THE COMMISSIONER OF INCOME TAX vs. M/S DAIMLER CHRYSLER RESEARCH

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ITA/690/2009HC KarnatakaKAHC01068883200916 February 2015Bench: B.VEERAPPA,N.KUMAR6 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that the assessee is liable to claim deduction under Section 10A of the Act, following a High Court judgment. The Assessing Authority was directed to exclude certain expenses while computing the deduction under Section 10A.

What were the facts?

The assessee, engaged in research and development of computer software, claimed a deduction under Section 10A of the Income Tax Act for the assessment year 2003-04. The Assessing Officer computed the deduction, and the Commissioner (Appeals) allowed the assessee's claim for deduction under Section 80HHE. The Tribunal partly allowed the appeal, holding the assessee liable to claim deduction under Section 10A.

What were the issues?

The primary issue was the eligibility and computation of deduction under Section 10A of the Income Tax Act for a software research and development company. The interplay between Section 10A and Section 80HHE was also a consideration.

Which sections of the Income-tax Act were involved?

Section 10A,Section 80HHE,Section 260-A

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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 16th DAY OF FEBRUARY, 2015 PRESENT THE HON' BLE MR. JUSTICE N.KUMAR AND THE HON' BLE MR. JUSTICE B. VEERAPPA INCOME TAX APPEAL No. 690/2009 BETWEEN:

1.

The Commissioner of Income Tax, C.R. Building, Queens Road, Bangalore.

2.

The Assistant Commissioner of Income-Tax, Circle-11(5), C.R. Building, Queens Road, Bangalore.

... APPELLANTS

(BY SRI K V ARAVIND, ADVOCATE)

AND:

M/s. Daimler Chrysler Research & Technology India P.Ltd., No.137, Infantry Road, Bangalore.

... RESPONDENT

(BY SRI P. DINESH, ADVOCATE) …

This ITA is filed under Section 260-A of the Income Tax Act, 1961 arising out of order dated 1.5.2009 passed in ITA No. 1179/Bang/2008 for the assessment year 2003-2004 praying to formulate the substantial questions of law stated therein and to allow the appeal and set aside the orders passed by the ITAT, Bangalore in I.T.A.No.1179/Bang/2008 dated 1.5.2009 confirming the order of the Appellate Commissioner and confirm the order passed by the Assistant Commissioner of Income Tax, Circle-11(5), Bangalure.

This Income Tax Appeal coming on for Hearing this day, B. VEERAPPA J., delivered the following:

JUDGMENT

The revenue has preferred this appeal against the order dated 1.5.2009 passed by the Tribunal in I.T.A.No.1179/Bang/2008 holding that the assessee is liable to claim deduction under Section 10A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

2.

The brief facts of the case are: That the assessee is carrying on the business in research and development activities in the field of computer software. The assessment is in respect of

3 assessment year 2003-04. The assessee had an income of Rs.58,58,448/- from the business. The claimed deduction of Rs.52,72,603/- under the provisions of Section 10A of the Act.

3.

The Assessing Authority after considering the entire material on record by its order dated 10.3.2006 has held that the total turnover as per the profit and loss account is adopted at Rs.16,05,83,428/- after deducting the interest of income of Rs.1,14,452/- from the total turn over of Rs.16,06,97,880/- depicted in the profit and loss account. The deduction under the provisions of Section 10A of the Act is computed at Rs.39,04,388/-. Aggrieved by the said order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) in ITA No.30/AC-11(5)/CIT(A)- I/06-07.

4 4. The Commissioner of Income Tax (Appeals) after hearing both the parties, by his order dated 27.6.2008 has held that in view of Sub-section 6(iii) of Section 10A of the Act, it is seen that the appellant’s contention in this regard is correct in as much as it does not include Section 80HHE of the Act among Sections such as 80HH, 80HHC, 80-I, 80-IA and 80-IB for denial of deduction. Hence, the appellant succeeds in its claim for deduction under Section 80HHE of the Act. Accordingly, the Assessing Authority was directed to allow the deduction to which the assessee was entitled to under Section 80HHE of the Act. Being aggrieved by the said order, the revenue filed an appeal – ITA No. 1179/Bang/2008 before the Income Tax Appellate Tribunal, Bangalore Bench ‘B’.

5.

The Income Tax Appellate Tribunal after hearing both parties, by its order dated 1st May, 2009 allowed the appeal in part holding that the assessee is

5 liable to claim deduction under Section 10A of the Act following the dictum of this Court in the case of Commissioner of Income Tax and Another –vs- Tata Elexsi Ltd., reported in [2012] 349 ITR 98 (Karn) and therefore, the Assessing Authority was directed to exclude the aforesaid expenses both on the total turnover as well as the export turnover, while computing deduction under Section 10A of the Act as the judgment of the Tribunal is based on the decision of this Court, no substantial question of law arises for consideration on merits for admission of this appeal.

6.

However, it is submitted by the learned Counsel Sri K.V. Aravind appearing for the revenue that, the revenue has preferred a Special Leave Petition before the Apex Court against the judgment of this Court and the same is pending consideration. In the event of Apex Court answering the substantial question of law in favour of the revenue, liberty be reserved to the

6 revenue, then the Assessing Authority shall pass appropriate orders in terms of Section 260(1A) of the Act as per the outcome of appeal before the Hon’ble Supreme Court. The said submission is taken on record and liberty is granted.

7.

With the above observations, the appeal is dismissed.

Sd/-

Judge

Sd/-

Judge

Nsu/-

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