Itxa/469/2012 Of The Commissioner Of Income Tax - 2 v. Larsen And Toubro Infotech Ltd

sbw *1* IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.469 OF 2012 The Commissioner of Income Tax-2Mumbai ..Appellant -Versus-Larsen & Toubro Infotech Ltd. ..Respondent ........... Mr. P. C. Chhotaray for the Appellant.Mr. J. D. Mistry, Senior Counsel, with Mr. P. C. Tripathi i/b. A. K. Jasani for the Respondent. ........... CORAM: S.C. DHARMADHIKARIAND B.P. COLABAWALLA, JJ. DATE :- 8[th] August, 2014 P.C.: 1]This appeal by the revenue challenges the order passed by the Income Tax Appellate Tribunal on 23[rd] September, 2011 in Income Tax Appeal No.2683/Mum/2009. The assessment year in question is 2004-05. 2]The assessee-respondent before us brought the appeal before the Tribunal challenging order dated 24[th] March, 2009. That order was passed by the Commissioner of Income Tax-2, Mumbai, under section 263 of the Income Tax Act, 1961. 1/6 3]Mr. Chhotaray submits that the jurisdiction under section 263 of the Income Tax Act exercised by the Commissioner has not been interfered with by the Tribunal. The Commissioner was of the opinion that the order of the Assessing Officer dated 23[rd] November, 2006 passed under section 143(3) of the Income Tax Act was erroneous and so far as it is prejudicial to the interest of the revenue. The Commissioner was of the opinion that the expenditure of Rs.172,56,43,532/- incurred in foreign currency for providing technical services outside India was not reduced from the export turnover in accordance with the definition. All this is envisaged by and comes under clause (iv) of explanation (2) to section 10A of the Act. Therefore, the order was plainly erroneous. It was also erroneous because communication expenses of Rs.9,39,89,556/- were also not excluded from this export turnover and in terms of the same definition. 4]Mr. Chhotaray submits that the show cause notice was issued by the Commissioner and the assessee was heard before the order was passed by him. The Commissioner was of the view that these two items were required to be excluded from the export turnover. The Commissioner was also of the view that there is no substance in the assessee's contention that if these two items are excluded in arriving at the export turnover, similar exclusion should be granted for these items in arriving at the total 2/6 turnover. That term or word has not been defined in the Act but it has to be understood in its natural meaning. That is why in para-6 of his order, he gave the following direction to the Assessing Officer while ordering re-assessment. “6. In the light of above discussion, it is to be held that the assessment is erroneous and prejudicial to the interest of revenue on account of allowance of excessive deduction u/s 10A. Th excessive deduction came to be allowed on account of failure on the part of the Assessing Officer in excluding the communication charges of Rs.9,39,89,556/- and expenses incurred in providing technical services outside India of Rs.172,56,43,532/- from the 'export turnover' though the definition of the 'export turnover' in section 10A required such exclusion. Thus, there was lack of proper application of mind on the part of the Assessing Officer. The assessment order is therefore, set aside with a direction to the Assessing Officer to re-compute the deduction u/s 10A, taking into account the 'export turnover' which excludes telecommunication charges and expenses for providing technical services outside India. The assessee may be given proper opportunity of being heard before passing the reassessment order.” 5]Aggrieved by this order of the Commissioner, the Tribunal was approached by the assessee but in the submission of Mr. Chhotaray, the Tribunal has upheld the exercise of jurisdiction by the Commissioner and *4* 904.itxa469.12 5]Aggrieved by this order of the Commissioner, the Tribunal was approached by the assessee but in the submission of Mr. Chhotaray, the Tribunal has upheld the exercise of jurisdiction by the Commissioner and *4* 904.itxa469.12 invocation of section 263 of the Income Tax Act by him. The Tribunal could not have, then, interfered with the direction of the Commissioner and substituted it inasmuch as, now the Tribunal has in its order directed that the matter must go back to the Commissioner and he will modify his original direction in the light of the decision of the Special Bench of the Tribunal in the case of Income Tax Officer V/s. Sak Soft Ltd. reported in (2009) 313 ITR 353. Mr. Chhotaray submits that this direction of the Tribunal goes contrary to a plain reading of the explanation of section 10A and which has been referred above. Though, Mr. Chhotaray fairly states that the view taken by the Special Bench is more or less identical to the one taken by the Division Bench of this Court in the case of Commissioner of Income Tax V/s. Gem Plus Jewellery India Ltd. reported in (2011) 330 ITR 175 a similar view taken by the Karnataka High Court in the decision reported in 350 ITR 65 and 349 ITR 98 has been challenged by the revenue and the Special Leave to Appeal has been granted by the Supreme Court. The Civil Appeal is now pending (Commissioner of Income Tax V/s. Samsung Electronics Co. Ltd. Civil Appeal No.8912 of 2012). Therefore, the two questions framed as substantial questions of law need to be considered further and the appeal should be admitted. Respondent-assessee would submit that assuming that in any manner, proceeding to concede that section 263 was rightly invoked, yet, the ultimate direction of the Commissioner and that of the Tribunal raises no substantial question of law. If the Assessing Officer has been directed to pass re-assessment order in accordance with law and the law laid down is the one rendered by the Division Bench of this Court, then, the interest of the revenue can never be said to be prejudicially affected. The direction of the Commissioner, in any event, is to abide by the law. The Tribunal has only done that, and therefore, this appeal raises no substantial question of law. It deserves to be dismissed. 7]We heard both sides extensively and with their assistance we have perused the order passed by the Assessing Officer, that of the Commissioner under section 263 and the impugned order of the Tribunal. 8]We find much substance in the contentions of Shri Mistry. We are of the view that the merits of the matter and on which the questions of law are essentially based need not be gone into in this case. Assuming that the jurisdiction under section 263 of the Income Tax Act has been rightly exercised, yet, if the Commissioner is empowered to pass such order as the circumstances of the case justify including an order enhancing or 5/6 modifying or cancelling the assessment and directing a fresh assessment, eventually, all such directions have been abide by the law. If the Tribunal has done nothing but inviting the attention of the Commissioner to the principles of law laid down in its Special Bench decision and equally the Division Bench of this Court, we do not see now this appeal can raise a substantial question of law. The merits of the claim cannot be and need not be considered once the Commissioner has been directed to abide by the law. In these circumstances and in facts peculiar to this case, we do not find that the appeal raises any substantial question of law. It is accordingly dismissed. We clarify that we have not gone into the other contentions which have been raised by Mr. Chhotaray and based on which substantial question of law and particularly question No.2 has been framed. That can be considered in an appropriate case. (B.P.COLABAWALLA, J.) (S.C. DHARMADHIKARI, J.) wadhwa 6/6