Income Tax Appellate Tribunal - Hyderabad
Iic Services (India) Private Limited, ... vs Acit, Circle-2(2), Hyd, Hyderabad on 29 September, 2017
ITA No 337 of 2015 IIC Services India P Ltd Hyderabad.
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ' A ' Bench, Hyderabad
Before Smt. P. Madhavi Devi, Judicial Member
AND
Shri S.Rifaur Rahman, Accountant Member
ITA No.337/Hyd/2015
(Assessment Year: 2010-11)
M/s. IIC Services (India) Vs Asstt. Commissioner of
Private Limited Income Tax, Circle 2(2),
Hyderabad Hyderabad
PAN: AAACI 4455 N
(Appellant) (Respondent)
For Assessee : Shri C. Subramanyam
For Revenue : Smt. Suman Malik, DR
Date of Hearing: 19.09.2017
Date of Pronouncement: 29.09.2017
ORDER
Per Smt. P. Madhavi Devi, J.M.
This is assessee's appeal for the A.Y 2010-11 against the order of the CIT (A)-2, Hyderabad, dated 18th December, 2014.. The assessee has raised the following grounds of appeal:
"1.0 That the orders passed by the CIT (A) are contrary to the provisions of law.
1.1 The learned CIT (A) ought to have allowed for carry forward and set off of losses of amalgamating company, losses up to the date of merger, as per the provisions of section 72A of the I.T. Act.
1.2 The learned CIT (A) ought to have known that claim for set off of carry forward losses of Page 1 of 6 ITA No 337 of 2015 IIC Services India P Ltd Hyderabad.
amalgamating company, there is no such condition provided in sub-section 7 of section 72A of the I.T. Act that the loss should arise out of manufacture of computer software when it is enough if assessee company is engaged in the business of manufacture of computer software".
2. Brief facts of the case are that the assessee company, engaged in the business of export of software and technical services, filed its return of income for the A.Y 2010-11 on 28.09.2010 admitting total income of Rs.45,38,643. The assessment u/s 143(3) of the Act was completed assessing the taxable income at Rs.3,37,43,080. Thereafter, the assessee filed an application u/s 154 of the I. T. Act stating that the adjustment for carry forward loss of Rs.7,48,28,011 should be given against the assessed income of Rs.3,37,43,080. It was also stated that a company by name M/s. Beacon Global Services Ltd had merged with the assessee company during the financial year relevant to A.Y 2010-11, and as such, the loss of the said company up to the date of merger, would also be available to assessee to be set off against the current year's income. The assessee was asked to file the details of above claim. The assessee filed the details of its own brought forward loss and also the brought forward loss of M/s. Beacon Global Services Ltd along with the Annual Report & Tax Audit report of M/s. Beacon Global Services Ltd. The AO observed that in the application u/s 154 of the Act, the assessee has claimed carry forward business loss of M/s. Beacon Global Services Ltd as well as the assessee's own loss to be set off against the assessee's current year's income. The AO observed that the carry forward business loss of M/s. Beacon Global Services Ltd is not allowable as the said company is not into the manufacture of Page 2 of 6 ITA No 337 of 2015 IIC Services India P Ltd Hyderabad.
computer software as is required under sub section (2) of section 72A of the I.T. Act. He observed that the M/s. Beacon Global Services Ltd was engaged in the business of export of call centre services and not in manufacture of computer software. He therefore, held that the claim to set off the carry forward loss of M/s. Beacon Global Services Ltd from the assessee's current year's income is not allowable. As regards the assessee's claim of set off of carry forward loss of its own from the business of export of computer software, he allowed the same to the extent of Rs.35,88,949. Aggrieved, the assessee preferred an appeal before the CIT (A) who confirmed the order of the AO and the assessee is in second appeal before us.
3. The learned Counsel for the assessee submitted that M/s. Beacon Global Services Ltd was set up for "facilitating business development of computer software, programmes, management concepts, information and communication facility"
as is evident from the main objectives to be pursued by the company (on its incorporation), from the memorandum of association. Therefore, according to him, the said company was formed for manufacture of computer software and it is to be considered as engaged in the business of development of computer software since its incorporation. He submitted that it is sufficient if the amalgamated company is engaged in the business of manufacture of computer services and it is not required that it has also to be manufacturing computer software. For this purpose, he placed reliance upon the decision of the Hon'ble Karnataka High Court in the case of CIT vs. M/s. KBD Sugars & Distilleries Ltd in ITA No.773 of 2009 dated 16.10.2015 wherein Page 3 of 6 ITA No 337 of 2015 IIC Services India P Ltd Hyderabad.
after considering the provisions of section 72A of the Act, it was held that section 72A of the Act, being a beneficial provision, should be interpreted liberally in favour of the assessee. He also relied upon the case of Dy. CIT vs. Gujarat NRE Coke Ltd, reported in (2008) 15 TTJ 822, wherein it was held that the word used in section 72A, i.e. "engaged in business" means that a person is stated to be engaged in the business wherein a business has been set up or it has come into existence and "engaged in business" does not imply "engaged in production".
4. The learned Counsel for the assessee had also contested the findings of the AO that the assessee has not filed its return of income and the assessee's claim u/s 154 cannot be allowed or considered in view of the Hon'ble Supreme Court in the case of Goetze (India) Ltd vs. CIT (284 ITR 0323) (S.C). The learned Counsel for the assessee submitted that the assessee has filed the revised return within the time allowed under the Act and he has filed a copy of the e-file in support of assessee's contentions that it has filed its revised return of income for the A.Y 2010-11 i.e. within the time permitted.
5. The learned DR, on the other hand, supported the orders of the authorities below and submitted that the company M/s. Beacon Global Services Ltd was never engaged in the business of manufacture of computer services and admittedly it was only in export of call centre services. Therefore, according to her, the assessee is not eligible for set off of carry forward losses of the amalgamated company from its current years' income.
Page 4 of 6ITA No 337 of 2015 IIC Services India P Ltd Hyderabad.
6. Having regard to the rival contentions and the material on record, we find that the assessee is claiming set off of carry forward losses of amalgamated company M/s. Beacon Global Services Ltd. Section 72A of the Act allows set off of carried forward loss of an amalgamating company from the income of an amalgamated company, provided it satisfied certain conditions. Clause (aa) of sub section 7 of section 72A describes "Industrial Undertaking" to mean any undertaking which is engaged in (i) the manufacture or processing of goods; or (ii) the manufacture of computer software. In the decisions relied upon by the learned Counsel for the assessee, the Hon'ble Courts have held that if the amalgamating company has obtained license or when it has set up the business, it has to be considered to be engaged in the business. The question before us is, whether the amalgamating company before us is engaged in the business of manufacture of computer software?. Though one of the main objectives of the said company is "development of computer software", it is not brought out on record by the assessee that the said company had taken any step in this regard or that it has ever engaged itself in the manufacture of computer software. The assessee's contention that from the date of incorporation, the assessee company should be considered as engaged in the manufacture of computer software, is not acceptable because the Memorandum of Association of a company has to contain all the objectives that a company wishes to engage in either in the present or in future but all the objectives may not be pursued at the same time. It may also so happen that some of the objectives may never be pursued at all. In that case, it cannot be said that the said company is engaged in all of the businesses which are mentioned in the Page 5 of 6 ITA No 337 of 2015 IIC Services India P Ltd Hyderabad.
objectives/clause of the Memorandum of Association, unless and until the company has taken some concrete steps in this regard. In the absence of any material on record to show that M/s. Beacon Global Services Ltd has ever carried or taken any steps for manufacture of computer software, we are not able to accept the assessee's contention. In view of the same, we see no reason to interfere with the order of the CIT (A) and the assessee's appeal is accordingly dismissed.
7. In the result, assessee's appeal is dismissed. Order pronounced in the Open Court on 29th September, 2017.
Sd/- Sd/-
(S.Rifaur Rahman) (P. Madhavi Devi)
Accountant Member Judicial Member
Hyderabad, dated 29th September, 2017.
Vinodan/sps
Copy to:
1 M/s. IIC Services (India) Pvt. Ltd, 405 Babukhan Millenium
Centre, Raj Bhavan Road, Near Yashodha Hospital, Somajiguda, Hyderabad 2 Asstt. Commissioner of Income Tax, Circle 2(2), 8th Floor, IT Towers, AC Guards, Hyderabad 3 CIT (A)-2 Hyderabad 4 CIT - 2 Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File By Order Page 6 of 6