Income Tax Appellate Tribunal - Mumbai
Roamware (India) P.Ltd, Mumbai vs Department Of Income Tax on 9 September, 2016
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IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "B", MUMBAI
BEFORE SHRI R.C. SHARMA(AM) AND SHRI SANDEEP GOSAIN (JM)
ITA No. 1951/MUM/2015
Assessment Year: 2007-08
DCIT 15(3)(1) Vs. Roamware (India) P. Ltd.
R.No. 451 4th Floor, 7th Floor, Sigma Hiranandani
Aayakar Bhavan, Gardens, Technology Street Powai
M.K. Road Mumbai - 400076
Mumbai- 400020
PAN No. AAACU4234H
&
Cross Objection No. 107/Mum/2016
(In ITA No. 1951/Mum/2015)
(Appellant) (Respondent)
Assessee by : Shri. Paras Sarla
Ms. Keerthiga Sharma
Revenue By : Shri. Randhir Gupta
Date of Hearing : 28/07/2016
Date of pronouncement : 09/09/2016
O R D ER
PER SANDEEP GOSAIN, JM :
The present appeal has been filed by the Revenue against the order of Ld. CIT(A)-24, Mumbai dt. 05/01/2015 as well as Cross Objection filed by the assessee against the Revenue.
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2. Firstly we deal with the Appeal of Revenue i.e; ITA No. 1951/Mum/2015.
3. Brief facts of the case are that the assessee is engaged in the business of computer software development and software consultancy. The return of income was e-filed on 31/10/2007, the same was processed under section 143(1) of the Act, thereafter assessment proceeding under section 143(3) of the Income Tax Act was completed on 12/10/2009, taking the total income at Rs. 1,44,33,480. Further reassessment proceeding were initiated by issuance of notice under section 148 dt. 29/03/2012 after recording reasons for reopening of the assessment and after serving statutory notices and seeking reply of the assessee, AO passed order of assessment under section 143(3)(ii)r.w.s 147 of the Income tax Act, 1961 on 28/03/2013 and accordingly Rs. 1,49,88,246/- was treated as unrealized foreign exchange and the deduction under section 10A was restricted by Rs. 18,40,104/- from the actual deduction under section 10A allowed while passing the order under section 143(3) of the Income Tax Act dt. 12/10/2009.
4. Aggrieved by the order of AO assessee preferred appeal before the Ld. CIT(A) and the CIT(A) after considering the case of both the parties has partly allowed the appeal thereby directing the AO to re consider the deduction 3 under section 10A on the enhanced income in respect of two items vis-à-vis leave encashment and bonus.
5. Aggrieved by the order of Ld. CIT(A) Revenue has filed the present appeal before us on the ground mentioned below:
1. " On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the A.O. to rework the deduction u/s 10A on the enhanced income on account of disallowance made in respect of leave encashment and bonus."
6. Ld. DR appearing on behalf of the Revenue submitted that the Ld. CIT erred in directing the AO to reconsider the deduction under section 10A on the enhanced income on account of disallowance made in respect of leave encashment and bonus.
Ld. DR further submitted that on verification or record and details annexed to the return of income filed under section 139(1) of the Act, the AO found that the assessee company has provided details of foreign inward remittance from various overseas parties and has submitted that the total amount received as per FIRCs stands at Rs. 26,50,34,349/-. The said amount was duly audited therefore the same was relied upon.
Ld. DR supported the order of Assessing Officer passed under section 143(3) r.w.s 147 and submitted that the assessee claimed that the entire export proceed have been realized with in the stipulated time as per Act remains unsubstantiated. It was further argued by Ld. DR that the AO has rightly treated 4 the sum of Rs. Rs. 1,49,88,246/- unrealized foreign remittance and rightly restricted deduction under section 10A by Rs. 18,40,104/-.
7. On the other hand Ld. AR appearing on behalf of the assessee and supporting the order passed by the Ld. CIT(A).
8. We have heard Ld. Representative of both the parties and perused the material on record placed before us.
9. We find that the Ld. CIT(A) has decided the said issue in his detailed order. The operative portion of the order is as follows:
4.3 I have carefully considered the submissions of the appellant and the impugned assessment order. It is the contention of the appellant that to the extent of disallowance made on account of above 2 items, the total income of the appellant goes up and consequently it is entitled for enhanced deduction u/s 10A in view of enhanced profits. In support of this, the AR of the appellant relied on order of Gem Plus Jewellery India Ltd. reported in 330 ITR 175 and the decision of ITAT, Hyderabad in the case of Virtusa India Pvt. Ltd. reported in 41 taxamnn.com 244.
4.4 The CIT(A) while adjudicating ground of appeal No. 3 had directed the AO to allow enhanced deduction u/s 10A on the increased profit on account of disallowance made by the AO towards capital expenses and provision for gratuity.
4.5 The question referred before the jurisdictional HC and the relevant portion of the finding in the case of Gem Plus Jewellery India ltd. (supra)is reproduced hereunder for better understanding and clarity.
"b Whether on the facts and in the circumstances of the case, the Tribunal was justified n 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."
Re Question b:
11. For the purposes of the appeal it is necessary ot refer tot eh admitted position which is that the assessee had deposited both the employer's and the employee's contribution towards Provident Fund and ESIC, though beyond the due date including the grace period. The Assessing Officer added these payments to the total income of the assessee and made an addition in th amount of Rs. 71.59 lacs. However, for the deduction under Section 10A, the addition made on accunt of the employees' contribution was ignored in calculating the profits eligible for deduction on the ground that these receipts were not generated out of the manufacturing activity of the assessee company.5
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 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 teh 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 Sectn 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.
4.6 Since the issue is covered by the decision of jurisdictional HC, I direct the AO to rework the deduction u/s 10A on the enhanced income on account of disallowances made in respect of the 2 items viz. leave encashment and bonus. This ground of appeal is Allowed.
From the perusal of the aforementioned detailed order passed by the Ld. CIT(A) we find that the Ld. CIT(A) after considering the fact of the case relied upon the order of his predecessors for Assessment Year 2007-08 and also while relying upon the jurisdictional High Court decision in the case of M/s Gem Plus Jewellery India Ltd. reported in 330 ITR 175 and the decision of Hon'ble Hyderabad bench 6 in case of Virtusa India Pvt. Ltd. reported in 41 taxmann.com 244. Since the fact of the present case are identical with the fact discussed in the case of M/s Gem Plus Jewellery India Ltd. (supra) decided by Hon'ble Jurisdictional High Court. Following the above discussion we dismissed the appeal of Revenue and CO is also dismissed by us.
10. In the result appeal of the Revenue and CO by the assessee both are dismissed.
Order pronounced in the open court on 9th September, 2016.
Sd/- Sd/-
(R.C. SHARMA) (SANDEEP GOSAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai; Dated: 09/09/2016
AG (On Tour)
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER,
//True Copy//
(Dy./Asstt. Registrar)
ITAT, Mumbai