Ita v. Ita

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE VIJU ABRAHAM MONDAY, THE 6 DAY OF SEPTEMBER 2021 / 15TH BHADRA, 1943 ITA NO. 25 OF 2018 AGAINST THE ORDER/JUDGMENT IN ITA 334/2016 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/APPELLANT/RESPONDENT/REVENUE: THE PRINCIPAL COMMISSIONER OF INCOME TAXTHIRUVANANTHAPURAM. BY ADV SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEP RESPONDENT/RESPONDENT/APPELLANT/ASSESSEE: M/S. PARAGON BIOMEDICAL INDIA (P) LTD. B-16, 'GAYATHRI', TECHNOPARK CAMPUS,KARIAVATTOM, TRIVANDRUM- 695 581. NOW KNOWN AS M/S.CLINIFACE CLINICAL RESEARCH (P) LTD. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 06.09.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA NO. 25 OF 2018 -2- J U D G M E N T S.V.BHATTI,J. Heard the learned Standing Counsel Mr.Christopher Abraham for the appellant. No representation for the respondent. 2.The Principal Commissioner of Income Tax,Thiruvananthapuram aggrieved by the order dated 04.10.2017 inI.T.A No.334/Coch/2016 has filed the instant appeal before this Court. The subject matter of the appeal relates to the return filedfor the Assessment Year 2011-12. The appellant raises thefollowing substantial questions of law: “i)Has not the tribunal erred in holding that the respondent-Assessee is eligible for deduction u/s 10A of the Act in spite of thefact that the assessee had made the claim for such deductionbefore the CIT(A) and had not made any such claim in its Returnof Income? ii)Is not the decision of the tribunal upholding the order of theCIT(A) allowing the respondent's alternate claim for deductionu/s. 10A in the circumstances of the case, contrary to theprinciples laid down by the Apex Court in 284 ITR 323 (SC)? iii)Is not observation of the Tribunal:"When the deduction u/s.10B was denied the AO ought to have examined whether theassesseee is eligible for deduction/s 10A of the Act” frivolous andopposed to the law , facts and circumstances of the case and alsoin the light of the decisions of the Hon'ble Supreme Court in thecase of CIT Vs.Ramakrishna Deo {[1959] 35 ITR 312(SC)}?” 3.M/s.Paragon Biomedical India (P) Ltd/Assessee in thereturn filed for the year 2011-12, claimed deduction under Section10B of Income Tax Act, 1961 (for short, 'the Act'). The AssessingOfficer through the order dated 29.03.2014 (Annexure-A)disallowed the claim of the Assessee under Section 10B of the Actand finalised the assessment. The Assessee, aggrieved thereby filedappeal before the Commissioner of Income Tax (Appeals) (forshort, 'the CIT(Appeals)'), changed the claim for deduction fromSection 10B to Section 10A of the Act, this change of claim wasaccepted by the Appellate Authority and the CIT (Appeals)recorded the following findings: “for the detailed reasons discussed in paras 3.1 to 3.4 of the orderpassed for the AY 2010-11, appeal filed for the year underconsideration against the claim of deduction made u/s. 10B of theAct which in turn been rejected by the Assessing Officer is alsodismissed since the Assessing Officer has rightly disallowed thededuction made u/s. 10B in accordance with the hon'ble DelhiHigh Court decision in the case of CIT vs. Regency Creations Ltd.However, considering the fact that the appellant is also entitledfor deduction u/s.10A as discussed in paras 4.1 to 4.8 of the orderpassed for the AY 2010-11, it is held that the appellant is entitledfor deduction u/s.10A of the Act for the year under considerationas well and accordingly the Assessing Officer is hereby directed towork out the deduction u/s. 10A to which the appellant is entitled for and allow the same as pleaded. Thus, appeal on these groundsare partly allowed.” 4.The Revenue filed ITA No.334/Coch/2016 before the for and allow the same as pleaded. Thus, appeal on these groundsare partly allowed.” 4.The Revenue filed ITA No.334/Coch/2016 before the Income Tax Appellate Tribunal, Cochin (for short, ‘the Tribunal’)and the Tribunal in Paragraph 4 of the order, prefaced the question falling for consideration before the Tribunal which reads thus: “The only issue raised in the Revenue's appeals is whether theCIT(A) is justified in allowing the alternative claim of theassessee u/s.10A of the I.T Act.” The Tribunal referred to the view taken by the Co-ordinate benchin Ms.QBurst Technologies Pvt.Ltd, which is to the following effect: “8. We have heard the rival submissions and perused thematerial on record. In the return of income, the assesseehad claimed deduction under section 10B of the Act. Theclaim of deduction under section 10B of the Act waswithdrawn in the assessment order passed for both theassessment years by following the dictum laid down bythe Hon'ble Delhi High Court in the case of RegencyCreations Ltd. (supra). The first appellate authority hasconfirmed the action of the Assessing Officer in makingthe disallowance of deduction under section 10B of theAct based on the judgment of the Hon'ble Delhi HighCourt, cited supra. However, the first appellate authorityhas allow the alternative claim for deduction undersection 10A of the Act based on the order of thecoordinate Bench of the Tribunal in the case of CWPTaylor in ITA No.695/Coch/2008 (order dated 28.7.2009).The CIT(A) has also verified the facts relating to thecompliance of all the conditions prescribed under section10A of the Act (in para 3.6.8 for A.Y. 2010-11). Based on the verification of facts, the CIT(A) directed the AssessingOfficer to allow deduction under section 10A of the Act.The following judgment of the Hon'ble Delhi High Courtand orders of the ITAT have held that when deduction u/s10B is denied, it is the duty of the revenue to examinewhether the alternative claim of deduction u/s 10A can begranted on facts and circumstances of the case: i)Fast Booking (I) Pvt Ltd vs. DCIT in ITA 334/2015judgment dated 2.9.2015 (Delhi High Court judgment)ii) M/s. Device Driven (India) P. Ltd. (ITA No.282/Coch/2013 (order dt 6.6.2014)iii) Cronos Consulting India P Ltd vs. ACIT (ITANo.15/Coch/2014. 9. Further, we notice that the Assessing Officer in theremand report has not state that the assessee has notsatisfied the conditions precedent to claim deductionunder section 10A of the Act. The Assessing Officer hasonly raised a technical objection namely, the assessee isnot entitled deduction under section 10A of the Act, since,the claim was not made in the return of income filed.However, we notice that the claim of deduction undersection 10B of the Act was made in the return of incomeand the revenue was granting the deduction undersection 10B of the Act in the previous assessment years.Only when the judgment of the Hon'ble Delhi High Courtin the case of Regency Creations Ltd, cited supra, waspronounced, the claim of deduction under section 10Bwas denied in the assessment concluded. When the claimof deduction under section 10B was denied, the AssessingOfficer ought to have examined whether the assessee iseligible for deduction under section 10A of the Act. TheCBDT circular no. 14 (XL-35) dated 11.4.1955 has clarifiedthat the revenue shall not take advantage of ignorance ofthe assessee as to his rights and the officers are dutybound to grant deduction legally available to the assessee.The CIT(A) also relied the judgment of the Hon'ble DelhiHigh Court in the case of CIT vs. Technovate E Solution PLtd reported in 354 ITR 110 wherein it was held that registration with Software Technology Parks of India issufficient to allow deduction under section 10A of the Act.The copies of the certificate of registration issued by STPIand the certificate of the Chartered Accountant in form56F are also enclosed in the paper book filed by theassessee for the respective assessment years. Onexamination of the certificates of registration under STPIand the certificate of the Chartered Accountant in form56F, we are of the view that the CIT(A) is justified inallowing the alternative claim of deduction under section10A of the Act. It is ordered accordingly." and held that the finding recorded by CIT(Appeals) are sustainablein law. Stated very briefly, there is no dispute between theRevenue and the Assessee that the Assessee in the return filed forthe subject year, claimed exclusion of income under Section 10B ofthe Act. For the reasons recorded by the Assessing Officer, theclaim under Section 10B of the Act was negatived and impliedaccepted by the Assessee in further stages of the matter. It is alsonot in dispute that without filing a revised return, which theAssessee is entitled to under the Act, an alternative plea i.e., claimunder Section 10A was introduced by the Assessee before theCIT(appeals). The alternative plea found favour with theCIT(Appeals) for the reasons stated in Annexure-B order anddirected extending the computation benefit under Section 10B of ITA NO. 25 OF 2018 the Act. The order in Annexure-B was confirmed by the Tribunal.Hence the appeal at the instance of the Revenue. 5.Mr.Christopher Abraham contends that theCIT(Appeals) erred in law by entertaining alternative plea at theappellate stage and such view was confirmed by the Tribunal. Theprocedure available in such circumstances, to the Assessee is to filea revised return, bringing the case under Section 10A of the Act.Each one of the exclusions, deductions, allowances are primarilyappreciated by the Assessing Officer by references to the claim asmade hence, it is for that purpose, the revised return is the methodby referring to which the benefit under Section 10A could havebeen claimed by the Assesseee and considered by the Revenue. TheCIT(Appeals) now directs consideration of Assessee's claim underSection 10A, leaving no option to the Assessing Officer, as if thefinding recorded by the Assessing Officer on the availability ofbenefits under Section 10A was denied by the Assessing Officer andsuch finding was reversed by the Appellate Authority. Now theoriginal authority is called upon to issue effect order. He places reliance on the judgment of Supreme Court reported in Goetze (India) Ltd V. Commissioner of Income Tax [1]. This is a shortjudgment, hence we prefer to excerpt the judgment in its entirety: 1. Leave granted. reliance on the judgment of Supreme Court reported in Goetze (India) Ltd V. Commissioner of Income Tax [1]. This is a shortjudgment, hence we prefer to excerpt the judgment in its entirety: 1. Leave granted. 2. The question raised in this appeal relates to whether theappellant assessee could make a claim for deduction otherthan by filing a revised return. The assessment year inquestion was 1995-96. The return was filed on November 30,1995, by the appellant for the assessment year in question.On January 12, 1998, the appellant sought to claim adeduction by way of a letter before the Assessing Officer.The deduction was disallowed by the Assessing Officer on-the ground that there was no provision under the Incometax Act to make amendment in the return of income bymodifying an application at the assessment stage withoutrevising the return. (Emphasis supplied)3. This appellant's appeal before the Commissioner ofIncome-tax (Appeals) was allowed. However, the order ofthe further appeal of the Department before the Income-taxAppellate Tribunal was allowed. The appellant hasapproached this court and has submitted that the Tribunalwas wrong in upholding the Assessing Officer's order. Hehas relied upon the decision of this court in NationalThermal Power Company Ltd. v. CIT [1998] 229 ITR 383, tocontend that it was open to the assessee to raise the pointsof law even before the Appellate Tribunal. 4. The decision in question is that the power of theTribunal under section 254 of the Income-tax Act, 1961, is toentertain for the first time a point of law provided the facton the basis of which the issue of law can be raised beforethe Tribunal. The decision does not in any way relate to thepower of the Assessing Officer to entertain a claim fordeduction otherwise than by filing a revised return. In thecircumstances of the case, we dismiss the civil appeal.However, we make it clear that the issue in this case is limited to the power of the assessing authority and does notimpinge on the power of the Income-tax Appellate Tribunalunder section 254 of the Income-tax Act, 1961. There shallbe no order as to costs.” 6. The circumstances surrounding the controversy are not in dispute, hence by keeping in view, what is stated above, weare of the view that acceptance of the case of assessee underSection 10 A of the Act by the CIT(Appeals), without there being arevised return is illegal and untenable. The expression of theStanding Counsel in the above judgment is clear to the point thatwithout a revised return by the Assessee the claims cannot bemodified. Hence ground interference against the order underappeal is made out. The questions of law are answered in favour ofRevenue and against the Assessee. Appeal is allowed as indicated above. Sd/-S.V.BHATTIJUDGE Sd/-VIJU ABRAHAMJUDGE ITA NO. 25 OF 2018 -10- APPENDIX APPELLANT'S ANNEXURES: ANNEXURE ATRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S. 143(3) DATED 18.03.2013 ANNEXURE BTRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS), DATED 29.03.2016 ANNEXURE CCOPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH IN ITA NO.249/COCH/2016 DATED 04.10.2017