WNS Global Services (P) Ltd. v. ITO

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The Tax Publishers2013 TaxPub(DT) 0302 (Mum-Trib) : (2012) 020 ITR (Trib) 0470 INCOME TAX ACT, 1961 --Revision under section 263--Erroneous and prejudicial order Non-application of mind by assessing officer--The assessee-company was engaged in the business of providing I.T. enabled services, outsourcing (BPO) and is part of WNS Group. The assessee-company was jointly held by WP Group (73%), BA (16.8%) and balance by others (10.2%). It was carrying out its business from 4 Software Technologies Parks through various units located in Mumbai, Pune and Nasik. It had in all seven units out of which two units were in Mumbai, three units in Pune and two units in Nasik. In the notes filed along with the return of income, the assessee has claimed deduction under section 10A for Mumbai Unit-1 and Pune Unit-1 only and in other units, the assessee has not claimed any deduction. These details have been duly mentioned in the said notes filed along with the return of income. Mumbai Unit-1 had commenced its operation in March 1997 and since then it has been claimed deduction under section 10A. During the year, it had claimed deduction under section 10A. In other units, i.e., Pune Unit-1, which had commenced its operation from December 1999, the assessee had earlier claimed deduction under section 10A, and also in this year. In Pune Unit-2, since the assessee had incurred losses during the year, no deduction under section 10A was claimed. The other four units came into existence in financial year 2003-04. However, since the deduction under section 10A has been claimed in Mumbai Unit-1 and Pune Unit-1, Tribunal is concerned only with these two units. Along with its return of income, the assessee-company has filed audit report under section 10A in Form 56F with regard to various units for claim of deduction under section 10A, after quantifying the computation of deduction, which was given in separate worksheet as Annexure to Form No. 56. Not only this, a detail note with regard to deduction under section 10A was made in Notes to the return of income for various units which was also filed along with return of income. During the course of scrutiny proceedings, the assessing officer noted the composition of holding of the company and also various activities which are being carried out by the assessee through its various units operating from Software Technology Parks. The assessing officer has also noted that WNS India is wholly held by WNS (Mauritius) Ltd. WNS India was originally incorporated in the year 1996, as wholly owned subsidiary of (BA) via BA subsidiary SI Ltd. In March 2001, the WP Group acquired from BA a majority stake in the WNS Group through WNS (Holdings) Ltd., Jersey'. The assessing officer ultimately completed the assessment vide order dated 18-12-2006, at an income of Rs. 18,38,67,230, after disallowing various expenses and the additions made by the TPO on international transactions with associate enterprises. Thereafter, the Commissioner, on examination of the assessment records, was of the opinion that there were certain errors in the assessment order. He, therefore, issued show cause notice under section 263. In response, the assessee made very detailed submissions on various aspects which have been incorporated from Pages-2 to 17 of the impugned order. Commissioner, after considering the assessees contention, held that they are not tenable in view of the fact that there was a change in the share holding pattern of the assessee-company in financial year 2002-03, which the assessing officer had not taken into account and, therefore, the deduction allowed under section 10A, in assessment year 2004-05, is not correct. Similar action under section 263, was taken in the assessment year 2003-04, whereby the grant of deduction under section 10A, by the then assessing officer were held to be erroneous. Further, he held that provisions of sub-section (9) of section 10A, not only prohibits allowance of exemption for assessment year during which the change in ownership takes place but also for all the assessment years. There was nothing in the record that the assessing officer has raised any query or sought any explanation as to why the deduction should not be disallowed in the assessment year 2004-05 due to change in ownership in the financial year relevant to assessment year 2003-04. Thus, the assessing officer has not applied his mind at all. Regarding Finance Minister's speech for proposal of removing of provisions of sub-section (9) of section 10A, the same would not be applicable in this case, as the provisions were made effective from assessment year 2004-05 and nothing was indicated in the speech as what would be effect in the cases where the provision has already been enforced for assessment year prior to assessment year 2004-05. Accordingly, he held that the assessment order passed by the assessing officer is erroneous insofar as it is prejudicial to the interests of Revenue. The Commissioner, therefore, set aside the assessment order and directed the assessing officer to reframe the assessment after giving opportunity of being heard to the assessee. *Held:* If a provision in a statute is unconditionally omitted without any saving clause in favour of the pending proceedings, all actions must stop where such an omission is found. Thus, once the provisions of sub-section (9) have been omitted, then it can be safely inferred that such an omission will be applicable wherever omitted section comes into play. Sub-section (9) to section 10A, which has been omitted from the statute with effect from 1-4-2004, has to be read to be obliterated from the statute book or at least it will not have any effect from the year in which it was omitted. Thus, even if there was any change in the ownership through acquisition of shares in earlier year 2003-04, exemption under section 10A, cannot be denied on this ground in the assessment year 2004-05. To this extent, the contentions of the Sr. Advocate are accepted. On the aforesaid conclusion, the assessment order passed by the assessing officer, which has been sought to be cancelled under section 263, is not erroneous in law. In view of aforesaid findings, there was no error of law by the assessing officer while allowing exemption under section 10A in assessment year 2004-05 and the impugned order passed by the Commissioner setting aside the assessment on the ground that deduction allowed under section 10A is neither a correct finding nor correct in law. Consequently, the impugned order passed by the Commissioner is hereby set aside and stands cancelled. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 0302 (Mum-Trib) : (2012) 020 ITR (Trib) 0470

INCOME TAX ACT, 1961

--Revision under section 263--Erroneous and prejudicial order Non-application of mind by assessing officer--The assessee-company was engaged in the business of providing I.T. enabled services, outsourcing (BPO) and is part of WNS Group. The assessee-company was jointly held by WP Group (73%), BA (16.8%) and balance by others (10.2%). It was carrying out its business from 4 Software Technologies Parks through various units located in Mumbai, Pune and Nasik. It had in all seven units out of which two units were in Mumbai, three units in Pune and two units in Nasik. In the notes filed along with the return of income, the assessee has claimed deduction under section 10A for Mumbai Unit-1 and Pune Unit-1 only and in other units, the assessee has not claimed any deduction. These details have been duly mentioned in the said notes filed along with the return of income. Mumbai Unit-1 had commenced its operation in March 1997 and since then it has been claimed deduction under section 10A. During the year, it had claimed deduction under section 10A. In other units, i.e., Pune Unit-1, which had commenced its operation from December 1999, the assessee had earlier claimed deduction under section 10A, and also in this year. In Pune Unit-2, since the assessee had incurred losses during the year, no deduction under section 10A was claimed. The other four units came into existence in financial year 2003-04. However, since the deduction under section 10A has been claimed in Mumbai Unit-1 and Pune Unit-1, Tribunal is concerned only with these two units. Along with its return of income, the assessee-company has filed audit report under section 10A in Form 56F with regard to various units for claim of deduction under section 10A, after quantifying the computation of deduction, which was given in separate worksheet as Annexure to Form No. 56. Not only this, a detail note with regard to deduction under section 10A was made in Notes to the return of income for various units which was also filed along with return of income. During the course of scrutiny proceedings, the assessing officer noted the composition of holding of the company and also various activities which are being carried out by the assessee through its various units operating from Software Technology Parks. The assessing officer has also noted that WNS India is wholly held by WNS (Mauritius) Ltd. WNS India was originally incorporated in the year 1996, as wholly owned subsidiary of (BA) via BA subsidiary SI Ltd. In March 2001, the WP Group acquired from BA a majority stake in the WNS Group through WNS (Holdings) Ltd., Jersey'. The assessing officer ultimately completed the assessment vide order dated 18-12-2006, at an income of Rs. 18,38,67,230, after disallowing various expenses and the additions made by the TPO on international transactions with associate enterprises. Thereafter, the Commissioner, on examination of the assessment records, was of the opinion that there were certain errors in the assessment order. He, therefore, issued show cause notice under section 263. In response, the assessee made very detailed submissions on various aspects which have been incorporated from Pages-2 to 17 of the impugned order. Commissioner, after considering the assessees contention, held that they are not tenable in view of the fact that there was a change in the share holding pattern of the assessee-company in financial year 2002-03, which the assessing officer had not taken into account and, therefore, the deduction allowed under section 10A, in assessment year 2004-05, is not correct. Similar action under section 263, was taken in the assessment year 2003-04, whereby the grant of deduction under section 10A, by the then assessing officer were held to be erroneous. Further, he held that provisions of sub-section (9) of section 10A, not only prohibits allowance of exemption for assessment year during which the change in ownership takes place but also for all the assessment years. There was nothing in the record that the assessing officer has raised any query or sought any explanation as to why the deduction should not be disallowed in the assessment year 2004-05 due to change in ownership in the financial year relevant to assessment year 2003-04. Thus, the assessing officer has not applied his mind at all. Regarding Finance Minister's speech for proposal of removing of provisions of sub-section (9) of section 10A, the same would not be applicable in this case, as the provisions were made effective from assessment year 2004-05 and nothing was indicated in the speech as what would be effect in the cases where the provision has already been enforced for assessment year prior to assessment year 2004-05. Accordingly, he held that the assessment order passed by the assessing officer is erroneous insofar as it is prejudicial to the interests of Revenue. The Commissioner, therefore, set aside the assessment order and directed the assessing officer to reframe the assessment after giving opportunity of being heard to the assessee. Held: If a provision in a statute is unconditionally omitted without any saving clause in favour of the pending proceedings, all actions must stop where such an omission is found. Thus, once the provisions of sub-section (9) have been omitted, then it can be safely inferred that such an omission will be applicable wherever omitted section comes into play. Sub-section (9) to section 10A, which has been omitted from the statute with effect from 1-4-2004, has to be read to be obliterated from the statute book or at least it will not have any effect from the year in which it was omitted. Thus, even if there was any change in the ownership through acquisition of shares in earlier year 2003-04, exemption under section 10A, cannot be denied on this ground in the assessment year 2004-05. To this extent, the contentions of the Sr. Advocate are accepted. On the aforesaid conclusion, the assessment order passed by the assessing officer, which has been sought to be cancelled under section 263, is not erroneous in law. In view of aforesaid findings, there was no error of law by the assessing officer while allowing exemption under section 10A in assessment year 2004-05 and the impugned order passed by the Commissioner setting aside the assessment on the ground that deduction allowed under section 10A is neither a correct finding nor correct in law. Consequently, the impugned order passed by the Commissioner is hereby set aside and stands cancelled.