Ita/1016/2008 Of The Commissioner Of Income Tax v. M/S Cypress Semi Conductor Technology India

1 IN THE HIGH COURT OF KARNATAKA AT.BANGALORE DATED THIS THE 07 DAY OF NOVEMBER, 2014 PRESENT _ THE HON' BLE MR.JUSTICE N.KUMAR. ANT) THE HON' BLE MR.JUSTICE B.MANOHAR| ITA NO.1016 OF 2008 C/W ITA NOS. 1017 OF 2008 & 1018 OF 2008 ITA NO.1016 OF 2008 BE TW B Ll.THRE COMMISSIONER OF INCOME TAX C.R.BUILDING, QUEENS ROAD, BANGALORE. iaTHR DEPUTY COMMISSIONER OF INCOME TAXCIRCLE-11(2)CIRCLE-11(2) C.R.BUILDING, QUEENS ROAD, BANGALORE... APPELLANTS (By Sri K V ARAVIND —- ADV.) | ANT M/S CYPRESS SEMI CONDUCTOR TECHNOLOGY INDIA PVT. LTD.SHARADA TOWERS. IST FLOOR, 56, NANDIDURGA ROAD.BENSON TOWN, BANGALORE ... RESPONDENT| (By Sri.T.SURYANARAYANA —- ADV. FOR M/S KING & PARTRIDGE) THIS ITA IS FILED U/S.260-A OF I.T.ACT, 1961)ARISING OUT OF ORDER DATED 21-06-2008 PASSEKBD IITA NO.740/BNG/2007 FOR THE ASSESSMENT YEAR2004-05, PRAYING TO: (I) FORMULATE THE SUBSTANTIAL|QUESTIONS OF LAW STATED THEREIN, (IJ) ALLOW THE|APPBKRAL AND SBT ASIDE THR ORDER PASSBD BY THITAT BANGALORE IN ITA NO. 740/BNG/2007 DATED 21-06-2008, CONFIRM THE ORDERS OF THE APPELLATECOMMISSIONBR AND CONFIRM THR ORDER PASSBD BY]THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-11(2), BANGALORE. IN ITA NO 1017 OF 2008 BETWEEN 1.THR COMMISSIONBR OF INCOME TAX C.R.BUILDING, QUEENS ROAD, BANGALORE. iaTHR INCOME TAX OFFICER WARD-11(1)| C.R.BUILDING, QUEENS ROAD, BANGALORE_ APPBRLLANTS (By Sri. K V ARAVIND, ADV..,) 3 ANI M/S CYPRESS SEMI CONDUCTOR TECHNOLOGY INDIA PVT LID| SHARADA TOWERS. IST FLOOR, 56, NANDIDURGA ROAD.BBNSON TOWN BANGALORE —. RBSPONDBENT (By Sri. T.SURYANARAYANA — ADV.FOR M/S.KING & PARTRIDGE) THIS ITA IS FILED U/S.2600-A OF I.T.ACT, 1961ARISING OUT OF ORDER DATED 21-06-2008 PASSEKBD IITA NO. 738/BNG/2007, FOR THE ASSESSMENT YEAR2002-03, PRAYING TO: (I) FORMULATE THE SUBSTANTIAL|QUESTIONS OF LAW STATED THEREIN, (II) ALLOW THE|APPBKRAL AND SBT ASIDE THR ORDER PASSBD BY THITAT BANGALORE IN ITA NO. 738/BNG/2007 DATED 21-06-2008, CONFIRM THE ORDERS OF THE APPELLATECOMMISSIONBR AND CONFIRM THR ORDER PASSBD BY]THE INCOME TAX OFFICER, WARD-11(1), BANGALORE. IN ITA NO 1018 OF 2008 BEITWER 1.)THE COMMISSIONER OF INCOME TAX, C.R.BUILDING, QUEENS ROAD, BANGALORE. iaTHR INCOME TAX OFFICER WARD-11(1)| C.R.BUILDING, QUEENS ROAD, BANGALORE_ APPBRLLANTS (By Sri.K V ARAVIND — ADV.) 4 AN) M/S CYPRESS SEMI CONDUCTORTECHNOLOGY INDIA PVT. LTD.SHARADA TOWERS.IST FLOOR, 56NANDIDURGA ROADBENSON TOWN, BANGALORE RBSPONDENT (By Sri.T.SURYANARAYANA —- ADV. FOR M/S. KING & PARTRIDGE) THIS ITA IS FILED U/S.260-A OF I.T.ACT, 1961ARISING OUT OF ORDER DATEBRD 21-06-2008 PASSED IITA NO.739/BNG/2007, FOR THE ASSESSMENT YEAR|2003-04, PRAYING THAT THIS HON'BLE COURT MAY BE)PLEASEDTO:iRFORMULATETHERSUBSTANTIALQUESTIONS OF LAW STATED THEREIN, UI. ALLOW THE)APPBAL AND SKIT ASIDE THR ORDER PASSBKD BY THITAT BANGALORE IN ITA NO.739/BNG/2007 DATED 21-06-2008 CONFIRM THR ORDERS OF THR APPELLATE|COMMISSIONBR AND CONFIRM THR ORDER PASSED BYTHE INCOME TAX OFFICER,WARD-11(1), BANGALORE. THRESH APPKALS COMING ON FOR HRARING THISDAY,N.KUMAR J.,DELIVBRBED THR FOLLOWING: | JU DBiGMENT The Revenue has preferred these three appealsagainst the impugned order in which the assessee isalso common and therefore, they are taken up for consideration together and disposed of by this commonorder. | 2. The substantial questions of law which arise for. consideration in these appeals are:- ]. Whether the Tribunal was correct inholding that Unit-I, which was taken over'from M/s.Arcus Technology Ltd. in June1999, was entitled to deduction u/s.10A of|the Act although the STPI approval had been|obtained on 15.6.1993 vide STPI order No.|EHTP. PER. 54(93).11(51)-93 which would be|the assessment year 1994-95 and the term offive years would expire in 1999-2000 and not1998-99? | THRESH APPKALS COMING ON FOR HRARING THISDAY,N.KUMAR J.,DELIVBRBED THR FOLLOWING: | JU DBiGMENT The Revenue has preferred these three appealsagainst the impugned order in which the assessee isalso common and therefore, they are taken up for consideration together and disposed of by this commonorder. | 2. The substantial questions of law which arise for. consideration in these appeals are:- ]. Whether the Tribunal was correct inholding that Unit-I, which was taken over'from M/s.Arcus Technology Ltd. in June1999, was entitled to deduction u/s.10A of|the Act although the STPI approval had been|obtained on 15.6.1993 vide STPI order No.|EHTP. PER. 54(93).11(51)-93 which would be|the assessment year 1994-95 and the term offive years would expire in 1999-2000 and not1998-99? | 2. Whether the Tribunal was correct inallowing deduction u/s.10A of the Act on|Unit-I despite the assessee having sold the)entire turn over 100% in respect of this unit in|the domestic market during the _ relevanassessment year of its production by the|assessee?| 3. Whether the Tribunal was correct inallowing deduction u/s.10A of the Act on|Unit-IthoughtheaSsSSCSSChad.been.reconstituted/ reconstructedby|virtueof|business already in existence which would|defeat the purpose of the provision?| 4. Whether the Tribunal was correct inallowing deduction u/s.10A of the Act on|Unit-I without alternatively considering thedisallowance made by the Assessing Officer|that the telecommunication charges would be|liable to be deducted from export turnover|before allowing deduction u/s.10A of the Act? 3. The undisputed facts are that Unit-I was.originally owned byM/s.Arcus Technology Ltd.It startedmanuliacturing from Unit-I during the financial year1993-94 and obtained STPI approval on 15.6.1993. The.assessee was entitled tor the benefit of Section 10A for 5Dconsecutive years as the law stood then. Section 10A_ came to be amended with eftect from 1.4.1999 and )Dyear period was replaced by 10 years. The assesseetook over the unit from|M/s.Arcus Technology Ltd.OT]29.6.1999 and also obtained transfer of registration as_STPI Unit on 3.12.1999. They also got transferredcustoms bonding with effect from 29.1.2000. TheAssessee claimed the benefit of Section 1OA from the|assessment year 2000-01. For the earlier periodM/s.Arcus Technology Ltd.claimed benefit undersection 1OA of the Act. The Assessing authority heldthat as the production had commenced in the year1993, the five year period is to be calculated fromassessment year 1994-95 and five years expired inassessment year 1998-99 before amendment of Section10A and therefore, the assessee was not entitled to thebenefit of 10 years exemption. The assessee preferredan appeal against the said order. The Commissioner ofIncome Tax (Appeals) upheld the said contention. The 3 Tribunal has set aside the said order holding that thefive year period is to be computed from the assessmentyear 1995-96 and the assessee is entitled to the benefitof the amended provisions which provided for a periodof 10 years. The finding of assessing authority that theassessee unit is not a new independent unit, it is a caseof reconstitution, has been set aside by both theauthorities. In fact the question of law as whether theassessee would be entitled for the benefit of deduction|under the amended Section 10A for the extended periodof 10 years was the subject matter of the decisionrendered by this court, in the case of Commissioner ofIncome Tax & Anr. — vs — DSL Software Ltd. (2013) 391.ITR385)whichWaSfollowed|IntheCaSE€oT|Commissioner of Income Tax - vs —- M/s.ArcusTechnology Ltd. in the case of ITA No.40 of 2011.disposed of vide order dated 2.11.2011, answering thesaid questions of law in favour of the assessee. 4. The undisputed facts of the case show that in|the first year of production i.e. in the financial year1993-94 the assessee did not earn any profit or gainfrom the business. Therefore, the question of claimingdeduction under Section l1OA did not arise. ‘Theoccasion arose only in the financial year 1994-95.Therefore, the assessee wrote a letter on 25.7.1995.claiming the benefit of Section 10A from the assessment.year 1995-96. The revenue contends that the five yearperiod is to be calculated from the date of production.We do not find any substance in the said contention.The entire section has to be read as a whole. Not onlythe unit should start production, but by export of whatis produced, the assessee should earn profit and gain.If in the financial year 1993-94 the productioncommenced, the export business did not realize anyprofit and gains, the question of claiming deduction does not arise. Therefore, when the assessee earned|profit and gain from the export from the assessmentyear 1995-96 they wrote a letter claiming deductionunder Section 10A and from that year onwards for fiveconsecutive years they are entitled for the benefit.Therefore, when Section 10A was amended with effect)from 1.4.1999 extending the benefit to 10 years from 5°years, they were entitled for the said benefit. | In that view of the matter following the judgmentscited above, the substantial questions of law areanswered against the revenue and in favour of theASSESSEE. Accordingly, the appeals are dismissed. However, while giving effect to these orders, theAssessing Authority also shall give efiect to thejudgment of this court in the case of Commissioner of 11] Income Tax — vs — Tata Elxsi Ltd. & Ors. reported in(2012) 349 ITR 98. The said judgment is the subjectmatter of appeal before the Apex Court. However, in theevent of the revenue succeeding before Apex Court, thenconsequential order in terms of Section 260(1)(1A) of theIncome Tax Act should be passed and given effect to. TS| Sd/-)JUDGESd/-)JUDGE