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Persistent Systems Pvt. Ltd. Versus Jt. Commissioner of Income Tax, Circle 4, Pune and Asst. Commissioner of Income Tax, Circle 4, Pune Versus M/s. Persistent Systems Pvt. Ltd.

2016 (5) TMI 537 - ITAT PUNE

Eligible for deduction u/s. 10A - Held that:- Commissioner of Income Tax (Appeals) has allowed deduction u/s. 10A to the assessee on the profits of Unit 1 for the subsequent assessment year.

Assessee is eligible to claim deduction u/s. 10A, before adjusting losses of Nagpur Unit. - ITA No. 1326/PN/2009, ITA No. 1344/PN/2011 - Dated:- 7-4-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri Niraj Sheth For The Revenue : Shri Hitendra Ninawe ORDER PER VIKAS AWA .....

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year 2005-06 on 30-10-2005 declaring total taxable income as Nil. The case of the assessee was selected for scrutiny and accordingly notice u/s. 143(2) was issued to the assessee on 22-06-2006. During the course of scrutiny assessment proceedings the Assessing Officer observed that the assessee has claimed deduction u/s. 10A amounting to ₹ 33,39,66,494/-. The assessee is having three units eligible for deduction u/s. 10A. The unit wise details of deduction claimed by the assessee u/s. 10A .....

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tion u/s. 10A, whereas, the profits of the old unit were subjected to tax after allowing deduction u/s. 80HHE. During the period relevant to the assessment year 2003-04, the assessee closed the old unit after taking necessary permission from the Director, STPI Pune, and executed certain software export contracts from the new unit and claimed deduction u/s. 10 A. The Department did not accept the contentions of the assessee with respect to profits from contracts which were entered prior to the fo .....

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e tune of ₹ 1,73,67,109/- in respect of Unit 1 was rejected. 2.2 Further, the Assessing Officer held that while computing deduction u/s. 10A, the loss of Nagpur Unit needs to be set off from profits of other Units eligible for deduction u/s. 10A. The assessee had computed profits and gains from business after setting off loss of the Nagpur unit. The Assessing Officer rejected the computation of deduction u/s. 10A of the Act made by assessee. The Assessing Officer restricted deduction u/s. .....

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ome Tax (Appeals) by raising following grounds: 1. The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the learned assessing officer in denying the claim under section 10 A in respect of revenues of ₹ 1,73,67,109/- on the ground that the contracts with the customers from whom these revenues were earned were entered in to prior to the commencement of the new unit. 2. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the contracts enter .....

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at the issue relating to allowability of deduction u/s. 10A on the revenue from the contracts prior to the formation of Unit 1 in the assessment year 2003-04 has been adjudicated by the Tribunal. The Tribunal in ITA Nos. 33 and 290/PN/2009 for the assessment year 2003-04 decided on 12-03-2012 allowed the claim of assessee. The ld. AR placed on record a copy of the order of Tribunal in ITA Nos. 33 and 290/PN/2009 along with the order of Tribunal in MA Nos. 37 and 38/PN/2013 in ITA No. 33 & 29 .....

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pted the appeal of assessee. The Hon'ble Bombay High Court vide order dated 07-02-2013 in Income Tax Appeal No. 246 of 2013 has upheld the order of Tribunal for assessment year 2004-05, as well. The ld. AR further submitted that the Commissioner of Income Tax (Appeals) in subsequent assessment years i.e. assessment years 2006- 07, 2007-08 and 2008-09 by following the order of Tribunal has granted relief to the assessee. The ld. AR further placed on record consolidated copy of the order passe .....

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ourt in the case of Commissioner of Income Tax Vs. Black & Veatch Consulting Pvt. Ltd. reported as 20 taxmann.com 727 (Bom) : 348 ITR 72 (Bom) has held that deduction u/s. 10A in respect of eligible unit has to be allowed before setting off brought forward depreciation and losses of a unit not eligible for deduction u/s. 10A of the Act. The ld. AR in support of his contentions placed reliance on the following decisions : i. Hindustan Unilever Ltd. Vs. Deputy Commissioner of Income Tax & .....

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f Commissioner of Income Tax (Appeals) in rejecting the claim of assessee u/s. 10A in respect of Unit 1, as well as disallowance of deduction u/s. 10A in respect of Nagpur Unit. The ld. DR submitted that the Delhi Bench of the Tribunal in the case of Tecnovate eSolution (P.) Ltd. Vs. Income Tax Officer reported as 59 taxmann.com 77 (Dehi-Trib.) has held that brought forward losses of eligible unit for preceding year should be reduced from the profits of business for current year before allowing .....

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ion of Unit 1. It has been contended that the old unit was closed down during the period relevant to the assessment year 2003-04 and after taking permission from the Director, STPI Pune the work was executed from the new Unit 1 and deduction was claimed u/s. 10A of the Act. The ld. AR of the assessee has brought to our notice that this issue has already been adjudicated by the Tribunal in assessee s own case for the assessment years 2003-04 and 2004-05. The Tribunal has held that the assessee is .....

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ara No. 11.2 to 11.5 of the assessment order with this submission that the A.O has reduced the claimed deduction on the basis that assessee has arranged its affairs in a manner to extend the exemption u/s. 10A of the Act as significant part of the income claimed as part of the new unit at Bhageerath is nothing but the income from same customers that are in the same domain of work that was being carried out at Panini. He worked out a sales of ₹ 9.87 crores as in respect of the earlier unit .....

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-1 or unit-2 as the customer does not know unit-1 or unit-2. The execution of work by the eligible unit is important ignoring the old contract/old customers. The Ld. A.R. asserted that the assessee had not claimed deduction u/s. 10A on the work executed by old unit as not eligible due to lapse of time. In the A.Y. 2003- 04, only unit No.2 was in existence. 7. Having gone through the contents of provisions laid down u/s. 10A, we find substance in the above contention of Ld. A.R. that deduction u/ .....

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ssment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee: In the course of business, contract is always received by an assessee and not by its unit-1 or unit-2, as customer is not aware about the unit-1 or unit-2 of the assessee and thier only concern is that assessee performs its part of the contra .....

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d by the undertaking. The only reason for disallowance of the claimed deduction or reducing the same upto the sales turnover by the authorities below was based upon the contract of work received by old unit or customers of the old unit. They did not consider the claimed deduction on the basis of work executed by the new unit. It is also not in dispute that the claimed deduction u/s. 10A by the assessee was based upon the work executed by the new unit i.e. unit No. 2. The only objection of the au .....

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s. 1 & 2 of the appeal preferred by the revenue are thus rejected and thus ground Nos. 1 & 2 of the appeal preferred by the assessee are allowed. Similar view has been taken by the Tribunal in assessee s appeal in ITA No. 1325/PN/2009 for assessment year 2004-05. The Hon'ble High Court in Income Tax Appeal (L) No. 1209 of 2012 for assessment year 2003-04 has upheld the findings of Tribunal and dismissed the appeal filed by the Revenue. Similarly, the Jurisdictional High Court has dis .....

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sessment order in assessment year 2009-10 wherein the claim of the assessee in respect of Unit 1 has been allowed. Thus, in view of the facts of the case, documents on record and the decisions of the Co-ordinate Bench of the Tribunal which has been upheld by the Hon'ble High Court, we do not find any reason to take a different view. Accordingly, ground nos. 1 and 2 raised in the appeal of the assessee are allowed. 8. In ground no. 3, the assessee has assailed the findings of Commissioner of .....

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t of the losses incurred by the eligible unit u/s. 10B of the Act. The provisions of section 10B are in pari materia with the provisions of section 10A of the Act. 9. The Hon'ble Karnataka High Court in the case of Commissioner of Income Tax Vs. Yokogawa India Ltd. reported as 341 ITR 385 (Kar) after placing reliance on the decision rendered in the case of Hindustan Unilever Ltd. Vs. Deputy Commissioner of Income Tax & Anr. (supra) has held that where the assessee is having more than one .....

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assessee claimed exemption of ₹ 3,95,99,100 under section 10A for its STP unit. The exemption was claimed before set off of brought forward losses and depreciation. According to the assessing authority, the deduction under section 10A had to be allowed from the total income of the assessee. The total income of the assessee was arrived at as per section 80B(5). Therefore, the exemption under section 10A had to be given after setting off all brought forward losses within the context of secti .....

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le High Court held : 33. As the income of the section10A unit has to be excluded at source itself before arriving at the gross total income, the loss of the non-section 10A unit cannot be set off against the income of the section 10A unit under sec-tion 72. The loss incurred by the assessee under the head "Profits and gains of business or profession" has to be set off against the profits and gains, if any, of any business or profession carried on by such assessee. Therefore, as the pro .....

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om the total income of the assessee the question of unabsorbed business loss being set off against such profit and gains of the undertaking would not arise. In that view of the matter, the approach of the assessing authority was quite contrary to the aforesaid statutory provisions and the Appellate Commissioner as well as the Tribunal were fully justified in setting aside the said assessment order and granting the benefit of section 10A to the assessee Hence, the main substantial question of law .....

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ction 10B in Hindustan Unilever Ltd Vs. Deputy Commissioner of Income Tax [2010] 325 ITR 102/191 Taxman 119 (Bom.). The submission of the Revenue placed its reliance on the literal reading of Section 10A under which a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive Assessment Years is to be allowed from the total income of the assessee. The deduction under Section 10A, in our view, has .....

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he Chapter, the deductions specified in Sections 80C to 80U. Section 80B(5) defines for the purposes of Chapter VI-A "gross total income" to mean the total income computed in accordance with the provisions of the Act, before making any deduction under the Chapter. What the Revenue in essence seeks to attain is to telescope the provisions of Chapter VI-A in the context of the deduction which is allowable under Section 10A, which would not be permissible unless a specific statutory provi .....

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der as to costs. 11. The Tribunal in the cases of F.C.I. Technology Services Ltd. Vs. Assistant Commissioner of Income Tax (supra), Behr India Limited Vs. ACIT (supra) and M/s. Vishay Components India Pvt. Ltd. Vs. The Addl. Commissioner of Income Tax (supra) have taken consistent view by following the above judgments rendered by the Hon'ble Bombay High Court and Hon'ble Karnataka High Court. 12. Thus, in view of the facts of the case and the judgments discussed above, we hold that the a .....

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ax (Appeals) primarily on the ground that the Commissioner of Income Tax (Appeals) has erred in holding that the assessees new unit is eligible for deduction u/s. 10A, without appreciating that the new unit has been formed by the reconstruction of a business already in existence in violation of provisions of section 10A(2)(ii) of the Act. 15. The Revenue has filed appeal with the delay of 696 days. The application for condonation of delay has been filed. The same reads as under: Sub: Filing of A .....

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has expired. However, it has been noticed that an appeal ought to have been filed for both the A.Y.2004-05 and 2005-06 on the similar grounds as that of A.Y.2003-04 in the subject assessee's case. The CIT(A) had dismissed the assessee's appeal for A.Y.2004-05 and 2005-06. Therefore, primafacie, there was no case for further appeal. However, on deeper analysis, it is clear that an appeal had to be preferred on the lines similar to the grounds of appeal for A.Y. 2003-04. 03. There was ina .....

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in filing of the appeal. The delay cannot be condoned in a casual manner or for the reasons that the delay has been caused due to delay in seeking approval or there was change of opinion regarding filing of appeal. The delay of each and every day in filing of appeal has to be explained. 17. The Hon'ble Supreme Court of India in the case of Office of the Chief Post Master General and Others Vs. Living Media India Ltd. and Another reported as 348 ITR 7 (SC) has depreciated the practice of fil .....

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mpetent persons familiar with court proceedings. In the absence of plausible and acceptable explanation, we are posing a question why the delay is to be condoned mechanically merely because the Government or a wing of the Government is a party before us. Though we are conscious of the fact that in a matter of condonation of delay when there was no gross negligence or deliberate inaction or lack of bonafide, a liberal concession has to be adopted to advance substantial justice, we are of the view .....

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ve reasonable and acceptable explanation for the delay and there was bonafide effort, there is no need to accept the usual explanation that the file was kept pending for several months/years due to considerable degree of procedural red-tape in the process. The government departments are under a special obligation to ensure that they perform their duties with diligence and commitment. Condonation of delay is an exception and should not be used as an anticipated benefit for government departments. .....

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