TaxTMI 
TaxTMI 
2025 (10) TMI 838
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....nt order by DCIT CC- 8(3), Mumbai, u/s. 143(3) r.w.s 147 Act, dated 21.06.2019 for Assessment Year 2013-14. 2. Grounds taken by the Revenue in ITA No.2110/Mum/2025 are reproduced as under: 1. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in quashing the reassessment proceedings under Section 147 of the Income Tax Act by concluding that the reopening was based on a mere change of opinion, without duly appreciating the Assessing Officer's independent reasoning, tangible material indicating possible escapement of income, and the due procedure followed for reopening? 2. Whether on the facts and under the circumstances of the case and in law, the Ld.CIT(A) was justified in deleting the disallowance of exemption claimed u/s. 10A/10AA of Rs. 94,15,03,969/- without appreciating the facts as brought by the assessing officer in the assessment order? 3. Whether on the facts and under the circumstances of the case and in law, the Ld.CIT(A) was justified in deleting the disallowance of exemption claimed u/s. 10A/10AA of Rs. 94,15,03,969/- without appreciating the facts as brought by the assessing officer in the asse....
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....donee trust was not carrying out genuine scientific research, leading to the withdrawal of its recognition? 6. Whether the Ld. CIT(A) was justified in holding that the retrospective withdrawal of recognition under Section 35(1)(ii) does not affect the allowability of deduction, without considering that the Revenue has demonstrated that the donee trust was engaged in non-genuine activities and that the approval was obtained by misrepresentation? 7. Whether the Ld. CIT(A) erred in relying on the decisions of the Hon'ble ITAT Mumbai in Vora Financial Services Pvt. Ltd. and the Hon'ble Bombay High Court in Ramdas Maneklal Gandhi, without appreciating that those cases did not involve a finding that the donee institution was engaged in fraudulent activities? 8. Whether, in light of the investigation findings, the deduction under Section 35(1)(ii) should be denied on the principle that an expenditure incurred in contravention of law or public policy is not allowable under the Income Tax Act, 1961? 2.2. Grounds taken by the Revenue in ITA No.2112/Mum/2025 are reproduced as under: 1. Whether, on the facts and in the circumstances of the case an....
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...., 20.05.2016 and 06.02.2017. Thus, provisions contained in the first proviso to section 147 becomes applicable in all the three appeals for the three said assessment years. First proviso to section 147 postulates that Assessing Officer can initiate reassessment proceedings after a period of four years from the end of the relevant assessment year, if he can substantiate the fact that any income chargeable to tax had escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. 4. Brief facts of the case before we take up the matter for adjudication are that assessee is engaged in the business of development of software technologies and services towards various segment, i.e., exchange business, brokerage and intermediaries services in India as well as outside India. Assessee has incorporated its wholly owned subsidiaries and step down subsidiaries including exchange joint ventures to represent its exchange business globally, since AY 2006-07. The details of these subsidiaries/ step down subsidiary companies is tabulated below: Sr. No. Holding co. Subsidiary company Step1 company subsidiary ....
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....ee against which Revenue is in appeal before the Tribunal. Our observations and findings in this appeal shall apply mutatis mutandis to the other two appeal for AY 2012-13 and 2013-14. 6. For AY 2011-12, original return was filed on 29.11.2011, reporting total income at Rs. 57,16,88,452/- after claiming deduction of Rs. 89,81,59,063/- u/s. 10A and of Rs. 4,33,44,906/- u/s. 10AA, totalling to Rs. 94,15,03,969/- (Rs.89,81,59,063 + Rs. 4,33,44,906). Case of the assessee was taken up for scrutiny assessment u/s. 143(3) r.w.s.144C. In the course of original assessment, assessee filed extensive details pertaining to deduction u/s. 10A and 10AA vide its letter dated 05.03.2015 bearing acknowledged stamp of the office of Deputy Commissioner of Income Tax, Central Circle - 8(3), Mumbai with the date stamp of 09.03.2015, placed in paper book at page-29 onwards. Relevant extract of the submission is reproduced below: "4). During the Assessment Year 2011-12 FTIL has claimed the deduction u/s 10AA of Rs. 4,33,44,906/- Please provide the detailed working for the same and also provide the detailed note whether the condition mentioned in section 10AA were satisfied. Please provide the ....
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.... formed by the transfer to a new business, of old plant and machinery. It is evident from the copies of sample bills of additions to Fixed Assets mentioned earlier in Annexure 4D Condition 5: The assessee has income from export of articles or thing or from services from such unit. In other words, the assessee has exported goods or provided services out of India from the Special Economic Zone by land, sea, air, or by any other mode, whether physical or otherwise. The assessee company has exported the computer software and earned income from rendering Computer Software related services abroad. Copies of sample invoices are enclosed herewith. Further copies of SOFTEX form filed with custom department are enclosed herewith. Annexure 4F (i) & (ii). Condition 6: Whether the consideration in respect of export by the undertaking received in or brought into India, The assessee has received consideration in respect of export into India. (Copy of statement and Certificate of Foreign Inward Remittance is enclosed herewith). (Annexure 4G.) Conditions 7: The Tax payer should submit The Report of the Accountant in Form No. 56F along with the return of ....
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....ure 5-B.) The deduction u/s 10A was duly claimed in the return of income. Kindly appreciate that the same deduction has been allowed in earlier years also by your good self and your predecessor-in-office. We submit that as there is no change in the facts and circumstances of the case, accordingly the deduction under section 10 AA should be allowed as claimed by the assessee in the year under consideration also. 6) Provide the NP Ratio of 10AA, 10A and other unit. Also give details of common expenses allocated between all the units and justify the ratio of allocation. The details showing the Operating Profit Ratio of 10 A, 10 AA and Normal Unit are enclosed herewith as per Annexure No 6-A. Details of allocation of common expenses are enclosed herewith as annexure 6B. Kindly note, that the profit in STPI & SEZ Units is more than the other units as these units are focused on business of software development which is catering to the international market where the sales prices are much higher than the domestic market. The products are developed according to the need of the customers and designed to use in different environment, different regulatory co....
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.... export into India. (Copy of statement and Certificate of Foreign Inward Remittance). ix. Copy of Audit Report in Form no 56 F filed electronically, Profit & Loss Account, Balance Sheet, Income Tax Depreciation Schedule and Computation of Income for 10AA unit. The deduction u/s 10AA was duly claimed in the return of income. (the aforesaid facts are noted on page 24 of the CIT(A) order) x. The assessee had also filed copies of the annual reports of the regulator of the Bahrain Financial Exchange and Global Board of Trade, which included information related to these exchanges. The details thereof are extracted on page 33 of the order passed by the CIT(A). xi. The assessee also made point-by-point detailed submissions on the satisfaction of each of the conditions contained in Section 10A and 10AA of the Act as under: a. Establishment of a unit in SEZ; b. Unit in SEZ which manufactures computer software; c. Such unit is not established by splitting up or reconstruction of a business already in existence; d. Software exported outside India; e. Export proceeds in the form of foreign currency received in India: ....
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....nd investments made by assessee. These subsidiary companies, having small turnover and also incurring losses over the years have no creditworthiness to pay for software imports. In the assessment for AY 2014-15, it was held that assessee is diverting its funds to these subsidiary companies in the form of investments and loans, which is coming back to assessee in the form of export receipts. During the AY 2011-12, assessee has claimed exemption u/s 10AA of Rs 4,33,44,906/- and exemption u/s 10A of Rs 89,81,59,063/- on the amount of exports made to these subsidiary companies. Thus, on the basis of this information, ld. Assessing Officer had reasons to believe that the income to the extent of Rs 94,15,03,969/- on account of exemption claimed u/s 10A and 10AA has escaped assessment for the AY 2011-12. 7.2. Assessee had raised its detailed objections challenging both, the jurisdiction of initiating reassessment proceedings as well as merits of the case relating to claim made u/s. 10A and 10AA which was disposed off by ld. Assessing Officer vide order dated 22.08.2018. Subsequently, reassessment was completed by passing the impugned order whereby claim of deduction u/s. 10A and 10AA a....
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....CIT vs. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC) as well as in the case of ITO vs. Tech Span India Pvt. Ltd. 92 taxmann.com 361 (SC) and of Hon'ble Jurisdictional High Court of Bombay in the case Hexaware Technologies Ltd. vs. ACIT, 162 taxmann.com 225, concluded that no new tangible material was available with the ld. Assessing Officer and the reopening is merely based on the change of opening on the existing facts and thus, held the reopening u/147 as invalid, allowing the ground raised by the assessee. 9. We have heard both the parties and perused the material on record and gone through the exhaustive paper book filed by the assessee for all the three years taken together, containing 657 pages. Admittedly, factual position is that impugned reassessment proceedings have been initiated after a period of four years from the end of the relevant assessment years and thus, conditions prescribed under the first proviso to section 147 squarely applies in this case. There are two conditions which are to be met as per the first proviso to section 147, first, the original assessment u/s. 143(3) ought to be have been completed and second, that there should be no failure on th....
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....ut in the reasons to believe recorded by the ld. Assessing Officer. 10. In the given set of facts and circumstances, the reopening proceedings are liable to be quashed resulting in the impugned reassessment order as bad in law. Accordingly, we hold so, finding our force from the decision of Hon'ble Jurisdictional High Court of Bombay in the case of Cedric De Souza Faria vs. DCIT [2018] 400 ITR 30 (Bom), wherein it was held that- "What the proviso to Section 147 postulates is material which was necessary for assessment, which the assessee failed to fully and truly disclose. There is no clear statement in the reasons as to which material the Petitioner failed to disclose. It is not enough that in the reasons supplied, there is one line to the effect that due to failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the relevant assessment year, A.Y. 2010-11. This is just copying and incorporating the language of the section to assume jurisdiction. Such mere lip service is not enough." ............ Thus, the validity of the initiation of the assessment proceedings will be determined only by ....
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....Officer has resorted to is based on assessment proceedings on a subsequent year, i.e., AY 2014-15 which does not constitute tangible material for the purpose of reopening for the concluded assessment. Reference to the assessment for the subsequent year of AY 2014-15 where a contrary view had been taken does not empower the Assessing Officer to assume jurisdiction for the purpose of reopening of the assessment in the present case. 11.1. Accordingly finding force from the judicial precedents referred above and those relied upon by the ld. CIT(A), in the given set of facts which are undisputed, we do not find any reason to interfere with the findings so arrived at by ld. CIT(A) in holding the reopening u/s. 147 as invalid. Thus, grounds raised by the Revenue on the jurisdictional issues of reopening of assessment u/s. 147 are dismissed. 12. Ld. CIT(A) has also dealt on the merits of the case and thoroughly analysed the factual position based on detailed and elaborate submission made by the assessee, which has been reproduced in the first appellate order. 12.1. Before us, nothing cogent has been brought on record to controvert the factual analysis undertaken by the ld. CIT(A) ....
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....ellant has expanded its business by establishing subsidiaries at various foreign exchanges. For the same, the appellant has made investments and has also provided financial assistance to them. The appellant has also exported the customized software as per the specific requirements of these foreign subsidiaries based on various challenges and regulatory frameworks that exist in different countries. It is further contended that the appellant company has complied with all the conditions stipulated in section 10A and 10AA of the I.T. Act. All the documentary evidence of the same were submitted before the AO during the initial assessment proceedings and after scrutinizing the same, the exemption claimed u/s 10A and 10AA was allowed. It is further contended that the appellant has been claiming exemption u/s 10A from AY 2006-07 to AY 2011-12, and exemption u/s 10AA from AY 2011-12 onwards. Merely on the basis of certain assumptions and conjectures, the exemption cannot be disallowed in the subsequent year once the same is allowed in the earlier years. The appellant has also relied on the decision of the Hon'ble Bombay High Court in the case of Western Outdoor Interactive Ltd. ....
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....3. How Export value will be realized: Name of Authorized Dealer and dealer code mentioned with conditions that export sales will be realized within six month from the date of invoice. The above declaration satisfied the condition that software has been developed in the SEZ unit and exported through internet to buyer. 24. It is seen that the AO has not doubted these documentary evidences which prove that the appellant has manufactured the software and the same were exported to the foreign subsidiaries. Therefore, it is an undisputed fact that the appellant company has exported the customized software as per the requirements of its subsidiaries and received export receipts. 25. It is also a fact that all these transactions with the associated enterprises are coming within the ambit of the provisions of section 92C of the I.T. Act and the same are reported in Form 3CEB and these transactions were already subjected to scrutiny by the transfer pricing officer. The appellant has regularly reported the financial details of its domestic as well as foreign subsidiaries in its notes to accounts. 26. I have also considered the details submitted by the appel....