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* IN THE HIGH COURT OF DELHI AT NEW DELHI
12.
+ ITA 607/2015
PR. COMMISSIONER OFINCOME TAX ..... Appellant
Through: Mr. Kamal Sawhney, Senior Standing
counsel with Mr. Raghvendra Singh and
Mr.Shikhar Garg, Advocates.
versus
E-FUNDS INTERNATIONAL INDIA PVT. LTD. ..... Respondent
Through: Mr. Piyush Kaushik, Advocate.
AND
13.
+ ITA 608/2015
PR. COMMISSIONER OFINCOME TAX ..... Appellant
Through: Mr. Kamal Sawhney, Senior Standing
counsel with Mr. Raghvendra Singh and
Mr.Shikhar Garg, Advocates.
versus
E-FUNDS INTERNATIONAL INDIA PVT. LTD. ..... Respondent
Through: Mr. Piyush Kaushik, Advocate.
CORAM:
HON'BLE DR. JUSTICE S. MURALIDHAR
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 06.10.2015
Dr. S. Muralidhar, J.
CM No. 15688/2015 (for condonation of delay in re-filing the appeal) in
ITA No. 607/2015
ITA Nos. 607 & 608 of 2015 Page 1 of 9
CM No. 15689/2015 (for condonation of delay in re-filing the appeal) in
ITA No. 608/2015
1. For the reasons stated in the applications, the delay in re-filing the
respective appeals is condoned.
2. The applications are disposed of.
ITA No. 607/2015 & 608/2015
3. These two appeals by the Revenue are under Section 260A of the Income
Tax Act, 1961 (,,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 ,,Pr. Commissioner of Income Tax versus E-Funds International
India Private Limited.
5. ITA No. 607/2015 is directed against the order dated 20 th October 2014
passed by the Income Tax Appellate Tribunal (,,ITAT) in ITA No.
2004/Del/2006 for the Assessment Year (,,AY) 2002-03.
6. ITA No. 608/2015 is directed against the order dated 20th October 2014
passed by the ITAT in ITA No.902/Del/2004 for the AY 2000-01.
7. The Assessee is engaged in the business of software related services such
ITA Nos. 607 & 608 of 2015 Page 2 of 9
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 80 HHE
of the Act.
8. The Assessee filed its return of income for AY 2000-01 on 30th November
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 27th November 2001.
9. The Assessing Officer (,,AO), in the order dated 30th December 2002 for
AY 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 115 JA of the
Act, the book profit was declared as ,,nil and no MAT was paid. The AO,
ITA Nos. 607 & 608 of 2015 Page 3 of 9
however, noticed that no Auditors report as required by Section 80HHE(4)
of the Act, was filed with return of income.
11. When a response was sought from the Assessee asking it to submit the
Auditors report certifying the claim under Section 80HHE of the Act, the
Assessee by a letter dated 16th September 2002, claimed that it was not
required to furnish the Auditors report but if the AO so required, it would
arrange for the same. Subsequently on 8th November 2002, the Assessee
wrote to the AO 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-10A unit. However, the total revenues
in the financial statement for the year ending 31st March 2000 had been
correctly reported as Rs.437,207,796." Attached as an annexure to the letter
was the revised split of the Profit & Loss Account indicating the basis of
arriving at the revised net profits as per the books of accounts for the Section
10A unit and the non-10A units. Thereafter the Auditors certificate was
filed whereby the claim under Section 80HHE was made in the sum of
Rs.1,67,72,977.
12. The AO 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-10A units imparted an entirely new dimension to
various facets of the case, leading to complete revision in various claims i.e.
ITA Nos. 607 & 608 of 2015 Page 4 of 9
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 AO 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) [,,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 31st March
2002, the CIT (A) held that the AO was justified in rejecting the claim made
by the Assessee under the revised computation.
14. By the impugned order dated 20th October 2014 in ITA No.
902/Del/2014, the ITAT allowed the Assessees plea. The ITAT 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 6,78,042 US
Dollars (,,USD) was not converted into rupees while preparing the
computation of income. The receipt of the aforementioned 6,78,042 USD
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 ITAT was of the view that this was not a case where the Assessee had
ITA Nos. 607 & 608 of 2015 Page 5 of 9
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. Commissioner of Income-Tax
[2006] 284 ITR 323 (SC) 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 Commissioner of Income
Tax v. Sam Global Securities Ltd. (2014) 360 ITR 682 (Del); M/s.
Influence v. Commissioner of Income Tax 2014-TIOL-1741-HC-DEL-IT
and Commissioner of Income Tax v. Jai Parabolic Springs Ltd. (2008) 306
ITR 42 and the decision of Bombay High Court in Commissioner of
Income Tax v. Pruthvi Brokers & Shareholders (P) Ltd. (2012) 349 ITR
336 (Bom).
ITA Nos. 607 & 608 of 2015 Page 6 of 9
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 AO
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 25 th
August 2015 in ITA No. 644/2015 (Pr. Commissioner of Income Tax-09 v.
Western India Shipyard Limited). 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 technic al view as what is
required to be determined is the taxable income of the Assessee in
accordance with law." In Influence v. Commissioner of Income Tax
(supra) a similar approach was adopted when the AO 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 ITAT
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
ITA Nos. 607 & 608 of 2015 Page 7 of 9
the revised computation as a result of wrongly showing a receipt in USDs
without converting it into rupees. The ITAT has, in fact, remitted the matter
back to the file of the AO 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 20 th
October 2014 of the ITAT in ITA No. 2004/Del/2006 for AY 2002-03 is the
entitlement of the Assessee to the deduction under Section 80HHE of the
Act. The AO was of the view that the Assessee had claimed a deduction
under Section 80HHE in respect of the SSC unit at Gurgaon for AY 2000-01
but started claiming the deduction under Section 10A in respect of the same
unit with effect from AY 2001-02. According to the AO, 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 AY 2000-01. Accordingly, it was held that no
deduction under Section 10A would be allowed to the Assessee either in AY
2001-02 or in any of the subsequent years.
21. The CIT (A) reversed the order of the AO by order dated 31 st March
2006 and restored the matter to the file of the AO with the direction to allow
ITA Nos. 607 & 608 of 2015 Page 8 of 9
the exemption under Section 10A of the Act subject to satisfying the
requisites contained therein. The ITAT has, in the impugned order dated 20th
October 2014, upheld the order of the CIT (A).
22. The decisions of this Court in Commissioner of Income Tax v. Interra
Software India (P) Ltd. (2011) 238 CTR (Del) 23, Commissioner of
Income-tax v. Damco Solutions (P) Ltd. [2011] 11 taxmann.com 365 (Del)
and Commissioner of Income Tax v. EDS Electronics Data Systems
(India) (P) Ltd. (2013)89 DTR (Del) 182 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.
23. Consequently, on this issue also the Court declines to frame a question.
24. The appeals are dismissed.
S. MURALIDHAR, J
VIBHU BAKHRU, J
OCTOBER 06, 2015/dn
ITA Nos. 607 & 608 of 2015 Page 9 of 9
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