Karnataka High Court
The Commissioner Of Income Tax vs M/S Fusion Software Engg Pvt Ltd on 2 November, 2011
Bench: V.G.Sabhahit, Ravi Malimath
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Cxx'.~.~.~.\.\\\\-\-3-3-3-1\'\'\'§.\.\.'\.\R'\¥-\\-'t3.&&:{\X.'\Xii§; E {$fE'& JEJDGEMENT E § These Ewes appeais am flied by ihe_~r'€cva?i:%;:::i€:. Esgjrzg aggrieved by the order fit. =._ N{;«.3}5g'Ba1:1g/2065 and by Income Tax AppeIIa%§"':>B,;ingal0re ihereinaftsr called as respenden: ---
3.S§3€SS€€ flied remrn 19992090 admitting V However, the:
return incerporaied on
04. 1 1. £392. jgifmicazed profit from businegs 4' 1 , E *5', 83, 132 /' ~ and me If18.E'>v.""?L,*:*;%:';<§f'1f1'_AA:CEE§i~i'§f1€fi an this among: 3330.
E?%f&:S".;§§3'G¢€SS€Ci on '.?.§2.2§$Q resuiiing in mi} deir;":,A;é;§::1. E:§'_j rsiurrz sf magma far the ; '.25' 2C%Q2~Gf:§ '¢;:.sse3S<:':'$ E133 fiied fgrm 58?' indiaaiiag that E: was thiré L I :.2fir~&§"':§f..$§aim af €X€tE'I1p'£i8fi mafia? Secéfié af E316 EEECGEEES .__""':§.""a4:><:V§fi;€i éhsrairsaftér zjalisé as '££:_*éf; fag? Shari}. Since the;
E ........ _' 53517,, I:;;}fi'@ /£" £ ';; 7)////////////z>3-;-.-.-.-.-.~.-. .
««<wmmmm mW%W § 3 3 2/méer ;S€{:.1§1% :3? {ha £3.02'; as it is I'€€§f1Sf}"1§*L°{§0I1 ::'.§-,:h5 earlier ssiabiishmant azzd mere than 29% and znachinery already available _<:21jC§"
establighrnent has been 1.lffliSE3d f:3I'_}YIiai§_}lfé.C's:}.iFi£3,€.'1?;'illA' the 81'? unit; and furtha' the ear;iis3f"--0rganiV3at§0fi has bsen closed and assessee szfgce the year 1993 but not: in :é:(.;:.g;'.gWfli;FCiiI1'gI}F,VH%iiéaHOW'€C} tbs exemption Clgimed order dig 209% January'V2_i{)4C}iji: had 21180 held that the be added for Sec. 1 TLSJB of the Act and being agg":*i_é€I€d' ETA N0862 to 64/W» ft§(2}/ff;'{'?{A}ij.VG3e§5;' xaréfire fiied by the 38558866 b€'fOE'€ sf I:2C0m€ Tax {Appaals} -~ I Ba::.g3.EQre ézfizfi 'ié§é:V'ih<)r§V:_§,»' b}? cer::ie: dt. E6%i2;2€}§4 heifi {hat :33 <;§::§:'{:sns Eaié dam in :aA{2:):f:;{b; am EQ(2;}{i§§f:
'A <?i":_¢€;;é campiiéé with. Howszrer, canéiiiezz in is :19: c<::m§§;Z€§ with ané aciéordiiigljg E26-Ed ihai;25
,'§ M...Mmwmmwmmmmwmmwmmmfita ;. .:' Sections };§A{2){B{b}; '2€}{2)A{I}; ':M:L:§{2:;Vg:VV:i;«' $ and 338 05 the Act'? ..
2. Whether the Tribune} ésgagi ee:>.rre§:'é'é helding that theeeepéroviéiefl fer 3 debts, dc:-ubtfui £nVe;§tments'--a_rié;i ,€E3.3E,f..'i;}tf?;i} a&Vanees shguid :n.Sf"- 'a ddedt ' for the puI'pGS<i*.V:i)f 'eor:1 p1fi:§f1g;>"ebQ0i< profit u/s.::5JB e_f.t1f 1_e--.Ae.t?;_ ' "
5. H;;x::5ex};:::"'.wri'en€rm ?;§52'/06 and 953/oe. were pasted itifvéas fountfi that {TA N0.552/QOQEEX:;efm_ee1fed to these cases and it was deiiniieei efrerii .}I'TAJS?:52 and 953 of 2008 by __Grder'._§jfi§ eA.I3.G'?.:Z_CV>:jVtZ end it was held that these are "~._ag§pe3.:e adjudication of Ehe faflewing {we sLé§;:Si::;2':fii3E".q--Lie§s*é§e:::s of 1336.: :
{E} Wheiheg' ihe Tribunai X33813 eerreei £2': heiéing that the assessee xveuid be enfifled to eiaim allowance urzdeer Seeéziezza IGA of ihe Aci: in re$§e:':€ :3?
<3 we" X x< ~. 1 iv 3' M ~%{3- Sefiware Deveiepmeni C7--74{:'3:1'1'{€.ifT": " ' ai Eevaiah Ceurt Ja}.?a:3.é:ga:2. ' ._ Bangaiere by-"""i§:1er§_::gv4 'i}1e"
firfiing of the Assessijng»C3ffi£te1<'~.__ that the same Vwas 'set '::p»bj»,2f "
recenstru.:;3:iQ:: efthe asseS:seef_s _ business a:1egi"'eQnsequent1§gg 3 eiaim was 1101- ,,aiEQwab1e_ 1:; View ef V sec::t5ns" 1C}A[2}'{I}{b); 1Q{2};.'»\,{{)_; '--e:a2.g;2}{i1§.';*ee 2:12;: 338 of the Act?' " .
'€:?:}_W11e:h<-:;:~--V»~': tihe" --i_"-Tribunal was 5Ij_,f:§f31'1*e'e_t ._in that the _ pi:'3%'iS'i:§}F1. far '=_d'eub1:fu1 debts,
-------- _ ' "-1:;;;1Qu-b'if1:'i " «--...,i};1x;*1estrnents and 1 H ':£Q1:bL£fi1i advances should net "I1'-~beV--,at§4;iede'back for the purpoee Si"-<':"o1'm'p31ting book profit under
-_Se{:iiv::;._1:"i IISJB of the Act?"
,'V We iheard the iearneei eeunsel A '__3.;i'?:§€»3:i§'§1'1g'A§'£}{:A:"ihfi appeiéané W Revenue and the Eearned eeijjfieei agfieaéfzig fer éhe respenéerzt. .. '?. " L€aE'§1f3§; eeuneel a§§earir:g fer ihe appeiiants '_'_«e&~__eé:%§f::'fié:eé file: 'file §'E;%."f' was get ai afi gzgsiifiefi i3{E //%% %%$ '%; W7)////////////;u,.-.~.-.-.-.-. . xx , ,.w_..W,W, .1-;-.x.xya.~.u.-.-s.-.~.~.~.-:--\'\'\'\'\'\'\.\\\\\\\\\\\¥¥Xi'%Q§'\ $ AC? "£'h€r€f<3re, 816 second Substantial qusstian cf'--éazar may be answered in favour of the appefiant.
8. Learned counsel respandent sL:bm:'tt€d that, b_theu '«.3::€ é::9"n<:i question of law hat} aIread'}§?""L:..:f§'ee:1 the H<)nV'bl€ Supreme in GE' INCQMBTAX Vse :--_~icL SERVICES LTD, raported wherein the Horfbie held that the bad and and Gamma? be added back fer beak: profit under Sec; 2310:. Wherefaérefi {ha Sfiéfifld Saw' has ta be amswéred againsi favour Sf {ha 38868336 anéi so far as V' ihe $'§b:%{é.n§ia1 qusgiisn af Eaw is {:on<:&rn${i {ha 2&3 the 517328.: a::ih<::z*ii}f gm {he q"%2€$i§G§% sf i"as::%:
._§i:.a5}~§:::g'" :regard is {he maéeriai an reseré ihaé was /flfafigW//%7%lZ}3%,5 W(%77//////////n;>2-M-aw.
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'£8. T316 m3.¥;€:"§3j 32$ rscord weuid sEe_a§E1§;' 5"
{E13}: thé Assssssing Gffiater held ihsst ':::EE3"£:"r::Eg/'fi:':3%i§%%.§'-'€31 S€C_1OA{2) {E}, (ii) and (iii) haxrfi E1{§{ ?3;é(3:i Wharefere, the 33365868 is :10: entiiléd £Q,v»évR;S§:T1pfit:jHu§' The appefiate auihority heki Elguéé-V.{iii) of S80. 30A {2} had bsen <:1a1vfi'$é (i§) was not satisfied as the SE'? was reconstruction5:3i';«.;§:'- existence in Deveiah chosen ':0 file an appea} the: assessee had S3.tiSfi€CiV:V".{;'1éL1%{S€ Se<:.10A(2) <31' the Act. Even :3th6ré%§7'£.<g€:, .i:1fi§€._I;I1§§.'£'.§}.é'h§Ch is {he final auiheriiy an .~-ighs {;;;$;?;s';§f0nVVM{>f ffi€:':,.._l1.a5 rightiy held; that having regard '-:0 ifhlfi-.II1z:s.§;é:i;;1:'{:>:1 recgrd, i': was dear "chad: the §§ar::t and :na <:%:i;*:'€z};« iE::'.:t5'wa$ a:»*a;§ab?::f3 in ihe E}eva§aLh C0122": unit ' 'W33 36$. f§*:._aré 2G% cf the fixisting mashimsyy in ST? amt hészymg regard :9 E326 numbey sf Séaff ané siheéc 530:3 Wsfsf {he (33%; ihé Said {we {?8fE§§_§§€}'iES 33 sgascified £1:
-§{)» Devaiah C::2u:*: gait. The said findi:r1g an the qu€s€:or:,___z:2f facé £3 dearly guppgjfied by ihe material er: §eC'éf§; ;§é' the matsriai prsduced by the assessee w9's:;: 1_ § V' Show "the: '':he STP unii: was estaE}}iAé§h€«:i¢_Vx2é:ith« arid machinay and assets purchaséd and the staff was also réC«1%::j;'i1i€d.V. W9#nd machinery used was LSFP and the earlier establishment work with the machinery' to 31.3,199E3, Having of the word of the Act and d€<::si0:1 '<;§_ ':hV€ Cour': in :he case of TEXT§L'::LA.i\xL;'i.C-?;i§If'E3R'§' €3.0RP§I LTD. VS; Cifé'. {SC} ":;epef:~::<éci'%"L:g;: {;9*z*?} Vibfi YER :95, wherein 1: :5 heid as '"'*-'As»--.."i3i:="iE1e insiani casa, SE86 than new j i§?€§§,_"§S'{§'ZZa}. underiakings 33¢: sepaiate arid V' V. _ é§;":§€§€1i:{i§::i §:"<::é::::§§<>::: uniis in tin? $613.36:
\< atmtj' ' {TR £32939 {SCL 'wherein :he Hezfble Sugreme Ceurtgfias eiearfiy heid 'ihaf. baa and deubtful debte can said is be liability and eannet be a,deZ__e{}.._: ""255 eemputing the book profit under I $126.4 it has been clearly »QE3se:€éeed:"--.h}?
Supreme Ceurt as foilmvs :
"The provision fez' ~..§:>a::i "éL1f1C5g ' 1' ri:Cit;_bif:Je? "debvfi iherefere, is made 4':Q_e'e(:}:J;'eV%? tine'-§i:.eM "probable diminution in the Veziuefof aése;f;.vi.'e., debt which is age' :§eceié!"3:f:>}e by the assessee. jfi'i1.ere'f€3ré;f',SLie'hga 'prbvision cannet be ve:~i.'2ii;<:i,i:fa:3 "-a'--.Vp'z-*0viA 11:31? for a. liability, beea.:1s--e" is' not recoverable I10 iiab:}fitj;L<e@u'i{§-- upon the assessee. E§:--:he §:'e§§e::i.v"ea;se;" the debt fie the amount .i§§<C€§V:a;}1¢ §5',;~----e::>«1«<e aseessee and :10: any ' ieiiabziigijfiflfiayabie by 'She assessee am}, ~_ §3f0'5f§SiQfi maeie éeavazuzie irreeevefiabiiiiy ef the deb: earmei be eaifi '£3 be "a___A§5§eI5ieie:1 fer §§afe§iij~;. Theeefere, in 0:2:
AAVvVT§?:ie2a;: item {{2} of 'ihe Expéanaiien is neat . f?1IO'.g%%:1g:., * aitraci6§ $0 ihe facts sf ihge ;;>":'{@3er£: :"i €116 circumstances, £125; Asséssizfsg Cf-E1'? net ;us::fied m addi3g"--~..§"a Wig %=.
F: th'é".;3Mri>xrisi0::3 for :a:E1{§f;*%: '$:'§~.idAgjfinciple laid dawn by In wijéw the H<>n"E>§:::_}%T:§upi€:§i':;«v:'"fifanzrig. We answer the seccrnd Substaritzfai . cjuefstiéfisa V "'3Ii£1x assesses afrd. agéf GRDER Apiafiéiis are dismissed;