TATA CONSULTANCY SERVICES LIMITED,MUMBAI vs. CIT(LTU), MUMBAI

Briefly the facts are the assessee, a company is engaged in the business of export of computer software, providing e-solutions, BPO activities and other management consultancy activities. For the assessment year under dispute the assessee filed its return of income on 24.09.2010 declaring total income of Rs.1483,18,88,873 under the normal provision and book profit of Rs.4473,00,27,417 u/s 115JB of the Act. Subsequently, the assessee filed revised return of income on 16.02.2012 enhancing the claim of TDS from Rs.146,84,69,198 to M/s.Tata Consultancy Services Limited. Rs.161,84,69,198. In the relevant previous year the assessee having entered into international transactions with its associated enterprises, the Assessing Officer made a reference to the Transfer Pricing Officer and the Transfer Pricing Officer passed an order making adjustment to the arm’s length price shown by the assessee. On the basis of transfer pricing adjustment made by the TPO, the Assessing Officer framed an assessment order which was objected to by the assessee before the Draft Resolution Panel (DRP). On the basis of directions of the DRP, the Assessing Officer finalized the assessment by order dated 03.03.2014 passed u/s 143(3) r.w.s. 144C(3) of the Act. However, in the present appeal we are not concerned with the Transfer Pricing Adjustment. After completion of assessment, the learned Commissioner of Income-tax called for and examined the assessment records of the assessee for the impugned assessment year. In course of such examination, we found that while computing income under the normal provision assessee has claimed exemption of an amount of Rs.2077,81,99,022 from SEZ Units as exempt u/s 10AA of the Act. Further, while computing tax liability u/s 115JB of the Act, the assessee has reduced the said income earned from SEZ Unit from the book profit, which has been allowed by the Assessing Officer in the impugned assessment year. The learned CIT being of the view as a result of the allowance of reduction of income from SEZ Unit from the book profit prejudice was caused to the revenue and thereby rendered the assessment order erroneous, issued a notice u/s 263 of the Act calling upon the assessee to explain why assessment order so passed should not be revised u/s 263 of the Act. Though the M/s.Tata Consultancy Services Limited. assessee objected to the proceedings initiated u/s 263 of the Act and made elaborate submission justifying the computation of book profit after reducing the income of SEZ Unit and also submitted that the assessment order passed cannot be considered to be either erroneous or prejudicial to the interest of revenue in view of the decision of the Tribunal on the issue, however, the CIT did not find merit in the submissions of the assessee. Though, the learned CIT accepted that the Tribunal in the case of Genesys International Corporation Ltd. has decided the issue in favour of the assessee, however, he observed that the decision of the Tribunal has not reached finality, which fact has been ignored by the Assessing Officer. Accordingly, he set aside the impugned assessment order with the direction to the Assessing Officer to modify the same in terms of his direction recorded in the revision order.

Shri Dinesh Vyas, the learned Senior Counsel appearing for the assessee submitted that the issue on the basis of which the learned CIT held the assessment order to be erroneous and prejudicial to the interest of the revenue has been decided in favour of the assessee by the ITAT Mumbai Bench in the case of DCIT v. GEBBS Health Care Solutions Pvt. Ltd. [(2016) 46 ITR (Trib.) 551], Genesys International Corporation Ltd. v. ACIT (2012-TIOL-767) and DCIT v. Genesys International Corporation Ltd. (2015-TIOL-2098). He submitted once identical issue has been decided by the Tribunal in favour of the assessee and the decision of the Assessing Officer is in consonance

M/s.Tata Consultancy Services Limited. with the view expressed by the Tribunal, the assessment order cannot be held to be erroneous. Further, he submitted the CBDT vide Circular No.14/2014 dated 8th October, 2014 has clarified the issue further by stating in case of new SEZ Unit where new technical manpower is 50% of the total technical manpower, such unit will be eligible for deduction u/s 10A / 10AA. He submitted, the Circular further advised the Department not to contest the decision of the appellate authority on the said issue. He submitted, in assessee’s own case for assessment years 2008-2009, 2009-2010 and 2019-2011, the CIT(A) has decided the issue in favour of the assessee and the Department keeping in view the CBDT Circular No.14/2014 dated 8th October, 2014, has not filed any appeal before the higher appellate authority contesting the aforesaid decision of the first appellate authority. Therefore, he submitted the conditions of section 263 of the Act being not satisfied, the revisional authority has wrongly exercised his jurisdiction in revising the assessment order. Hence, the order passed u/s 263 of the Act should be set aside / quashed.

The learned Departmental Representative relied upon the observation of the learned CIT.

We have considered the rival submissions and perused the materials on record. It is evident, the only issue on which learned CIT has held the assessment order to be erroneous and prejudicial to the interest of revenue and therefore, exercised powers u/s 263 of the Act is, while computing the book profit u/s 115JB of the Act the income of M/s.Tata Consultancy Services Limited. SEZ Unit claimed as exempt u/s 10AA of the Act should not have been reduced as the Assessing Officer has not allowed such exemption under the normal provisions of the Act. However, from the finding of the learned CIT as contained in para 4.2 of his order, it is evident that while considering the merits of the issue, he has accepted that in case of Genesys International Corporation Ltd. (supra) the ITAT Mumbai Bench has decided identical issue in favour of the assessee. Thus, when the CIT himself agrees that the issue stands decided in favour of the assessee by the decision of the Tribunal in the case of Genesys International Corporation Ltd. (supra), we fail to understand how the assessment order can be held to be erroneous when it is in consonance with the decision of the Tribunal in the case of Genesys International Corporation Ltd. (supra). Therefore, one of the conditions of section 263 of the Act is not satisfied. Further, as far as the issue relating to disallowance of assessee’s claim of exemption u/s 10AA of the Act is concerned, such issue stands resolved in view of the decision of the Commissioner of Income-tax (Appeals) while deciding assessee’s appeal against such disallowance made by the Assessing Officer. The CIT(A) while deciding the issue has allowed assessee’s claim not only in the impugned assessment year but also in assessment years 2008- 2009 and 2009-2010. That being the case, the assessment order cannot be held to be erroneous and prejudicial to the interest of the revenue on the ground of reduction of income of SEZ Unit from the book profit. In any case of the matter, even if we accept the reasoning of the learned CIT that the decision of the Tribunal in the case of Genesys