AMDOCS DEVELOPMENT CENTRE INDIA PVT. LTD. vs. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE (1) AND ORS

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WP/2295/2016HC BombayHCBM01007333201625 April 2024Author: HON'BLE SHRI JUSTICE K.R. SHRIRAM,HON'BLE JUSTICE DR. NEELA KEDAR GOKHALE2 pages
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What did the High Court hold?

The High Court made the Rule absolute, quashing and setting aside the impugned Notice dated March 26, 2015, and the Impugned Order dated January 15, 2016. The Court noted that the Apex Court, in the case of CIT Central-III vs. HCL Technologies Ltd., had confirmed the decision in Gem Plus Jewellery India Ltd. (Supra). This subsequent development validated the assessee's position that the pending appeal in the Apex Court did not negate the binding precedent of the Bombay High Court, especially when the Apex Court itself had later confirmed the same principle. Therefore, the AO's refusal to follow the High Court's decision based on a pending appeal was found to be unsustainable. The operative direction was to quash the reopening notice and the order disposing of objections.

What were the facts?

The petitioner, Amdocs Development Centre India Pvt Ltd., is challenging a Notice dated March 26, 2015, issued under Section 148 of the Income Tax Act, 1961, to reopen the assessment for Assessment Year 2008-2009. The Assessing Officer (AO) believed income had escaped assessment because taxes at source were not deducted on payments for software to foreign parties, making the expenditure disallowable under Section 40(a)(ia). The petitioner, a Section 10A unit, argued that even if expenditure was disallowed, no tax would be payable due to the exemption. The AO, while not disputing the applicability of the Bombay High Court's decision in CIT vs. Gem Plus Jewellery India Ltd., refused to follow it, citing a pending appeal in the Apex Court. The High Court, in its order dated February 24, 2016, noted the Revenue's absence and directed service, granting ad-interim relief. Subsequently, the AO disposed of the petitioner's objections, reiterating the stance based on the pending appeal.

What were the issues?

1. Whether the Assessing Officer was justified in refusing to follow the decision of the Bombay High Court in CIT vs. Gem Plus Jewellery India Ltd. solely because an appeal was pending before the Apex Court, when the assessee is a Section 10A unit and the expenditure disallowance under Section 40(a)(ia) would not result in tax liability? Assessee's Contentions: - The assessee, being a Section 10A unit, would not be liable to pay tax even if expenditure was disallowed and added to its income. - The decision of the Bombay High Court in CIT vs. Gem Plus Jewellery India Ltd. was applicable to its case. Revenue's Contentions: - The Revenue contended that the pending appeal before the Apex Court in the case of CIT vs. Gem Plus Jewellery India Ltd. meant that the issue was not conclusively decided, and therefore, the AO was justified in not applying the High Court's decision. - The AO proceeded on the basis that the assessee was not eligible for deduction/exemption on enhanced profit in case of statutory disallowances since the appeal was pending.

Which sections of the Income-tax Act were involved?

Section 148,Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

1/2 202-wp-2295-16.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.2295 OF 2016 Amdocs Development Centre India Pvt Ltd. ...Petitioner Versus The Deputy Commissioner of Income Tax Circle (1) & Ors. ...Respondents ---- Mr. Percy Pardiwalla, Senior Advocate (Through V.C.) i/b Mint & Confreres for Petitioner. Mr. Suresh Kumar for Respondents. ---- CORAM : K. R. SHRIRAM & Dr. NEELA GOKHALE, JJ.

DATED : 25th APRIL 2024 P.C. : 1 On 24th February 2016, the following order came to be passed: “1 None appears for the Revenue although served. Mr. Seth, the learned counsel appearing for the Petitioner, on instructions, states that an affidavit of service would be filed by 1st March, 2016. 2 This petition challenges a Notice dated 26th March, 2015 issued under Section 148 of the Income Tax Act, 1961, seeking to reopen assessment for the assessment year 2008-2009. The reasons, for reason to believe that income assessed to tax has escaped assessment in support of the impugned notice indicates that as the taxes at source had not been deducted while making the payments for purchase of software to foreign parties, the expenditure cannot be allowed under section 40(a)(ia) of the Act. The Petitioner raised its objection by relying upon a decision of this court in the case of Commissioner of Income-Tax vs. Gem Plus Jewellery India Ltd., [2011] 330 ITR 175 (Bombay), in support of its contention that it being a section 10A unit under Act even if any expenditure is disallowed so as to be added to the income, no tax would still be payable by it. The Assessing Officer white disposing of the objection, does not dispute that the decision of this court in Gem Plus Jewellery India Ltd., (supra) applies to the present facts. However, refuses to follow / apply the same only because the Revenue has filed an Appeal from the decision of this court in Gem Plus Jewellery India Ltd., (supra) to the Apex Court and it is pending. 3 In the light of the aforesaid submission of the learned counsel for the Petitioner, we are inclined to admit this petition. However, as the Meera Jadhav

2/2 202-wp-2295-16.doc Revenue is not appearing in spite of the service, we adjourn the hearing of this petition to 2nd March, 2016 so as to pass an order only after appreciating its point of view. 4 The Petitioner is directed to once again serve the Respondent Revenue with a copy of the petition alongwith the copy of this order, intimating to the Assessing Officer that the petition is adjourned to 2nd March, 2016. 5 Ad-interim relief in terms of prayer clause (d) till further orders. S.O. to 2nd March, 2016.” 2 The order dated 15th January 2016 disposing petitioner’s objections to the reopening, the Assessing Officer has proceeded on the basis that assessee is not eligible for deduction / exemption on enhanced profit in In CIT Central-III Vs. HCL Technologies Ltd.2, the Apex Court has confirmed Gem Plus Jewellery India Ltd. (Supra). 3 In the circumstances, Rule is made absolute in terms of prayer clause (a), which reads as under: “(a) that this Hon'ble Court be pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other appropriate writ, order or direction under Article 226 and/ or Article 227 of the Constitution of India calling for the records of the Petitioner's case and after examining the legality and validity thereof quash and set aside the Impugned Notice dated 26 March 2015 (Exhibit A) and the Impugned Order dated 15 January 2016 (Exhibit B).”

(Dr. NEELA GOKHALE, J.) (K. R. SHRIRAM, J.) 1 2010 SCC Online Bom 2068 2 (2018) 93 taxmann.com 33 (SC) Meera Jadhav

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