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Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This is the appeal filed by the Revenue against the order of CIT(A)-1, Pune, 27-02-2017 for the Assessment Year 2009-10.
Grounds raised by the Revenue read as under:
“1. The order of the Ld. Commissioner of Income-tax [Appeal-1] is contrary to the law and on facts and in the circumstances of the case. 2. The Ld. Commissioner of Income-tax (Appeals) erred on the facts and in the circumstances of the case and in law in allowing alternate claim of the assessee for deduction u/s.10A of the Act, when the Ld. CIT(A) had upheld the order of the assessing officer in denying deduction u/s.10B. 3. The Ld. Commissioner of the Income-tax (Appeals) erred on the facts and in the circumstances of the case and in law in allowing alternate claim of the assessee for deduction u/s 10 of the Act ignoring the provisions of section 80A(5) of the IT Act, 1961 which mandate that no deduction u/s 10A would be allowable unless so claimed by the assessee in the Return of Income.
2 ITA No.1105/PUN/2017 Enterprised DB Software India Pvt. Ltd.
The Ld. Commissioner of Income-tax Appeals) erred on the facts and in the circumstances of the case and in law in allowing alternate claim of the assessee for deduction u/s 10A of the Act ignoring the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd Vs CIT reported in 157 Taxman 1, wherein it has been held that an assessee can amend a return filed by him for making a claim for deduction only by filing a revised return?
The Ld. Commissioner of Income-tax Appeals) erred on the facts and in the circumstances of the case and in law in allowing alternate claim of the assessee for deduction u/s 10A of the Act ignoring decision of the Hon. SC in the case of CIT Vs Shelly Products reported in 129 Taxmann 270 wherein it has been held that the assessing authority may grant relief to an assessee, if an assessee by mistake or inadvertence or on account of ignorance, included in his income any amount which is exempted from payment of income-tax, or is not income within the contemplation of law, which is clearly not established in this case.
On the facts & circumstance of the case, the learned Commissioner of Income-tax (Appeals), 'Pune grossly erred in ignoring the section 10A(5) of the Act as per which deduction u/s 10A cannot be allowed unless report of an accountant is furnished in prescribed Form No. 56F certifying that deduction has been correctly claimed as per law. In this case Form No. 56F have been filed on 07.07.2016 which is beyond the prescribed date as form No.56F was not filed with the return of Income. Claiming deduction u/s. 10B in original return by filing for No. 56G and making alternate claim u/s. 10A by filing form No. 56F cannot be permitted.
On the facts & circumstance of the case and in law, the learned Commissioner of Income-tax [Appeals-1), grossly erred in allowing enhanced deduction on the quantum of disallowance made u/s.40a(ia) of the Act, especially when the decision to allow alternate claim of deduction u/s. 10A of the Act, was not in order as against the same claimed by the assessee u/s.10B of the Act.
For, these and such other grounds as may be urged at the time of hearing, the order of the Ld. Commissioner of Income-tax (Appeals) may be vacated and that of the Assessing officer be restored.
The appellant craves to add, amend, alter or delete any of the above ground of appeal during the course of appellate proceedings before the Hon'ble Tribunal.”
Briefly stated relevant facts include that the assessee-company is
engaged in the business export of software development and support
services. The assessee’s unit is a registered Software Technology Park of
India (STPI) and holds a green card issued by STPI on 11.03.2008. Assessee
filed the return of income on 31.10.2009 u/s.139(1) of the Income Tax Act,
1961 declaring total income at Nil and however, assessee paid the tax as per
the provisions of section 115JB of the Act. The return of income was
processed u/s. 143(1)(a) of the Act. For denying the claim of deduction
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u/s.10B of the Act, a notice u/s. 148 of the Act was issued to the assessee
on 30.03.2016. In response to the same, the return was filed on 31-05-
2016. Thereafter, a notice u/s.142(1) of the Act of the act on the assessee
asking for the details and documents to substantiate the claim of deduction
u/s.10B of the Act at Rs.39,28,955/-. In the assessment proceedings, AO
observed that the assessee reported domestic as well as export sales and
hence the deduction u/s.10B claimed by the assessee is not tenable. It was
argued before the AO that alternate claim made by the assessee u/s.10A was
allowed by the CIT(A) for the A.Y. 2010-11 and therefore, the same should be
allowed for the A.Y. 2009-10. However, the AO denied the claim of deduction
u/s.10B of the Act. AO also denied the alternate claim of deduction
u/s.10A of the Act relying on the judgment of Hon’ble Supreme Court in the
case of Goetz India Limited 284 ITR 323. AO also rejected the reliance of the
assessee on the CBDT Circular No.XIV, dated 11-04-1955 stating that the
time limit to file the revised return has elapsed and any deduction can be
made only through a valid return of income as required u/s.80A(5) of the
Act. Eventually, the AO disallowed the claim of deduction u/s.10B as well as
alternate claim u/s.10A of the Act at Rs.39,28,955/-. AO also made addition
of Rs.1,62,361/- on account of license fees paid to its associated concern
Enterprise DB Corporation, USA.
Aggrieved with the assessment order dated 31.08.2016, the assessee
filed an appeal before CIT(A). During the First Appellate proceedings,
assessee reiterated the submissions made before the AO. He further
submitted that as per section 10A of the Act, any undertaking commencing
on or after 01-04-1994 in any electronic hardware technology park or as the
case may be, Software Technology Park shall fall within the ambit of
provisions of section 10A of the Act. Assessee is a 100% EOU registered with
STPI. Distinguishing the case relied upon by the AO in the case of Goetz
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India Ltd. (supra), assessee submitted that assessee has not made a fresh
claim. He made an alternate claim consequential to disallowance of original
claim u/s.10B of the Act. In support, the assessee relied on various
decisions, the details of which are given on pages 12 and 13 of the appellate
order. At the end, it is the prayer of the assessee that the alternate claim
u/s.10A of the Act on the profit earned from export of Software Services
should be allowed.
In the First Appellate proceedings, the CIT(A) relying on his own for the
A.Y. 2010-11 allowed the alternate claim made by the assessee u/s.10A of
the Act.
Regarding the disallowance made u/s.40a(ia) of the Act, AO denied the
same treating the same as Royalty on which TDS was required to be
deducted u/s.195 of the Act. Before the CIT(A), assessee submitted that
disallowance is made when taxes are not withheld on amounts paid or
payable to non-residents which are chargeable to tax as per the provisions
of the Act and on which taxes were required to be withheld. He submitted
that the assessee provided for license fees of Rs.1,62,361/- in its books of
accounts. Referring to section 195 of the Act, assessee submitted that the
person responsible for making payments of any sum to a nonresident which
is chargeable to tax under the Act is under an obligation to withhold tax on
the payments, at the prescribed rate. Assessee relied on various decisions
for the proposition that Royalties/FTS are taxable under the respective tax
treaties on actual payment of Royalties/FTS to the non-resident.
In the First Appellate proceedings, the CIT(A) relying on the judgment
of jurisdictional High Court in the case of CIT Vs. Gem Plus Jewellery India
Ltd. 194 taxmann.com 210 directed the AO to consider the alternate claim of
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the assessee u/s.10A of the Act on the enhanced profit too after considering
the disallowance of Rs.1,62,361/-.
Aggrieved with the order of CIT(A) the Revenue is in appeal before the
Tribunal with the grounds extracted above.
Ld. DR for the Revenue submitted that the CIT(A) ignored the
provisions of section 80A(5) of the Act while allowing alternate claim of the
assessee for deduction u/s. 10A of the Act, which mandates that no
deduction u/s.10A would be allowable unless the assessee claimed it in the
return of income. Ld. DR for the Revenue placed reliance on the decision of
Hon'ble Supreme Court of India in the case of Goetze India Ltd. Vs. CIT
reported in 157 Taxman 1 wherein it has been held that an assessee can
amend a return filed by him for making a claim for deduction only by filing a
revised return. Further, Ld. DR placed reliance on another decision of
Hon'ble Supreme Court of India in the case of CIT Vs. Shelly Products
reported in 129 Taxman 270 wherein it has been held that the assessing
authority may grant relief to an assessee, if an assessee by mistake or
inadvertence or on account of ignorance, included in his income any amount
which is exempted from payment of income tax or is not income within the
contemplation of law.
9.1 With regard to allowing enhanced deduction on the quantum of
disallowance made u/s.40(a)(ia) of the Act, Ld. DR submitted that as the
decision to allow alternate claim of deduction u/s.10A of the Act is not in
order.
Before me, there is none to represent the case of the assessee despite
service of notice. Acknowledgement is placed on record. However, on going
through the facts, issues and availability of assistance of Ld. DR for the
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Revenue, I am of the opinion that the appeal can be taken up for
adjudication.
I have heard the submissions made by the Ld. DR for the Revenue and
perused the material available on record. On going through the orders of the
AO and the CIT(A), I find the issue of allowing alternate claim of the assessee
u/s.10A by the CIT(A) was decided in favour of the assessee relying on his
own order for the A.Y. 2010-11. I find it relevant to extract the contents of
Para No.10. of the CIT(A) and therefore, the same is reproduced as under:
“10. I have carefully considered the facts of the case as well as reply of the appellant. In this case, it is seen that the issue has been decided in the appellant’s own case for A.Y.2010-11 in my appellate order dated 11/07/2016. Since facts being identical, the AO is directed to allow alternate claim u/s. 10A of the I.T.Act, 1961 following my appellate order for A.Y.2010- 11. The AO shall be at liberty to verify quantum of deduction allowable u/s. 10A of the I.T. Act. Subject to the above remarks, the grounds No. 4 and 5 are allowed.”
Considering the above, the order of CIT(A) in allowing alternate claim of
deduction u/s.10A of the Act is fair and reasonable and does not call for any
interference. Hence, I uphold the order of CIT(A) on this issue. Accordingly,
Grounds No.1 to 6 raised in appeal by Revenue are dismissed.
Regarding the allowing of disallowance of Rs.1,62,361/- u/s.40(a)(i) of
the Act, the CIT(A) held that TDS should be deducted at the time of credit or
payment whichever is earlier and thus rejected the explanation given by the
assessee by holding as under :
“13. I have carefully considered the facts of the case as well as reply of the appellant. In this case there is no dispute that the payment in question is royalty. The appellant has tried to make a case on the ground that the amount in question can be taxed in India only when non-resident entity receives payment. This position of law tried to be emphasized by the appellant is extraneous to the issue under consideration as in the present case the issue is deductibility u/s. 195 of the I.T. Act, 1961 which requires that TDS should be deducted at the time of credit or payment whichever is earlier. This being so, the reply of the appellant is devoid of any merit and accordingly, the same is rejected. Thus ground No. 6 and 7 are dismissed.”
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However, the CIT(A) vide the discussion given in Para No.15 of his order
allowed the alternate claim of deduction u/s.10A of the Act on the enhanced
profit after considering the disallowance of Rs.1,62,361/- u/s.40(a)(ia) of the
Act. For the sake of completeness, the contents of Para No.15 are
reproduced here as under :
“15. I have carefully considered the facts of the case as well as reply of the appellant. It is seen that the issue is decided in favour of the appellant by the decision of Hon. Bombay High Court in the case of CIT Vs. Gem Plus Jewellery India Ltd. (194 taxmann.192( 210. This being so, relying upon the decision of Hon. Jurisdictional High Court, the AO is directed to allow alternate claim of deduction u/s.10A of the Act on enhanced profit after considering disallowance of Rs.1,62,361/- u/s.40(a)(ia) of the I.T. Act, 1961. Accordingly, ground No.8 is allowed.”
Considering the above, I find the order of the CIT(A) is a well reasoned one
and therefore, it does not call for any interference.
In the result, the appeal of the Revenue is dismissed.
Order pronounced on this 22nd day of June, 2018.
Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 22nd June, 2018. Satish
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Pune 3. आयकर आयु� / The Pr.CIT-1, Pune 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / 5. DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune