Income Tax Appellate Tribunal - Chennai
Helios & Matheson Information ... vs Department Of Income Tax on 22 January, 2016
आयकर अपील
य अ धकरण, 'डी' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH, CHENNAI
ी एन.आर.एस. गणेशन, या यक सद य एवं
ी ए. मोहन अलंकामणी, लेखा सद य केसम&
BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER
आयकर अपील सं./ITA Nos.2027, 2028, 2029 & 2030/Mds/2014
नधा(रण वष( / Assessment Years : 2006-07, 2008-09, 2009-10 & 2010-11
The Deputy Commissioner of M/s Helios & Matheson Information
Income Tax, v. Technology Limited,
Company Circle II(2), No.9, Adwave Towers,
Chennai - 600 034. South Boag Road, T. Nagar,
Chennai - 600 017.
PAN : AAACE 0805 A
(अपीलाथ,/Appellant) (-.यथ,/Respondent)
अपीलाथ, क/ ओर से/Appellant by : Dr. Milind Madhukar Bhusari, CIT
-.यथ, क/ ओर से/Respondent by : Sh. R. Vijayaraghavan, Advocate
सन
ु वाई क/ तार
ख/Date of Hearing : 30.12.2015
घोषणा क/ तार
ख/Date of Pronouncement : 22.01.2016
आदे श /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
All the appeals of the Revenue are directed against the common order of the Commissioner of Income Tax (Appeals) - II, Chennai, dated 19.02.2014, for the assessment years 2006-07, 2008-09, 2009-10 and 2010-11. Since common issue arises for 2 I.T.A. Nos.2027 to 2030/Mds/14 consideration in all these appeals, we heard all these appeals together and disposing of the same by this common order.
2. Dr. Milind Madhukar Bhusari, the Ld. Departmental Representative, submitted that the first issue arises for consideration is with regard to deduction claimed by the assessee under Section 10A of the Income-tax Act, 1961 (in short 'the Act') According to the Ld. D.R., the assessee claimed deduction under Section 10A of the Act and the Commissioner granted the deduction by directing the Assessing Officer to reduce the foreign currency expenses from total turnover. According to the Ld. D.R., for claiming deduction under Section 10A of the Act, the assessee is expected to file return of income within the time specified under Section 139(1) of the Act. Referring to Section 10A of the Act, more particularly, 5th proviso to Section 10A(1) of the Act, the Ld. D.R. submitted that no deduction shall be allowed under Section 10A of the Act if the return was not filed within the due date as specified under Section 139(1) of the Act. In view of the above, the CIT(Appeals) is not justified in directing the Assessing Officer to allow the claim of deduction under Section 10A of the Act. 3 I.T.A. Nos.2027 to 2030/Mds/14
3. On the contrary, Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee filed the returns of income for the assessment years 2006-07 and 2010-11within the time specified under Section 139(1) of the Act. For the assessment years 2008-09 and 2009-10, the returns of income were not filed within the time specified under Section 139(1) of the Act. According to the Ld. counsel, where the return was filed within the due date, the CIT(Appeals) considered the same and allowed the claim of the assessee. Referring to the decision of the Special Bench of this Tribunal in ITO v. Sak Soft Ltd. [313 ITR (AT) 353], the Ld.counsel submitted that the foreign currency expenses were excluded from the total export turnover, therefore, the same has to be excluded from the total turnover. In fact, the CIT(Appeals) has directed the Assessing Officer to exclude from total turnover also. Therefore, the Revenue may not have any grievance at all.
4. We have considered the rival submissions on either side and perused the relevant material available on record. In respect of foreign currency expenses, what is excluded in the export turnover has also to be excluded from total turnover. In other words, numerator and denominator should be of the same figure. Since 4 I.T.A. Nos.2027 to 2030/Mds/14 the Assessing Officer has excluded from export turnover, the same has also to be excluded from total turnover. For the purpose of claiming deduction under Section 10A of the Act, the assessee has to necessarily file the return of income within the time prescribed under Section 139(1) of the Act. The due date specified under Section 139(1) of the Act is the date specified under Section 139(1) and not under Section 139(4) of the Act. Therefore, merely because the assessee filed return of income within the extended period under Section 139(4) of the Act, it will not make the assessee eligible to claim deduction under Section 10A of the Act. In fact, a Special Bench of this Tribunal at Rajkot in Saffire Garments v. ITO (2013) 140 ITD 6 examined this issue elaborately. By placing reliance on the judgment of Apex Court in Prakash Nath Khanna v. CIT (266 ITR 1), the Special Bench found that 5th proviso to Section 10A is mandatory and not directory. The Special Bench further found that when one of the consequences for not filing return of income within the due date prescribed under Section 139(1) of the Act is mandatory, then other consequence of the same failure of the assessee cannot be directory. The Tribunal has found that the assessee has to necessarily file the return of income within the due date specified under Section 139(1) of the Act for the purpose of 5 I.T.A. Nos.2027 to 2030/Mds/14 claiming deduction under Section 10A of the Act. Therefore, the CIT(Appeals) is not justified in allowing the claim of deduction under Section 10A of the Act on the ground that the assessee filed return of income within the period specified under Section 139(4) of the Act. This Tribunal is of the considered opinion that the return has to be necessarily filed under Section 139(1) of the Act. Therefore, when the return was not filed within the period specified under Section 139(1) of the Act, then naturally the assessee is not eligible to claim deduction under Section 10A of the Act.
5. The Ld.counsel for the assessee now claims that the returns of income for the assessment years 2006-07 and 2010-11 were filed within the due date. However, for the assessment years 2008-09 and 2009-10, it was not filed within the due date specified under Section 139(1) of the Act. On perusal of the assessment order, it appears that for the assessment year 2006-07, the assessee filed return of income on 30.11.2006. It is not known what was the due date for filing return of income for the assessment year 2006-07. Similarly, for other assessment year also it is not clear from the orders of the lower authorities the due date for filing return of income under Section 139(1) of the Act specified by the CBDT. 6 I.T.A. Nos.2027 to 2030/Mds/14 Therefore, the order of the CIT(Appeals) is set aside on this issue and the matter is remitted back to the file of the Assessing Officer to verify the due date for filing return of income under Section 139(1) for the respective assessment years. After verification, if the Assessing Officer found that the return of income was filed within the due date specified under Section 139(1), then the assessee is eligible for deduction under Section 10A of the Act. If, for any reason, if the Assessing Officer came to a conclusion that the return of income was not filed under Section 139(1), then the assessee is not eligible for deduction under Section 10A of the Act. Therefore, for a limited purpose of verifying the due date for filing the return of income under Section 139(1) of the Act, the matter is remitted back to the file of the Assessing Officer.
6. The next issue arises for consideration is with regard to disallowance made by the Assessing Officer under Section 14A of the Act.
7. Dr. Milind Madhukar Bhusari, the Ld. Departmental Representative, submitted that the Assessing Officer found that the assessee has made investment in the shares and mutual funds, therefore, income from such investments does not form part of total 7 I.T.A. Nos.2027 to 2030/Mds/14 income. Hence, according to the Ld. D.R., the expenditure related to earning the income was disallowed. However, the CIT(Appeals) deleted the addition made by the Assessing Officer.
8. On the contrary, Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee invested in shares and mutual funds of 100% subsidiary companies. In fact, the assessee has received income only from the Bangalore subsidiary company, where the investment was about `9 Crores. The subsidiary company is also engaged in I.T. business and the investment is in the nature of capital. According to the Ld. counsel, the initial investment was made during financial year 2001-02 and subsequently it was emphasized that the object of the investment was not to earn the dividend income but for commercial expediency.
9. We have considered the rival submissions on either side and perused the relevant material available on record. Section 14A of the Act provides for disallowance of expenditure incurred by the assessee for earning the income which does not form part of total income. Rule 8D of the Income-tax Rules, 1962 provides for method of computation for disallowance. The CIT(Appeals), after considering the material available on record and the investment 8 I.T.A. Nos.2027 to 2030/Mds/14 made by the assessee, directed the Assessing Officer to consider the disallowance of `24,39,220/- and `35,43,108/- for the assessment years 2009-10 and 2010-11 respectively against `1,20,90,107/- and `1,83,22,970/- disallowed by the Assessing Officer in his order. The balance disallowance of `96,50,887/- and `1,47,79,862/- were deleted. In fact, the CIT(Appeals) applied the provisions of Rule 8D for computing the disallowance for the assessment years 2009-10 and 2010-11. For the assessment years 2006-07 and 2008-09, the investments were made in 100% foreign subsidiary companies. No fresh investment had been made in the financial years 2008-09 and 2009-10. Since the investment was made in the subsidiary companies in the form of equity, the CIT(Appeals) found that such investment is outside the scope of Section 14A of the Act. When the assessee invested the funds in subsidiary companies, as rightly submitted by the Ld.counsel for the assessee, the intention is not for earning the exempt income but because of commercial expediency. Therefore, as rightly found by the CIT(Appeals), the provisions of Section 14A would not be applicable for the assessment year 2006-07 and 2008-09. In view of this, we find no reason to interfere with the order of the CIT(Appeals) and accordingly, the same is confirmed. 9 I.T.A. Nos.2027 to 2030/Mds/14
10. In the result, the appeals filed by the Revenue are partly allowed for statistical purposes.
Order pronounced on 22nd January, 2016 at Chennai.
sd/- sd/-
(ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन)
(A. Mohan Alankamony) (N.R.S. Ganesan)
लेखा सद य/Accountant Member या यक सद य/Judicial Member
चे नई/Chennai,
nd
5दनांक/Dated, the 22 January, 2016.
Kri.
आदे श क/ - त6ल7प अ8े7षत/Copy to:
1. अपीलाथ,/Appellant
2. -.यथ,/Respondent
3. आयकर आयु9त (अपील)/CIT(A)-II, Chennai
4. आयकर आयु9त/CIT-II, Chennai
5. 7वभागीय - त न ध/DR
6. गाड( फाईल/GF.