By Sri K v. Aravind, Advocate

IN THE HIGH COURT OF KARNATAKA AT BENGALURU|ON THE 19 DAY OF NOVEMBER, 2018 BEFORE THE HON BLE MR. JUSTICE RAVI MALIMATH| AND| THE HON BLE MR. JUSTICE K. NATARAJAN. INCOME TAX APPEAL NO .443 OF 200 BEIWEEN: | 1THE COMMISSIONER OF INCOME-TA®™(LTU), C.R. BUILDING,QUEENS ROAD,BANGALORE.(LTU), C.R. BUILDING,QUEENS ROAD,BANGALORE. 2.|THE DEPUTY COMMISSIONER OF INCOME-TAX.CIRCLE-11(1),C.R. BUILDING,QUEENS ROAD,BANGALORE.CIRCLE-11(1),C.R. BUILDING,QUEENS ROAD,BANGALORE. ... APPELLANTS | (BY SRI K. V. ARAVIND, ADVOCATE) AND: M/S. IBM GLOBAL SERVICES INDIA PVT.LTD. SUBRAMANYA ARCADE, NO.12,BANNERGHATTA ROAD, BANGALORE. ~., RESPONDENT (BY SRI K. P. KUMAR, SENIOR ADVOCATE, |ALONG WITH SMT. VANI H., ADVOCATE) | THIS INCOME TAX APPEAL [IS FILED UNDERSECTION 260-A OF THE INCOME TAX ACT, 1961,|PRAYING|TO.FORMULATETHE.SUBSTANTIALQUESTIONS OF LAW STATED THEREIN AND ALLOW|THE APPEAL AND SET ASIDE THE ORDERS PASSED BY.THE INCOME-TAX APPELLATE TRIBUNAL, BANGALORE,|IN|LIA.NO.3832/2004DATED26-L0-200 /AND|CONFIRMTHEORDER|OF|THE.APPELLATE|COMMISSIONER CONFIRMING THE ORDER PASSED BY.THE.DEPUTYCOMMISSIONER.OF|INCOME|TAX,CIRCLE-11(1), BANGALORE. THIS INCOME TAK APPEAL COMING ON FORHEARING THIS DAY, RAVI MALIMATH, J., DELIVERED|THE FOLLOWING: JUDGMENT Tne asssessee Company is involved in thebusiness of manufacture and trading of computer|hardware and maintenance of computer equipments.In respect of tne assessment year 2000-01, the’assessee filed a return of income declaring a loss of Rs.5,53,22,145/-. Tne assessee claimed deduction|under section 80-IB of the Income Tax Act, 1961, |(for short, the Act’) in a sum of Rs.16,36,97,283/-.Thereafter, proceedings were initiated under section|148 of the Act. The assessee filed a return and the| deduction claimed under section 80-IB of the Act was/reduced to Rs.11,16,26,648/-. The Assessing Officer|neld that once there is no net profit, no deduction|Under section 80-IB of tne Act can be attributed.Accordingly, the claim under section 80-IB of the Act|was held to be inadmissible. On an appeal before the|Commissioner of Income Tax, the same was rejected.Thereafter, an appeal was. preferred before theTribunal. The Tribunal set aside the orders of the|Assessing Officer as well as the Commissioner of Income Tax (Appeals) and upheld the claim of the|assessee, while directing the Assessing Officer to|compute tne deduction under Section 80-IB of the Act.Aggrieved by the same, this appeal is filed by the|Revenue. 2. By the order dated 3-8-2009, the appeal was.admitted to consider tne following substantial questionsof law: — /. Whether tne Tribunal was correct|in holding tnat the assessee would|be entitled to claim of deductionUnder Section S8OQOIB of the Adespitethecategoricalfindingrecorded by the Assessing Officer|and confirmed by the Appellate|Commissioner that no. profit wasearned by the assessee from its|trading and manufacturing activity|and the net profit was derived fromotner sources2 i.Whether the Tribunal was correctin nolding that the assessee was|entitled to claim of deduction under.Section 8S8OIB of the Act Dased othe report under Section 44AB ofthe Act which was found to be.erroneous by the Assessing Officer|and tne CIT (A) as it was based onestimation and not on actuals? TinWhether tne Tribunal was correct|in| nolding that deduction underSectionSOIBofthe|ACLWasallowable on the basis of estimatedprofit from tne eligible undertaking|as per the report under Section44AB of the Act which was basedon a hypothesis and_ thereforearbitrary without assigning” anyreasons to set aside tne finaing of|the Appellate Commissioner andthe|AssessingOfficerandconsequently recorded a perversefinding? 3. The learned counsel for the appellantscontends that the substantial question of law that nave|been framed requires to be reframed. Arguments are|advanced on this ground. TinWhether tne Tribunal was correct|in| nolding that deduction underSectionSOIBofthe|ACLWasallowable on the basis of estimatedprofit from tne eligible undertaking|as per the report under Section44AB of the Act which was basedon a hypothesis and_ thereforearbitrary without assigning” anyreasons to set aside tne finaing of|the Appellate Commissioner andthe|AssessingOfficerandconsequently recorded a perversefinding? 3. The learned counsel for the appellantscontends that the substantial question of law that nave|been framed requires to be reframed. Arguments are|advanced on this ground. 4. On hearing learned counsels, we are of tne|view that the following substantial question of law)requires to be framed for consideration in this appeal: 6| “Whether the Tribunal was Justified|in passing the order without even|considering the contentions of the.Revenue and without discussing tne|reasons assigned by tne Assessing|Officer?” 5. The Assessing Officer, while passing tneorder, took note of the fact that the assessee Company|nas not maintained separate books of accounts forPondicherry Unit nor has it computed the income of thePondicherry Unit on any cogent and conerent basis.When there is a gross profit of about 22.5% from)trading/manufacturing activity, there is no profit from|these activities as the entire net profit has come from|other income. Therefore, no net profit can be.assignedevefntOthemanufacturingunitat.Pondicherry. Even if 50% expenses is allowed on.earning ‘other income, the net income to Rs.129|million which is still higher than the net profit of the|entire Dusiness at 389 million. Therefore, once there is | no net profit, there cannot be deduction under Section|80-IB of the Act. The Commissioner of Income Tax.(Appeals), firstly, took note of the fact that various|claims were sought by the assessee Defore it, with|different figures, was noted in paragraph No.2.14. —Thereafter, it confirmed the order of the Assessing|Officer. However, none of the contentions nave been)raised by the Tribunal. 6. Tne Tribunal came to tne conciusion tnat tnefigures as assigned by the Assessing Officer at'Rs.3,50,17,424/- is to be accepted. This is sougnt to.be supported by the assessee by relying on the order|of tne Assessing Officer, wno nimself came to the|conclusionthatprofitat.Pondicherry.WOUIC|de|Rs.3,50,17,424/-. Therefore, the entire income was|confused as profit earned at Pondicherry Unit. 7. Therefore, keeping the contentions in mind,|we are of the view that the Tribunal should have| considered the contentions as advanced before it. The|Tribunal being an appellate forum did not appropriately|consider the reasons assigned by the Assessing Officer.In our considered view, non-consideration of all the)contentions and without any discussion would render|the order of the Tribunal to be interfered with.Therefore, it is only just and necessary that the|impugned order of the Tribunal be set-aside, Dbyremanding the matter to the Tribunal for a fresh)consideration in accordance witn law. 8. Consequently, the substantial question of lawis answered by holding that the Tribunal was not'justified in passing the order without considering the|contentions advanced by the Revenue and witnout|discussing the reasons as assigned by the Assessing|Officer. Therefore, the order of Tribunal is set-aside|and tne matter Is remanded to the Tribunal for a fresn|consideration. �� �22-.7�5/��.==0>853?74��85/20/-8�0<<�� ��)%��� �������������� ��������)%� ���������� G6G�