JCIT, NOIDA vs. M/S. COLWELL & SALMON COMMUNICATION (INDIA) LTD., GAUTAM BUDH NAGAR

The aforesaid appeal has been filed by the Revenue against the impugned order dated 19.12.2011 passed by ld. CIT(A), Ghaziabad for the quantum of assessment passed u/s.143(3) for the Assessment Year 2007-08. In the grounds of appeal, the Revenue has raised following grounds:- “(1) The Ld. CIT(A) has erred in law and on facts by allowing exemption u/s 10A without considering the fact that assessee has not claimed the exemption u/s 10A of Income Tax Act, 1961 in its return f income filed in the Income Tax Department. (2) That the learned CIT(A) has erred in law and on facts

The facts in brief are that the assessee-company is engaged in the business of IT enabled services wherein the assessee provides its client with, in-bound and out-bound tele services, market research, web-based communication and complete BPO Solution. The assessee had shown gross receipt of Rs.31,50,83,000/- which included income from export services of Rs.31,32,67,000/-. The Assessing Officer noted that assessee has set off income of Rs.3,13,24,937/- against the brought forward losses of earlier years. However, he observed that in the preceding year, the loss of Rs.75,44,540/- was only allowed to be carry forward after the assessments and hence, assessee has wrongly set off the income of Rs. 2,37,80,397/-, which has been added by the Assessing Officer to the income of the assessee. He has further disallowed the claim of deduction u/s.10A on the ground that assessee-company has not furnished the prescribed report in Form No.56 along with return of income.

Before the Ld. CIT (A), the assessee regarding claim of deduction u/s.10A submitted that the assessee had filed return of income at Nil after setting off the past year losses and hence there was no occasion for the assessee to claim the deduction u/s.10A. Otherwise, assessee had already claimed the deduction u/s.10A by submitting both STP approval and Assessing Officer has denied the benefit of deduction u/s.10A without giving opportunity to submit the certificate in Form No. 56F. It was further submitted that the appeals of the assessments for the Assessment Years 2005-06 and 2006-07 were still pending and applicant has claimed losses, because it has contested the additions and therefore, the return was filed at a Nil income. Ld. CIT (A) observed that as per the CBDT Notification No.169 dated 14th May, 2007, wherever the return of income has been filed electronically then assessees were not require to file various documents including any form or audit report which would otherwise have been required to be filed. Thus, he held that there was no fault on the part of the assessee to file Form No.56F for the claim of deduction u/s.10A. Ld. CIT (A) allowed the deduction claim u/s.10A holding that in view of the judgment of Hon’ble Jurisdictional High Court in the following cases:- CIT vs. Axis Computer India Pvt. Ltd., 178 Taxman 143, (Del); and CIT vs. Mantec Consultants Pvt. Ltd., 178 Taxman 429, (Del)., wherein it has been held that even if the assessee fails to claim deduction u/s.10A in the original return and files Form No.56F for the first time before the Ld. CIT(A) then also same can be considered. Accordingly, after taking consideration into Form No.56F, he allowed the claim of deduction u/s.10A.

Before us, at the outset, ld. counsel submitted that now the ITAT in the appeals for the Assessment Years 2004-05 and 2005-06 have been passed and matter has been decided in favour of the assessee, and therefore, the losses carried forward which was denied by the Assessing Officer will now be allowed to be set off. However, he submitted that appeal for the Assessment Year 2006-07 is still pending before the ITAT. Even without prejudice to the aforesaid, he submitted that once assessee has filed Form 56F and is otherwise available for claim of deduction u/s.10A, then no addition can be made, because assessee would be eligible for deduction of the income.

Ld. DR has strongly relied upon the order of the Assessing Officer.

After considering the relevant findings given in the impugned orders, we find that it is an undisputed fact that the assessee is otherwise eligible for claim of deduction u/s.10A, which assessee had not claimed at the time of filing of return, because same was filed at ‘NIL’ income after setting of carried forward losses of Rs.3,13,24,937/-. The Assessing Officer had denied the part of carry forward losses to be set off in the current year on the ground only amount of Rs.75,44,540/- was available for carry forward after the assessments of the earlier years and has completed the assessment at an amount of Rs.2,37,80,400/-. Even though the Tribunal in the Assessment Years 2004-05 and 2005-06, has decided the issue in favour of the assessee, it will only go to enhance the losses to be carried forward and consequently the income of the assessee will reduce to nil. But be as it may, once assessee’s income is liable for deduction u/s.10A for which assessee is otherwise eligible and also has made due compliance by filing Form No.56F and relevant audit report. If that is so, then claim of deduction u/s.10A is to be allowed and we do not find any legal infirmity in the order of the Ld. CIT (A) in allowing the deduction u/s.10A in the light of Form No.56F. In that case, the assessment made by the Assessing Officer will be subjected to 100% deduction u/s.10A and the assessed income would be ‘Nil’. Accordingly, the order of the Ld. CIT (A) is affirmed and the grounds raised by the Revenue are dismissed.

In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 27th November, 2020