THE COMMISSIONER OF INCOME TAX vs. M/S NTT DATA GLOBAL DELIVERY SERVICES PVT LTD.

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF NOVEMBER 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.377 OF 2013 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX

C.R. BUILDING, QUEENS ROAD

BANGALORE. 2. THE ASST. COMMISSIONER OF INCOME-TAX

CIRCLE-11(5), RASHTROTHANA BHAVAN

NRUPATHUNGA ROAD, BANGALORE. ... APPELLANTS (BY SRI. K.V. ARAVIND, ADV.,) AND: M/S. NTT DATA GLOBAL DELIVERY SERVICES PVT LTD. GLOBAL VILLAGE TECH PARK TOWER-E, 9TH FLOOR MYLASANDRA, PATTANGERE VILLAGE RVCE POST, BANGALORE-560058 (AMENDED AS PER THE ORDER DATED 12-11-2020) ... RESPONDENT (BY SRI. CHYTHANYA K.K. ADV.) - - - THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 01.03.2013 PASSED IN

2 MISC. PETN. No.34/BANG/2013 (IN ITA NO.1182/BANG/2011 FOR THE ASSESSMENT YEAR 2007-08, PRAYING TO: (I) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. (II) ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE MISC. PETN. No.34/BANG/2013 (IN ITA No.1182/BANG/2011) DATED 01-03- 2013 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-11(5), BANGALORE. THIS ITA COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment year 2007-08. The appeal was admitted by a bench of this Court vide order dated 28.02.2014 on the following substantial question of law: (i) Whether on the facts and in the circumstances and in law the Tribunal was correct in recalling the order dated 25-05-2012 under Section 254(2) of the Act, wherein it was held that "income from manpower supply was income from other

3 sources and therefore, does not qualify for deduction under Section 10A of the Act. (ii) Whether on the facts and in the circumstances and in law the Tribunal was correct in recalling the order dated 25-05-2012 when there was no mistake apparent from record which could be rectified without reviewing the earlier order. (iii) Whether the order of the Tribunal recalling the order dated 25-05- 2012 is justified under Section 254(2) of the Act. 2. Facts leading to filing of this appeal briefly stated are that the assessee is engaged in the business of software development services and professional services. The filed the return of income for the Assessment Year 2007-08. The Assessing Officer vide order dated 24.12.2010 re-computed the deduction under Section 10A of the Act by reducing the recruitment fee from the export turnover. The assessee

4 thereupon filed an appeal before the Commissioner of Income Tax (Appeals) who by an order dated 24.10.2011 affirmed the findings recorded by the Assessing Officer. However, the Commissioner of Income Tax (Appeals) accepted the alternative plea of the assessee to tax only net income from the business of manpower supply. The assessee thereupon filed an appeal before Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). The tribunal by order dated 25.05.2012 by placing reliance on the decision in ‘COMMISSIONER OF INCOME TAX AND ANR. VS. M/S TATA ELXSI LTD AND ANR.’, I.T.A.NO.386, 387 & 388/2015 DECIDED ON 15.02.2016 held that income reduced from export turnover has to be reduced from total turnover. 3. The assessee thereupon filed a petition under Section 254(2) of the Act seeking rectification of the mistake. The tribunal by an order dated 01.03.2013 inter alia held that the order dated 25.05.2012 is

5 erroneous and therefore, the same was recalled. In the aforesaid factual background, this appeal has been filed. 4. Learned counsel for the revenue submitted that the assessee had consciously agreed for the alternative contention and therefore, there was no mistake apparent on the record to invoke Section 254(2) of the Act in the fact situation of the case. It was further pleaded that the order of recall tantamounts to review which is beyond the scope of under Section 254(2) of the Act. It is also urged that the reasons assigned by the tribunal for recalling the earlier order is that it has not properly appreciated the facts and the issues have not been properly adjudicated. The same amounts to sitting in appeal over the previous order, which is beyond the scope of Section 254(2) of the Act and is not permissible in law. It is also urged that reasons assigned by the tribunal are to be accepted, then the Assessing Officer can exercise the power under Section 154 of the Act to review the earlier order and

6 the aforesaid view would completely defeat the object and purpose of Section 154 and Section 254(2) of the Act. 5. On the other hand, learned counsel for the assessee while inviting the attention to the order passed by the tribunal dated 25.05.2011 submitted that even though, the tribunal has recorded the grounds on which the order passed by the Commissioner of Income Tax (Appeals) was challenged, however, no adjudication was made in the order by the tribunal with regard to grounds No.8 and 9 and therefore, the order suffers from the error apparent on the face of the record as the issue was not dealt with on merits. It is further submitted that the plea, which has been recorded in para 29 with regard to alternative contention was never raised by the assessee and therefore, the order passed by the tribunal is within the purview of Section 254(2) of the Act.

7 6. We have considered the submissions made by learned counsel for the parties and have perused the record. The tribunal has recorded the submissions of the assessee in the opening paragraph and in particular has referred to the following submissions, which read as under: 8. The learned CIT (A) has erred in law and on facts in holding that income from human resource services is not eligible for deduction under Section 10A of the Act. 9. The learned CIT(A) has erred in law and on facts in not appreciating that income from human resource services is eligible for deduction under Section 10A since it is covered within the notified information technology enabled services constituting computer software. 7. From perusal of the submissions recorded by the tribunal in the order dated 25.05.2012, it is evident that no such alternative submission as recorded in paragraph 29 was made by the assessee. However, the

8 tribunal has not adjudicated the issues on merits and has recorded the alternative contention which was not taken by the assessee. Therefore, the tribunal has rightly invoked the powers under Section 254(2) of the Act as the order passed by the tribunal suffers from the mistake apparent on the face of the record. 8. For the aforementioned reasons, the substantial question of law framed in these appeals are answered against the revenue and in favour of the assessee. In the result, the appeal fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE ss