GATEWAY INTERNET PROTOCOL MANAGEMENT PVT. LTD.,PUNE vs. PRINCIPAL COMMISSIONER OF INCOME-TAX : 1,

आदेश / ORDER PER ANIL CHATURVEDI, AM :

This appeal filed by the assessee is emanating out of the order of 1. Pr. Commissioner of Income Tax - 1, Pune dated 29.03.2016 for the assessment year 2011-12.

Assessee is a company stated to be engaged in the business of analysis of Telecom billing, preparation of reports, telecom audit and cost reduction consultancy services to its clients. Assessee

electronically filed its return of income for A.Y. 2011-12 declaring total

loss of Rs.75,51,891/-. The case was selected for scrutiny and

thereafter assessment was framed u/s 143(3) of the Act vide order dated

28.03.2014 accepting the total income filed by the assessee.

Subsequently, on examining the assessment records, the Ld.PCIT

noticed that assessee had filed return of income declaring loss of

Rs.75,51,891/- and had claimed deduction u/s 10A of the Act to the

tune of Rs.1,02,28,453/-. He noted that AO had allowed the entire

amount of deduction u/s 10A of the Act. He also noticed that assessee

had carried forward losses of Rs.19,34,774/- pertaining to earlier years

and according to him, AO had accepted the return of income without

giving effect to carry forward losses. He was of the view that after giving

effect to the current year losses as well as carry forward losses, the

eligible deduction u/s 10A of the Act should have been of Rs.4,41,788/-

only and by allowing the deduction of Rs.1,02,28,453/- as claimed by

the assessee had resulted into allowing excess deduction u/s 10A of

Rs.97,86,665/-. He was therefore of the view that the order passed by

the AO to be erroneous and prejudicial to the interest of the Revenue.

He accordingly issued show-cause notice dated 17.03.2015 which was

served on assessee on 23.03.2015 calling upon the assessee as to why

the order should not be revised u/s 263 of the Act. Assessee challenged

the invocation of revisionary proceedings by Ld. PCIT and on the merits

of the issue also submitted that AO had rightly allowed the claim of

deduction. The submissions of the assessee were not found acceptable

to Ld. PCIT. He therefore vide order passed u/s 263 of the Act dated

29.03.2016 wherein he held the order passed by the AO to be erroneous

and prejudicial to the interest of the Revenue and accordingly directed

the AO to reframe the assessment after considering the directions

mentioned therein. He accordingly set aside the order of AO.

Aggrieved by the order of Ld. PCIT, assessee carried the matter

before the Tribunal. The Tribunal initially vide order dated 06.11.2018

in ITA No.1660/PUN/2016 dismissed the appeal on account of non-

prosecution of appeal by the assessee. Thereafter, assessee filed M.A.

requesting for recalling the ex-parte order passed by the Tribunal. The

Tribunal vide order in M.A.No.31/PUN/2019 dt.26.07.2019 recalled the

ex-parte order dated 06.11.2018. Thus, the assessee is now before us in

second round and had raised the follows grounds :

“1. The learned Pr CIT-1, Pune erred in law and on facts in passing an order u/s 263 of the ITA, 1961.

of Rs.1,02,28,453/- u/s 10A of the Act in respect of profits derived by

unit approved by Software Technology Park, Pune where Information

Technology Enabled Services had commenced since March, 2004. After

claiming deduction u/s 10A of the Act, assessee declared business loss

of Rs.75,51,891/- for the year under consideration. Assessee had also

brought forward business loss of earlier years amounting to

Rs.19,34,774/-. He submitted that the deduction u/s 10A of the Act is

to be allowed from the total income of the assessee before giving effect to

the provisions of the said section and that Hon’ble Apex Court in the

case of CIT Vs. Yokogawa India Ltd., reported in (2017) 391 ITR 274 has

held the loss or unabsorbed depreciation is to be set off against profits

of eligible units after the deduction u/s 10A of the Act has been allowed.

He further submitted that the Hon’ble Apex Court has further held that

the provisions of Sec.10A of the Act is a provision for deduction and the

stage of deduction would be while computing the gross total income of

the eligible undertaking under Chapter IV of the Act and not at the stage

of computation of income under Chapter VI of the Act. In other words,

he submitted that the deduction should be granted first and the set off

of unabsorbed depreciation of eligible units after computing the gross

total income of eligible undertaking after the claim of deduction. He

therefore submitted that in view of the aforesaid decision of Hon’ble

Apex Court, that Ld. PCIT was not justified in invoking the revisionary

powers u/s 263 of the Act. He therefore submitted that the order of Ld.

PCIT be set aside. Ld. D.R. on the other hand supported the order of

Ld. PCIT.

record.

Ld. PCIT that deduction u/s 10A of the Act should have been allowed by

the AO after considering the business loss and carry forward the

business loss of the assessee and since AO had accepted the return of

income without giving effect to carry forward losses, excess deduction

u/s 10A of the Act was erroneously allowed by the AO and therefore he

by invoking the powers u/s 263 of the Act set aside the assessment

order passed by AO u/s 143(3) of the Act. We find that Hon’ble Apex

Court in the case of CIT Vs. Yokogawa India Ltd., (supra), held that the

deduction u/s 10A of the Act would be prior to the commencement of

the exercise to be taken under Chapter IV for arriving at the total

income of the assessee from the gross total income. It further held that

though Section 10A of the Act as amended provision for deduction, the

stage of deduction would be while computing the gross total income of

the eligible undertaking under Chapter IV and not at the stage of

computation of the total income under Chapter VI. In view of the

aforesaid decision of Hon’ble Apex Court, we are of the view that Ld.

PCIT was not justified in invoking the provisions of Sec.263 of the Act so

as to term the order of AO to be erroneous and prejudicial to the interest

of Revenue. We therefore set aside the order of Ld. PCIT. Thus, the

grounds of the assessee are allowed.

Order pronounced on 19th day of December, 2019.

Sd/- Sd/- (S.S. VISWANETHRA RAVI) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 19th December, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. Pr.CIT- 1, Pune. 4 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” / DR, ITAT, “A” Pune; 5. गाड� फाईल / Guard file.

आदेशानुसार/ BY ORDER

// True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.