Date Of Judgment 19-06-2018, Ita v. M/S Nous Infosystems Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 19 DAY OF JUNE 2018 PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A. No.589/2016 BETWEEN : 1.Pr. COMMISSIONER OF INCOME TAX-)5BMTC COMPLEX, KORAMANGALA,BMTC COMPLEX, KORAMANGALA, BANGALORE. «|DEPUTY COMMISSIONER OFINCOME [TAX OFFICER CIRCLE 9 (1) (1), BANGALORE. _ APPBLLANTS| (BY SRI E.I.SANMATHI, ADV.) AND : M/s NOUS INFOSYSTEMS PVT. LTD. 1[Si]MAIN, 1[S|]BLOCK, KORAMANGALA, BENGALURU,PAN: .. RESPONDENT. (BY SRI ANKUR PAI, ADV.) THIS INCOME TAX APPEAL IS FILED UNDER SECTION|2600-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED 05.02.2016 PASSED IN ITA NO.1369/BANG/2015, FOR:THE ASSESSMENT YEAR 2006-07 PRAYING TO (1) DECIDE THEFOREGOING QUESTION OF LAW AND / OR SUCH OTHER,QUESTIONS OF LAW AS MAY BE FORMULATED BY THEHON BLE COURIT AS DEEMED HIT AND SEI ASIDE THEAPPELLATE ORDER DATED 05.02.2016 PASSED BY THE ITAT,| Date of Judgment 19-06-2018, ITA No.589/2016 Pr. Commissioner of Income Tax-5 & another Vs. M/s Nous Infosystems Pvt. Ltd. 2/7 ‘C¢BENCH,BENGALURU,AS|SOUGHTFOR, IN|THERESPONDENT-ASSESSEE'S CASE, IN APPEAL PROCEEDINGS IN|ITA NO.1369/BANG/2015 FOR A.Y.2006-07 AND GRANT SUCHOTHEBR RBELIBEF AS DBEMBED F THIS APPEAL COMING ON FOR ORDERS, THIS DAY, |Dr. VINEET KOTHARI, J., DELIVERED THE FOLLOWING: JU DGMENT Mr. E.I.Sanmathi,Adv. for Appellants - RevenueMr. Ankur Pai,Adv. for Respondents - Assessee_ Both learned Counsels at the Bar submit that theissue involved in the present case is covered by thedecision of the Hon’ble Supreme Court in the case of ‘Commissioner of Income Tax And Another v.Yokogawa India Limited’|reported in2017 (S91) ITR|374 (SC)59holding that deduction under Section 10A ofthe Act is to be computed at the stage of computingeross total income of the eligible undertaking underChapter IV of the Act and at the stage of computation oftotal income under Chapter VI of the Act and deductionunder Section 10A of the Act only qua the eligible undertaking and without reference to other eligible or noneligible units or undertakings of same assessee. Date of Judgment 19-06-2018, ITA No.589/2016 Pr. Commissioner of Income Tax-5 & another Vs. M/s Nous Infosystems Pvt. Ltd. 3/7 ? The findings of the learned Tribunal about. deduction of Section 10A of the Income Tax Act, 1961 is quoted below for ready reference: “8Havingconsidered|therivalSubmissions as well as relevant material onrecord, we note that the tissue prior to theamended provisions of Section IOA/1IOB wasdecided in favour of the Revenue by the Hon’bleJurisdictional High Court in the case of CIT v.Himatasingike Seide (supra). However, there is asubstantial change in the provisions of Section1OA/10B vide amendment by Finance Act, 2000w.e.f. 1.4.2001. “The Hon’ble Jurisdictional HighCourt in the case of Yokogawa India Ltd. (supra)has considered the provisions of Section 10A/ 10Bas amended by the Finance Act, 2000 & 2001and after noting the change in the provisions, theHon’ble Jurisdictional High Court has decidedthis issue in favour of assessee. Thus prior to theamendment, this provision was considered asexemption,whereaspost-amendment,thisprovision is only a deduction. We further note thatfor the AY 2004-05, the Hon’ble JurisdictionalHigh Court in assessee’s own case in IIANo.189/2009 vide order dated 6.4.2015 has 4/7 decided this issue in favour of the assessee inpara 4 as under: “4. In such view of the matter, we are of the|view that no substantial questions of lawremains to be answered by this Court. SriK.V.Aravind,learnedcounselforthe.appellant states that in the case oOfCOMMISSIONER OF INCOME-TAX vs. TATA|ELXSI LTD. (supra), appeals have beenfiled before the Apex Court which havebeen admitted on the questions of law.” 4/7 decided this issue in favour of the assessee inpara 4 as under: “4. In such view of the matter, we are of the|view that no substantial questions of lawremains to be answered by this Court. SriK.V.Aravind,learnedcounselforthe.appellant states that in the case oOfCOMMISSIONER OF INCOME-TAX vs. TATA|ELXSI LTD. (supra), appeals have beenfiled before the Apex Court which havebeen admitted on the questions of law.” ”9_In view of the above facts andcircumstances of the case and by following thedecision of the Hon’ble Jurisdictional High Courtin assessee’s own case, we do not find any effortor illegality in the impugned order of CIT(Appeals).” YOKOGAWA?’scase |Supra| has held as under: “From a reading of the relevant provisions|of Section 10A it is more than clear to us that thedeductions contemplated therein its qua theeligible undertaking of an assessee standing|on tits own and without reference to the Date of Judgment 19-06-2018, ITA No.589/2016 Pr. Commissioner of Income Tax-5 & another Vs. M/s Nous Infosystems Pvt. Ltd. 5/7 othereligtbleOT|non-eligibleuntts.Orundertakings of the assessee. The benefit of|deduction is given by the Act to the individualundertakingandresultantlyflowsTo|theassessee. This is also more than clear from thecontemporaneousCircular|No.7 IEdated9.8.2000 which states in paragraph 15.6 that,“The export turnover and the total turnoverfor thepurposes ofsections 10A and 10B shall be of theundertaking located in specified zones or 100%Export Oriented Undertakings, as the case maybe, and this. shall not have any materialrelationship with the other business of theassessee outside these zones or units for thePurposes,Of|thisprovision.Ifthe specificprovisions of the Act provide [first provisoto Sections 1OA(1); 1OA (1A) and 10A (4)/ that theunit that is contemplated for grant of benefit ofdeduction is the eligible undertaking and that isalso how the contemporaneous Circular of thedepartment(No. 794dated09.08.2000)understood the situation,|it ts only logical andnatural that the stage of deduction of theprofits and gains of the business of an|eligibleundertakinghasto|bemadeindependently and,therefore, immediately afterthe stage of determination of its profits and gains. Date of Judgment 19-06-2018, ITA No.589/2016 Pr. Commissioner of Income Tax-5 & another Vs. M/s Nous Infosystems Pvt. Ltd. 6/7 At that stage the aggregate of the incomes underother heads and the provisions for set off andcarryforwardcontained|in Sections|70,72and /4of the Act would be premature forapplication.The deductions under Section1OA thereforewouldbepriorto.thecommencementoftheexerciseto|beundertaken under Chapter VI of the Act forarriving at the total income of the assessee|from the gross total income. The somewhatdiscordant use of the expression “total income ofthe assessee” in Section 10A has already beendealt with earlier and in the overall scenariounfolded by the provisions of Section 10A theaforesaiddiscordCa?be|reconciledby understanding the expression “total income of theassessee” in Section 10A as ‘total income of theundertaking’. Therefore, though Section1OA,as|amended, is a provision for deduction, the stageof deduction would be while computing the grosstotal income of the eligible undertaking underChapter IV of the Act and not at the stage ofcomputation of the _ total income underChapter VI.” Date of Judgment 19-06-2018, ITA No.589/2016 Pr. Commissioner of Income Tax-5 & another Vs. M/s Nous Infosystems Pvt. Ltd. 7/7 4Accordingly, the present Appeal is disposed of in same terms. AN /- Sd/-.JUDGE. Sd/-.JU DGE