Loading judgment…
No AI summary yet for this case.
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 18TH DAY OF SEPTEMBER 2020
PRESENT
THE HON’BLE MR. JUSTICE ALOK ARADHE
AND
THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD
I.T.A. NO.57 OF 2013 BETWEEN:
THE COMMISSIONER OF INCOME TAX
C.R. BUILDING, QUEENS ROAD
BANGALORE.
THE ASST. COMMISSIONER OF INCOME TAX
CIRCLE-11(5), C.R. BUILDING
QUEENS ROAD, BANGALORE. ... APPELLANTS (BY SRI. K.V. ARAVIND, ADV.,)
AND:
M/S. L & T VALDEL ENGINEERING PVT. LTD., NO.19, SHRUTHA COMPLEX PRIMROSE ROAD, BANGALORE-560025. ... RESPONDENT (BY SRI. A. SHANKAR, SR. COUNSEL A/W SRI. M. LAVA, ADV.) - - -
THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 13.09.2012 PASSED IN ITA NO.1186/BANG/2011 FOR THE ASSESSMENT YEAR 2007-08, PRAYING THAT THIS HON’BLE COURT MAY BE PLEASED TO: (I) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN.
(II) ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE ITAT, BANGALORE IN ITA NO.1186/BANG/2011 DATED 13-09-2012 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-11(5), BANGALORE.
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 2007-08. The appeal was admitted by a bench of this Court vide order dated 03.06.2013 on the following substantial question of law: (i) Whether the Tribunal was correct in holding that the assessee is entitled for deduction u/s.10A of the Act, when the new STP unit was not in existence and no activities are carried out from the STP unit?
(ii) Whether the Appellate Authorities were correct in allowing the
deduction u/s.10A of the Act, when the assessee is not new industrial undertaking in terms of section 10A(2) of the Act?.”
Facts leading to filing of the appeal briefly stated are that assessee is a Design Engineering Company. The assessee filed its return of income for the Assessment Year 2007-08 on 19.06.2008 and thereafter, filed a revised return on 04.11.2008, in which total income of Rs.1,04,49,130/- was declared. The return was processed under Section 143(2) of the Act on 07.03.2009. The case was selected for scrutiny and a notice under Section 143(2) of the Act was issued. The Assessing Officer vide order dated 17.12.2009 inter alia held that though the assessee has claimed deduction under Section 10A of the Act, yet from the statement filed by the assessee, it is evident that changes have been made to the existing unit and no new unit is set up. It was further held that even from perusal of assets, the assessee has purchased few
computers for the use of STPI unit and the assessee has not purchased any land for the use of STPI unit. The Assessing Officer therefore, concluded that the assessee has only split the existing infrastructure and business already in existence and rejected the claim of the assessee for deduction under Section 10A of the Act. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) by an order dated 16.09.2011 followed the order of the Tribunal in ITA No.616 to 618/2008 dated 18.02.2008 and held that assessee is entitled to deduction under Section 10A of the Act. In the result, the appeal preferred by the assessee was allowed. Being aggrieved, the revenue filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal' for short). The Tribunal vide order dated 13.09.2012 dismissed the appeal preferred by the revenue. In the aforesaid factual background, this appeal has been filed.
Learned counsel for the revenue submitted that in order to claim the benefit of deduction under Section 10A of the Act, an assessee is required to satisfy the requirements mentioned in Section 10(2)(ii) & (iii) of the Act. It is further submitted that the eligibility of the assessee has to be ascertained in the first year itself and since, the assessee has not set up a new unit, it cannot claim the benefit of deduction under Section 10A of the Act. It is further submitted that the Tribunal erred in proceeding on the assumption that the nature of the business of the assessee does not require any infrastructure. In support of aforesaid submission, reliance has been placed on decision of the Supreme Court in ‘DEPUTY COMMISSIONER OF INCOME TAX 11(1), BANGALORE VS. ACE MULTI AXES SYSTEMS LTD.’, (2017) 88 TAXMANN.COM 69 (SC).
On the other hand, learned counsel for the assessee submitted that the assessee is registered as STPL and was granted approval on 14.09.2001. It is
further submitted that concurrent findings of fact have been recorded by the Commissioner of Income Tax (Appeals) as well as the Tribunal with regard to eligibility of the assessee to claim benefit of deduction under Section 10A of the Act, which have not been challenged as perverse. It is further submitted that the assessee was engaged on site development of software program and the programs were delivered at the premises of clients at the work site in South Korea and therefore, there was no need of a full fledged infrastructure facility and the assessee has therefore, rightly been held entitled to deduction under Section 10A of the Act. It is further submitted that newly established undertaking does not mean a new company or a partnership but means an undertaking independent of all the undertakings of the assessee. In support of aforesaid submissions, reliance has been placed on the decisions in ‘CIT VS. WIPRO GE MEDICAL SYSTEM LTD.’, 50 TAXMANN.COM 181 (KAR), ‘CIT VS.
EXPERT OUTSOURCE PVT LTD’, 358 ITR 518 (KAR), ‘CIT VS. QUEST INFORMATICS PVT LTD’, 372 BITR 526 (KAR) and ‘PCIT VS. MACQUARIE GLOBAL SERVICES PVT LTD’, 102 TAXMANN.COM 272 (DEL).
We have considered the submissions made by learned counsel for the parties and have perused the record. Section 10A has been subject matter of interpretation by this court as well as Delhi High Court. It has been held that in order to claim deduction under Section 10A of the Act, the pre test is not whether a new industrial undertaking connotes expansion of the existing business of the assessee but, whether it is all the same and a new identifiable undertaking separate and distinct from existing business. It has further been held that a new activity may produce the same commodities of the old business or it may produce some other distinct marketable products. It has also been held that newly established undertaking is an undertaking of
the assessee independent of all the undertakings that he is already possessing. In the instant case, the assessee was engaged on site development of software program. The programs were delivered at the premises of the client at the work site in South Korea. The activities of the assessee finally culminated at the work site of the clients at South Korea and there was no need for full fledged infrastructure facilities in India. Thus, the industrial undertaking of the assessee was independent of all the undertakings which it was already possessing. Therefore, the assessee has rightly been held entitled to deduction under Section 10A of the Act by the Commissioner of Income Tax (Appeals) as well as the Tribunal. The aforesaid concurrent findings of fact by no stretch of imagination can be said to be perverse.
It is the cardinal principle of law that tribunal is fact finding authority and a decision on facts on the tribunal can be gone into by the High Court only if a question has been referred to it, which says the finding
of the tribunal is perverse. [SEE: ‘SUDARSHAN SILKS & SAREES VS. CIT’, 300 ITR 205 SCC @ 211 and ‘MANGALORE GANESH BEEDI WORKS VS. CIT’, 378 ITR 640 (SC) @ 648]. A three judge bench of the Supreme Court in ‘SANTOSH HAZARI VS. PURSHOTTAM TIWARI’, (2001) 3 SCC 179 while dealing with the expression ‘to be a question of law involving in the case’ held that ‘to be a question of law involving in the case’, there must be first a foundation for it laid in pleadings and the questions emerged from sustainable findings of fact arrived at by courts of fact and it must be necessary to decide that question of law for a just and proper decision of the case. It has been held that entirely a new point raised for the first time before the High Court is not a question involved in a case unless, it goes to the root of the matter. In ‘HERO VINOTH (MINOR) VS. SESHAMMAL’, (2006) 5 SCC 545 while dealing with the scope of Section 260A of the Act, it was held that this court will not interfere with
findings of the court, unless the courts have ignored material evidence or acted on no evidence or have drawn wrong inferences from proved facts by applying the law erroneously or the decision is based on no evidence. The aforesaid decisions were referred to with approval in VIJAY KUMAR TALWAR supra as well as in ‘UNION OF INDIA V. IBRAHIM UDDIN’, (2012) 8 SCC 148 and has been followed by a division bench of this court in ‘CIT VS. SOFT BRANDS (P.) LTD.,’ (2018) 406 ITR 513.
The findings of fact have not been assailed as perverse. It is also pertinent to mention that even in memo of appeal neither any grounds have been urged nor any material has been placed on record to demonstrate that the concurrent findings of fact recorded by the Commissioner of Income Tax (Appeals) and Tribunal are perverse.
In view of preceding analysis, we find that matter
stands concluded by findings of fact and the revenue has not been able to either plead or place on record material to show that findings of fact recorded by the Tribunal are perverse. Thus, we hold that non substantial questions of law. arise for consideration in this appeal.
In the result, the appeal is dismissed.
Sd/- JUDGE
Sd/- JUDGE ss