The Commissioner of Income Tax IV vs. M/s. Nav Bharat Enterprises Limited

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 9TH DAY OF DECEMBER 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.169 OF 2013 BETWEEN: 1. COMMISSIONER OF INCOME TAX-III

C.R. BUILDING, QUEENS ROAD

BENGALURU. 2. DEPUTY COMMISSIONER OF INCOME TAX

RANGE-12(5), BENGALURU. ... APPELLANTS (BY SRI. E.I. SANMATHI, ADV.,) AND: M/S. WIPRO LIMITED DODDAKANNELLI SARJAPUR ROAD BENGALURU-560025 PAN: AAACW0387R. ... RESPONDENT (BY SRI. S. GANESH, SR. COUNSEL FOR SRI. SANDEEP HUILGOL, ADV., FOR SRI. R.B. KRISHNA, ADV.,) - - - THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 16.11.2012 PASSED IN ITA NO.525/BANG/2011 AND 621/BANG/2011, FOR THE ASSESSMENT YEAR 2005-06, PRAYING TO (I) FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED THEREIN. (II) SET ASIDE THE

2 APPELLATE ORDER DATED 16.11.2012 PASSED BY THE ITAT, 'B' BENCH BANGALORE, IN APPEAL PROCEEDINGS ITA NO.525/BANG/2011 AND 621/BANG/2011. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment year 2005-06. The appeal was admitted by a bench of this Court vide order dated 17.12.2013 on the following substantial questions of law: (1) Whether on the facts and circumstances of the case, the tribunal is right in law in directing the assessing authority to set off the loss of the units in STP from other taxable business income even when the same is not permitted under provisions of IT Act? (2) Whether on the facts and circumstances of the case, the tribunal is right in law in allowing the assessee's claim

3 of depreciation of Rs.17.06,58,039/- on software imported even though the assessing authority had rightly disallowed the expenditure under section 40(a)(i) of IT Act as the assessee had failed to comply with the provisions of section 195 while making payments to the vendors? (3) Whether on the facts and circumstances of the case, the tribunal is right in law in setting aside the reallocation of expenditure done by assessing authority relating to expenditure booked by Wipro Corporate division to other divisions even though the said re-allocation by the assessing authority was in accordance with law? (4) Whether on the facts and circumstances of the case, the tribunal is right in law in setting aside the exclusions made by assessing authority relating to other income such as interest income, scrap sales, profit on sale of fixed assets, profit on account of fluctuation in exchange rate from the profits of 10A?

4 (5) Whether on the facts and circumstances of the case, the tribunal is right in law setting aside the exclusion of certain amount received after six months from export even when the assessing authority had rightly excluded by holding that the said sum was not remitted to India within 6 months from the end of the previous years in terms of section 10A(3) of I.T. Act? (6) Whether on the facts and circumstances of the case, the tribunal is right in law is setting aside the re- computation of deduction under section 10A of the IT Act done by assessing authority even though the assessing authority had rightly made the adjustments to the export turnover and the profits of the business by holding that certain units of the company started operations in Bangalore on the strength of the earlier approvals from the STP for expansion of business and as such do not represent new undertakings but only extension of original units?

5 (7) Whether on the facts and circumstances of the case, the tribunal is right in law in setting aside the re-allocation of Corporate Expenses to certain extent to other Wipro division even though the assessing authority was right in holding that in absence of such allocation expenses, the profits of the units eligible for deduction in chapter VIA would be artificially enhanced? (8) Whether on the facts and circumstances of the case, the Tribunal is right in law in setting aside the addition made on account of unavailed MODVAT credit to the value of the closing stock even when the said addition is in accordance with law? (9) Whether on the facts and circumstances of the case, the Tribunal is right in law in setting aside the exclusion of reimbursement of Communication link and other sales performance linked incentives and telecommunication expenses even the assessing authority rightly excluded

6 reimbursement of aforesaid expenses from export turnover and rightly held that the said expenses cannot be treated as a consideration received for export of computer software or articles or things? (10) Whether on the facts and circumstances of the case, the Tribunal is right in law in setting exclusion of foreign currency expenditure from export turnover even though the same has been done by assessing authority in accordance with law? (11) Whether on the facts and circumstances of the case, the Tribunal is right in law in setting disallowance of deduction under section 14A made by assessing authority even though the same is in accordance with law? (12) Whether the order of the tribunal can be said as perverse in nature as the tribunal has relied on its earlier decisions which have not reached finality since appeals preferred by Revenue under section 260A against those orders are

7 pending before this Hon'ble High Court in ITA No.363 of 2009 and other connected matters and as such tribunal ought to have awaited decision of this Hon'ble High Court? (13) Whether on the facts and circumstances of the case, the Tribunal is right in law in setting aside the allocation of corporate expenses pertaining to computation of deduction under section 80IB done by assessing authority even though the same is in accordance with provisions of IT Act? (14) Whether on the facts and circumstances of the case, the Tribunal is right in law in setting aside the allocation of corporate expenses pertaining to computation of deduction under section 80IC done by assessing authority even though the same is in accordance with provisions of IT Act? 2. Learned counsel for the revenue submits that all the remaining issues covered by decisions of this court in M/S WIPRO LTD. VS. DCIT, 383 ITR 179

8 (KAR) and 'COMMISSIONER OF INCOME-TAX & ANOTHER VS. TATA ELXSI LTD.' 382 ITR 654 (KAR) are pending adjudication at the instance of the revenue before the Supreme Court. In view of aforesaid submission needless to state that the Assessing Officer shall decide the issues in accordance with the decision which may be rendered by the Supreme Court. 3. For the reasons assigned by us in the judgment passed today in I.T.A.No.464/2017, this appeal also stands disposed of in the same terms and with similar directions. Sd/- JUDGE Sd/- JUDGE ss