED BY THE COMMISSIONER IN PROCEEDINGS UNDER SECTION 263 OF THE ACT WERE BEYOND HIS JURISDICTION HAVING REGARD TO THE PROHIBITION CONTAIN ED IN EXPLANATION (C) TO SECTION 263(1) OF THE ACT. 19. IN THE RESULT THE ORDER OF THE COMMISSIONER IS HE REBY SET ASIDE AND THE APPEAL OF THE ASSESSEE VIDE ITA NO 519/PN/07 FOR THE A SSESSMENT YEAR 2002-03 IS ALLOWED AS ABOVE. 20. IN ITA NO. 475/PN/08 FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2003- 04 SAME ISSUE RELATING TO INVOKING OF REVISIONAL JURISD ICTION UNDER SECTION 263 OF THE ACT BY THE COMMISSIONER IS INVOLVED AND FOR THE DE TAILED REASONING GIVEN HEREINABOVE IN ITA NO. 519/PN/07 FOR THE ASSESSMENT Y EAR 2002-03 THE ORDER 13 OF THE COMMISSIONER PASSED UNDER SECTION 263 IS HEREBY SET ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 21. IN THE RESULT ITA NO 475/PN/08 PERTAINING TO T HE ASSESSMENT YEAR 2003- 04 IS ALLOWED. 22. WE SHALL NOW TAKE UP CROSS-APPEALS FILED BY THE ASSESSEE VIDE ITA NO 794/PN/08 AND BY THE REVENUE VIDE ITA NO.1058/PN/08 FOR THE ASSESSMENT YEAR 2002-03. BOTH THE CROSS APPEALS ARISE OUT OF THE ORDER P ASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) GIVING EFFECT TO THE ORDE R PASSED BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT. FOR THE DETAI LED REASONS GIVEN BY US HEREINABOVE IN ITA NO 519/PN/07 FOR THE ASSESSMENT YEA R 2002-03 WE HAVE SET ASIDE THE ORDER OF THE COMMISSIONER PASSED UNDER SECTION 263 OF THE ACT AND THEREFORE THE CONSEQUENTIAL ASSESSMENT MADE BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 263 NO LONGER SURVIVES AND THE SAM E THUS HAVING BECOME INFRUCTUOUS THE AFORESAID CROSS APPEALS ARE DISMISSED AS SU CH. 23. IN THE RESULT ITA NO. 794/PN/08 OF THE ASSESSEE A ND ITA NO. 1058/PN/08 FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2002-03 ARE DISMISSED. DECISION WAS PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF JULY 2011. SD/- SD/- (I.C. SUDHIR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE: DATED: 29 TH JULY 2011 B COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-II PUNE 4. THE CIT-II PUNE 4. THE D.R B BENCH PUNE 5. GUARD FILE TRUE COPY BY ORDER ASSISTANT R EGISTRAR ITAT PUNE