Income Tax Appellate Tribunal - Delhi
Interra Information Technologies ... vs Department Of Income Tax on 7 September, 2007
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'C' : NEW DELHI)
BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND
SHRI K.G. BANSAL, ACCOUNTANT MEMBER
ITA No.3920/Del./2010
(Assessment Year : 2004-05)
DCIT, Cir.11(1), Vs. M/s Interra Information
New Delhi. Technologies India (P) Ltd.,
5/207, Gupta Arcade,
LSC Shreshta Vihar,
Delhi.
(PAN/GIR No.- AAACL2351P)
(Appellant) (Respondent)
Assessee by : Shri Rohit Jain, CA
Revenue by : Smt. Mona Mohanty, Sr.DR
ORDER
PER A.D. JAIN, JM
This is department's appeal for AY 2004-05 taking the following grounds:
"1. The order of CIT(A) is wrong, perverse, illegal and against the provision of law, liable to be set aside.
2. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the disallowance amounting to `2,32,11,019 on account of deduction u/s 10A in respect of profits of Noida Unit.
3. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the disallowance of `3,23,37,842 pertains to profits of the Japan Branch.
4. The appellant craves leave to add, alter or amend and ground of appeal raised above at the time of hearing.
2. Ground nos.1 and 4 are general.
ITA No.3920/Del./10 (AY : 2004-05)
3. Regarding ground no.2, as per the assessment order in AYs 2002-03 and 03-04, i.e. the two immediately preceding assessment years, the claim of the assessee limited company, in respect of its Noida Unit u/s 10A of the I.T. Act was not allowed by the AO. The CIT(A) directed the AO to allow the claim of the assessee. The department, however, filed an appeal against the said order of the CIT(A) before the Tribunal. For the year under consideration, the AO, considering these facts, disallowed the assessee's claim of deduction of `20456074, u/s 10A of the Act.
4. The CIT(A), however, allowed the assessee's claim u/s 10A of the Act, following the Tribunal decision in the assessee's own case for AYs 2002-03 and 03-04, rendered in ITA No.3846/Del./06, on 27.6.08 in 'DCIT vs. Interra Software India Pvt. Ltd.'.
5. The Ld.DR has contended that the CIT(A) has erred in deleting the disallowance on account of deduction u/s 10A of the Act in respect of profits of the Noida unit of the assessee limited company, ignoring that the claim could not have been made, since the assessee had claimed deduction u/s 80HHC of the Act.
6. The Ld.Counsel for the assessee, on the other hand, has strongly relied on the impugned order. It has been contended that AY 1997-98 was the first year of the assessee company; that in AY 1998-99, the assessee made profit for the first time; that deduction u/s 80HHE was claimed for AYs 1999-2000 to 2001-02; that deduction u/s 10A of the Act was claimed and was deemed allowed, as no scrutiny was done; that for AY 2002-03, the AO observed that the claim of deduction u/s 10A was debarred, as the deduction had been claimed u/s 80HHE in AY 1998-99; that the Tribunal, vide its order dated 07.09.2007 in ITA No.3832/Del./05, in the assessee's own case for AY 2002-03 in the department's appeal in 'DCIT, Cir.11(1), New Delhi vs. M/s Interra Software (India) Pvt. Ltd.' (copy at pages 90-98 of the assessee's paper book), which order was followed by the Tribunal for AY 2003-04, vide 2 ITA No.3920/Del./10 (AY : 2004-05) its order dated 27.06.2008, in ITA No.3846/Del./06 (authored by one of us - the Ld.AM) (copy at pages 99-104 of the assessee's paper book), has held the assessee entitled to exemption u/s 10A of the Act.
7. Having considered the matter, we find that the issue has been effectively dealt with at length by the Tribunal in the assessee's own case for AY 2002-03 (supra). The Tribunal observed that the assessee company was engaged in the business of development and export of computer software; that for AY 2002-03, it had claimed exemption of `14748225 u/s 10A of the Act, which had been disallowed by the AO on the basis that since the assessee had been allowed exemption u/s 80HHE of the Act for AY 1998-99, no other provision of the Act was available to the assessee for any other assessment year; that the CIT(A) allowed the assessee's claim on the basis of the decision of the Delhi Bench of the Tribunal in the case of "Legato Systems vs. ITO", 93 TTJ 828; that the department had relied on in section 80HHE(5) of the Act to contend that once the assessee opts to claim u/s 80HHE, exemption in other provisions of the Act is not available to the assessee; that the assessee, on the other hand, had placed reliance on the Delhi High Court decision in the case of CIT v. Legato Systems, 203 CTR 101(Del.), the order of the Tribunal of the Tribunal in "Jindal Exports Pvt. Ltd. vs. ACIT", 31 ITD 217 (Del.) and the order of the Delhi Tribunal in "ITO vs. Demco Solutions P. Ltd. in ITA No.3915/Del./04, dated 23.03.07; that the stand maintained by the assessee was that it was eligible for the exemption u/s 10A of the Act, since it had satisfied all the conditions precedent for claiming such exemption; that it was the assessee's case that the provisions of section 80HHE(5) of the Act merely provide that no deduction under any other provision of the Act shall be available to such profits on which deduction has been claimed u/s 80HHE of the Act and that the emphasis under section 80HHE(5) of the Act is in relation to provides which are subject matter of deduction and that the section 80HHE(5) merely profits for not allowing of double 3 ITA No.3920/Del./10 (AY : 2004-05) deduction on the same profits; that in the assessee's case, in the initial assessment year, i.e., AY 1997-98, the assessee suffered a loss in its NEPZ unit, which was the reason why the assessee had not claimed deduction u/s 10A of the Act; that from the second year, i.e., AY 1999- 00 onwards, it claimed exemption u/s 10A of the Act on profits from its NEPZ unit; that in the assessment year under consideration, for the first time, the claim of exemption u/s 10A had been denied, ostensibly on the strength of the provisions of section 80HHE(5) of the Act; that prior to the amendment made to it by the Income Tax (2nd Amendment) Act, 1998, section 10A of the Act provided for exemption up to AY 1998-99, for a period of five consecutive years falling within a period of eight years beginning with the assessment year relevant to the previous year in which the undertaking began to manufacture or produce articles; that w.e.f. AY 1999-00, the provisions of section 10A of the Act were amended, by virtue of which amendment, the exemption was made available for ten consecutive years beginning with assessment year in which the industrial undertaking begins to manufacture or produce articles or things; that as per the provisions of the Act applicable to the year under consideration, the assessee was entitled to claim exemption u/s 10A of the Act for ten consecutive assessment years, beginning with the initial year i.e., Ay 1997-98, in which, the assessee company started manufacture; that the basic eligibility for the assessee for exemption u/s 10A of the Act had not been hit; that section 80HHE(5) of the Act seeks to plug a situation where double deduction is claimed with reference to the same income, once the assessee had claimed exemption u/s 80HHE of the Act in respect of business, no deduction shall be allowed under any other provision of the Act, either for the same, or for any other assessment year in relation to the profits of such business; that this position does not emerge from section 80HHE(5); that section 80HHE(5) merely provides that where deduction u/s 80HHE has been claimed and 4 ITA No.3920/Del./10 (AY : 2004-05) allowed in respect of profits of an eligible business, no deduction in relation to such profits can be allowed under any other provision of the Act, either for the same, or for any other assessment year; that section 80HhE(5) talks of "such profits"; that it seeks to restrict subjecting profits which have already been subjected to deduction u/s 80HHE to any other deduction which the assessee made otherwise be entitled to claim, either for the same, or in any assessment year; that section 80HHE(5) cannot be read so as to mean that the assessee, having once claimed deduction u/s 80HHE in respect of profits of an eligible business, would be debarred for all times to claim deduction under any other provision of the Act in respect of the profits of such business for any other assessment year; that in "Legato Systems" (supra), the Tribunal observed that section 80HHE(5) was entitled to avoid double deduction in as much as the profit calculated in accordance with section 80HHE for a particular assessment year cannot be claimed as deduction either for the same, or any other assessment year; that the reasoning adopted in "Jindal Exports Pvt. Ltd."(supra) was similar, holding that deductions u/s 80HHE cannot be denied to the assessee simply because the assessee enjoyed exemption u/s 10A of the Act; and that therefore, the claim of the assessee had been rightly allowed by the CIT(A).
8. In view of the above detailed discussion by the Tribunal in the assessee's case for AY 2002-03, which was followed by the Tribunal in the assessee's case for AY 2003-04 and which orders of the Tribunal have not been shown to have been set aside or cancelled or even stayed by the Hon'ble High Court, respectively following the said decision of the Tribunal in the assessee's own case, ground no.2 raised by the department is rejected.
9. Ground no.3 contends that the CIT(A) has erred in deleting the disallowance of `3,23,37,842, pertaining to profits of the assessee's Japan Branch.
5ITA No.3920/Del./10 (AY : 2004-05)
10. The AO observed that the assessee company, vide letter dated 22.11.06 made a fresh claim u/s 80 HHE of the Act and filed auditor's certificate in Form No.10 for entertaining the claim; and that while computing the deduction u/s 80HHE, the assessee, u/s 10CCAF, had considered the turnover of its Japan Branch of `3,23,37,842. The assessee was asked as to why this claim be not disallowed as the profits had not been received in India. In response, the assessee had placed reliance on the order of the CIT(A) for AYs 2002-03 and 03-04, whereby, the CIT(A) had directed the AO to consider the export of the assessee's Japan Branch as exempt. The AO, however, went on to disallow the assessee's claim on the basis that the CIT(A)'s said orders had not been accepted by the department and appeals had been filed before the ITAT.
11. The CIT(A) allowed the assessee's claim following the aforesaid Tribunal orders.
12. The Ld.DR has contended that the provisions of section 10A of the Act do not cover the profits of a foreign branch of the assessee.
13. The Ld.Counsel for the assessee, on the other hand, has placed strong reliance on the impugned order in this regard. It has been contended that in allowing the claim of the assessee, the CIT(A) has correctly followed the Tribunal's decisions in the assessee's own case for AYs 2002-03 & 03-04.
14. In this regard, the Tribunal, in the assessee's own case for AY 2002-03, has upheld the CIT(A)'s action in allowing the claim of the assessee for exemption u/s 10A of the Act. There, the CIT(A) had allowed the claim on the basis of Explanation (3) to section 10A of the Act, as per which, the profits and gains derived from onsite development of computer software including services of development of software outside India is deemed to be profits and gains derived from the export of computers software outside India, w.e.f. 1.4.2001. There was no dispute that the Japan Branch of the assessee was to 6 ITA No.3920/Del./10 (AY : 2004-05) provide onsite development service. The profits derived by the Japan Branch of the assessee were found to qualify for exemption 10A of the Act.
15. The facts situation regarding this issue remained much the same for AY 2003-04, for which year also, the Tribunal's order (supra) allowed the assessee's claim. In the year under consideration also, the facts continued to remain the same. As such, respectfully following the said Tribunal's orders, this issue is decided in favour of the assessee. Ground no.3 is, therefore, rejected.
16. In the result, the appeal filed by the department is dismissed.
17. Order pronounced in the open court 14.01.2010.
Sd/- Sd/-
(K.G. BANSAL) (A.D. JAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: Jan. 14, 2011.
*SKB*
Copy forwarded to:-
to:-
1. The Assessee
2. The Revenue
3. The CIT
4. The CIT (A)-
(A)-XII, Delhi.
5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi.
Asstt. Registrar, Income-
Income-tax Appellate Tribunal New Delhi.
7ITA No.3920/Del./10 (AY : 2004-05) 8