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Income Tax Appellate Tribunal, DELHI BENCH ‘D’, NEW DELHI
Before: SH. N. K. BILLAIYA & SH. ANUBHAV SHARMA
C.O. No.156/Del/2019 are appeal by the revenue and cross objection by the assessee preferred against the order of the CIT(A) -12, New Delhi dated 15.12.2017 pertaining to A.Y.2009-10. 2. Since the appeal and the cross objection were heard together they are disposed of by this common order for the sake of convenience and brevity. 3. The grievance of the revenue read as under :-
1. 1. Whether the ld. CIT(A) has erred on facts and in law in allowing the deduction of Rs.2,06,36,579/- u/s. 10A of the Income Tax Act, 1961 on account of remittance from associate enterprise treating it as export remittance instead of royalty income.
2. The appellant craves leave for reserving the right to amend, modify alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.
The cross objection of the assessee read as under :-
Since cross objection go to the root of the matter we decided to proceed and adjudicate cross objections first.
Briefly stated the facts of the case are that the assessee filed its return of income on 29.09.2009 declaring a loss of Rs. 19.32 crores. The returned income was assessed at Rs. 42 crores vide order dated 10.02.2014 framed u/s. 143 (3) r.w.s. 144 C of the Act. 7. An information was received from the office the DIT (Intelligence & Criminal Investigation), Chandigarh from which AO came to know that the assessee has received certain money / income in Japan in Yen in that country. The information is as under :-
“During A.Y. 2009-10 M/s Canon India Pvt. Ltd. has received remittance of 40,27,12,135/- JPY (Japanese Yen) equivalent to Rs. 16,10,84,854/- in the nature of ‘royalty' from Canon Inc. Japan, whereas the assessee company has accounted for the same as 'export remittance ’. Moreover, the assessee has not shown any income under the head royalty. It may he noted that benefit under the provision of section 10 A of the Income Tax Act is available only in respect of 'export of articles or things or computer software ’. In other words amount received in the form of 'royalty' is not eligible for benefit u/s WA, by classifying the same and showing the receipts as export of software services the assessee has claimed deduction /exemption to which it is not entitled or eligible. Hence, the entire amount of royalty received constitutes taxable income which has not been offered to tax".
On the basis of the aforementioned information the AO formed a belief that income to the tune of Rs.16.10 crores has escaped assessment in A.Y.2009-10 by the reason of failure on the part of the assessee to disclose fully and truly or material facts necessary for the assessment. Hence, the case was reopened by issuing notice u/s. 148 of the Act with the approval of the PCIT.
During the course of the reassessment proceedings assessee was asked to explain as to why the amount of Rs.16,10,84,854/- should not be treated as income of the assessee not exempted u/s. 10A of the Act as royalty, as royalty is not eligible for benefit u/s. 10A of the Act. The assessee replied as under :-
The aforementioned reply of the assessee did not find any favour with the AO who completed the assessment by making addition of Rs.20636579/-.
The assessee challenged the addition before the CIT(A) alongwith the challenge to the reopening of the assessment. 12. Though the CIT(A) dismissed the challenge of reopening of the assessment but on merits allowed the claim of exemption u/s.10A of the Act and directed the AO to delete the addition of Rs.20636579/-. 13. During the course of the original assessment proceedings the AO issued questionnaire dated 02.02.2011 raising 26 questions and the relevant question is question 7 which reads as under :- “Q-7 Furnish the details of various exemption and deductions claimed by the assessee and the reason why the same should be accepted by the department” 14. Assessee filed a detailed reply dated 13.02.2013 and in the notes on business activities it has been mentioned as under:- “Development and export of computer software through STP under taking supported from July 1999” 15. And further replied as under :-
It can be seen from the above that specific queries were raised by the AO in respect of the claim of exemptions and deductions to which specific reply was furnished by the assessee alongwith the supportive documentary evidences like certificate from CA in form No. 56 F wherein it has been specifically pointed out the date of commencement of manufacture/ production as 01.07.1999 and number of the consecutive year for which the deduction is claimed is mentioned as 10th. These evidences clearly demonstrate that this is not the first year of the claim of deduction u/s.10A of the Act but the last year i.e.10th year of the claim of deduction which means that the deduction has been allowed in earlier nine assessment years.
Considering the facts of the case in totality we are of the considered view that the reopening of the assessment by the issue of notice u/s.148 of the Act is nothing but change of opinion as no new fact have been brought on record to justify the reopening and, therefore, the ratio laid down by the Hon’ble Supreme Court in the case of Kelvinator of India Limited 320 ITR 561 squarely apply.
We are of the considered view that the assessee has disclosed truly and fully all the facts relevant for the completion of the assessment on the basis of which the AO framed the original assessment order dated 10.02.2014, therefore, the assumption jurisdiction u/s. 147 of the Act by issuing notice u/s. 148 of the Act is bad in law and, therefore, the said notices deserves to be set aside consequently resulting into the annulment of the assessment order dated 14.12.2016 framed u/s. 143 (3)/148/ 147 of the Act.
On the facts of the case discussed here in above the assessment order is quashed and the cross objection is allowed.
Since we have quashed the assessment order we do not find it necessary to dwell into the merits of the case. In the result, the appeal of the revenue is otios.
Order pronounced in the open court on 15.02.2023.