THOMSON PRESS (INDIA) LTD.,NEW DELHI vs. DCIT, NEW DELHI

This appeal has been preferred by the assessee against order dated 01/10/2010 which has been passed by the Ld. CIT (Appeals) – XIX, New Delhi for Assessment Year 2007-08.

2.0 The brief facts are that the Assessee is a limited company incorporated under the Companies Act, 1956 in the year 1962. The Assessee company has been carrying on the business of commercial printing and photo type setting. The return of income was filed by the assessee for the Assessment Year 2007-08 declaring a total income of Rs 17,65,29,535/-. In 1 the return of income, the assessee also claimed deduction u/s 10B of the Income Tax Act, 1961 (‘the Act’) of Rs. 47,15,626/- in respect of Faridabad Digital Unit and of Rs. 7,32,32,608/- in respect of unit at F-5, Noida. Both the undertakings were eligible for deduction u/s 10B of the Act and in all the preceding assessment years, the deduction claimed had been allowed. The case was selected for scrutiny and the order of assessment u/s 143(3) of the Act was passed by the Assessing Officer (“AO”), wherein the total income was assessed at Rs. 18,91,41,620/.

While computing the income, the AO did not treat the following income as profits derived from Faridabad and Noida undertakings and accordingly a sum of Rs. 1,24,52,081/- was computed as excess deduction claimed by the assessee which was disallowed:

Faridabad, F-5, Digital unit Noida (in Rs) (in Rs) Misc Income 22,970.80 39,393.00 Foreign exchange 3,72,786.24 5,33,555.89 fluctuation gain Compensation 5,31,107.41 2.1 The assessee, being aggrieved by order dated 30.12.2009 passed by the Assessing Officer, filed an appeal before the Ld. Commissioner of Income Tax (Appeals). The Ld. Commissioner of Income Tax (Appeals) partly allowed the appeal wherein it was held that the Foreign exchange fluctuation gain was profit derived from the undertaking. However Miscellaneous Income and compensation were held to be not derived from the undertaking.

2.2 The Assessee challenged the order dated 01.10.2010 passed by the Ld. CIT(A) before the Income Tax Appellate Tribunal, New Delhi and the Tribunal held that the compensation of Rs. 5,31,107.41 and Rs. 7,300/- out of Rs. 62,363/- of the miscellaneous income was not derived from the undertaking.

2.3 Thereafter, the assessee filed a rectification application u/s 254(2) of the Act being Miscellaneous Application No. 181/Del/2016 in Tribunal seeking rectification of mistakes apparent on record in the order of the Tribunal dated 15.01.2016. The Miscellaneous Application No. 181/Del/2016 u/s 254(2) of the Act was dismissed by the Tribunal, wherein it was held that there was no apparent mistake in the order dated 15.01.2016 of the Tribunal. 3 2.4 The Assessee preferred a writ petition before the Hon’ble High Court of Delhi, wherein, the Hon’ble High Court, vide order dated 04/09/2017, set aside the matter back to the file of the ITAT to decide the matter afresh having regard to the previous orders with respect to the compensation received as unpaid salary or leave with wages payable which has been surrendered by the employees.

2.5 Now, this set aside appeal is being taken up for hearing by this Bench as per the directions of the Hon’ble Delhi High Court.

3.0 At the outset, the Ld. Authorised Representative submitted that while the matter was being decided by the ITAT in the first round i.e. vide order dated 15.01.2016, the assessee had specifically referred to the details of the miscellaneous income for both the undertakings, details of the compensation income and had also filed a chart showing history of deduction claimed under section 10B in respect of miscellaneous income and compensation income and treatment accorded by the Revenue and had also submitted that in none of the preceding assessment years, disallowance has ever been made. He also referred to the order of assessment passed u/s 143(3) of the Act for the 4 immediately preceding assessment year 2006-07, wherein the AO had himself accepted that miscellaneous income and compensation income was profit derived from the undertaking as no disallowance was made. It was also submitted that miscellaneous income and compensation income have been treated as business income and, as such, in accordance with subsection (4) of section 10B of the Act, both the aforesaid items of income should be profits derived from the export, as the assessee had not made any domestic sales and all the sales of the assessee was export sales. In respect of compensation income, it was submitted that same had direct nexus with the profits of the assessee as compensation income was unclaimed salary/leave with wages, which was originally debited while computing the income of the undertaking, but when the same was not claimed, the same was credited and, as such, the same also had direct nexus. In support, the Ld. AR also filed the ledger account as well as the chart indicating that in the preceding assessment year 2006-07, compensation income received by the assessee had been treated as profits derived from the undertaking. Reliance was placed on the judgment of the Hon’ble Apex Court in the case of CIT vs. Excel Industries Ltd reported in 358 ITR 285 wherein it was held that it is inappropriate to allow the reconsideration of an issue for a subsequent assessment year if the same "fundamental aspect" permeates in different assessment years and the Revenue cannot be allowed to flip-flop on the issue and it ought to let the matter rest. It was submitted that once the revenue has accepted that miscellaneous income and compensation is profit derived from the undertaking in the earlier assessment years, there was no justification to deny such claim in the instant year where it is not in dispute that nature of income was same as was in the preceding years.

4.0 In response, the Ld. Sr. DR placed reliance on the orders of the authorities below, but could not rebut the fact that the department had accepted that miscellaneous income and compensation was part of income for the purpose of computation of eligible profit u/s 10B of the Act.

5.0 On a query from the Bench, both the parties had no objection if the issue was restored to the file of the AO for allowing the claim of the assessee after due verification.

6.0 Having heard both the parties and in view of the undisputed fact that the Revenue had accepted miscellaneous income and compensation as part of the eligible profits for the purpose of computation of claim u/s 10B of the Act coupled with the concurrence of both the parties for the issue being restored to the file of the AO for verification, we restore the issue to the file of the AO with a direction to allow the claim of the assessee after due verification and also after duly appreciating the fact that similar income/s had been held to be includible in eligible profits in the preceding assessment years.

7.0 In the final result, the appeal of the assessee stands allowed for statistical purposes.

Order pronounced in the open court on 20th November, 2018.