DY. COMMISSIONER OF INCOME TAX-5(2)(1), MUMBAI, MUMBAI vs. INFINITE COMPUTER SOLUTIONS (INDIA) LIMITED, MUMBAI

In the case of the assessee, the original assessment u/s 143(3) of the Act was completed on 15.12.2016 determining total income at Rs. 55,05,99,440/- under normal and Rs. 121,96,73,982/- under MAT and the tax was computed under the provisions of MAT. The assessee company engaged in the business of computer software development and providing technical services. The case of the assessee was reopened by issuing of notice u/s 148 of the Act on 24.06.2021 and the AO has described the Audit Objection raised in this case as under:

The AO pointed out that assessee has debited an amount of Rs. 19,11,94,853/- on account of foreign exchange loss to the consolidated profit and loss account and same was not apportioned to the SEZ, Chennai and SEZ, Bangalore. It was further stated that such foreign exchange loss ought to be deducted from export turnover while computing deduction u/s 10AA as the export sales were from this unit. The AO has given the working of foreign exchange loss to the SEZ Unit as under:

The AO was of the view that non-apportionment of foreign exchange loss to the SEZ Unit has resulted in excess deduction under section 10AA of Rs. 997,59,663/- (14061098+85698565). On query, the assesses submitted that the assessee company maintained independent books of account of Bangalore non SEZ Unit, Chennai SEZ Unit & Bangalore SEZ Unit. All three units were audited by an independent Auditors who issued their Audit Report of its true and fair view under Company Act and also issued audit report under Rule 16D in Form No. 56F under Income Tax Act, 1961. Since the income was assessed based on above Audited accounts, therefore, there was no question of further allocation of loss on account of foreign exchange loss between the three units. The assessee submitted that as per the audited accounts followings were the exchange exchanges gain and loss:

The AO has not agreed with the submission of the assessee and stated that assesse has furnished only general reply but did not furnish any supporting documentary evidences to support that aforesaid loss pertains to only non SEZ unit and therefore stated that there is an escapement of income chargeable to tax amounting to Rs. 997,59,663/. The AO further stated that non-apportionment of foreign exchange loss amongst various units resulted in excess deduction u/s 10AA of Rs. , 2005 & 2217/Mum/2024 & C.O. Nos. 113 to 115/Mum/2024 Infinite Computer Solutions (India) Limited A.Y. 2013-14 to 2015-16 997,59,663/-(14061098+85698565). Therefore, the AO has disallowed the excess deduction of Rs. 997,59,663/- and added to the total income of the assessee.

The assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee.

Before us, during the course of appellate proceedings, the ld. Counsel filed factual paper book comprising copies of documents and details furnished before the lower authorities and contended that assessee had maintained separate books of account in respect of SEZ unit at Chennai and Bangalore and the AO was not justified in allocating the foreign exchange loss among the unit based on their turnover. He also submitted that in the original assessment as well as in the reassessment, the assessee has been assessed under MAT and the taxes have also been paid under MAT, therefore the question of income escaping does not arise.

On the other hand, ld. DR supported the order of lower authorities.

Heard both the sides and perused the material on record.

The assessee has filed complete details of foreign exchange gain and loss and it had maintained separate books of account in respect of the SEZ Unit at Chennai and Bangalore and these accounts were audited and based upon this the final accounts of the SEZ were drawn up. The ld. CIT(A) held that when actual figures in respect of foreign exchange gain in respect of two SEZ units were available there was no , 2005 & 2217/Mum/2024 & C.O. Nos. 113 to 115/Mum/2024 Infinite Computer Solutions (India) Limited A.Y. 2013-14 to 2015-16 need to allocate any further loss to the said units. The relevant extract of the ld. CIT(A) is as under:

The assessee had maintained separate books of account in respect of SEZ unit located at Bangalore and Chennai respectively. After considering the above material placed on record the action of the assessing officer in allocating the foreign exchange loss among the units based on the turnover of the respective units is not justified as the assessing officer neither controvert the relevant supporting material filed by the assessee in support of its claim nor brought any material on record to demonstrate that assessee had not maintained separate books of account for the respective units. Therefore, we do not find any reason to interfere in the decision of ld. CIT(A). Accordingly, all the grounds of appeal filed by the Revenue are dismissed. In the result, the appeal of the Revenue is dismissed.

Ground no. 1 & 2: Since identical issue and similar fact we have dismissed the appeal of the revenue vide therefore applying the finding mutatis mutandis the grounds of appeal of the revenue also dismissed.

Assessee have filed the cross objection for the A.Y. 2013-14 to A.Y. 2015-16 on the validity of the re-assessment proceedings. Since we have dismissed all the three appeals filed by the revenue for the A.Y. 2013-14 to 2015-16 vide 2005/M/2024 & 2217/M2024 on merit as discussed supra in this order therefore the cross objection filed by the assessee for all the three year not required any adjudication and the same are dismissed as infructuous.

In the result, all the appeals of the revenue and all the cross- objections filed by the assessee are dismissed.