INCOME TAX OFFICER 8(1)(3), MUMBAI v. M/S. EDR CONTINUOUS INFORMATION PVT. LTD., MUMBAI

ITA 6715/MUM/2008 | 2005-2006
Pronouncement Date: 25-02-2010 | Result: Allowed

Appeal Details

RSA Number 671519914 RSA 2008
Assessee PAN AAACE9170A
Bench Mumbai
Appeal Number ITA 6715/MUM/2008
Duration Of Justice 1 year(s) 3 month(s) 3 day(s)
Appellant INCOME TAX OFFICER 8(1)(3), MUMBAI
Respondent M/S. EDR CONTINUOUS INFORMATION PVT. LTD., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-02-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted E
Tribunal Order Date 25-02-2010
Assessment Year 2005-2006
Appeal Filed On 21-11-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHRI. P.M. JAGTAP (A.M.) AND SHRI. N.V. VASU DEVAN (J.M.) ITA NO.6715/MUM/2008 ASSESSMENT YEAR : 2005-2006 INCOME TAX OFFICER 8(1)(3) ROOM NO.260A 2 ND FLR. AAYAKAR BHAVAN M.K. RD. MUMBAI 400 020. VS. EDR CONTINUOUS INFORMATION PVT. LTD. A-36 NANDBHUVAN INDS. ESTATE MAHAKALI CAVES RD. ANDHERI (E) MUMBAI 400 093. PAN : AAACE9170A (APPELLANT) (RESPONDENT) C.O. NO.84/MUM/2009 ARISING OUT OF ITA NO.6715/MUM/2008 ASSESSMENT YEAR : 2005-2006 EDR CONTINUOUS INFORMATION PVT. LTD. A-36 NANDBHUVAN INDS. ESTATE MAHAKALI CAVES RD. ANDHERI (E) MUMBAI 400 093. PAN : AAACE9170A VS. INCOME TAX OFFICER 8(1)(3) ROOM NO.260A 2 ND FLR. AAYAKAR BHAVAN M.K. RD. MUMBAI 400 020. (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY : SHRI P.N. DEVENDARAN RESPONDENT BY : SHRI MAYUR KISNADWALA O R D E R PER P.M. JAGTAP A.M. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) VIII MUMBAI DATED 05.09.2008 AND THE SAME IS BEING DISPOSED OFF ALONG WITH THE CROSS OBJECTION FILED B Y THE ASSESSEE BEING C.O. NO.84/MUM/09. 2. IN THE SOLITARY GROUND RAISED IN ITS APPEAL THE REVENUE HAS CHALLENGED THE ACTION OF THE LEARNED CIT(A) IN DELETING THE DI SALLOWANCE OF ITA NO.6715/MUM/2008 C.O. NO.84/MUM/2009 A.Y.: 2005-2006 2 RS.53 54 728/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF ASSESSEES CLAIM FOR DEDUCTION U/S.10B. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS MAINLY ENGAGED IN THE BUSINESS OF DATA PROCESSING. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 28.10.2 005 DECLARING THE TOTAL INCOME OF RS.1 77 634/- AFTER CLAIMING DEDUCTION OF RS.53 54 728/- U/S.10B. DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.10A WAS EXAMINED BY THE ASSESSING OFFICER AND ON SUCH EXAMINATION HE RECORDED THE FOLLOWING FIND INGS/OBSERVATIONS: 1. THE ASSESSEE HAS RECEIVED DATA PROCESSING CHARG ES FROM E DATA RESOURCES INC. DOLPHIN SOFTWARE INC & B USINESS PROCESS SOLUTIONS INC. THE ASSESSEE HAS GOT CONT RACT FROM THESE PARTIES AND SUB CONTRACTED THE JOB TO THE LOC AL PARTIES WHO HAVE DONE THIS WORK LOCALLY. 2. JUST BY CLAIMING THAT THE ASSESSEE SATISFIES TH E CONDITIONS WILL NOT PROVE THE CASE OF THE ASSESSEE. IT HAS TO BE PROVED BY WAY OF DOCUMENTARY EVIDENCES. THE ASSES SEE HAS GOT WORK CONTRACT FROM THE THREE FOREIGN PARTIES B UT GOT IT EXECUTED BY THE LOCAL PEOPLE. THE ASSESSEE HAS CL AIMED THAT THE CONTRACT LABOUR EMPLOYEES HAD CARRIED OUT PROCE SSING OF DATA AT THEIR PREMISES. BUT THERE IS NO EVIDENCE O F SUCH WORK BEING DONE AT THE PREMISES OF THE ASSESSEE. 3. THE STP UNIT WAS ALLOWED TO MANUFACTURE OR PROD UCE THE ARTICLES OR THINGS OR COMPUTER SOFTWARE IN SUCH SPECIALIZED AREA WHERE MAXIMUM BENEFITS OR SUBSIDIES OR PREFERE NTIAL TREATMENT IS GIVEN TO THE ASSESSEE. IT WAS NEVER THE INTENTION OF THE LEGISLATURE TO ALLOW THE PEOPLE TO SET UP SU CH UNITS AND GET THE WORK DONE FROM THE CONTRACTORS OUTSIDE THE AREA OF THE FREE TRADE ZONE. THE VERY PURPOSE AND OBJECTS OF SETTING UP SUCH FREE TRADE ZONE/STP WILL BE DEFEATED IF SUCH S UB CONTRACTING IS BEING DONE BY THE PEOPLE UNDER THE G UISE OF STPI UNITS. 4. THE INTENTION OF THE LEGISLATURE WAS TO GIVE TH E DEDUCTION TO THE ASSESSEE ONLY WHEN THE ASSESSEE PR ODUCES OR MANUFACTURES IN THE FREE TRADE ZONE. AND THESE FR EE TRADE ZONES ARE GOVERNED BY THE SEZ. SUB CONTRACT IS ALLO WED ONLY WITH PRIOR APPROVAL OF STPI OR THE DEVELOPMENT COMM ISSIONER. THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE ABO UT THESE FORMALITIES. SO THE CLAIM OF THE ASSESSEE THAT IT HAS GOT THE WORK DONE AT ITS OWN PREMISES IS WITHOUT ANY BASIS. 5. THE ASSESSEE HAS NOT DONE ANY WORK WHICH CAN BE CALLED AS PRODUCING MANUFACTURING OR PRODUCTION OF ARTICLES OR ITA NO.6715/MUM/2008 C.O. NO.84/MUM/2009 A.Y.: 2005-2006 3 THINGS OR COMPUTER SOFTWARE FROM THE SAID PREMISES. THE ENTIRE WORK HAS BEEN DONE BY THE VENDORS LOCALLY BY THEIR EMPLOYEES. 6. SECTION 10B DOES NOT STATE THAT DEDUCTION UNDER THIS SECTION IS APPLICABLE EVEN IF THE ASSESSEE DOES NOT MANUFACTURE OR PRODUCE ANY ARTICLES OR COMPUTER SOFTWARE ITSELF BUT GETS IT DONE FORM VENDORS. THE ASSESSEE HAS NOT SATISFIED THE BASIC CONDITION OF SECTION 10B(1) OF THE ACT. 7. THE ASSESSEE HAS ALSO STATED THAT THE WORKERS O F THE VENDORS HAVE WORKED IN THE ASSESSEES PREMISES. THE ASSESSEE HAS NOT PRODUCED ANY SUPPORTING EVIDENCES LIKE DETAILS OF THE WORKERS THE NECESSARY PERMISSIONS F ROM STPI AUTHORITIES FOR THESE WORKERS TO WORK IN THE ASSESS EES PREMISES THE ATTENDANCE REGISTER THE ACTUAL WORK DONE BY THE WORKER THE DURATION OF THE WORK ETC. 8. THE ASSESSEE HAS CAMOUFLAGED ITS ACTIVITIES OF SUB CONTRACTING UNDER THE PRETEXT OF ON SITE EXPENSES A ND HENCE TRIED TO HOODWINK THE TAX AUTHORITIES AND THE CLAIM DEDUCTION U/S.10B OF THE I.T. ACT. 3. ON THE BASIS OF THE ABOVE FINDINGS/OBSERVATIONS THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.10B WAS DISALLOWED BY TH E ASSESSING OFFICER IN THE ASSESSMENT COMPLETED U/S.143(3) VIDE AN ORDER D ATED 28.12.2007. 4. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R U/S.143(3) DISALLOWING ITS CLAIM FOR DEDUCTION U/S.10B AN APP EAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) SUBMISSIONS WERE MADE ON BEHALF OF THE ASSESSEE IN SUPPORT OF ITS CLAIM FOR DEDUCTION U/S.10B. ADDITIONAL EVIDENCE IN THE FORM OF COPIES OF ATTENDANCE REGIST ER MAINTAINED AT ITS PREMISES WAS ALSO SOUGHT TO BE FILED BY THE ASSESSE E IN ORDER TO SUPPORT AND SUBSTANTIATE ITS CLAIM THAT THE HIRED MAN-POWER PER FORMED THE JOB OF DATA ENTRY ETC. AT ITS PREMISES AND NOT AT THE PREMISES OF ANY SUB-CONTRACTOR. THE LEARNED CIT(A) DID NOT ACCEDE TO THE REQUEST OF THE ASSESSEE FOR ADMISSION OF ADDITIONAL EVIDENCE. HE HOWEVER AC CEPTED THE STAND OF THE ASSESSEE COMPANY THAT IT WAS ENTITLED TO CLAIM DEDU CTION U/S.10B FOR THE FOLLOWING REASONS GIVEN IN PARA 2.29 TO 2.33 OF HIS IMPUGNED ORDER. 2.29 IT IS AN ADMITTED FACT THAT THE APPELLANT HAD ALREADY FURNISHED THE CONFIRMATIONS REGARDING THE SUPPLY OF THE DATA ITA NO.6715/MUM/2008 C.O. NO.84/MUM/2009 A.Y.: 2005-2006 4 OPERATORS TO THE APPELLANT COMPANY FOR CARRYING OU T THEIR DATA WORK UNDER THE DIRECTION AND SUPERVISION OF THE APP ELLANT COMPANY. THESE CONFIRMATIONS CLEARLY STATED THAT THE DATA OPERATORS WORKED FOR AND UNDER THE DIRECTION/SUPERV ISION OF THE APPELLANT COMPANY. IN ADDITION TO THE ABOVE THE APPELLANT ITSELF SUBMITTED ITS WON CONFIRMATION DATED 20.03.2 007 ALSO TO THE ASSESSING OFFICER CONFIRMING THAT THE CONTRACT WORKERS HIRED HAD ACTUALLY WORKED AT THE PREMISES OF THE APPELLAN T COMPANY. THEREFORE WITHOUT CARRYING ANY INDEPENDENT ENQUIRY THE ASSESSING OFFICER SHOULD NOT HAVE CONCLUDED THAT TH E HIRED MAN-POWER DID NOT WORK AT THE PREMISES OF THE APPEL LANT COMPANY. 2.30 REGARDING THE ASSESSING OFFICERS COMMENTS THA T THE PROVISIONS OF SECTION 10B APPLY WITH RESPECT OF NEW LY ESTABLISHED UNDERTAKING IN FREE TRADE ZONE IS FOUN D TO BE PATENTLY INCORRECT. HOWEVER SUCH PROVISIONS VERY MUCH FORM A PART OF SECTION 10A. THEREFORE THE PROVISIONS OF SECTION 10A CANNOT BE APPLIED FOR A CLAIM MADE U/S.10B. 2.31 FURTHER OBSERVATION OF THE ASSESSING OFFICER T HAT THE APPELLANT HAD OBTAINED THE STPI LICENCE IS ALSO FOU ND TO BE INCORRECT AS ALREADY CLARIFIED IN THE EARLIER PARAG RAPH THAT THE APPELLANT WAS NEVER REGISTERED WITH STPI. 2.32 FURTHER THE APPELLANT HAS EXPLAINED THAT IT H AD NOT OUTSOURCED TO ANY SUB-CONTRACTOR ANY JOB WORK AND H AD IN FACT ONLY HIRED MAN-POWER TO WORK AT IS OWN PREMISES AS SUPPORTED BY THE CONFIRMATIONS ALREADY FURNISHED TO THE ASSESSING OFFICER. MOREOVER THERE IS O BAR EVEN IF A PART OF THE JOB IS OUTSOURCED OR GIVEN ON SUB-CONTRACT AS FAR A S THE PROVISIONS OF 10B ARE CONCERNED. 2.33 IN VIEW OF THE ABOVE MENTIONED OBSERVATIONS AN D FINDINGS SUPPORTED WITH THE JUDGMENTS ALREADY DISCU SSED EARLIER IT IS HELD THAT THE APPELLANT WAS ENTITLED TO CLAIM THE DEDUCTION U/S.10B OF THE I.T. ACT. THEREFORE TH E DISALLOWANCE BY THE ASSESSING OFFICER OF THE ABOVE MENTIONED CLA IM OF DEDUCTION U/S.10B IS DELETED. THEREFORE THIS GRO UND IS TREATED AS ALLOWED. 5. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER O N ACCOUNT OF ASSESSEES CLAIM FOR DEDUCTION U/S.10B THUS WAS DEL ETED BY THE LEARNED CIT(A) BY HIS APPELLATE ORDER DATED 05.09.2008 WHIC H IS IMPUGNED BY THE REVENUE IN THE PRESENT APPEAL FILED BEFORE THE TRIB UNAL. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT T HE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.10B WAS DISALLOWED BY THE ASSESSING O FFICER ON THE BASIS OF ITA NO.6715/MUM/2008 C.O. NO.84/MUM/2009 A.Y.: 2005-2006 5 SPECIFIC FINDINGS/OBSERVATIONS RECORDED IN THE ASSE SSMENT ORDER WHICH HAVE ALREADY BEEN REPRODUCED BY US IN THE FORGOING PORTI ON OF THIS ORDER. IT APPEARS FROM THE IMPUGNED ORDER OF THE LEARNED CIT( A) THAT THE SAID FINDINGS/OBSERVATIONS RECORDED BY THE ASSESSING OFF ICER HAVE NOT BEEN DULY TAKEN INTO CONSIDERATION WHILE DELETING THE DISALLO WANCE MADE ON ACCOUNT OF ASSESSEES CLAIM FOR DEDUCTION U/S.10B. ON THE OTH ER HAND THE FINDINGS RECORDED BY THE LEARNED CIT(A) IN HIS IMPUGNED ORDE R ARE CONTRARY TO THE FACTS RECORDED BY THE ASSESSING OFFICER IN THE ASSE SSMENT ORDER APPARENTLY ON THE BASIS OF ASSESSEES OWN SUBMISSIONS. FOR INSTANCE AS PER PARA 3.4 OF THE ASSESSMENT ORDER THE ASSESSEE WAS STATED TO HAVE CLAIMED THAT IT WAS REGISTERED WITH STPI AND EVEN GREEN CARD WAS ALSO I SSUED TO ITS UNIT BY THE STPI. IN PARA 2.31 OF HIS IMPUGNED ORDER THE LEA RNED CIT(A) HOWEVER HAS GIVEN A FINDING THAT THE ASSESSEE WAS NEVER REGISTE RED WITH STPI. MOREOVER A PERUSAL OF THE IMPUGNED ORDER OF THE LEARNED CIT( A) THE RELEVANT PORTION OF WHICH IS ALREADY EXTRACTED HEREIN ABOVE SHOWS THAT HE HAS PASSED A VERY CRYPTIC ORDER WITHOUT DULY TAKING INTO CONSIDERATIO N THE VARIOUS FINDINGS/OBSERVATIONS RECORDED BY THE ASSESSING OFF ICER WHILE DISALLOWING ASSESSEES CLAIM FOR DEDUCTION U/S.10B. THE IMPUG NED ORDER PASSED BY THE LEARNED CIT(A) ALLOWING THE ASSESSEES CLAIM U/S.10 B THUS IS NOT WELL- DISCUSSED AND WELL-REASONED AND KEEPING IN VIEW THE FACTUAL CONTRADICTION NOTED THEREIN WE ARE OF THE VIEW THAT IT WOULD BE FAIR AND PROPER AND IN THE INTEREST OF JUSTICE TO SET ASIDE THE SAID ORDER AND REMAND THE MATTER TO THE LEARNED CIT(A) TO DISPOSE OF THE APPEAL OF THE ASSE SSEE ON MERIT AFRESH BY PASSING A WELL-REASONED AND WELL-DISCUSSED ORDER. WE ORDER ACCORDINGLY AND ALLOW THIS APPEAL OF THE REVENUE FOR STATISTICA L PURPOSE. 7. AS REGARDS CROSS OBJECTION FILED BY THE ASSESSEE IT IS OBSERVED THAT THE SOLITARY ISSUE RAISED THEREIN CHALLENGING THE LEVY OF INTEREST U/S.234B HAS NOT BEEN DECIDED BY THE LEARNED CIT(A) BY HIS IMPUG NED ORDER. WE THEREFORE DIRECT THE LEARNED CIT(A) TO DECIDE THE SAID ISSUE ON MERIT. 8. IN THE RESULT APPEAL OF THE REVENUE AS WELL AS CROSS OBJECTION OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURP OSE. ITA NO.6715/MUM/2008 C.O. NO.84/MUM/2009 A.Y.: 2005-2006 6 ORDER PRONOUNCED ON THIS 25 TH DAY OF FEBRUARY 2010. SD/- (N.V. VASUDEVAN) (JUDICIAL MEMBER) SD/- (P.M. JAGTAP) (ACCOUNTANT MEMBER) MUMBAI DATED 25 TH FEBRUARY 2010. JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-XXIX MUMB AI 4. COMMISSIONER OF INCOME TAX CITY-XXIX MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH E MUMBAI TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI ITA NO.6715/MUM/2008 C.O. NO.84/MUM/2009 A.Y.: 2005-2006 7 DATE INITIALS 1. DRAFT DICTATED ON 17-02-2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 18-02-2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM 5. APPROVED DRAFT COMES TO THE SR. PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER