High Court Of Delhi
Pr. CIT vs. E-Funds International India (P.) Ltd.
Section 10A
Assessment years 2000-01 and 2002-03
Dr. S. Muralidhar and vibhu bakhru, JJ.
IT appeal nos. 607 & 608 of 2015
October 6, 2015
JUDGMENT
Dr. S. Muralidhar, J. – CM No. 15688 of 2015 (for condonation of delay in re-filing the appeal) in I.T.A. No. 607 of 2015.
CM No. 15689 of 2015 (for condonation of delay in re-filing the appeal) in I.T.A. No. 608 of 2015.
1.1 For the reasons stated in the applications, the delay in re-filing the respective appeals is condoned.
2. The applications are disposed of.
I.T.A. Nos. 607 of 2015 and 608 of 2015
3. These two appeals by the Revenue are under section 260A of the Income-tax Act, 1961 (“the Act”).
4. At the outset, Mr. Kamal Sawhney, learned senior standing counsel for the Revenue, states that page 6 of the memorandum of appeal in both appeals shows the wrong cause title. The cause title in each of these appeals should read as the Pr. CIT v. E-Funds International India P. Ltd.
5. I.T.A. No. 607 of 2015 is directed against the order dated October 20, 2014, passed by the Income-tax Appellate Tribunal (“the ITAT”) in I.T.A. No. 2004/Del/2006 for the assessment year (“the AY”) 2002-03.
6. I.T.A. No. 608 of 2015 is directed against the order dated October 20, 2014, passed by the Income-tax Appellate Tribunal in I.T.A. No. 902/Del/ 2004 for the assessment year 2000-01.
7. The assessee is engaged in the business of software related services such as software design and development. The business is conducted at the Software Development Centre (“SDC”) at Chennai for which the assessee claimed exemption under section 10A of the Act. Apart from this, the assessee has established a shared service centre (“SSC”) at Gurgaon for rendering information technology related services and business process management services for which it claimed deduction under section 80HHE of the Act.
8. The assessee filed its return of income for the assessment year 2000-01 on November 30, 2000, declaring an income of Rs. 5,28,590. The case was processed under section 143(1) of the Act and a notice was issued to it under section 143(2) of the Act on November 27, 2001.
9. The Assessing Officer (“the AO”), in the order dated December 30, 2002, for the assessment year 2000-01, noted that the business activities at the SDC unit at Chennai had resulted in a loss of Rs. 23,49,473 and, therefore, the assessee was not eligible for exemption under section 10A of the Act.
10. As regards the activities at the SSC unit at Gurgaon, the assessee had earned an income of Rs. 4,25,60,064. However, after adjustment of business losses the gross total income was nil. Accordingly, the assessee did not claim any deduction under section 80HHE in the computation of the income. However, for computation of minimum alternate tax (“MAT”), the assessee claimed a deduction of Rs. 4,20,31,476 under section 80HHE of the Act. After making other adjustments in terms of section 115JA of the Act, the book profit was declared as nil and no MAT was paid. The Assessing Officer, however, noticed that no auditor’s report as required by section 80HHE(4) of the Act, was filed with the return of income.
11. When a response was sought from the assessee asking it to submit the auditor’s report certifying the claim under section 80HHE of the Act, the assessee by a letter dated September 16, 2002, claimed that it was not required to furnish the auditor’s report but if the Assessing Officer so required, it would arrange for the same. Subsequently, on November 8, 2002, the assessee wrote to the Assessing Officer stating that there were certain administrative errors in the calculation of the revenues between the two units. As a result “revenues amounting to Rs. 2.8 crores pertaining to the 10A unit were inadvertently classified as the revenues of the non-section 10A unit. However, the total revenues in the financial statement for the year ending March 31, 2000, had been correctly reported as Rs. 437,207,796”. Attached as an annexure to the letter was the revised split of the profit and loss account indicating the basis of arriving at the revised net profits as per the books of account for the section 10A unit and the non-section 10A units. Thereafter the auditor’s certificate was filed whereby the claim under section 80HHE was made in the sum of Rs. 1,67,72,977.
12. The Assessing Officer rejected the stand of the assessee and noted that it had only filed a revised computation and not a revised return. It was held that although the net taxable income as per the original return and the revised computation remained the same, the significant changes in the profits of the section 10A and non-section 10A units imparted an entirely new dimension to various facets of the case, leading to complete revision in various claims, i.e., the claims under section 10A and section 80HHE in the revised computation vis-a-vis the original return. With the time limit for filing of a revised return having elapsed, the Assessing Officer refused to take cognizance of the revised computation.
13. In the appeal filed by the assessee against the aforementioned assessment order, the Commissioner of Income-tax (Appeals) (“the CIT (A)) noted that it was quite possible and natural that while submitting a return “some bona fide omission, wrong statements may occur”. There was a distinction drawn between a revised return and a correction in the originally filed return. Since the assessee had failed to file the revised return within the time period stipulated under section 139(5) of the Act, i.e., by March 31, 2002, the Commissioner of Income-tax (Appeals) held that the Assessing Officer was justified in rejecting the claim made by the assessee under the revised computation.
14. By the impugned order dated October 20, 2014, in I.T.A. No. 902/Del/ 2014, the Income-tax Appellate Tribunal allowed the assessee’s plea. The Income-tax Appellate Tribunal noted that in the revised computation the loss shown for the section 10A unit in the sum of Rs. 23,49,473 was revised at an income of Rs. 2,29,61,884 for the reason that a receipt by the section 10A unit of a sum of US dollars 6,78,042 was not converted into rupees while preparing the computation of income. The receipt of the aforementioned US dollars 6,78,042 when converted into rupees worked out to Rs. 2,95,76,197. Once the correct figure was adopted, the loss from the section 10A unit got converted into a profit in the manner computed shown in the revised computation of income. The Income-tax Appellate Tribunal was of the view that this was not a case where the assessee had not made a claim under section 10A in the original return of income and, therefore, the above correction did not result in the assessee making any fresh claim. It was merely a case where a loss determined on account of an incorrect adoption of a receipt was corrected and as a result, the assessee became entitled to the deduction. It was held that the judgment of the Supreme Court in Goetze (India) Ltd. v. CIT [2006] 284 ITR 323/157 Taxman 1 did not debar the claim made by the assessee.
15. As far as the above issue is concerned, it was submitted by Mr. Kamal Sawhney, learned senior standing counsel for the Revenue, that there was no option for the assessee but to file a revised return within the time stipulated under section 139(5) of the Act. He submitted that in Goetze (India) Ltd. (supra), the Supreme Court clarified that an assessee could not amend a return for claiming a deduction. A revised return had to necessarily be filed. He also pointed out that there was a distinction between a correction in the original return and filing a revised return and that the former was not permissible in law.
16. Mr. Piyush Kaushik, learned counsel for the assessee, on the other hand, referred to the recent decisions of this court in CIT v. Sam Global Securities Ltd. [2014] 360 ITR 682/[2013] 38 taxmann.com 129 (Delhi), Influence v. CIT [2015] 55 taxmann.com 192 (Delhi) and CIT v. Jai Parabolic Springs Ltd. [2008] 306 ITR 42/172 Taxman 258 (Delhi) and the decision of the Bombay High Court in CIT v. Pruthvi Brokers and Shareholders (P.) Ltd. [2012] 349 ITR 336/208 Taxman 498/23 taxmann.com 23.
17. In all the aforementioned decisions cited by learned counsel for the assessee, the High Court has considered the effect of the decision of the Supreme Court in Goetze (India) Ltd. (supra). The common thread running through the ratio in all the decisions of the High Courts is that while an Assessing Officer may not be entitled to grant a deduction or an exemption on the basis of a revised computation of income, there was no such fetter on the appellate authorities. This was recently reiterated by this court in a decision dated August 25, 2015, in I.T.A. No. 644 of 2015 (Pr. CIT v. Western India Shipyard Ltd. [2015] 379 ITR 289 (Delhi)). In Sam Global Securities Ltd. (supra), this court pointed out that the power of the Tribunal in dealing with appeals was expressed in the widest possible terms and the purpose of assessment proceedings was to assess the correct tax liability. The court noted that “courts have taken a pragmatic view and not a technical view as what is required to be determined is the taxable income of the assessee in accordance with law”. In Influence (supra) a similar approach was adopted when the Assessing Officer in that case refused to accept the revised computation submitted beyond the time limit for filing the revised return under section 139(5) of the Act. This court noted that the decision in Goetze (India) Ltd. (supra) “would not apply if the assessee had not made a new claim but had asked for re-computation of the deduction”.
18. Turning to the facts of the present case, as rightly noted by the Income-tax Appellate Tribunal itself, this is not a case where any new claim for deduction under section 10A of the Act has been made by the assessee. This claim had been made in the original return itself. It is only the figure of profit that was changed in the revised computation as a result of wrongly showing a receipt in USDs without converting it into rupees. The Income-tax Appellate Tribunal has, in fact, remitted the matter back to the file of the Assessing Officer to compute the deduction in accordance with law.
19. The court does not see any prejudice being caused to the Revenue as a result of the above directions. It is consistent with the law explained by this court in the above decisions after considering the effect of the decision of the Supreme Court in Goetze (India) Ltd. (supra). Consequently, as regards the issue of the deduction under section 10A of the Act, the court declines to frame a question.
20. The second issued that arises from the impugned order dated October 20, 2014, of the Income-tax Appellate Tribunal in I.T.A. No. 2004/Del/ 2006 for the assessment year 2002-03 is the entitlement of the assessee to the deduction under section 80HHE of the Act. The Assessing Officer was of the view that the assessee had claimed a deduction under section 80HHE in respect of the SSC unit at Gurgaon for the assessment year 2000-01 but started claiming the deduction under section 10A in respect of the same unit with effect from the assessment year 2001-02. According to the Assessing Officer, no deduction under section 10A would be allowed to the assessee either for the same or any subsequent assessment year since it had claimed deduction under section 80HHE of the Act in the assessment year 2000-01. Accordingly, it was held that no deduction under section 10A would be allowed to the assessee either in the assessment year 2001-02 or in any of the subsequent years.
21. The Commissioner of Income-tax (Appeals) reversed the order of the Assessing Officer by order dated March 31, 2006, and restored the matter to the file of the Assessing Officer with the direction to allow the exemption under section 10A of the Act subject to satisfying the requisites contained therein. The Income-tax Appellate Tribunal has, in the impugned order dated October 20, 2014, upheld the order of the Commissioner of Income-tax (Appeals).
22. The decisions of this court in CIT v. Interra Software India (P.) Ltd. [2011] 199 Taxman 38/11 taxmann.com 82 (Delhi), CIT v. Damco Solutions (P.) Ltd. [2011] 11 taxmann.com 365/200 Taxman 26 (Delhi) (Mag) and CIT v. EDS Electronics Data Systems (India) (P.) Ltd. [2012] 27 taxmann.com 152/211 Taxman 133 (Delhi) answer the question in favour of the assessee and against the Revenue. These decisions explain that the making of a claim under section 80HHE of the Act in one assessment year will not preclude an assessee from claiming the benefit under section 10A of the Act in respect of the same unit in a succeeding assessment year. It was explained that the purpose of the section 80HHE(5) of the Act was to avoid double benefit but that would not mean that if for a particular assessment year the assessee wants to claim a benefit only under section 10A of the Act and not section 80HHE, that would be denied to the assessee.
Consequently, on this issue also the court declines to frame a question.
The appeals are dismissed.
[Citation : 379 ITR 292]
