TaxTMI 
TaxTMI 
2014 (10) TMI 356
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....t. 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 separate license was obtained by the appellant from STPI Authorities in respect of these undertakings (c) that deduction in respect of these undertakings was deliberately not claime....
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....egarding 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 law in drawing an adverse inference regarding the newer nature of the projects executed by each undertaking in the complete disregard of facts and circumstances and even without....
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....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 on facts and in law in enhancing the expenditure disallowable under section 14A of the Act to Rs.l,05,07,741 from Rs,44,55,082 disallowed by the assessee in respect of e....
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....ever deduction u/s 10A had been claimed at Rs. 275,57,24,990/- and loss from business & profession had been shown at Rs. 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 was summarized by way of a chart by the AO in para 4.3 in the following manner:- Name of the Unit (as per the Original Return) No. of units split into Chennai 1 8 Chennai 2 5 Chennai 3....
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....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 PM Towers, No.-37, Greams Road, hennai-6 5th Sapna Trade Centre, 110 P.H.Road, Chennai-84. 5th 2.7 The AO held that this action not only impacted the result by extending the benefit of the tax holiday, but also impacted the amount of claim. It was observed that the amount of claim under the original return was Rs. 257.25 crores odd which went up to Rs. 275.57 crores odd. This increase was found to be mainly on account of the split up of the units. He took note of the fact that as a result of splitting the units the losses of the individual units were ignored and this accounted for an increase of deduction claimed of Rs. 16.75 crores odd. 2.8. The AO further observed that those units which were in their last year of the tax holiday period, were the ones, which earned the maximum profits for the assessee as out of the total claim made by the asses....
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....ld not be formed by splitting up/reconstruction of a business already in existence. c) The unit should not be formed by transfer to a new business of machinery or plant previously used for any purpose. d) The assessee must furnish a report of an accountant in the prescribed format certifying that the exemption has been properly claimed. This report should be submitted alongwith the return of income." 2.12. Considering the case law relied upon by the assessee in its reply submitted the AO relying on the judgment of the Karnataka High Court in Nippon Electronics (India) Pvt. Ltd. (181 ITR 518) (KAR.) was of the view that the Court had examined therein the argument whether the requirement of formation had to be seen in the year of set-up or, could it be seen even in subsequent years also and on examining the said question it had been held that the term "formed" has been interpreted to imply 'which needs to be seen at the initial year of tax holiday and not during subsequent years'. Reliance was also placed on the decision of the Madras High Court in case of L.G. Balakrishnan and Bros Ltd. (151 ITR 270) wherein the High Court examined as to whether transfer of machinery took p....
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...., 1951 as which defined industrial undertaking as "any undertaking pertaining to a scheduled industry carried on in one or more factories by any person or authority including Government." 3.2 Further considering the definition prescribed in Section 33 B of the Income Tax Act, the various dictionary and law lexicon meanings of the said term and relying on I-Gate Global Solutions Ltd. vs ACIT (2007) 112 TTJ (BANG.) 1002; Videsh Sanchar Nigam Ltd. vs. CIT, City-I, Mumbai [2008] 111 ITD 190 (MUM.) (SB)/[2007] 110 TTJ 948 he was of the view that the following legal position emerged which was summed up by him in the following manner:- "6.10. In all those decisions, certain distinguishing features are apparent. An existing unit may start new units; the new units may produce the same articles produced by the old unit; the items produced by the new units may be consumed by the existing unit; there is no quarrel on these factual aspects. But apart from the above common features, the Courts have also held that the new units set up by the existing business houses should be independent units engaged in a distinguishable commercial activity and capable of surviving independent of the....
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....:- "1. The development/production of the unit under the scheme shall be carried on in a customs bonded area. 2. Commencement of production within the gestation period allowed under the scheme and starting exports. Intimate STPI of the date of commencement of commercial production within 30 days. If commercial production and exports are not commenced within a period of 3 years from the issue of the letter of approval (LOP) given for the establishment of the unit under the Scheme, the LOPLAPSES automatically after the expiry of the said 3 years. 3. The nit shall be a net foreign exchange (NFE) earner and NFE should be positive over the period of 5 years. 4. The unit shall realize the amounts due for the exports made within 180 days from the date of export, or the due date under the contract, whichever is earlier. 5. If the unit fails to fulfill the export and other obligations under the scheme, it will be liable to pay the customs duty and excise duty on the goods procured and such other penalties and liquidated damages as may be decided by the Government. 6. In case external commercial borrowings are resorted to, necessary permission from Ministry of finance to be ....
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.... in the paragraphs below: 7. Banking: Each STP unit is required to maintain separate bank accounts for its operations. The unit may maintain as many bank accounts as it desires but shall have to designate a single branch of a bank through which all export documents are required to be submitted. In other words the work of handling of all shipping documents and realization of export proceeds ought to be entrusted to this designated bank branch. The proof of this bank account has to be submitted along with the application for registration under the STP Scheme. 8. Customs Bonding: The premises of STP unit have to be mandatory Custom Bonded, irrespective of whether such unit avails the benefit of customs duty/ excise duty exemption. The custom bonding is to be renewed on a yearly basis for STP units which in the normal course expire on 31st December each year. 9. Certain filing requirements 9.1. "Softex Declaration form As per current regulation a Software Export Declaration (Softex) form is to be filed with STPI authorities within six months of the invoice date. This is a mandatory requirement under the Exchange Control Regulations issued by the Reserve Bank of India. Th....
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....h and every location with a single license is a separate undertaking and as proof of the same has submitted that there are separate lease deeds for each premise, separate STPI approval documents, and separate Customs Bond certificates. Further, the assessee has contended that he has maintained separate books of accounts. 12.2 Expansion and Not New Undertakings As mentioned in the STPI regulations above, a unit to be registered under an approved STPI has to be granted a license by the respective STPL After having granted a license, the unit gets registered and is permitted to commence operations, Thereafter, the unit is permitted to expand its area of operation by seeking permission for expansion, At the time of seeking the permission for expansion, it is logical that the assessee will have to execute lease deeds for separate premises and will also have to approach the customs authorities for bonding certificate. Hence the mere existence of these documents does not establish that each expansion is a new undertaking. 3.6. Further considering the reliance placed by the assessee on letter dated 24th October 2008 of STP, Chennai-I he was further of the view that it did not help....
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....of accounts which clearly show the investment made and the return earned by the undertaking. The assessee despite repeated oral requests has not been able to produce books of accounts of any of the units. In the absence of the present of books of accounts it becomes difficult to verify the claim of the assessee that each and every unit has been set up with substantial new investment. 14. Separate Work Force:-The assessee has contended that each and every unit has a separate identified work force and in support of the same has presented sample, attendance sheets. This information is not a deciding factor in the debate over a separate undertaking and hence is being considered as being irrelevant. 15. New Technology:-The assessee has further contended that each of these undertaking are addressing newer and different technology areas. This is difficult to verify and further the Mumbai Tribunal in the case of VSNL referred to above has held that the mere fact that new unit has been added by adopting contemporary and appropriate technology will not qualify the new unit as a separate undertaking for tax holiday purposes. 16. Separate Customers:-The assessee has further contended ....
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....ring the fact that only 13 separate licenses were available to the assessee which had been issued by STP authority on the basis of which the assessee had acted over the years and claimed deduction u/s10A it was held that the deduction claimed in the Revised Return was not maintainable as the original 13 units were further split into 31 units were not supported by separate licenses. The list of licenses available with the assessee were summed up in para 20 of the assessment order in the following manner:- STP License License No. & Date Chennai 1 STPI/IMSC/94/2111 26 Dec 1994 Chennai 2 STPIC/MSC/1999-2000/2589& 2590 07 Mar 2000 Chennai 3 STPIC/IMSC/2002-2003 1287 & 1288 13 Mar 2003 Chennai 4 Noida 1 5(4)/94/57 2796 26 Dec 1994 Noida 2 PCMG/PSE/05/025/STPIN/5524 14 Mar 2000 Noida 3 STPIN/APP/8282003/200228/18766 28 August 2003 Banglore 1 EIG/HCL-Technologies/GEN/19225& 26 30 October 2003 PSO-Chennai 1 STPB/IMSC/93/665 7 June 1996 PSO-Chennai 2 STPIC/IMSC/93/665 7 June 1996 PSO-Noida March 16, 1995 PSO-Kolkata EIC:90:96-97:071 7 June 1996 3.9. Carrying on the ....
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....roperly claimed. This report should be submitted along with the return of income. 23.2 Even the mandatory filing of Form 56F has not been complied for in the previous years. This is the first year in which the assessee has actually submitted a separate Form 56 for each of the 31 units. Till the assessment year 2003-04, the assessee was maintaining that it had only 13 different units for which the benefits u/s10A were being claimed. It is only in the current assessment year that the assessee has carved out 31 separate units after splitting the erstwhile 13 units. The assessee has no explanation as to why this mandatory condition has not been followed in the earlier years. Hence going by this condition it is clear that the assessee has not been meeting the fourth condition as stated in Section 10A. 24. Conclusion: Based on the above analysis the following conclusions are reached: * I restrict the claim u/s 10A with respect to the amount as computed under the Original Return of income and ignore the claim made under the Revised Return of Income: and * The time period for the claim u/s 10A will be computed as per the Form 56F submitted along with the original Return only. C....
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....contention of the assessee that although, the 31 undertakings were operating only under 13 licenses granted by the STPI authorities but these were operating in separate premises with separate addresses also in most of the cases. The AO however, did not accept this contention of the assessee. The AO treated the group of all the development centres operating under one license granted by the STI authorities as one undertaking for the purpose of granting deduction u/s 10A of the I.T.Act." 4.1. Considering the same, the DRP came to the following conclusion:- "We have given a careful consideration to the claim of the assessee and various arguments advance by the Ld. ARs in support of the claim. We, however find that the claim of the assessee cannot be accepted. The registration granted to the separate software development centres by the STPIs and by the Custom Authorities in no way satisfies the condition that each software development centre is a separate undertaking. These registrations are granted for different purposes. The registration granted by the STPI, is only a certificate that the entire production of that software development centre will be exported. Similarly, th....
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....ugh the draft assessment order, the order of the DRP and the impugned order passed in pursuance to the directions of the DRP highlighting the fact that the original return filed was revised wherein the deduction claimed u/s 10A was revised. The argument put forth was that the assessee had 13 "mother licenses" and the applications made for setting up new units were permitted by the STP Authorities who instead of issuing separate licenses granted permission on the existing "13 mother licenses" accordingly it was contended that as per the revised claim the 31 undertakings registered with STPI were eligible for deduction u/s 10A. 5.2. Referring to the material available on record it was submitted that in fact there were 28 undertakings in the previous year + 6 new undertakings out of which 2 undertakings did not have operation and one unit at PSO, Chennai-1 became taxable in the next year. It was submitted referring to the Synopsis dated 01.02.2012 filed that in the revised return of income deduction u/s 10A was computed at Rs. 275.57 crores as against Rs. 257.24 crores computed in the original return of income which was further clarified by the following chart:- Particular....
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....0029 4 D12 & 12B, Sidco Industrial Estate, Ambattur, Chennai-600058 5 PM Towers, No. 37, Greams Road, Chennai- 600006 6 158, Arcot Road, Vadapalani, Chennai-600026 7 Sapna Trade Center, 110, P.H. Road, Chennai- 600084 8 602, Tidel Park, 4 Canal Bank Road, Taramani, Chennai-600113 9 PM Towers, 6th & 7th Floor, NO. 37, Greams Road, Chennai-600006 10 51, Jawaharlal Nehru Street, Guindy Industrial Estate, Ekkattuthangal, Chennai- 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....
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....e 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 number) Undertakings (in number) 1995-96 21.05 602 2 1996-97 48.22 917 3 1997-98 93.55 1,223 5 1998-99 227.08 1,458 6 1999-2000 367.32 2,575 8 2000-01 663.08 3,488 15 2001-02 720.10 4,044 18 2002-03 824.89 5,670 22 2003-04 1,058.42 7,673 28 2004-05 1,353.31 10,996 34 At the time of setting up each of the undertakings, the following steps were taken by the appellant: 1. Separate premis....
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....e units and it only requires the assessee to compute the profits of the eligible units which requirement has been fulfilled by the assessee. As such it was his argument that maintenance of separate books of accounts is not a necessary condition to be met for claiming deduction u/s 10A of the Act. 5.7. Reliance was placed upon DCIT Vs. Arabian Exports Ltd 109 TTJ 440 (Mum) wherein considering the conditions as mentioned in sub section (2) of the section 10B the action of the CIT(A) has been affirmed by the Tribunal. The objections of the AO therein that separate books of accounts were to be maintained qua the unit for which deduction u/s 10B was being claimed was held to be not justified. Relying on the same it was his contention that the AO has erred in holding that separate books of accounts are to be maintained for claiming deduction u/s 10A and has thereby imputed more onerous obligation for allowance of deduction u/s 10A then what is actually provided in the statute. 5.8. Without prejudice to the above legal position on facts it was contended that the assessee has maintained separate records for each undertaking and has computed the deduction u/s 10A in respect of which e....
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....or the contention that it has been held in the same that the manner in which the approval has been granted is not relevant to examine the assessee's claim of deduction u/s 10A of the Act. Relying on the said decisions it was contended that each of the 31 undertakings of the assessee are registered with STPI authority and merely because approval for setting up another STPI Unit(s) is granted on one license it would not lead to the implication that the units are not registered by the STPI authority for the purposes of Section 10A. Each of the 31 undertakings it was contended represents an independent separate and viable unit, registered with STPI Authorities in accordance with the Software Technology Park Scheme notified by the Government of India in the Ministry of Commerce and Industry as required by Section 10A of the Income Tax Act, 1961[Clause (i) (b) of Sub-Section (2) of Section 10A read with Explanation 2(vii) of Section 10A o the Act]. It was argued that Section 10A provides for deduction in respect of profits and gains derived by an undertaking from export of article or things or computer software and the term undertaking has been variously defined in the dictionaries, law ....
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....ion 80J must be interpreted to mean any venture or enterprise which a person undertakes to do and which has relation to some industry or has some industrial consequences. The notion of an undertaking basically means that it has got to be a concrete and tangible venture in the path of industry to make it an industrial undertaking, wherein some capital is employed, and which is separate to the extent as to show how much a 6% (or 7 1/2 , as the case may be), return would amount so as to make it allowable." 5.14 Reliance was also placed upon the judgement of the Kerala High Court in the case of CIT vs Bhagirath 193 ITR 674 which was stated to be subsequently affirmed by the Apex Court and published in 199 ITR 12 (SC) in the context of provisions of Section 32A of the Act, while holding that the assessee company engaged in the business of construction was an 'industrial undertaking' which term it was pointed out is narrower than the term "undertaking" as such eligible for investment allowance, explained the said term as follows: " in the absence of a definition in the Act, the words "industrial undertaking" should be construed in its popular sense. Construing the words "indu....
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....gagement'. It can as well mean ' the act of one who undertakes or engages in a project or business' (Webster). An undertaking mentioned in section 54D must be one maintained by a person for the purpose of carrying on his business 'Undertaking', for the purpose of this section, however, must be an 'industrial undertaking'. The demonstrative adjective 'industrial' qualifying the word 'undertaking' unmistakably and with precision shows that the undertaking must be one which partakes of the character of a business." 5.15. It was his submission that on a consideration of the principles laid down by the Hon'ble High Court in the case of Textile Machinery Corporation Ltd. vs CIT, what emerges is that the undertaking should be a physically separate industrial undertaking which may exist on its own as a viable unit. Reliance was further placed upon ITO Vs. DSM Soft (P) Ltd 115 TTJ 469 (Chennai) and JCIT Vs. Associated Capsule (P) Ltd 114 ITD 189 (Mum) wherein also one of the reasons for denying relief under Section 80-I and 80-IA was that the AO observed that there was only one licence for all the units wherein against the action of the CIT(A) in granting relief relying on Textiles....
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....eme Court in the case of Textile Machinery (supra). The assessing officer did not dispute that each undertaking has a separate identified workforce, as is demonstrated by attendance sheet, etc. placed on record. The assessing officer has on his own ignored the relevant facts, which go to the very root of the matter for deciding whether reach undertaking constituted a separate undertaking in terms of tests laid down by the Supreme Court. In order to support the fact that each undertaking is a separate unit, the appellant submitted that each undertaking is executing independently computer software projects. The assessee also submitted before the assessing officer that undertakings deals in newer and different technology area in order to strengthen/corroborate, the fact that such undertakings in fact is an independent viable undertaking, producing and delivering computer software projects, in its own specialized field to the customers on its own. The aforesaid fact was also relevant for demonstrating that each unit dealt with a different technology area, was not common or part of other unit. The assessing officer has not disputed that each undertaking is independently handling soft....
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.... by bold texting) In any case, the aforesaid inadvertence on the part of the appellant not to treat each of the eligible undertakings (i.e. software development center) as a separate unit for computing deduction u/s 10A of the Act could not be used as estoppel to deny deduction legitimately admissible to the appellant under that Section. It is settled proposition that the assessing officer is required to correctly compute the taxable income of the appellant and is duty bound to suo moto allow deduction of claim, which is other wise lawfully admissible to the appellant. In any case, the various documents and information relating to the various undertakings, such as, copy of STPI registration documents, copy of custom bond register, separate lease deed, details of fixed assets, details of employees and year-wise details of turnover, etc., have placed on record. Considering that all the aforesaid documents have been placed on record before the AO, the deduction lawfully admissible to the assessee, cannot be denied merely for the reason that the aforesaid conditions/requirements as provided in sub-section(2) of Section 10A of the Act were not examined by the assessing officer in ....
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....of arguments dated 11/7/2013 placed on record on behalf of the assessee. A perusal of the same shows that addressing Ground 2, and Ground 3 to 3.19 the action of the Revenue in denying the revised claim u/s 10A has been assailed. Referring to the relevant provision of the Act it was submitted that the Act provides for deduction to an undertaking which is established/set up in a software Technology Park and the statute does not specify the manner in which the approval/registration is to be issued by the STPI authorities. It has also been argued that the section does not provide for a separate license as a condition precedent for holding a unit operating in Software Technology Park as eligible for deduction under that section. 5.20 Reliance in these written submissions has again been placed on the case of the Textile Machinery Corporation Ltd. vs. CIT and it has been contended that the said case lays the following tests which have to be applied :- " (1) Investment of substantial fresh capital in the industrial undertaking set up. (2) Employment of requisite labour therein, (3) manufacture or production of articles in the said undertaking, (4) earning of profits c....
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.... by the following decisions:- * CIT Vs. Dunlop Rubber Co (India) Ltd: 107 ITR 182 (Cal.) [Section 84] * Mahindra Sintered Products Ltd. Vs. CIT: 177 ITR 111 (Bom) [Section 80J] * CIT VS. J. K. Synthetics Ltd: 182 ITR 125 (Del.) [Section 84] * CIT Vs. Hidn Lamps Ltd: 190 ITR 553 (All.) [Section 80J] * CIT Vs. Mazagaon Dock Ltd: 191 ITR460 (Bom) [Section 80J] * CIT Vs. Hindustan Malleables & Forgings Ltd: 191 ITR 70 (pat.) [Section 80J] * CIT Vs. Abirami Cotton Mills (P) Ltd: 220 ITR 84 (AP) [Section 80J] * CIT Vs. Technotive Eastern (P) Ltd: 255 ITR 253 (Gau) [Section 80-HH and 80I] * Rajasthan Petro Synthetics Ltd. Vs. DCIT: 60 ITD 682 (Del) [Section 80I] * Punjab Tractors Ltd. Vs. DCIT: 128 Taxman (Chd.) (Mag.) [Section 80I] * DCIT Vs. Arabian Exports Ltd: 109 TTJ 440 (Mum.) * CBDT Circular No. 1 of 2013 dated 17/1/2013 also clarifies the position to the aforesaid fact. 5.24. Reliance has been placed on the aforementioned certificate dated 24.10.2008 of Chennai STPI Authority which it is urged clarifies the position that each of the 31 undertakings in respect of which deduction u/s 10A of the Act has been claimed, are set up in Software Techn....
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....on. The AO it was submitted has allowed deduction u/s 10A for the 13 units originally claimed which claim was based on the factual position accepted by the assessee over the years, as it is an undisputed fact that the additional units which the assessee is now claiming are entitled for deduction, have been formed and are part of the existing 13 undertakings some of which are in the 10th year some and some are in their 6th or 5th year of their claim of deduction. It has been argued relying upon the orders of the authorities below that the factual position of 13 units has been accepted by the assessee over the years and ignoring the same the claim now being advanced by the assessee cannot be allowed as it is aimed at acquiring twin benefit namely(i) i.e extended period of deduction i.e extended beyond the statutory limitation and (ii) higher claim of deduction by showing losses arising in some units separately and not setting off against the profits of the other. Accordingly ignoring its own accepted position it was argued the assessee's claim is not maintainable. 6.2. As noted in the earlier part of the order the hearing in the present appeal took place on various dates and conse....
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....ew units were made operational. (ii) The conduct of the assessee for all these years, whether these units were regarded by the assessee itself as separate undertakings or formed integral part of the existing units. (iii) The treatment given to the these additional units in financial statements. (iv) Treatment given to these so called "new" units by the Regulatory Authorities. (v) Other circumstantial evidence throwing light on the nature and status of the units. 6.4. It was his submission that no doubt law permits an assessee to file a revised return of income if he discovers on omission in the returned filed. It was also his submission that the law also permits the assessee to file a revised return whereby the assessee may advance a claim of deduction which has escaped from being claimed in the original return filed. It was his submission that merely because filing of revised return is permissible it cannot be held that the revised claim in the revised return has to be necessarily accepted. The filing of a revised return cannot change the factual matrix. It was argued that once on facts it is to be held that a claim of deduction is not allowable on facts. The filing....
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....ests in this regard, the assessee company has preferred not to file a copy of the application submitted to STPI authorities which would have given some indication of the fact whether these additional units were set up as separate/independent units or were merely the expanded work stations/location/integral units. Revenue has placed before the Hon'ble Bench the notification issued by STPI authorities which provides: a. The format for the application for a new unit which is entirely different from that of new locations for the existing undertakings. b. The requirements (check list) for the two i.e. the expansion of the existing units and of the new independent undertakings are entirely different. In the case of former, only the permission for bonding of the place is required. (May kindly refer to set of papers containing STPI notification) The assessee has deliberately withheld copies of such applications as these might clinch the issue against it as it was never the intention o the assessee to set up new and independent undertakings at the relevant point of time. (emphasis provided by the Bench) (ii) Stand of the assessee before tax authorities in earlier years ....
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....establishes the fact that for the whole of the financial year when these units were in operation, these were regarded by the assessee itself as integral part of the existing units and not as separate/independent undertakings. 9) The Regulatory authorities have treated these units as part of existing units. This is evident from the fact that these locations have merely been given permission to obtain separate bonding of premises. Such bonding is needed both in respect of new units as also for the new location of the existing unit. The permission accorded by STPI authorities clearly indicate that permission was neither sought nor given for a new independent unit. 10) Various case laws relied upon by the assessee are not relevant to the issue involved in the present appeal. The question is not whether these additional units have the attributes of a new independent unit. The question is whether these were set up as new independent units or integral part of the existing units. The case of the TEXTILE MACHINERY on which great deal of reliance has been placed lays down, after enlisting certain major attributes of a new independent unit, that the new unit should be "above all a separ....
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....not been defined in the relevant provision and in the circumstances relying on the legal definition of the term and as has been understood on a consideration of various judgments considering the analogous provisions it has been argued that the term means any unit which is a viable unit capable of existing independently, capable of conducting business in an independent manner and is not linked to other units or dependent on them for doing its business is an undertaking if it exists in the STPI Zone and in the case of the assessee it has been argued that the 31 units exist as independent viable units whose accounts are capable of being culled out as such the claim should be allowed on verification. It has been emphasized that the units exist at separate locations as such this fact itself demonstrates that these are separate undertaking where separate lease deeds are available and the customs authorities have bonded these separate premises wherein fresh capital has been introduced and these cater to different and separate clients as such the units are capable of existing independently in their own right. On behalf of the assessee it has also been claimed that it is a matter of r....
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....state that the activities/transactions of HCL Technologies are only related to export of software. The Finance Act, 2000 w.e.f. assessment year 2001-02 has amended the provisions of section 10A and has clearly included a concept of a certificate which has been drawn up with the provisions of this section. However, this insertion in sub section 5 is applicable only from assessment year 2001-02". The assessee has given distinctive addresses of 15 business premises, viz. 1. Client/Server Applications Division, Gurgaon. 2. Advance Technologies Centre, Gurgaon. 3. Netcentric Technologies Division, Noida. 4. Mircro processor Software Group, Noida. 5. Internet Application Centre, Noida. 6. Remote Network Management Centre, Noida. 7. Core Technologies Division, Chennai. 8. Networking Products Division, Chennai. 9. Application Solutions Development Centre, Chennai. 10. Integrated Technologies Centre, Chennai. 11. Embedded Software Centre, Chennai. 12. CRM Centre, Chennai. 13. Cisco Centre, Chennai. 14. Software Engineering Solutions Centre, Chennai. 15. Global Resources Group, Chennai. (The above portion highlighted is emphasized by the ....
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.... of the assessee as to why this cannot be accepted not only on the reasoning that the assessee is resiling from its own stated position in the fag end of the period but also on the ground that such an action is against the letter and spirit of law. On consideration we find ourselves fully in support of the arguments advanced by the Revenue. Our attention has been invited to the findings that it is not possible to examine and verify the claim at this belated stage and the assessee cannot expect the Revenue to work out the profits separately for these extended units which details have never been provided as assessee over the years treated them as part of the existing units. The consistent stand of the Revenue while referring to findings recorded in the assessment order reproduced in the earlier part of this order that the criteria on which emphasis is being laid as having been settled by legal precedents applies in equal force to setting up expanded locations as permission from STPI authorities is required therein also and the fact that these extended locations permission is endorsed on the 13 licenses supports the conclusion that permission to expand the licensed undertaking w....
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....erials were supplied to the jute mill division by the boiler division of the appellant and after machining and forging, the parts were given back by the jute mill division to the boiler division. The appellant claimed exemption from tax u/s 15C of the India Income-tax, 1922, in respect of the profits form the steel foundry division for the assessment years 1958-59 and 1959-60, and in respect of the profits from the jute mill division for the assessment year 1959-60. The income-tax authorities held that the two units were formed by reconstruction of the business already existing within the meaning of section 15C(i); but the Appellate Tribunal, on appeal, held that the appellant was entitled to the relief u/s 15C because the two divisions were new industrial undertakings and that they were not formed by reconstruction of the existing business. The Tribunal found that the machinery in the two divisions were new, they were housed in a separate building and that industrial licenses had to be obtained for manufacturing the parts; that the existing business of the appellant consisted of manufacturing boilers, wagons, etc., and for that purpose the appellant was purchasing the parts, forgi....
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.... dismissing the plea of the Revenue who had proceeded to deny the same for the reason that it was considered to be an act of reconstitution of existing business for an assessee who was an engineering concern manufacturing boilers etc. The assessee after setting up Steel Foundry Division and Jute Mill Division started consuming their products instead of procuring them from the market as was done in the past. Rejecting the reasoning of the Revenue their Lordships held that "reconstruction" presupposes that transfer of assets of the existing business took place which was not a fact in that case as fresh capital had been introduced. It was also held that the fact that the product of the two divisions was utilized by the assessee who earlier was purchasing it from outsiders was not a relevant criteria for denying the claim. Accordingly the well settled principle in the said judgment in the facts of the assessee's case has no bearing on the issue at hand as in the facts of the present case introduction of fresh capital is required even for expanding an existing business to a different location which is permitted by STPI Authorities. The examining of this claim in the fag end of the....
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....y decides and not for what may remotely or even logically follow from it." 7.3.1. Reference may also be made to the celebrated judgement of the Hon'ble Apex Court in the case of CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297/64 Taxman 442 (SC) that it is neither desirable nor permissible to pick out a word or a sentence from the judgement of the Hon'ble Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared. This view had been expressed by the Apex Court way back in 1968 while referring to Lord Halsbury LC From Quiun V. Leathem [1901] AC 495 (HL), at page 506; in K.Ramakrishnan (supra) and State of Orissa v. Sudhansu Shekhar Misra AIR 1968 SC 647. ".... There are two observations of a general character which I wish to make, and one is to repeat what I have very often said before, that every judgement must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expression which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. The ....
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....sessment order that the need and necessity for the same does not arise since it is the assessee who is the best judge of its internal affairs and it is the assessee who has consistently taken a decision as per facts exclusively available to it in its personal domain on the basis of which the assessee has chosen to treat the expanded units as part of the 13 units and we agree that referring to legal precedents will not change these accepted and settled facts. 7.5. Examining the argument that the revised claim is maintainable as due to "inadvertent mistake" correct claim could not be made we on consideration hold that this argument has no legs to stand on as the plausibility of inadvertent mistake of such a nature and magnitude could be allowed to be continued for almost 10 years in some cases and 5 to 7 years in the others requires the swallowing of a huge pill of naivety in order to make it acceptable. Even the argument that the inadvertent mistake is now by way of a revised return is being corrected based on "legal advise" also cannot be accepted. The attempt to change the accepted, settled facts which have consciously and consistently been put forth by the assessee backe....
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....te to record that there is no document available on record on the basis of which an inference can be drawn that the assessee's application before the STPI Authorities was for setting up a new undertaking and not for expanding an existing undertaking. The reliance placed on the Certificate of STPI, Chennai is of no help as it is ambiguously worded. The record shows that assessee has never placed on record the document seeking STPI permission either before the AO nor before the DRP and as observed has also not even been placed before us. In fact the assessee has never even pleaded that any such document was available with it despite the pointed arguments of the Revenue. It is curious to note that no attempt in the course of the hearings has been made on behalf of the assessee to either seek permission to place any such evidence on record or seek permission to file the same before the AO. Considering the entirety of the facts, circumstances, decisions, findings and pleadings of the parties, we are inclined to agree with the departmental stand that had any such document been available with the assessee then attempt to bring the same on record would have been done. 7.7. On exam....
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....oftware outside India from "Export Turnover" without making corresponding adjustment from the "Total Turnover". The said issue was also decided by the AO against the assessee in order to keep the issue alive despite the fact that it was brought to the notice of the AO that it had been decided in assessee's favour by the Tribunal in the assessee's own case for 2004-05 assessment year. The Ld. Special Counsel herein also placed reliance upon the assessment order and the factual issue having been considered by the Tribunal was not disputed. In the circumstances respectfully following the order of the Tribunal in 2004-05 assessment year, the ground raised is allowed and the AO is directed to grant necessary relief. 10. The next issue agitated by the assessee is the disallowance made by the AO amounting to Rs. 1,05,07,741/- u/s 14A r.w. Rule 8D holding the disallowance made by the assessee amounting to Rs. 44,55,082/- as not sufficient resulting in the addition of Rs. 60,52,659/-. A perusal of the record shows that the assessee had earned tax free income of Rs. 17,91,53,673/- on account of tax free interest on securities. The AO after considering the assessee's objections made the ad....
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....llow the expenditure from income from other sources. A perusal of the assessment order u/s 143(3) r.w.s 144(c)(13) shows that incompliance of the direction of the DRP opportunity was given and the assessee's submissions dated 25.10.2010 were considered however it was found that the assessee could not substantiate its claim accordingly it was rejected. Assailing this action vide its submissions advanced through "Broad submissions" dated 01.02.2012. Following claim has been put forth before us:- "The appellant in the relevant previous year has accrued expenditure amounting to Rs. 6,20,012/- being in the nature of expenses incurred by the appellant for the purpose of earning of the incomes subject to tax under the head "other sources". The details in respect of such expenses have been placed on record before the assessing officer. The above claim was made by the appellant in the revised return of income. The assessing officer, however, proceeded to compute the income fo the appellant with reference to the original return of income and accordingly, inadvertently did not allow deduction of the said expenditure of Rs. 6,20,012/- against the income from other sources in term of section 57....