Income Tax Appellate Tribunal - Mumbai
Edr Continuous Information Pvt. Ltd., ... vs Department Of Income Tax on 5 September, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "E", MUMBAI
BEFORE SHRI. P.M. JAGTAP (A.M.) AND SHRI. N.V. VASUDEVAN (J.M.)
ITA No.6715/MUM/2008
ASSESSMENT YEAR : 2005-2006
Income Tax Officer - 8(1)(3) EDR Continuous Information Pvt.
Room No.260A, 2nd Flr., Ltd.
Aayakar Bhavan, M.K. Rd., A-36, Nandbhuvan Inds. Estate,
Mumbai - 400 020. Vs. Mahakali Caves Rd., Andheri (E),
Mumbai - 400 093.
PAN : AAACE9170A
(Appellant) (Respondent)
C.O. No.84/MUM/2009
Arising out of ITA No.6715/MUM/2008
ASSESSMENT YEAR : 2005-2006
EDR Continuous Information Pvt. Income Tax Officer - 8(1)(3)
Ltd. Room No.260A, 2nd Flr.,
A-36, Nandbhuvan Inds. Estate, Aayakar Bhavan, M.K. Rd.,
Mahakali Caves Rd., Andheri (E), Vs. Mumbai - 400 020.
Mumbai - 400 093.
PAN : AAACE9170A
(Cross Objector) (Respondent)
Appellant by : Shri P.N. Devendaran
Respondent by : Shri Mayur Kisnadwala
ORDER
PER P.M. JAGTAP, A.M.
This appeal is preferred by the Revenue against the order of the learned CIT(A) - VIII, Mumbai dated 05.09.2008 and the same is being disposed off along with the cross objection filed by the assessee being C.O. No.84/Mum/09.
2. In the solitary ground raised in its appeal, the Revenue has challenged the action of the learned CIT(A) in deleting the disallowance of 2 ITA No.6715/MUM/2008 C.O. No.84/MUM/2009 A.Y.: 2005-2006 Rs.53,54,728/- made by the Assessing Officer on account of assessee's claim for deduction u/s.10B.
3. The assessee in the present case is a company which is mainly engaged in the business of data processing. The return of income for the year under consideration was filed by it on 28.10.2005 declaring the total income of Rs.1,77,634/- after claiming deduction of Rs.53,54,728/- u/s.10B. During the course of assessment proceedings, the claim of the assessee for deduction u/s.10A was examined by the Assessing Officer and, on such examination, he recorded the following findings/observations:
"1. The assessee has received data processing charges from E Data Resources Inc. Dolphin Software Inc & Business Process Solutions Inc. The assessee has got contract from these parties and sub contracted the job to the local parties who have done this work locally.
2. Just by claiming that the assessee satisfies the conditions will not prove the case of the assessee. It has to be proved by way of documentary evidences. The assessee has got work contract from the three foreign parties, but got it executed by the local people. The assessee has claimed that the contract labour employees had carried out processing of data at their premises. But there is no evidence of such work being done at the premises of the assessee.
3. The STP unit was allowed to manufacture or produce the articles or things or computer software in such specialized area where maximum benefits or subsidies or preferential treatment is given to the assessee. It was never the intention of the Legislature to allow the people to set up such units and get the work done from the contractors outside the area of the free trade zone. The very purpose and objects of setting up such free trade zone/STP will be defeated if such sub contracting is being done by the people under the guise of STPI units.
4. The intention of the legislature was to give the deduction to the assessee only when the assessee produces or manufactures in the free trade zone. And these free trade zones are governed by the SEZ. Sub contract is allowed only with prior approval of STPI or the Development Commissioner. The assessee has failed to produce any evidence about these formalities. So the claim of the assessee that it has got the work done at its own premises is without any basis.
5. The assessee has not done any work which can be called as producing, manufacturing or production of articles or 3 ITA No.6715/MUM/2008 C.O. No.84/MUM/2009 A.Y.: 2005-2006 things or computer software from the said premises. The entire work has been done by the vendors locally by their employees.
6. Section 10B does not state that deduction under this section is applicable even if the assessee does not manufacture or produce any articles or computer software itself but gets it done form vendors. The assessee has not satisfied the basic condition of section 10B(1) of the Act.
7. The assessee has also stated that the workers of the vendors have worked in the assessee's premises. The assessee has not produced any supporting evidences like details of the workers, the necessary permissions from STPI authorities for these workers to work in the assessee's premises, the attendance register, the actual work done by the worker, the duration of the work etc.
8. The assessee has camouflaged its activities of sub contracting under the pretext of on site expenses and hence tried to hoodwink the tax authorities and the claim deduction u/s.10B of the I.T. Act."
3. On the basis of the above findings/observations, the claim of the assessee for deduction u/s.10B was disallowed by the Assessing Officer in the assessment completed u/s.143(3) vide an order dated 28.12.2007.
4. Against the order passed by the Assessing Officer u/s.143(3) disallowing its claim for deduction u/s.10B, an appeal was preferred by the assessee before the learned CIT(A). During the course of appellate proceedings before the learned CIT(A), submissions were made on behalf of the assessee in support of its claim for deduction u/s.10B. Additional evidence in the form of copies of attendance register maintained at its premises was also sought to be filed by the assessee in order to support and substantiate its claim that the hired man-power performed the job of data entry etc. at its premises and not at the premises of any sub-contractor. The learned CIT(A) did not accede to the request of the assessee for admission of additional evidence. He, however, accepted the stand of the assessee company that it was entitled to claim deduction u/s.10B for the following reasons given in para 2.29 to 2.33 of his impugned order.
"2.29 It is an admitted fact that the appellant had already furnished the confirmations regarding the supply of the data 4 ITA No.6715/MUM/2008 C.O. No.84/MUM/2009 A.Y.: 2005-2006 operators to the appellant company for carrying out their data work under the direction and supervision of the appellant company. These confirmations clearly stated that the data operators worked for and under the direction/supervision of the appellant company. In addition to the above, the appellant itself submitted its won confirmation dated 20.03.2007 also to the Assessing Officer confirming that the contract workers hired had actually worked at the premises of the appellant company. Therefore, without carrying any independent enquiry, the Assessing Officer should not have concluded that the hired man-power did not work at the premises of the appellant company.
2.30 Regarding the Assessing Officer's comments that the provisions of section 10B apply with respect of newly established undertaking in free trade zone, is found to be patently incorrect. However, such provisions very much form a part of section 10A. therefore, the provisions of section 10A cannot be applied for a claim made u/s.10B.
2.31 Further observation of the Assessing Officer that the appellant had obtained the STPI licence is also found to be incorrect as already clarified in the earlier paragraph that the appellant was never registered with STPI.
2.32 Further, the appellant has explained that it had not outsourced to any sub-contractor any job work and had, in fact, only hired man-power to work at is own premises, as supported by the confirmations already furnished to the Assessing Officer. Moreover, there is o bar even if a part of the job is outsourced or given on sub-contract as far as the provisions of 10B are concerned.
2.33 In view of the above mentioned observations and findings supported with the judgments already discussed earlier, it is held that the appellant was entitled to claim the deduction u/s.10B of the I.T. Act. Therefore, the disallowance by the Assessing Officer of the above mentioned claim of deduction u/s.10B is deleted. Therefore, this ground is treated as allowed."
5. The disallowance made by the Assessing Officer on account of assessee's claim for deduction u/s.10B thus was deleted by the learned CIT(A) by his appellate order dated 05.09.2008 which is impugned by the Revenue in the present appeal filed before the Tribunal.
6. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that the claim of the assessee for deduction u/s.10B was disallowed by the Assessing Officer on the basis of 5 ITA No.6715/MUM/2008 C.O. No.84/MUM/2009 A.Y.: 2005-2006 specific findings/observations recorded in the assessment order which have already been reproduced by us in the forgoing portion of this order. It appears from the impugned order of the learned CIT(A) that the said findings/observations recorded by the Assessing Officer have not been duly taken into consideration while deleting the disallowance made on account of assessee's claim for deduction u/s.10B. On the other hand, the findings recorded by the learned CIT(A) in his impugned order are contrary to the facts recorded by the Assessing Officer in the assessment order apparently on the basis of assessee's own submissions. For instance, as per para 3.4 of the assessment order, the assessee was stated to have claimed that it was registered with STPI and even green card was also issued to its unit by the STPI. In para 2.31 of his impugned order, the learned CIT(A) however has given a finding that the assessee was never registered with STPI. Moreover, a perusal of the impugned order of the learned CIT(A), the relevant portion of which is already extracted herein above, shows that he has passed a very cryptic order without duly taking into consideration the various findings/observations recorded by the Assessing Officer while disallowing assessee's claim for deduction u/s.10B. The impugned order passed by the learned CIT(A) allowing the assessee's claim u/s.10B thus is not well- discussed and well-reasoned and keeping in view the factual contradiction noted therein, we are of the view that it would be fair and proper and in the interest of justice to set aside the said order and remand the matter to the learned CIT(A) to dispose of the appeal of the assessee on merit afresh by passing a well-reasoned and well-discussed order. We order accordingly and allow this appeal of the Revenue for statistical purpose.
7. As regards cross objection filed by the assessee, it is observed that the solitary issue raised therein challenging the levy of interest u/s.234B has not been decided by the learned CIT(A) by his impugned order. We, therefore, direct the learned CIT(A) to decide the said issue on merit.
8. In the result, appeal of the Revenue as well as cross objection of the assessee is treated as allowed for statistical purpose.
6 ITA No.6715/MUM/2008 C.O. No.84/MUM/2009 A.Y.: 2005-2006Order pronounced on this 25th day of February, 2010.
Sd/- Sd/-
(N.V. VASUDEVAN) (P.M. JAGTAP)
(JUDICIAL MEMBER) (ACCOUNTANT MEMBER)
Mumbai, Dated 25th February, 2010.
Janhavi
Copy to:
1. The appellant
2. The respondent
3. Commissioner of Income Tax (Appeals)-XXIX, Mumbai
4. Commissioner of Income Tax, City-XXIX, Mumbai
5. Departmental Representative, Bench 'E', Mumbai TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI 7 ITA No.6715/MUM/2008 C.O. No.84/MUM/2009 A.Y.: 2005-2006 Date Initials
1. Draft dictated on 17-02-2010 Sr.PS
2. Draft placed before author 18-02-2010 Sr.PS
3. Draft proposed & placed before the Second AM Member
4. Draft discussed/approved by Second Member AM
5. Approved Draft comes to the Sr. PS Sr.PS
6. Kept for pronouncement on Sr.PS
7. File sent to the Bench Clerk Sr.PS
8. Date on which file goes to the Head Clerk
9. Date of dispatch of Order