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PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by revenue is directed against the order of ld.
Commissioner of Income Tax (Appeals)-24 [the ld. CIT(A)], Mumbai dated 28th February 2017 for Assessment Year 2011-12. The revenue has raised the following grounds of appeal: i) "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying on the decision in the case of Gem Plus Jewellery India Ltd. (330 ITR 175), ignoring that the income Tax Department has not accepted the principles laid down by the said decision and SLP (Civil) 11030/2011 has been filed against the said decision?" Mum 2017-M/s Credit Suisse Business Analytics (India) Pvt. Ltd.
(ii) "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that expenses disallowed u/s. 40(a)(ia) amounting to Rs.7,77,98,460/- shall be reduced from the Export Turnover and the Total Turnover while working out the amount eligible for deduction u/s 10A of the Act, ignoring that the disallowances made on the ground of non compliance of the mandatory provisions of the Act cannot be used for claiming deduction provided u/s 10A of the Income Tax Act?" (iii) The appellant prays that the order of Ld. CIT(A) on the above directions be set aside and that of the Assessing Officer be restored.
Brief facts of the case are that the assessee is engaged in the business of providing various information technology enabled services to its group companies located within and outside India. The assessee filed its return of income for Assessment Year 2011-12 on 23.11.2011 declaring total income of Rs. 93,924/-. In the return of income, the assessee claimed deduction under section 10A for Assessment Year, the assessee was liable to disallow a sum of Rs. 7,80,06,253/- under section 40(a)(ia). Accordingly, the assessee disallowed Rs. 7,80,06,253/- while computing deduction under section 10A, accordingly added back the said sum for the purpose of computing Profit & Gains of eligible unit. On the ground that there being no income other than the Profit & Gains of unit eligible for deduction under section 10A. During the assessment, the Assessing Officer hold that assessee is not entitled for deduction under section10A on the disallowance made under section 40(a)(ia) of Rs. 7,77,98,460/-, Mum 2017-M/s Credit Suisse Business Analytics (India) Pvt. Ltd. therefore, not eligible for computing Profit & Gains of the business of unit, eligible for deduction under section 10A. On appeal before the ld. CIT(A), the action of Assessing Officer was reversed. The ld. CIT(A) while granting relief to the assessee followed the decision of jurisdictional High Court in CIT vs. Gem Plus Jewellery Pvt. Ltd. [2010] 194 Taxman 192. Thus, aggrieved by the order of ld. CIT(A), the revenue has filed the present appeal before us.
At the outset of hearing, the ld. AR of the assessee submits that the ground of appeal
raised by revenue is squarely covered by the decision of Tribunal in assessee’s own case for Assessment Year 2010-11 in ITA No. 1900/Mum/2015 dated 28.02.2017, wherein on identical grounds of appeal, the appeal of revenue was dismissed. The ld. AR of the assessee furnished the copy of order of Tribunal for Assessment Year 2020-11 dated 28.02.2017.
4. On the other hand, the ld. Departmental Representative (DR) for the revenue after going through the contents of order of Tribunal relied upon the order of Assessing Officer.
5. We have considered the rival submission of the parties and gone through the orders of authorities below. We have also deliberated on case laws relied by lower authorities. We have noted that on identical grounds of appeal, the co-ordinate bench of Tribunal in assessee’s own ITA No 3306 Mum 2017-M/s Credit Suisse Business Analytics (India) Pvt. Ltd. case for Assessment Year 2020-11 in ITA No. 1900/Mum/2015 passed the following order:
“5. We have heard the rival submissions and also perused the material placed on record including the decisions relied upon by the parties. The Ld. CIT(A) has decided this ground of appeal holding as under- "3.5 In view of the above, I am of the view that the appellant is entitled to claim of deduction u/ s 10A on an enhanced income. The appellant had relied on various other decisions and contended that deduction u/s 10A should be allowed on the income which was assessed to tax by the A.O after considering the allowance/ disallowance made during the course of assessment proceedings as per the provisions of the I. T. Act. I find these decisions support the case of the appellant. Therefore, the action of A.O in not considering the disallowance made u/s 40 a (ia) while computing the deduction u/s 10A is not correct and hence, the addition made is deleted. This ground of appeal is allowed.”
6. We notice that in CIT vs. Gem Plus Jewellery India Ltd. (supra) one of the issue before the Hon'ble High Court was whether on the facts and in the circumstances of the case the Tribunal was justified in directing the A.O to exempt u/s 10A of the Act, on the assessed income which was enhanced due to allowance of the employers as well as the employees contribution towards Provident Fund/ESIC. The Hon'ble High Court decided the issue in favour of the assessee holding as under:-
“11. For the purposes of the appeal it is necessary to refer to the admitted position which is that the assessee had deposited both the employer's and the employees contribution towards provident fund and ESIC, though beyond the due date including the grace period. The Assessing Officer added these payments to the total income of the assessee and made an addition in the amount of Rs. 71.59 lakhs, However, for the deduction under section 10A, the addition made on account of the employees' contribution was ignored in calculating the Mum 2017-M/s Credit Suisse Business Analytics (India) Pvt. Ltd. profits eligible for deduction on the ground that these receipts were not generated out of the manufacturing activity of the assessee-company.
By reason of the judgment of the Supreme Court in CIT vs. Alom Extrusions Limited [2009] 319 ITR 306 the employer's contribution was liable to be allowed, since it was deposited by the due date for the filing of the return. The peculiar position, however, as it obtains in the present case arises out of the fact that the disallowance which was effected by the Assessing Officer has not, the court is informed, been challenged by the assessee. As a matter of fact the question of law which is formulated by the Revenue proceeds on the basis that the assessed income was enhanced due to the disallowance of the employer's as well as the employees contribution towards provident fund/ ESIC and the only question which is can-vassed on behalf of the Revenue is whether on that basis the Tribunal was justified in directing the Assessing Officer to grant the exemption under section 10A. On this position, in the present case it cannot be disputed that the net consequence of the disallowance of the employer's and the employees' contribution is that the business profits have to that extent been enhanced. There was as we have already noted, an add back by the Assessing Officer to the Income. All profits of the unit of the assessee have been derived from manufacturing activity. The salaries paid by the assessee, It has not been disputed, relate to the manufacturing activity. The disallowance of the provident fund/ ESIC payments has been made because of the statutory provisions-section 43B in the case of the employer's contribution and section 36(v) read with section 2(24) (x) in the case of the employees' contribution which has been deemed to be the income of the assessee. The plain consequence of the disallowance and the add back that has been made by the Assessing Officer is an increase in the business profits of the assessee. The contention of the Revenue that in computing the deduction under section 10A the addition made on account of the disallowance of the provident fund/ ESIC payments ought to be ignored cannot be Mum 2017-M/s Credit Suisse Business Analytics (India) Pvt. Ltd.
accepted. No statutory provision to that effect having been made, the plain consequence of the disallowance made by the Assessing Officer must follow. The second question shall accordingly stand answered against the Revenue and in favour of the assessee."
7. We also notice that the ITAT Hyderabad Bench has decided the similar issue in favour of the assessee in the case of and cross appeal (supra). 2007-08. We find that the Ld. CIT(A) has passed the impugned order in accordance with the law laid down by the Hon 'ble Jurisdictional High Court in err vs. Gem Plus Jewellery India Ltd. (supra). Hence, we do not find any infirmity in the impugned order passed by the Ld. CIT(A) to interfere with the same. We therefore, uphold the order passed by the Ld. CIT(A) and dismiss the sole ground of appeal of the revenue.
Considering the decision of Tribunal in assessee’s own case for preceding year and respectfully following the same, we affirm the order passed by ld CIT(A). No contrary fact or law is brought to our notice, thus, the grounds of appeal raised by revenue are dismissed. In the result, appeal of the revenue is dismissed.
Order pronounced in the open court on 26/06/2019.