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TMI Blog2023 (12) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of appellate proceedings." 3. Brief facts as culled out from records are that Ixia Technologies Private Limited (in short "ITPL"), now merged with Keysight Technologies India Private Limited (in short "KTIPL) is incorporated in India with principal business of software designing and development for network testing systems and services and other products. Assessee filed its return on 23.09.2009, reporting total income of Rs. 68,56,130/- after claiming deduction u/s. 10A of the Act of Rs. 1,13,05,508/-. Assessment proceedings were completed u/s. 143(3) wherein deduction u/s. 10A of the Act was duly examined and allowed. Thereafter, rectification proceedings u/s. 154 of the Act were initiated. Ld. AO passed a rectification order u/s. 154/143(3) of the Act dated 10.07.2015, denying the claim of deduction u/s. 10A of the Act on the component of refund of service tax received by the assessee. Aggrieved, assessee went in appeal before the Ld. CIT(A). 3.1. Ld. CIT(A) had decided the case in favour of the assessee by stating that Ld. AO erred in initiating rectification proceedings on an issue which is debatable and on which two opinions are conceivable. Against the said order p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciples find support from the decision of the Hon'ble Chandigarh Tribunal in City Clinic Pvt. Ltd vs. ACIT (ITA No. 112/Chd/2017) and the Hon'ble Delhi High Court in CIT vs. R.K. Shrivastav (HUF) (2008) 298 ITR 53. 4.2. It was further contended that the issue whether service tax refund would be considered as 'profits/gains derived from the eligible undertaking' is a subject matter of debate, in respect of which two views are possible. Therefore, refund of service tax could not be a subject matter of rectification u/s 154 for the purpose of disallowing claim u/s. 10A. Reliance in this regard was placed on the decision of the Hon'ble Karnataka High Court in the case of CIT vs. TTK Prestige Limited (2009) 184 Taxman 18 wherein the Hon'ble Court has held that section 154 cannot be invoked when the original assessment did not contain any adverse finding and the Ld. AO subsequently initiated rectification proceedings to add back the deduction allowed u/s 80-IA to the extent of export incentive received by the assessee had been claimed as deduction as a part of profits of the eligible undertaking. The Hon'ble High Court held that the matter of allowability of expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of these two judgments, according to Ld. AO, the receipt from refund of service tax is not a profit derived from the exports of articles or things or service and hence, do not form part of the net profit eligible for deduction u/s. 10A of the Act. Since this was not excluded from the profit of the eligible unit for computing the deduction u/s. 10A, it is an inadvertent error resulting in excess allowance u/s. 10A of the Act. 7.2. Ld. Sr. DR also placed on record, copy of decision of the Hon'ble Supreme Court in the case of Saraf Exports Vs. CIT [2023] 453 ITR 625 (SC), wherein it was held that where assessee received income in the form of receipts from Duty Entitlement Pass Book (DEPB) and from Duty Drawback Scheme (DDS), said income could not be said to be derived from an industrial undertaking and thus assessee would not be entitled to claim deduction u/s. 80IB with respect to such receipts. Ld. Sr. DR thus, strongly contended that Ld. AO has rightly disallowed the claim u/s. 10A in respect of receipt of refund of service tax by the assessee. 8. Per contra, Ld. Counsel for the assessee, at the outset submitted that rectification powers can be exercised only to rectify self-ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction. The matter does not stand apparently evident until and unless it is a clear cut case of similar facts already adjudicated by any court. 8.2. It was contended by the Ld. Counsel that case of the assessee is not a plain and simple case of a glaring error which needs to be rectified at the first look of it or, is so apparent that there are no doubts regarding it being a mistake crept into the original order as has been treated by the Ld. AO, rather it is a complete contrasting position, and stands in favour of the assessee when the same principles as relied upon by the Ld. AO are applied to the present case. Ld. Counsel strongly submitted that it is a case of change in the view of the Ld. AO which he has originally arrived after taking into consideration detailed explanation and documentary evidences placed on record in the original assessment proceedings. 8.3. In the proceedings initiated u/s. 154, ld. AO has resorted to a view which is solely based on the decision of the Hon'ble Supreme Court in the case of Liberty India (supra) and Sterling Foods (supra) which in itself demonstrates that it is a case of long drawn discussion on which debate can be made and then a conclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of the fact that these were calculated on the basis of certain percentage or rate applied to an underlying relevant item and were not a plain- vanilla return of the exact amount paid. However, case of the assessee is different as it is entitled to the refund of exact amount of input service tax paid which have been utilised in connection with the export of goods and there is no percentage or rate which is applied for calculation of the refund to be made to the assessee. Accordingly, it is to be considered as first source of revenue having immediate nexus with the operation of the eligible business. 8.5.1. Similarly, in the second decision referred to by the Ld. AO of Sterling Foods (supra), ld. Counsel elaborated on the same that the term 'derived from' would mean a direct nexus between the profits and gains of the industrial undertaking. The Hon'ble Court went on to hold that the facts of the case present before them showed that the assessee had received import entitlements granted by the Central Government under an Export Promotion Scheme as it was carrying out the export of prawns, sea food, etc. The Hon'ble Court went on to hold that the source of import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & consultancy services, which were all availed directly for the operation of the STP undertaking engaged in the export of computer software and hence its refund shall constitute part of the receipts of the undertaking and thereby allowable u/s 10A being derived from the business. According to him, assessee had paid the service tax on input services used directly in the course of operation of the undertaking eligible for deduction. When the refund of the same amount of service tax is made then it should also be construed as being directly linked to the operation of the eligible undertaking and accordingly should be allowed as a deduction falling within the meaning of the term 'derived from'. He further submitted that service tax paid on input service is an expense which is debited to the profit and loss account when incurred and goes on to reduce the profits eligible for deduction in the year of its incurrence. Similarly, the refund of service tax should be considered as recovery of the expenses already made, considered and offered in the earlier year and has a direct nexus to the operations of the undertaking. Hence, refund of service tax is recovery of cost incurred in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the record if one has to travel beyond the record to see whether the judgment is correct or not. An error apparent on the face of the record means an error which strikes on mere looking and does not need long-drawn out process of reasoning on points where there may conceivably be two opinions. Such error should not require any extraneous matter to show its incorrectness. To put it differently, it should be so manifest and clear that no Court would permit it to remain on record. If the view accepted by the Court in the original judgment is one of the possible views, the case cannot be said to be covered by an error apparent on the face of the record." 9.2. From the perusal of the assessment order passed u/s. 143(3) and the queries raised by the Ld. AO and submissions made by the assessee thereon vis-à-vis refund of service tax forming part of claim u/s. 10A, we note that Ld. AO had passed the original assessment order after examining the details furnished by the assessee. He did not dispute the computation made by the assessee which included refund of service tax in the claim made u/s. 10A. 9.3. From the perusal of the impugned order passed u/s. 154 read with sec. 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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