TMI Blog2014 (10) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... med - having separate locations for the unit does not mean these separate expanded locations become separate undertaking as an undertaking in the STPI Zone even for expansion purpose can expand only if permission is granted by the STPI authorities which has been granted over the years and the assessee over the years has treated these expanded locations as expansions and only now in some cases after a lapse of five years or seven years and even in the last year would now want the department to re-look at the entire facts right from the first year of these expanded centres in order to ascertain whether five years or seven years ago or for that matter 10 years ago the expanded locations were capable of being called “independent stand alone units” as envisaged in Textiles Machineries case and other such decisions and orders. Relying on the findings recorded in the assessment order upheld by the DRP it has been contended that such an inquiry is difficult to make after so many years and even when enquired into it may not be possible to conclusively decided the same after so many years - The reasoning cannot be faulted with - the need and necessity for the same does not arise since it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er erred on facts and in law in completing the impugned assessment proceedings on the basis of original return of income by arbitrarily ignoring the revised return filed by the appellant. 3. That the Assessing Officer erred on facts and in law in arbitrarily denying deduction claimed in the revised return of income under Section 10A of the Act in respect of the profits derived from the various undertakings owned by the appellant in the complete disregard of actual facts and circumstances. 3.1. That the Assessing Officer erred on facts and in law in drawing an adverse inference regarding the eligibility of the various undertakings owned by the appellant, for the purpose of claiming deduction under Section 10A of the Act without considering all the documentary evidence placed on record in support of the claim. 3.2. That the Assessing Officer erred on facts and in law in denying deduction under Section 10A of the Act in respect of the profits derived from the various undertakings owned by the appellant alleging that (a) the original 13 undertakings (as per the original return of income) were split into 31 undertakings by the appellant in the revised return of income (b) no s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possible for him to verify whether all the undertakings were set-up with substantial new investment despite the fact that he himself has observed that there was no dispute regarding the setting up of each undertaking with substantial new investment. 3.9. That the Assessing Officer erred on facts and in law in drawing an adverse inference regarding the fulfillment of condition of setting up of each undertaking with substantial new investment without considering the details of capital investment made by each undertaking and the necessary evidence in support thereof fled by the appellant in the course of impugned assessment proceedings. 3.10. That the Assessing Officer erred on facts and in law in concluding that the undertakings owned by the appellant do not represent new undertakings despite the fact that these undertakings have separate identifiable work force. 3.11. That the Assessing Officer erred on facts and in law in concluding that the undertakings owned by the appellant do not represent new undertakings despite the fact that these undertakings were clearly engaged in newer and different technology areas. 3.12. That the Assessing Officer erred on facts and in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to delivery of computer software outside India from the export turnover in terms of clause (iv) of Explanation 2 of Section 10A of the Act, without making the similar adjustment from the total turnover resulting into absurd and unintended results. 5.1. That the assessing officer erred on facts and in law in making the reduction of link charges incurred by the appellant from export turnover without making the corresponding adjustment from total turnover following the assessment order for assessment year 2004-05, without appreciating that the said issue has already been decided by the Hon'ble ITAT in favor of the appellant for theAssessmentYear2004- 05 and even the departmental appeal against the said order of the ITAT has been rejected by the Hon ble Delhi High Court. 5.2. That the Hon'ble DRP erred on facts and in law in upholding the proposed action of the learned AO of reduction of expenses incurred by the appellant from export turnover for computing deduction under section 10A of the Act without making the corresponding adjustment from the total turnover by merely observing that the said issue is under litigation. 6. That the assessing officer erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57,24,87,070/- and business income had been shown at ₹ 92,28,838/-. In the revised return it was observed by the AO that whereas gross income from business and profession remained the same however deduction u/s 10A had been claimed at ₹ 275,57,24,990/- and loss from business profession had been shown at ₹ 16,79,29,000/-. Taking into consideration the fact that both the claims u/s 10A in the original return and also in the revised return were supported by 13 and 31 separate Forms 56F respectively duly certified by a Chartered Accountant, he was of the view that in the said background the basic question which arose for consideration was whether the units for whom separate Form 56F had been filed in the revised return could be treated as a separate unit for the purposes of section 10A or not. 2.2. Referring to the fact that till the filing of the revised return, the assessee had all along claimed benefit u/s 10A on the basis of license which were now sought to be changed, he was of the view that the additional units had been formed after the splitting up of the existing 13 units into different units for which fresh and new Form-56F were being filed. The position ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to be different for registration and commencement of the units. As a result of this difference, he was of the view the time period for which the benefit u/s 10A available was extended. This position he notes is specially visible in the case of STP Chennai-I, Noida-1 and PSO, Noida all of which were in their 10th (last) year of claiming the benefit as per the original Return but now have different years of claim in the split units. 2.6. The resultant position with respect to the 8 units formed by splitting STP Chennai-1 as per the Revised Return was summarized in the following manner:- Address OF THE Split Unit Year of claim u/s 10A 168, Arcot Road, Vadapalani, Chennai 26; 5th 49-50 Nelson Manickam Road, Chennai 29; 8th 602, Tidel Park, 4 Canal bank Road, Chennai 113 4th D 12 and 12B, SIDCO industrial Estate, Ambattur, Chennai-58 7th J-16, Anna Nagar, Chennai-102 10th No.-50-53, Greams Road, Chennai 6 9th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29.40 17.61 Noida 4 0.64 (4.70) Kolkata (0.11) NA Bangalore 2.14 0.07 PSO 1 (3.48) (2.20) PSO 2 (0.57) (0.60) PSO 3 0.54 (0.18) 2.9. He further observed that the profit figures as per the revised return had been worked out by summing up of the split units corresponding to the single units mentioned in the original return. 2.10. In the light of these observations and discrepancies noted by the AO as per para 4.10 of his order detailed questionnaire on 15.09.2008 was issued to the assessee requiring him to explain why the claim u/s 10A in respect of the split units should not be rejected. The assessee was further required to provide whatever material it had on record to substantiate its claim that each of the 31 units was separate and distinct and was not formed by splitting up of the existing units. 2.11. Considering the repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce till the current year the assessee had never claimed that the extensions were separate units. Accordingly based on the decisions considered he was of the view that there is no reason as to why the claim of the assessee with respect to the additional units be entertained in the current year when the initial year of all the additional units had already passed without any scrutiny. He was of the view that this clearly shows that the assessee has deliberately and intentionally not subjected itself to scrutiny in the initial years. In the circumstances where no compliance has been demonstrated by the assessee in the initial years, which is the basic requirement he restricted the claim under section 10A with respect to the amount as computed under the Original Return of income and ignored the claim made under the Revised Return of Income. The time period for the claim under section 10A accordingly he was of the view was to be computed as per the Form 56F submitted along with the Original Return only. 3. Having come to the above conclusion the AO proceeded to further examine the claim of the assessee on merits with respect to the conditions mentioned in Section 10 A in para 6 to 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclude that a new-undertaking whether integrated in the existing business or not, has to have an independent functional identity which makes it a separate operational and profit centre. 6.11. Hence it is clear from the judicial precedents cited above that the undertaking to be able to claim the benefits of a tax holiday should be an independent and separate unit which is capable of conducting business in an independent manner and should not be linked to the other units of the assessee for doing its business. 3.3. The AO further proceeded to examine the position from the point of view of STP scheme and other related regulations as under:- 6.14. In order to be set up and considered as a separate unit, eligible for relief under section 10A, the unit has to be compulsorily situated within and registered with a Software Technology Park. The STP is governed by the STP Scheme issued by the Government of India vide Notification No. SO 243(E) dated 22nd March, 1994. Hence each unit has to comply with the requirements laid down by the Scheme to be called a separate unit. As per the scheme, each unit has to be granted a license after which it can commence operations within the STP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods to be imported. For debonding of the equipment/ debonding of the unit. For reimbursement of CST. For sale of imported capital goods and materials. For disposal of obsolete equipment. For donation of obsolete equipment. 11. Pay the dues to STPI on time. 12. Submit the Quarterly/ Annual performance reports in the prescribed form on time. ( Bold texted for Emphasis) 3.5. Considering the STP Regulations he further observed that the regulations also permit an undertaking to expand its premises for carrying out its operations. Since expansion of an existing unit does not lead to the formation of a new undertaking and infact the STPI Regulations refer to and permit the extension of the premises and further for carrying out its operations a single undertaking can have multiple locations within the STPI the AO concluded that the assessee has not been issued separate license but has merely been permitted to expand extension certificate. He further found support for his conclusion on considering the specific provisions in the Import/Export policy and procedures, the Foreign Trade Regulation Act, Customs Central Excise Regulation which were also app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /documentation arc required to be maintained : a) Maintenance of cash book. b) Maintenance of Bank book. c) Maintenance of separate cash and bank vouchers. d) Maintenance of sale invoices. One copy of the export invoice is required to be endorsed by the Banker's and kept in record. e) Maintenance of party-wise ledger for both debtors and creditors. f) Maintenance of fixed asset register. g) Maintenance of Foreign Inward Remittance Certificates (FIRC's) file where the original FIRC's are kept. h) Maintenance or Bank Realization Certificates (BRCs) file where the original BRCs are kept. i) Maintenance of purchase order file where copies of all purchase order issued are kept. The purchase orders should be numbered to avoid confusion. j) Maintenance of contract file, where copies of contracts received from buyers are maintained. k) Preparation of monthly trial balance. l) Preparation of yearly balance sheet for the unit which would ultimately become a part of the balance sheet of the company. 11. Hence for a unit to be treated as a separate and distinct undertaking under the STP Scheme, to which the benefits of section 10A can be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king with multiple locations. 12.4. This fact is reinforced by a letter written by STPI Chennai dated 28th January 2005 produced by the assessee in Volume I of the detailed submission referred to above. In this letter, the STPI has mentioned that the assessee has three STP units in Chennai with multiple locations. 12.5. Further, if one is to go by the contention or the assessee that each and every location should be treated as a separate undertaking then from the submissions made by the assessee it is observed that Chennai-I consists of 23 location which have been clubbed into 8 separate undertakings, Chennai -II consists of 11 locations which have been clubbed into 5 undertakings and Chennai consists of 6 locations which have been clubbed into 4 undertakings. These submissions have been made on pages 38 and 39 of the submission dated 24/l1/2008. 3.7. Examining further the claim of the assessee on facts he further was of the view that the claim was not maintainable on the following reasoning:- 13. New Investment: The assessee has contented that each of the units have been set up with substantial new investments. This however has never been disputed. In support of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to furnish a list of bank accounts for each and every unit right from the initial year. The assessee has placed no evidence on record to prove that each and every unit has a separate bank. 18. Softex Forms: The softex form is a specific requirement under the RBI Regulations. It has ot be filed client wise and unit wise. The assessee has produced a few softex forms on a test check basis. However, even if it is assumed that the softex forms exist, it is not sufficient to prove that the unit is an independent unit. 19. Separate Books of Accounts: The assessee has not produced separate books of accounts for any of the units. In fact the profit figures of claim under section 10A in the original return adds up top ₹ 257.24 crores and in the revised return this claim has gone up to ₹ 275.57 crores. One of the reasons for this claim going up is because as the number of units was increased, some of the units were running into losses and their losses were not considered. Hence the claim went up by ₹ 16.75 crores. This fact clearly points out that the assessee has not been maintaining separate books of accounts and also points out to the fact that in the earlier yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealing with Section 80IA and 80J of the Income Tax Act 1961 and Section 15C of the Income Tax Act 1922 and the judgment of the Apex Court in the case of Textile Machinery Corporation Ltd. vs. CIT (107 ITR 195) (SC) wherein the Hon ble Court was dealing with Section 15C of Income Tax Act 1922 he was of the view that the following points emerged therefrom:- 21.2. Applying the above principles to the facts of the assessee, the following points emerge: There has been no emergence of a fresh new undertaking and no fresh investments have been made. The profits and capital of the 31 units have been carved out from the original 13 units. The assessee has not been able to produce any documentary evidence to show that in the years in which the units were formed, there was a separate capital investment: No record of profits has been shown by the assessee from the year of inception thus clearly showing tht the so called separate units did not exist prior to the current Assessment Year. No evidence has been provided that the new units were engaged in executing jobs which were distinct from the original units. Hence it is reasonable to assume that the so called new units ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was required to meet namely that the unit should not be formed by transfer to a new business of machinery or plant previously used for any purpose the AO was of the view that it was a factual condition which was to be verified in the first year and since there was no verification of the units in the first year, he held that it is difficult to conclude whether the additional units satisfied this condition or not. 3.12. Similarly examining the fourth condition, namely the claim to be supported by Form 56F. Considering that fact that this is the first year in which the assessee had actually submitted separate From 56 for each of the 31 units because till 2003-04 A. Year, the assessee was maintaining that it had only 13 different units for which the benefits under section 10A had been claimed and it is only in the current assessment year that the assessee had carved out 31 separate units after splitting the erstwhile 13 units he concluded that it was clear that the assessee had not met the fourth condition as stated in Section 10A. 3.13. On the basis of the above reasoning the claim of the assessee was restricted to the claim made in the original return. 4. Aggrieved by thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ense already granted. The software development center added under each license is only an extension of the original undertaking set off under the license granted by the STPI authorities. Therefore the development centers, added subsequent to opening of the centres under the original license is only an expansion of the original undertaking and in no way can be treated as a separate undertaking for the purpose of deduction u/s 10A of the I.T.Act. The AO s observations in this regard in the assessment order are important. The AO has mentioned that the examination of Form No-56F filed by the assessee reveals that the majority of the cases of original centre have been split up into different centres and the separate form 56F has been filed for each and every split centre, thereby claiming deduction u/s 10A for each centre. The AO has given example of such splitting up of the units in the assessment order. It is also noteworthy that in the original return the assessee itself has claimed deduction u/s 10A as if, it had only 13 undertakings. It is only by way of revised return that the deduction u/s 10A have been claimed showing that the assessee had separate 31 undertakings. Up to A.Y.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son of separate treatment of losses of loss making undertakings and by the reason of certain disallowances omitted to be made in the original return and subsequently made in the revised return of income. 173,119,409/- Add: Increase in the amount of deduction claimed u/s 10A of the Act on account of adjustment which was done in the original return of income from the export turnover and from the total turnover on account of expenses incurred in foreign currency but no such adjustment was done in the revised return of income 10,118,511 Total amount of deduction claimed u/s 10A of the Act as per the revised return of income 2,755,724,990/- 5.3. Referring to the material available on record, it was his submission that merely because the assessee in the earlier year did not compute the deduction u/s 10A considering the 31 units as separate undertakings and instead computed the deduction u/s 10A on the basis of the 13 STPI licenses this fact does not act as an estoppel to prevent the assessee from correctly computing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 184, Arcot Road, Vadapalani, Chennai-600026 12 34-35, Haddows Road, Chennai 13 299, Arcot Road, Vadapalani, Chennai. 600026 3 STPI Chennai-3 4 14 No. 78, South Phase, Ambattur Industrial Estate, Ambattur, Chennai-600058 15 No. 402, Tidel Park, Taramani, Chennai- 600113 16 64, 65 Second Main Road, Ambattur Industrial Estate, Ambattur, Chennai-600058 17 No. 35, South Phase, developed Estate, Guindy, Chennai-60032 4 STPI Chennai-4 1 18 Plot No. 94, South Phase, Ambattur Industrial Estate, Ambattur, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order for 1999-2000 wherein reference of each of the 15 undertakings which was existing on 31.03.2001 had been made by the AO copy of this order it was stated is placed at pages 826-831 of the paper book. It was argued by the Ld. AR that each software development centre owned by the assessee constituted an independent viable undertaking and fulfilled the conditions as prescribed u/s 10A of the Act on the following propositions on facts:- Propositions on facts: (a) The appellant has set-up STPI Units (hereinafter referred to as undertakings) from time to time by seeking the necessary approval from the STPI and Customs Authorities in accordance with the provisions as contained in the Software Technology Park Scheme (the STP Scheme) notified by the Government of India in the Ministry of Commerce and Industry. Whenever a undertaking was set-up by the appellant, it was for the purpose of meeting the requirement of business growth and expansion as is evidenced by the following numbers of the revenues, employees and number of undertakings of the appellant:- Financial Year Revenues (in Crores of Rupees) Employees(in nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p with substantial capital investment, in plant and machinery; had new employees, new business projects; new technology. These submissions are found advanced at pages 8 to 15 of the above mentioned Broad synopsis filed. As an illustration it was submitted the complete set of accounts of Sapna Trade Centre, Chennai and 602 Tidel Park, Chennai had been produced. 5.6. Referring to sub-section (5) of section 10A it was submitted that the Act provides that the deduction shall not be admissible unless it is furnished in the prescribed form alongwith the return of income accompanied by the report of a Chartered Accountant certifying that the deduction has been correctly claimed in accordance with the provisions of the section. Accordingly the only requirement is that Form 56 F is to be signed by the Chartered Accountant certifying the correctness of the computation of deduction u/s 10A of the Act on the basis of examination of accounts and records of the assessee. It was his submission that the said section does not require that assessee to maintain separate books of accounts for each of the units and it only requires the assessee to compute the profits of the eligible units which r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions as contained in the Software Technology Park Scheme (the STP Scheme) notified by the Government of India in the Ministry of Commerce and Industry. Whenever the approval has been granted to the Company for expansion, the Company is eligible to expand its operations by setting up new undertakings subject to fulfillment of conditions as contained in the first approval. 5.10. Referring to Section 10A it was his submission that the requirement of law is that the undertaking should be established/set up in a software Technology Park and the provision does not specify the manner in which the approval/Registration is to be issued by the STPI Authorities. It was further contended that it does not specify that a separate licence is a condition precedent for holding an independent unit operating in Software Technology Park as eligible for deduction. 5.11. Reliance in support of the claim was also placed upon ITO Vs. AMD Export Corporation 79 ITD 381 (Del)and Patni Computer System Ltd. vs DCIT (ITA Nos. 426 1131/PN/06) and ACIT vs Symantec Software Pvt. Ltd. (ITA 787 and 805/PN/09 for the contention that it has been held in the same that the manner in which the approval has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise, etc. undertaken, a promise, pledge , guarantee . 5.12. Reliance was placed upon the judgment of the Apex Court in the case of Textile Machinery Corporation Ltd. vs CIT 107 ITR 195 on the basis of which it was argued that what is relevant is that a new undertaking has been launched by the assessee by investing substantial funds so as to establish new plant and machineries and the enquiry whether it produces the same commodity as the old business or it produced a distinct marketable product was not relevant as it has been held that it may even produce the commodities which may feed the old business and are consumed by the assessee in the old business itself or may be sold in the open market were all irrelevant facts what was relevant is that has a new undertaking satisfying other conditions is eligible for deduction has come up or not. 5.13. Attention was also invited to Chaturvedi and Pithisaria s Income-tax, Third Edn., at Page 2156 wherein the authors have opined as to what is meant by industrial undertaking , as under: The expression industrial undertaking in Section 80J must be interpreted to mean any venture or enterprise which a person undertakes to do and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral. When we apply section 84 to a particular undertaking it has to be seen when that undertaking commenced the manufacture or production of articles. It is true that the word undertaking has not been defined under the Income-tax Act. But in common parlance it is taken as a concern started or formed for a specific purpose or a project engaged in. Status dealing with matters relating to the public in general. In short, if an act is directed t o dealing with matters affecting everybody generally, the words used have the meaning attached to them in the common and originally use of language . (Vide Unwin V. Hanson [1891] Q. B. 115 (CA), per Lord Esher M. R., at page (119). That the Income-tax Act is of general application, is beyond dispute. It, therefore, follows that the meaning that should be given to these words industrial undertaking must be the natural meaning. It is all the more so because the Income-tax and super tax. (See Rao Bahadur Ravula Subba Rao Vs. CIT 91956] 30 ITR 163 (SC) at P. 169.) Undertaking in common parlance means an enterprise , venture , engagement . It can as well mean the act of one who undertakes or engages in a project or business (Web ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to produce or deliver the final project on its own. The appellant with reference to the various evidences, documents, etc., demonstrated that all the aforesaid criteria are satisfied in respect of all the 31 undertakings. Further, each undertaking is custom bonded and is registered with STP authorities. The STP is governed by the STP Scheme issued by the Government of India vide Notification No. SO 243(E) dated 22nd March, 1994. Hence each unit has to comply with the requirements laid down by the Scheme to be called a separate unit. As per the scheme, each unit has to be granted a license after which it can commence operations within the STP. Further, a unit registered under the STP has a number of obligations. It has been submitted that each of the 31 undertakings has separate address(es) and are registered with STPI. Further each unit is also custom bounded and the address of such undertaking is on the record of the custom authorities (to constitute a separate undertaking). An identified separate workforce is one of the determinative tests, as laid down by the Supreme Court in the case of Textile Machinery (supra). The assessing officer did not dispute that each undertaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso the argument taken that no finding has been recorded by the AO that the Software Units were not functioning as independent viable unit, independently executing software development project. 5.18. It may not be out of place to reproduce the claim of the assessee in assessee s own words extracted from the submissions on record:- In the case of the appellant, since all the undertakings were eligible for deduction u/s 10A of the Act in earlier years. The appellant inadvertently did not consider it necessary to separately compute the deduction under that section in respect of each of such undertakings having regard to the fact that almost all the undertakings for the appellant were profit making only and the manner of claiming deduction u/s10A of the Act did not matter much for the appellant, i.e., whether to compute the amount of deduction permissible to the appellant either by treating each of the Software Development Centers ( SDCs) as a separate undertaking or by clubbing all the undertakings covered under a particular mother STPI license. (emphasis supplied by bold texting) In any case, the aforesaid inadvertence on the part of the appellant not to treat each of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee the Paper Book relatable to the years were segregated. The documents being referred to are the documents which had been relied upon by the assessee over and above the main Paper Book containing documents 758 pages along with supplementary Paper Book consisting of 783 to 968 pages further accompanied by a Paper Book-III. These Paper Books of documents have further been supplemented by case law Paper Book running into 437 pages further supplemented by case law Vol-II III Paper Book running up to 534 and 605 pages respectively; further fortified by case law Volume-V (pages 701 to 723) along with various loose documents and orders. Accordingly the parties were directed to ensure that the documents relied upon are complete and compiled in separate folders consisting of written submissions mutually exchanged by the assessee and department. The sorting was directed to take place in the presence of the Registry staff by the office staff of the Ld. AR and the special Counsel engaged for the Revenue. In this background it is necessary to also refer to the summary of arguments dated 11/7/2013 placed on record on behalf of the assessee. A perusal of the same shows that addressing G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) for variety of reasons, the assessee is not estopped from making the claim for deduction u/s10A of the Act in any of the subsequent years falling within the ten year period. The claim made in the subsequent years has to be adjudicated on merits, whcih view is supported by the following decisions: - CIT Vs. Tata Communications Internet Services Ltd.: 204 Taxman 606 (Delhi HC) -Gujrat Alkalies and Chemicals Ltd. Vs. CIT: ITa No. 141 of 1991 (Gujarat High Court) -CIT VS. Seeyan Plywoods 190 ITR 564 (Kerala) -CIT Gujarat-1 Vs. Satellite Engineering Ltd 113 ITR 208 (Gujarat) -CIT Vs. Gopal Plastics (P.) Ltd 215 ITR 136 (Chennai) -CIT Vs. Laxmi Metal Industries: 236 ITR 130 (All.) -CIT Vs. Natraj Stationery Products (P) Ltd. 312 ITR 22 (Delhi) 5.23. In the summary of arguments advanced it has also been stated that the maintenance of separate books of accounts is not a requirement in Section 10A and there is no provision in the analogous section to sub-section (7) of section 80IA/80IB (13) of the Act. This view it has been urged is supported by the following decisions:- CIT Vs. Dunlop Rubber Co (India) Ltd: 107 ITR 182 (Cal.) [Section 84] Mahindra Sinte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order and emphasizing the specific reasoning of the Assessing Officer on the basis of which the claim of the assessee submitted by way of revised return was not allowed by him. It was his vehement plea that in the facts of the present case the case of the assessee is not that the benefit of deduction claimed u/s 10A has been denied as a perusal of the assessment order would show that the deduction claimed has been allowed for 13 STPI Units as per the original claim put forth by the assessee. In the facts of the present case it was submitted the AO has only on full examination of facts, legal position and the relevant provisions come to the conclusion that the revised claim put forth by way of a revised return claiming deduction for 31 units instead of 13 units as was originally claimed was not allowable under law. As such it was his submission the only grievance posed by the assessee is that the claim for deduction should be computed for 31 units considering them 31 undertakings eligible for deduction and not considering 13 units eligible for deduction. The AO it was submitted has allowed deduction u/s 10A for the 13 units originally claimed which claim was based on the factua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical issue and all other issues were merely incidental to the primary issue. The said question it has been argued can be answered from the stand taken by the assessee itself as the assessee itself is the best judge of its affairs. Referring to the record it was submitted that the assessee has consistently taken the stand over the years that these additional units (31-13) were mere extended locations of the existing units. In the circumstances it was argued the onus was placed heavily and squarely on the assessee issue to establish that these additional units were set up as a separate undertaking independent of the mother undertaking . This question it was submitted has to be answered in the factual background where at the time of filing of the return which means up to the said date the assessee itself considered them to be integral part of the 13 undertakings. The said issue it was his submission was a matter of fact and is illustrated by the following consistent acts of the assessee:- (i) The intention of the assessee at the time when these new units were made operational. (ii) The conduct of the assessee for all these years, whether these units were regarded by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been advanced for the year by way of revised return were set up by the assessee company as an expanded location/work station/units of the existing undertaking or were these set up as independent separate viable units. In order to arrive at the true nature it was his submission that the following facts deserve special mention namely (i) application for setting up of the additional unit by the assessee.(ii) the accepted stand of the assessee taken by the assessee itself before the tax authorities etc. In the context of the same extract of the relevant portion from the gist of the argument placed by the revenue are record are extracted hereunder, for ready reference:- (i) Applications for setting up of the additional units: Since the existing as also the additional units could be set up only with the permission of the regulatory authorities of STPI, the assessee company filed the applications for setting up new and independent units and also applications for operating the existing units from more than one location. Despite repeated requests in this regard, the assessee company has preferred not to file a copy of the application submitted to STPI authorities which would hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents for all these years did clearly take the position that these additional units were neither separate nor independent. c. The amount of depreciation charged to these units is not on the basis of the assets held by these units (as per notes to the original return of income d. The allocation of certain expenses does not demonstrate that these units functioned as independent units. e. The Auditors have field Form No. 56 for the earlier years showing only 13 units ( or less) as independent undertakings. The Auditors further certify that the claim of the deduction has been correctly made. f. Even for the whole of the Financial Year relevant to A. Y 2005-06, Forms No. 56 were filed along with the Original return of Income declaring that only 13 independent units were in operation during the year under appeal. It is only much after the filing of Form No. 56 and the original return that the new claim was advanced and Form No. 56 (Fresh) for all the locations regarding these as separate units were file as an after thought. This further establishes the fact that for the whole of the financial year when these units were in operation, these were regarded by the assessee itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents and decisions referred to in the orders of the authorities below have also been taken into consideration. At the cost of repetition we deem it appropriate to briefly refer to the undisputed facts namely that the assessee in the year under consideration following its own accepted past practice by filing a return lodged the claim of deduction u/s 10A for 13 units amounting to ₹ 257,24,87,070/- duly supported by 13 Form 56 F Certificates for these units which claim has been allowed. It is a matter of record that the said claim was revised by filing a revised return. The Ld. AR has consistently argued before the AO, the DRP as well as before us that the law permits the filing of revised return within the stipulated time which has been done as such the assessee s action on this count cannot be faulted with. The revised return it has been contended is duly supported with the requisite numbers of 31certificates in Form 56F duly signed by the CA which is the legal requirement. It has been the stand of the assessee that the term undertaking has not been defined in the relevant provision and in the circumstances relying on the legal definition of the term and as has been underst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Resident P.Y. ending : 31.3.1999 Dates of Hearing : 19.02.02, 11.03.02, 21.03.02 23.03.02 Date of Order : 28.03.2002 Section in which order passed : 143(3) Return of income was filed on 31.12.1999 declaring income of NIL after claim of exemption under section 10A for its entire income of ₹ 83,39,03,218/-. The return was processed on 31.5.2000 under section 143(1) at NIL income./ A notice under section 143(2) was issued on 27.12.2000 for scrutiny of the case. In response to the notice, Shri Raman Sridhar, General Manager (Taxation) of the assessee company appeared and furnished requisitions details. 2. The nature of the business of the assessee is software development as per part IV of the Return of Income in response to specific query regarding the details of different STP Units, profit derived from various units and allowability of deduction in respect of various sources of income, it has been submitted by Mr. Sridhar:- with regard to the information on undertaking wise profit and loss, we would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its of the specific undertakings original return was filed. It is also an accepted fact that only by way of a revised return for the very first time it has been claimed that these extended units at different locations were in fact fully meeting the criteria of being designated as an independent undertaking as enumerated by various judgements and orders. On the basis of which considering the provisions it has been argued by the assessee that the requirements are fully met. The reliance placed on legal precedents it has been argued on behalf of the Revenue so as to seek to redesignate the status of these units some of which it has been emphasized are in the fag end of their claim should not be allowed as it would not only extend the statutory period which would be against the principles of law but would also vary the deduction being claimed which would not be correct. The contention put forth is that the approach to pick a stray sentence or ratio decidendi from decisions which operate on different facts would be of no relevance. In the facts of the present case it has been emphasized the assessee is trying to extend the period of claim of deduction beyond the statutory limitation and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n consideration of the decisions and judgement cited, we also find ourselves in agreement with the submission of the department as it would not only be against legal ethics and contrary to settled facts but would also amount to travesty of justice. In the circumstances the claim put forth by way of a revised claim we find has rightly been disallowed. 7.2. While arriving at the said conclusion we have taken into consideration the decisions cited. It may be appropriate to refer to judgement of the Apex Court in the case of Textiles Machinery Corporation Ltd.(cited supra) on which heavy reliance has been placed by the assessee. A perusal of the principle laid down therein with which there can be no quarrel it is seen that the same has been settled in entirely different facts and circumstances and does not help the assessee in any manner.. The following extract from the head note of the said judgement brings our the material facts before the Hon ble Court, these have been bold texted by us for emphasis:- The appellant, a heavy engineering concern manufacturing boilers, machinery parts, wagons, etc., set up two new units, a steel foundry division and jute mill division. The ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustrial undertaking. A new activity launched by the assessee by establishing new plants and machinery by investing substantial funds may produce the same commodities of the old business or it may produce some other distinct marketable products, even commodities which may feed the old business. These products may be consumed by the assessee in his old business or may be sold in the open market. One thing is certain that the new undertaking must be an integrated unit by itself wherein articles are produced and at least a minimum of ten person with the aid of power and a minimum of twenty persons without the aid of power have been employed. Such a new industrially recognizable unit of an assessee cannot be said to be reconstruction of his ld business since there is no transfer of any assets of the old business to the new undertaking which takes place when there is reconstruction of the old business. For the purpose of section 15C the industrial units set up must be new in the sense that new plants and machinery are erected for producing either the same commodities or some distinct commodities. In order to deny the benefit of section 15C the new undertaking must be formed by reconst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t criteria and where the increased work force has been considered to be a relevant criteria etc. would in the facts of the present case be of no assistance to hold that the 31 units were viable independent undertaking within the meaning of the Act and the relevant provisions as by assessee s own choice they have been treated over the years as part of existing undertakings and in the fag end of the period for claiming deduction their status cannot be changed by selectively reading the principles in cases where the material facts are entirely distinguishable. It is a matter of fact that in none of the cases cited the peculiar facts of the present case have been considered. It cannot be over emphasized that settled legal principles can and should be resorted to only where pari-materia of the facts qua the case and hand is established. In the facts of the present case the facts which the assessee seeks to unsettle have become settled facts due to the conscious, consistent and informed actions of the assessee and they cannot be wished away. The reliance placed on case laws in different context on facts and circumstances which are entirely distinguishable is of no help. It may not be out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue and on consideration we find the reasons cogent, relevant and acceptable, it has also been his stand that having separate locations for the unit does not mean these separate expanded locations become separate undertaking as an undertaking in the STPI Zone even for expansion purpose can expand only if permission is granted by the STPI authorities which has been granted over the years and the assessee over the years has treated these expanded locations as expansions and only now in some cases after a lapse of five years or seven years and even in the last year would now want the department to re-look at the entire facts right from the first year of these expanded centres in order to ascertain whether five years or seven years ago or for that matter 10 years ago the expanded locations were capable of being called independent stand alone units as envisaged in Textiles Machineries case and other such decisions and orders. Relying on the findings recorded in the assessment order upheld by the DRP it has been contended that such an inquiry is difficult to make after so many years and even when enquired into it may not be possible to conclusively decided the same after so many ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lead to travesty of justice. The reports, study have their own role and relevance however adjudication necessitates marshalling the accepted facts and not unsettling the settled facts. The revised return based on legal advise in the peculiar facts and circumstances of the present case cannot unsettle the settled facts and neither can reliance placed on legal precedents and case law in entirely different context warrant such an action. It has also been canvassed that it is for the AO to advise the assessee. The argument made in passing has no merit as the claim is put-forth by the assessee based on its personal knowledge and being the best judge of its affairs and having the benefit of full facts about the nature of permission being sought as to whether it was for expansion or setting up a new undertaking cannot expect the AO to advise him whether it is an expansion or setting up a new undertaking. The assessee having taken a prudent informed business decision cannot be allowed to turn around and claim at the fag end of the period of allowable deduction that the AO should have advised him differently. The circulars and decisions of the Court do not cast any such duty on the AO and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DRP leading to the passing of the order under challenge. It is seen that the issue had been decided in assessee s favour by the Tribunal in the immediately preceding assessment year which was not unsettled by the Hon ble High Court. Only because SLP filing was under consideration the issue was kept alive by the AO. In the afore-mentioned peculiar facts and circumstances the reliance by the assessee on the order dated 23.01.2009 in ITA Nos.-3199 3144/Del/07) which view was also taken in 2003-04 assessment year and considering the departmental stand wherein reliance is placed on the orders of the authorities below and no contrary decision or judgement is cited disputing the view taken in the order to deviate from the stand taken by the ITAT we deem it appropriate since facts, circumstances and reasoning is identical to restore the issue back to the AO by allowing the ground raised and directing the AO to grant necessary relief following the orders of the ITAT wherein we note that the view take in 2003-04 A.Year has been considered by the Hon ble High Court. 9. The next issue addressed by the assessee is set out in Ground No-5 to 5.2 wherein the action of the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt machinery. A perusal of the record shows that the said direction has not been followed accordingly we restore the issue back to the AO with the direction to decide the same in accordance with law after giving the assessee a reasonable opportunity of being heard. 12. Qua the next issue agitated by the assessee vide Ground No-8, it is found that the assessee by way of its revised return of income has claimed deduction of ₹ 6,20,012/- on account of expenditure incurred for the purpose of earning of income subject to tax under the head other sources which claim was not allowed by the AO. The DRP while considering the issue were of the view that outrightly the claim of the assessee could not be accepted being of the view that the said expenditure had only been culled out from the P L A/c for separately claiming it as a deduction against the income from other sources. They were of the view that the said expenditure would have already been debited in some head under the P L A/c thus the said authority was of the view that unless the assessee showed that the said expenditure had not already been claimed under some other head of income the claim could not be allowed. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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