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Income Tax Appellate Tribunal, BENGALURU BENCH A, BENGALURU
Before: SHRI VIJAY PAL RAO
PER S. JAYARAMAN, ACCOUNTANT MEMBER :
This is an appeal filed by the Revenue against the order of the CIT (A), Bengaluru -2, Bengaluru, dt.27.08.2015, for the assessment year 2008-09.
The only grievance of the Revenue is that the CIT (A) has erred in holding that the assessee is entitled for deduction u/s.10B of the Income Tax Act, 1961.
ITA.1395/Bang/2015 Page - 2
Facts in brief are that the assessee, a private limited company engaged in the manufacture and sale of thermostats, filed its return of income for the impugned assessment year declaring a total income at Rs.1,63,10,133/-. While doing so , it had claimed deduction u/s.10B at Rs.13,86,59,788/- viz Rs.3,12,61,134/- & R s . 1 0 , 7 3 , 9 8 , 6 5 4 / - f o r t w o e x p o r t - o r i e n t e d undertakings viz.- EOU-I and EOU-II, respectively. The AO noted that the assessee's share-holding pattern underwent a change in as much as M/s Spirent BV Group to which the assessee belonged made an exit. As a result of which the business of manufacture and sale of sensors came to be acquired by the GE Group worldwide and the assessee acquired 74% shares held by M/s Spirent BV group in the assessee -company. This took place in the previous year relevant to the assessment year 2003-04. In the assessments made for the assessment years 2003-04 to 2007-08, the respective AOs have held that the change in the share-holding pattern was tantamount to reconstruction or reorganisation due to transfer of beneficial interest in the undertaking known as M/S Spirent BV Group in favour of the assessee - company and ,therefore, the assessee was hit by the mischief contemplated in section 10B(9) and accordingly, they have rejected the assessee 's claim for deduction u/s 10B in those assessment years . On the same lines, for this a y also, the AO has denied the benefit of deduction at Rs.3,12,61,134/- u/s 10B in respect of EOU-I, although the assessee brought to his notice that its claim for deduction u/s 10B in the earlier years had been upheld by the Hon'ble ITAT, Bangalore Bench ITA.1395/Bang/2015 Page - 3 "B' in ITA.Nos.157 & 258(Bang)/2008 dated 30/5/2008 and in ITA.No.151/Bang/2011 dated 10/6/2011 for the assessment year 2006-07. Nevertheless, the AO did not allow the claim on the ground that the department has contested, the Hon'ble ITAT's order before the Hon'ble High Court of Karnataka, which is pending decision. Thus, the AO held that the assessee was not entitled for deduction u/.10B at Rs.3,12,61,134/-. On an appeal, the CIT(A) allowed the assessee’s appeal.
Aggrieved, the Revenue filed this appeal.
We heard the rival submissions and gone through the relevant orders. The relevant portion of the CIT (A) order is extracted as under :
“3.4 The gist of the elaborate grounds of appeal is that the AO failed to appreciate that the change in shareholding pattern was necessitated by the world-wide reorganisation of the business in sensors leading to the exit of M/s Spirent BV Group from this line of business and the appellant consequently came to acquire the said business; that omission of sub- section (9) of section 10B did not deprive the appellant of its claim for deduction u/s 10B in as much as omission of a sub- section made it as non est in law right from the time it was introduced in the statute; and that it was entitled to the claim of deduction u/s 10B in respect of the EOU-II in the light of the favourable decisions given by the Hon'ble ITAT, Bangalore Bench 'B' for the assessment years 2003-04; 2004-05 and 2006-07.
3.5 I h ave carefully cons idere d the appellan t' s contentions and perused the assessment order. At the time of appeal hearing, the appellant furnished a copy of the orders of the Hon'ble ITAT, Bangalore Bench in the appellant's own case for the assessment years 2003-04 and 2004-05 mentioned above. I find merit in the appellant's contentions in as much as the Hon'ble ITAT, Bangalore Bench 'B' in its orders mentioned above ITA.1395/Bang/2015 Page - 4 has held that the appellant was entitled to the deduction u/s 10B of the Act. The relevant portion of the Hon'ble ITAT's order is reproduced below:
"11. Therefore, even though the Finance Act, 2003 mentions that the aforesaid sub-section (9) is omitted with effect from 1-4-2004, in view of the fact that the said omission is different from repeal, the saving clause provided in section 6 of the General Clauses Act is not applicable. Therefore, the learned CIT(A) is not justified in not appreciating the fact that section10B should be read as though it never had the said subsection (9) in it in all proceedings under the Act. As the appellate proceedings are the continuation of the assessment proceedings, as held by the Hon'ble Supreme Court in the case of Jute Corporation of India Ltd., (187 ITR 688), even for the assessment year 2003-04 the aforesaid section 10B has to be read without the impugned sub-section (9). Therefore, we find much force in the stand taken by the assessee in view of the decision of the Supreme Court. Even on this issue, the assessee is bound to succeed......”
3.6 In deciding the appeal for the assessment year 2006-07 in favour of the appellant, the Hon'ble ITAT has followed the above-mentioned decision for the assessment years 2003-04 and 2004-05.
3.7 Respectfully following the decisions of the Hon'ble ITAT in this regard in favour of the appellant, I hold that t h e a p p e l l a n t i s e n t i t l e d t o t h e d e d u c t i o n o f Rs.3,12,61,134/- u/s 10B of the Act in respect of EOU-I for the assessment year 2008-09, which is the tenth and last year for which the claim can be made/allowed. The AO is directed to allow the claim accordingly.”
Thus, the CIT(A) followed the decision of this Tribunal in the assessee’s case in 258/ BNG/2008 dt 30.5.2008 for ays 2003-04 & 2004-05 and also for a y 2006-07, supra. On Revenue’s appeal, the Hon’ble jurisdictional High Court in ITA No 876 & 877 of 2008 dt 25.12.2014, answered the substantial question of law in favour of assessee and against the Revenue for ays 2003-04 & 2004-05. Respectfully ITA.1395/Bang/2015 Page - 5 applying the ratio, the Revenue’s appeal is dismissed
In the result, Revenue’s appeal is dismissed.
Order pronounced in the open court on 23rd November, 2016.