TMI Blog2012 (8) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... r year 2003–04, exemption u/s 10A, cannot be denied on this ground in the AY 2004–05. Further, in the present AY, no such provision was appearing in the statute and the AO was obliged to follow the law which was in force as on the first day of AY i.e., 1st April 2004; we hold that there was no error of law by the AO while allowing exemption u/s 10A in AY 2004–05 and the impugned order passed u/s 263 setting aside the assessment on the ground that deduction allowed u/s 10A is neither a correct finding nor correct in law. Order of Commissioner set aside - Decided in favor of assessee. - ITA no. 2566/Mum./2009 - - - Dated:- 10-8-2012 - SHRI G.E. VEERABHADRAPPA, SHRI AMIT SHUKLA, JJ. Assessee by : Mr. S.E. Dastur a/w Mr. Niraj Shah Revenue by : Mr. Pavan Ved ORDER PER AMIT SHUKLA, J.M. The present appeal preferred by the assessee, is directed against the impugned order dated 17th March 2009, passed by the learned Commissioner X, Mumbai, for assessment year 2004 05, canceling the assessment under section 263 of the Income Tax Act, 1961 (for short "the Act"), being erroneous insofar as it is prejudicial to the interests of Revenue. Following grounds have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, which was given in separate worksheet as Annexure to Form 56. Not only this, a detail note with regard to deduction under section 10A, was made in notes to the return of income for various units which was also filed along with return of income. During the course of scrutiny proceedings, the Assessing Officer noted the composition of holding of the company and also various activities which are being carried out by the assessee through its various units operating from Software Technology Parks. The Assessing Officer has also noted that WNS India is wholly held by WNS (Mauritius) Ltd. WNS India was originally incorporated in the year 1996, as wholly owned subsidiary of British Airway Plc. (BA) via BA subsidiary Speedwing International Ltd. In March 2001, the Warburg Pincus Group acquired from BA a majority stake in the WNS Group through WNS (Holdings) Ltd., Jersey . The Assessing Officer ultimately completed the assessment vide order dated 18th December 2006, at an income of Rs. 18,38,67,230, after disallowing various expenses and the additions made by the TPO on international transactions with associate enterprises. 4. Thereafter, the learned Commissioner, on examination of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of Revenue, on these facts, reliance was placed on the judgment of Hon'ble Supreme Court in Malabar Industrial Co. Ltd. v/s CIT, [2000] 243 ITR 083 (SC); (ii) The assessment was completed by the Assessing Officer on the basis of statutory provisions as contained in section 10A, relevant for assessment year 2004 05. Since the law which is applicable on the 1st day of April 2004, has been applied by the Assessing Officer, hence, there was no infirmity or error in the order of the assessment as sub section 9 of section 10A was not in the statute. In support of this contention, reliance was placed on the judgment of Hon'ble Supreme Court in Karimtharuvi Tea Estate Ltd. v/s State of Kerala, decided on 15th December 1965, 60 ITR 262 (SC); (iii) It was submitted that s/section 9 of section 10A, stands omitted w.e.f. 1st April 2004, by Finance Act, 2003, i.e., from assessment year 2004 05 and reliance was placed on the Finance Minister s speech while deleting the said provision. Thus, once a provision has been deleted, it will have retrospective effect in the light of the judgment of Hon'ble Supreme Court in Allied Motors Pvt. Ltd. etc. v/s CIT, [1997], 224 ITR 677 (SC); (iv) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct. Similar action under section 263, was taken in the assessment year 2003 04, whereby the grant of deduction under section 10A, by the then Assessing Officer were held to be erroneous. Further, he held that provisions of sub section 9 of section 10A, not only prohibits allowance of exemption for assessment year during which the change in ownership takes place but also for all the assessment years. There was nothing in the record that the Assessing Officer has raised any query or sought any explanation as to why the deduction should not be disallowed in the assessment year 2004 05 due to change in ownership year relevant to assessment year 2003 04. Thus, the Assessing Officer has not applied his mind at all. Regarding Finance Minister s speech for proposal of removing of provisions of sub section 9 of section 10A, the same would not be applicable in this case, as the provisions were made effective from assessment year 2004 05 and nothing was indicated in the speech as what would be effect in the cases where the provision has already been enforced for assessment year prior to assessment year 2004 05. Accordingly, he held that the assessment order passed by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal order can be said to have any precedence nor the impugned order under section 263, can be sustained. The allowance of deduction under section 10A, is in conformity with the judgment of Jurisdictional High Court and, therefore, such an exemption allowed by the Assessing Officer cannot be held to be erroneous insofar as it is prejudicial to the interests of Revenue within the meaning of section 263 of the Act. He also referred to various judicial pronouncements in support of the contentions and drew our attention to the judgment of Hon'ble Supreme Court in Malabar Industrial Co. Ltd. (supra). Mr. Dastur, further submitted that it is not necessary that the Assessing Officer has to deal separately, in the assessment order, as to why he is allowing exemption, as, from the records, if it is proved that the assessee is entitled to deduction under section 10A, the same is sufficient. Thus, his primary contention was that the judgment of Jurisdictional High Court which is dated 8th September 2009, which has been rendered after the date of earlier Tribunal order and also the impugned order passed under section 263 and, therefore, in view of the said judgment, the assessment order canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncluded that not only the view taken by the Assessing Officer is the correct view, but also one of the possible views and in such a situation, the learned Commissioner cannot term the assessment order as erroneous insofar as it is prejudicial to the interests of Revenue so as to take a different view. The Hon'ble Supreme Court s judgment in Malabar Industrial Co. Ltd. (supra), is very categorical on this point. He also brought to our notice that earlier also, in this case, the learned Commissioner has initiated proceedings 263, and the same was dropped after the assessee made elaborate submissions and objection before the learned Commissioner. However, such dropping of 263 proceedings have not been communicated or made available to the assessee despite repeated reminders before the learned Commissioner. 9. Per contra, the learned Departmental Representative submitted that the Assessing Officer has neither enquired into the composition of holding nor has given any finding in the assessment order in this regard. Hence, there is no application of mind by the Assessing Officer. He relied on the judgment of Hon'ble Supreme Court in ACIT v/s Gurjargravures Ltd., [1978] 111 ITR 001 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound that it is erroneous insofar as it is prejudicial to the interests or Revenue. The law envisages that the pre requisite condition for exercise of jurisdiction under section 263 by the learned Commissioner is that firstly, the order of the Assessing Officer sought to be revised should be erroneous and secondly, it should be prejudicial to the interests of the Revenue. If, any one of the conditions is absent, the assessment cannot be cancelled by the learned Commissioner under section 263. In the present case, there is also a very important fact that in the earlier year i.e., assessment year 2003 04, the Tribunal, in assessee s own case, has upheld the order of the learned Commissioner under section 263, on the similar issue and ground that the Assessing Officer has not examined the applicability or non applicability of provisions of sub section 9 to section 10A, in assessee s own case. 12. The undisputed facts of the case are that during the year, the assessee has claimed exemption under section 10A, from Pune Unit 1 and Mumbai Unit 1, which were established and started their operation of manufacturing in December 1999 and March 1997 respectively. Since then, these units ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 10A, which is contrary to the CBDT circular cited supra. This sub section 9 to section 10A, has been omitted from the statute by the Finance Act, 2003, w.e.f. 1st April 2004. While omitting sub section 9, the Finance Minister, at the time of budget speech, proposed that such a provision was illogical. The relevant speech of the Finance Minister is reproduced herein below: Information Technology (IT) 102. IT is India s showpiece success story. We have to not just maintain its momentum of growth, but continuously encourage it. Therefore, it is proposed that the concessions extended to I.T. under section 10A and 10B of the Income tax Act will continue as originally envisaged. As per law, such companies, as are currently covered by these tax exemption lose the benefits upon change in their ownership or shareholding. This is not logical. I am, therefore, removing these restrictions; the benefit of such tax exemptions will remain even in the case of amalgamation or de merger. Thus, such restrictions were removed so that benefit of tax exemption under section 10A should continue even in case of amalgamation or de merger. It is a settled principle now that while interpret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1969 (2) SCC 412, wherein it was held that section 6 of General Causes Act, 1897, applies to Repeals and not to the Omission . Further, this principle has been reiterated by the Constitutional Bench of the Hon'ble Supreme Court again in Kolhapur Cane Sugar Works Ltd. v/s Union of India, reported as [2002] 2 SCC 536, wherein it has been observed and held as under: 37. The position is well known that at common law, the normal effect of repealing a statute or deleting a provision is to obliterate it from the statute book as completely as if it had never been passed, and the statute must be considered as a law that never existed. To this rule, an exception is engrafted by the provisions of section 6(1). If a provision of a statute is unconditionally omitted without a saving clause in favour of pending proceedings, all actions must stop where the omission finds them, and if final relief has not been the omission goes into effect, it cannot be granted afterwards. Savings of the nature contained in section 6 or in special Act may modify the position. Thus the operation of repeal or deletion as to where a particular provision in a statute is omitted and in its place another provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip and in view of section 10A(9), which was there in the statute, the Assessing Officer was required to look into the claim of exemption. In the present assessment year, no such provision was appearing in the statute and the Assessing Officer was obliged to follow the law which was in force as on the first day of assessment year i.e., 1st April 2004; Secondly, as pointed out by the Sr. Advocate, the Jurisdictional High Court in Zycus Infotech Pvt. Ltd. (supra), has held that provision of section 10A(9) would be applicable to those entities who has applied from 1st April 2001 i.e., the date from which sub section 9 was inserted. Before the High Court, following substantial question of law was required to be answered: (b) Whether on the facts and in the circumstances of the case, Explanation I to section 10A(9) of the Income tax Act, 1961, was at all applicable to the facts of the present case as the Explanation I to section 10A(9) has been inserted with effect from 1.4.2001 and will apply only to those entities which for the first time got entitled to exemption under section 10A of the Act with effect from 1.4.2001 and it will not apply to those entities which have become entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal High Court. Thus, the Assessing Officer, while allowing the deduction under section 10A, based on assessee s audit report in Form no.56F and notes to the return of income was following the law which was applicable for assessment year 2004 05, which is to be followed in view of the judgment of Hon'ble Supreme Court in Isthmian Steamship Lines (supra) that in the Income tax matter, the law to be applied is the law in force on the first day of assessment year and this has been reiterated by the Hon'ble Supreme Court in Karimtharuvi Tea Estate Ltd. (supra) also. On these grounds and in conclusion, we hold that the earlier decision of the Tribunal passed in assessment year 2003 04, will not be applicable in this year and, hence, we decline to follow the same as a precedence. 21. In view of our aforesaid findings, we hold that there was no error of law by the Assessing Officer while allowing exemption under section 10A in assessment year 2004 05 and the impugned order passed by the learned Commissioner setting aside the assessment on the ground that deduction allowed under section 10A is neither a correct finding nor correct in law. Consequently, the impugned order passed by the le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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