Income Tax Appellate Tribunal - Bangalore
Assistant Commissioner Of Income-Tax, ... vs M/S Citrix R & D India Pvt Ltd, Bangalore on 1 June, 2018
ITA.99/Bang/2017 & CO.75/Bang/2017 Page - 1
IN THE INCOME TAX APPELLATE TRIBUNAL
BENGALURU BENCH 'C', BENGALURU
BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER
AND
SHRI. LALIET KUMAR, JUDICIAL MEMBER
I.T.A No.99/Bang/2017
(Assessment Year : 2008-09)
Asst. Commissioner of Income-tax,
Circle -2(1)(11), Bengaluru .. Appellant
v.
M/s. Citrix R & D India P. Ltd,
No.33, Prestige Dynasty, Next to HCL,
Ulsoor Road, Begaluru 560 042 .. Respondent
PAN : AABCN3639C
Cross Objection No.75/Bang/2017
(In I.T.A No.99/Bang/2017)
(Assessment Year : 2008-09)
(By the Assessee)
Assessee by : Shri. P. K. Prasad, Advocate
Revenue by : Dr. P. V. Pradeep Kumar, Addl. CIT
Heard on : 23.05.2018
Pronounced on : 01.06.2018
ORDER
PER LALIET KUMAR, JUDICIAL MEMBER :
These are appeal and cross objection filed by the Revenue and the assessee respectively, against the order of the CIT (A), Bengaluru -2, Bengaluru, dt.10.08.2016, for the A. Y. 2008-09.
ITA.99/Bang/2017 & CO.75/Bang/2017 Page - 2 The grounds of appeal raised by the Revenue are as under :
The grounds raised by the assessee in its cross objection are as under :
ITA.99/Bang/2017 & CO.75/Bang/2017 Page - 3 Revenue's appeal :
02. Grounds 1, 3 and 4 raised by the Revenue pertains to the issue of pay and payable, as is clear from the grounds which pertain to the disallowance u/s.40(a)(ia) of the Act.
03. The Ld. DR has placed reliance upon the order passed by the lower authorities.
04. The Ld. AR appearing on behalf of the assessee has submitted that the Revenue should not be aggrieved by the order passed by the CIT (A), as the CIT (A) has disallowed the expenditure u/s.40(a)(i) of the Act and therefore the issue of pay and payable, does not arise in the present appeal.
05. We have heard the rival contentions and perused the record.
As correctly pointed out by the Ld. AR, the issue of pay and payable does not arise in the present appeal as the lower authorities Have disallowed u/s.40(a)(i). We agree with the lower authorities and dismiss the appeal of the Revenue on this issue.
06. In respect of ground 2 of the Revenue, it was submitted by the Ld. DR that the CIT (A) relying upon the judgment of the Hon'ble Bombay High Court in CIT v. Gem Plus Jewellery India Ltd [(2010) 194 taxman 192], has directed the AO to recomputed the deduction u/s.10A of the Act. It was submitted by the Ld. DR that the CIT (A) has not decided the issue conclusively and had erred in directing the AO to recompute the deduction u/s.10A.
ITA.99/Bang/2017 & CO.75/Bang/2017 Page - 4
07. On the other hand the Ld. AR has submitted that the CIT (A) has directed the AO to recompute the deduction u/s.10A of the Act, only after relying upon the judgment of the Hon'ble Bombay High Court in the matter of Gem Plus Jewellery India Ltd (supra). Hence there was no lacuna in the direction of the CIT (A).
08. We have heard the rival contentions and perused the material. The ground raised by the Revenue before us is, whether the CIT (A) was correct in deleting the addition made on account of disallowance u/s.40(a)(ia), relying on the decision of the Hon'ble Bombay High Court in the matter of Gem Plus Jewellery India Ltd (supra), as it does not have the judicial precedence value for the CIT (A) at Bengaluru.
09. The core issue emerging from ground no.3 was whether the judgment rendered by the non-jurisdictional High Court binds the Revenue or not. Firstly, we may like to point out that the issue of enhancement of profit resulting on account of disallowance u/s.40(a)(i) u/s.10A had already been settled by the coordinate bench in the matter of Cerner Healthcare Solutions P. Ltd [(2017) 83 taxmann.com 62], which we will refer herein below. Secondly, The contention raised by way of the present ground is that the judgment in Gem Plus Jewellery Ltd (supra) is not binding on the CIT (A), based in Bengaluru. In our view, the Revenue is not permitted to take this ground of jurisdictional or non-jurisdictional issue. In the considered opinion of the bench, this issue is no more res integra and is settled by a catena of judgments. For this ITA.99/Bang/2017 & CO.75/Bang/2017 Page - 5 proposition we rely upon ACIT v. Aurangabad Holiday Resorts (P.) Ltd. [118 ITD 1], wherein the coordinate bench held as under :
"5. As observed by a Co-ordinate Bench of this Tribunal, in the case of Tej International (P.) Ltd. v. DCIT (69 TTJ 650), in the hierarchical judicial system that we have in India, the wisdom of the court below has to yield to the higher wisdom of the court above and, therefore, once an authority higher than this Tribunal has expressed its esteemed views on an issue, normally the decision of the higher judicial authority is to be followed. The Bench has further held that the fact that the judgment of the higher judicial forum is from a non- jurisdictional High Court does not really alter this position, as laid down by the Hon'ble Bombay High Court in the case of CIT v. Godavari Devi Saraf ( 113 ITR 589). For slightly different reasons and alongwith some other observations on the issue, which we shall set out a little later, we are in agreement with the conclusions arrived in this case.
6. That takes us to the question whether this decision stands overruled by the Hon'ble Bombay High Court's later judgment in the case of Thana Electricity Co. Ltd. (supra), as submitted by the learned Departmental Representative.
7. It is also important to bear in mind that the question requiring adjudication by Their Lordship was whether or not decision of one of the High Courts was binding on the other High Courts. This will be clear from following observations made by Their Lordships in the beginning of the judgment :
"On a careful consideration of the submissions of the learned counsel for the assessee, we find that before taking up the issue involved in the question of law referred to us in this case for consideration, it is necessary to first decide.... whether this Court, while interpreting an all India statute like Income-tax Act, is bound to follow the decisions of any other High Court and to decide accordingly, even if its own view is contrary thereto, because of the practice followed in this Court. Because, if we are to accept this submission, it will be an exercise in futility to examine the real controversy before us...."
8. One of the propositions that Their Lordships took note of was that 'the decisions of the High Court on the subordinate Courts and authorities or Tribunals under its superintendence throughout the territories in relation to which it exercises jurisdiction (but) it does not extend beyond its territorial jurisdiction.' Their Lordships in the same paragraph also noted that 'A Division Bench of the High Court ITA.99/Bang/2017 & CO.75/Bang/2017 Page - 6 should follow the decision of another Division Bench of equal strength or a Full Bench of the same High Court', and 'if one Division Bench differs with another Division Bench of the same High Court, it should refer the case to a larger Bench'. Having thus noted the proposition, Their Lordships proceeded to 'analyse the decisions of this Court, on which reliance has been placed by the learned counsel for the assessee, in support of his contention that decision of any other High Court on all India statute like Income-tax Act, is binding even on this Court and on the Tribunals outside jurisdictions of that High Court'. On Godavari Devi Saraf's case (supra), which was delivered by a Division Bench of equal strength of this very Hon'ble High Court, Their Lordships took note of revenue's stand as follows :
"Referring to the observations of Godavari Devi (supra), that an all India Tribunal acting anywhere should follow the decisions of any other High Court on the point, it was submitted by the counsel of the revenue that this observation itself would show that the High Court was aware of the fact that different High Courts were not bound by the decisions of each other and, as such, there may be contrary decisions of different High Courts on the same point."
9. The issue of consideration was thus confined to the question whether or not a High Court decision is binding on another High Court or not. That admittedly was the core issue decided by Their Lordships. As for the binding nature of non-jurisdictional High Court decisions on the Tribunal, the observations made by Their Lordships were no more than obiter dictum and in this very judgment, Their Lordships have held that even in the case of Hon'ble Supreme Court judgments, which are binding on all Courts, except Supreme Court itself, but 'what is binding, of course, is the ratio of the decision and not every expression found therein'. Their Lordships have also referred to the oft quoted judgment of the Hon'ble Supreme Court in the case of CIT v. Sun Engg. Works (P.) Ltd. ( 198 ITR 297) wherein it is held that 'it is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of question under consideration, and treat it to be complete law declared by this Court." [Emphasis supplied].
10. In this light, and bearing in mind the fact that limited question before Their Lordships was whether or not decision of one of the High Courts is binding on another High Court, it would appear to us that ratio decidendi in Thana Electricity Co. Ltd. (supra), is on the non-binding nature of a High Court's judgment on another High Court. In any case, this Division Bench did not, and as stated in this ITA.99/Bang/2017 & CO.75/Bang/2017 Page - 7 judgment itself, could not have differed with another Division Bench of the same strength in the case of Godavari Devi Saraf (supra). Therefore, it cannot be open to a subordinate Tribunal like us to disregard any of the judgments of the Hon'ble Bombay High Court, whether in the case of Thana Electricity Co. Ltd. (supra) or in the case of Godavari Devi Saraf. It is indeed our duty to loyally extend utmost respect and reverence to the Hon'ble High Court, and to read these two judgments by the Division Benches of equal strength of the Hon'ble jurisdictional High Court, i.e., in the cases of Thana Electricity Co. Ltd. (supra) and Godavari Devi Saraf (supra), in a harmonious manner."
In our view, therefore the judgment of the non-jurisdictional High Court binds the Revenue, unless there is a contrary jurisdictional High Court judgment. Further We also find that case is covered by coordinate bench decision in the matter of Cerner Healthcare Solutions P. Ltd [ITA.675/Bang/2012, dt.08.01.2016], wherein the coordinate bench in paras 19 and 20 held as under :
19. As rightly contended on behalf of the Assessee the consequence of disallowance u/s.40(a)(ia) of the Act will be that the business profits of the Assessee to that extent will stand enhanced. In the case of Gem Plus Jewellery India Ltd. (supra), the Hon'ble Bombay High Court had to answer the following question of law:
"Whether on the facts and in the circumstances of the case, the Tribunal was justified in directing the Assessing Officer to grant the exemption u/s.10A of the Act on the assessed income, which was enhanced due to disallowance of employer's as well as employee's contribution towards PF/ ESIC;"
The Hon'ble Bombay High Court held on the above question of law as follows:
"12. By reason of the judgment of the Supreme Court in Commissioner of Income Tax v. Alom Extrusions Limited the employer's contribution was liable to be allowed, since it was deposited by the due date for the filing of the return. The peculiar position, however, as it obtains in the present case arises out of the fact that the disallowance which was effected by the Assessing Officer has not, the Court is informed, been challenged by the assessee. As a matter of fact the question of law which is formulated ITA.99/Bang/2017 & CO.75/Bang/2017 Page - 8 by the Revenue proceeds on the basis that the assessed income was enhanced due to the disallowance of the employer's as well as the employees' contribution towards Provident Fund /ESIC and the only question which is canvassed on behalf of the Revenue is whether on that basis the Tribunal was justified in directing the Assessing Officer to grant the exemption under Section 10A. On this position, in the present case it cannot be disputed that the net consequence of the disallowance of the employer's and the employee's contribution is that the business profits have to that extent been enhanced. There was, as we have already noted, an add back by the Assessing Officer to the income. All profits of the 4 (2009) 319 ITR 306 unit of the assessee have been derived from manufacturing activity.
The salaries paid by the assessee, it has not been disputed, relate to the manufacturing activity. The disallowance of the Provident Fund/ ESIC payments has been made because of the statutory provisions - Section 43B in the case of the employer's contribution and Section 36(v) read with Section 2(24)(x) in the case of the employee's contribution which has been deemed to be the income of the assessee. The plain consequence of the disallowance and the add back that has been made by the Assessing Officer is an increase in the business profits of the assessee. The contention of the Revenue that in computing the deduction under Section 10A the addition made on account of the disallowance of the Provident Fund/ESIC payments ought to be ignored cannot be accepted. No statutory provision to that effect having been made, the plain consequence of the disallowance made by the Assessing Officer must follow. The second question shall accordingly stand answered against the Revenue and in favour of the assessee."
20. In view of the aforesaid decision of the Hon'ble Bombay High Court which has been followed in several decisions rendered by ITAT Benches of Delhi, Hyderabad and Bangalore referred to in the submissions made by the learned counsel for the Assessee, we are of the view that the order of the CIT(A) on this issue does not call for any interference. Consequently, grounds Nos. 5 to 8 raised by the revenue are dismissed.
Therefore in the considered opinion of the bench, the coordinate bench, in similar facts, has taken a decision against the Revenue. The decision rendered by the coordinate bench is binding.
ITA.99/Bang/2017 & CO.75/Bang/2017 Page - 9
10. We may record that the CIT (A) in para 9.5 of his order has remanded the matter back to the AO for re computing the deduction u/s.10A of the Act. In our view, the CIT (A) has no power to remand the matter for re computing to the AO. Therefore, in the facts of the case, we direct the AO to re compute the deduction u/s.10A of the assessee, considering the disallowance made u/s.40(a)(i) as it would result in enhancing the profit derived by the assessee which in turn results in enhanced profit deduction u/s.10A, We may also point out that at the time of hearing, the bench had indicated, on the submission of Ld. AR ,to send back the matter to the file of AO, under the wrong impression that the case pertains to 80IB, whereas there is no requirement of such sending Back to the AO for verification as the case pertains to 10A. Accordingly, the ground no.3 is decided against the Revenue.
Cross objection No.75/Bang/2017 - By the assessee :
09. As we have dismissed the Revenue appeal, the cross objection filed becomes academic and hence dismissed as infructuous.
10. To summarise, Revenue's appeal is dismissed and the cross objection of the assessee is also dismissed as infructuous.
Order pronounced in the open court on 1st day of June, 2018.
Sd/- Sd/-
(A. K. GARODIA) (LALIET KUMAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Bengaluru
Dated : 01.06.2018
MCN*
ITA.99/Bang/2017 & CO.75/Bang/2017 Page - 10
Copy to:
1. The assessee
2. The Assessing Officer
3. The Commissioner of Income-tax
4. Commissioner of Income-tax(A)
5. DR
6. GF, ITAT, Bangalore
By order
Senior Private Secretary,
Income Tax Appellate Tribunal,
Bangalore.