INCOME TAX ACT, 1961

Section 10AA

Deduction under section 10AA - Allowability - Alleged addition of non-SEZ units expenses and undertaking formed by splitting up or reconstruction of business already in existence -

Assessee was a wholly-owned subsidiary of Ebix Singapore Pvt. Ltd. and was engaged in the business of rendering information technology/information technology enabled services (IT/ITES). It filed its return of income declaring nil income after claiming deduction under section 10AA. The AO, after considering the various replies given by the assessee, rejected the claim of deduction under section 10AA made by the assessee in respect of income from six SEZ units. CIT(A) deleted the additions made by the AO. Held: Assessee had furnished unit-wise computation of deduction under section 10AA out of the four eligible units, only in respect of Noida SEZ and Coimbatore SEZ, the assessee had added back expenses of Rs. 19,14,995 and Rs. 3 lakhs respectively. The above figure represents expenses which were added back while computing the unit-wise computation for determining the profit eligible for deduction under section 10AA. Therefore, once the expenditure had been added back which claim had also been accepted by the AO in the order of assessment, then, this, becomes a non-issue. The allegation of the AO that the entire expenses had not been added back and it was a clear admission on the part of the assessee that resources of non-SEZ units had been used for earning of revenue in SEZ units, this also, was a vague finding without any basis. Mere add back of certain expenses from eligible profits of eligible unit which was accepted in the order of assessment cannot be a basis to assume that the resources of non-SEZ units have been used for earning the revenue in SEZ units. Assessee had not claimed the loss of Hyderabad and Chennai unit while computing the income. Once separate books of account have been maintained for each of the undertakings, there was no basis for the assessing officer to allege that any of the expenses of non-SEZ units pertained to revenue of eligible units. Once such expenses had also not been claimed, the same was of no consequences. At best, the AO could have reduced the net expenditure claimed from the deduction under section 10AA and nothing more but the same could not be a reason for the AO to deny the claim of deduction under section 10AA. Therefore, to suggest that there was fictitious arrangement and the entire resources of Chennai unit or Hyderabad unit had been utilised for earning tax free income of SEZ unit was not justified. Once the deduction had been allowed in the year of formation of the unit, then, the AO was not entitled to re-examine the eligibility of claim of deduction in the succeeding year. So far as the question as to whether amalgamation of the Noida SEZ and Nagpur SEZ with the assessee company can be a ground to suggest that the same amounts to splitting up or reconstruction of business already in existence is concerned, Tribunal found the provisions of section 10AA(5). Is an enabling provision to enable an assessee to claim deduction desite transfer of the eligible unit in a scheme of amalgamation of demerger. Once separate books of acount maintained by assessee have been accepted, the quantum of the claim cannot be tinkered with on surmises and conjectures by alleging in a vague manner that expenditure or revenue had been diverted to another unit. Even if the undertaking is established by transfer of building, plant or machinery, but it was not formed as a result of such transfer, the assessee could not be denied the benefit. In view of the above and in view of the detailed reasoning given by the CIT(A), there was no infirmity in his order allowing the claim of deduction under section 10AA.

Relied:CIT v. Excel Industries Ltd., (2013) 358 ITR 295 (SC) : 2013 TaxPub(DT) 2414 (SC), ITO v. Last Peak Data Pvt. Ltd., ITA Nos. 154 & 155/Kol/2013 : 2015 TaxPub(DT) 4375 (Kol-Trib), Samsung India Software Operations (P) Ltd. v. Addl. CIT, ITA No. 399/Bang/2012, Bajaj Tempo Ltd. v. CIT (1992) 196 ITR 188 (SC) : 1992 TaxPub(DT) 1271 (SC), Addl. CIT v. Delhi Press Samachar Patra (P) Ltd. (2006) 103 TTJ 578 (Del-Trib) : 2006 TaxPub(DT) 1521 (Del-Trib), CIT v. Excel Industries 358 ITR 295 (SC), CIT v. Delhi Press Samachar Patra (P) Ltd. (2013) 355 ITR 14 (Del-HC) : 2013 TaxPub(DT) 1873 (Del-HC), CIT v. Western Outdoor Interactive (P) Ltd., (2012) 349 ITR 309 (Bom-HC) : 2012 TaxPub(DT) 3202 (Bom-HC)Saraswati Industrial Syndicate, (1990) 186 ITR 278 (SC) : 1990 TaxPub(DT) 1328 (SC).

REFERRED : CIT v. Quest Informatics (P) Ltd., (2015) 372 ITR 526 (Kar) : 2015 TaxPub(DT) 1598 (Karn-HC), Larsen & Toubro Infotech Ltd. v. DCIT, (2012) 19 ITR (T) 361 (Mum-Trib) : 2012 TaxPub(DT) 2960 (Mum-Trib), CIT v. Translam Ltd., 231 Taxman 901 (All), Cadila Healthcare Ltd. v. Addl. CIT 67 SOT 110 (Ahd-Trib), Shiva Exports v. ITO (2009) 28 SOT 512 (Chd-Trib) : 2009 TaxPub(DT) 929 (Chd-Trib), Dy. CIT v. Delhi Press Samachar Patra (P) Ltd. (2008) 101 ITD 283 (Del-Trib) : 2008 TaxPub(DT) 77 (Del-Trib), Dy. CIT v. A.P. Industrial Infrastructure Corporation Ltd. (2015) 156 ITD 410 (Hyd-Trib) : 2015 TaxPub(DT) 3924 (Hyd-Trib), CIT v. J.K. Charitable Trust, (2009) 308 ITR 161 (SC) : 2009 TaxPub(DT) 1022 (SC), Moolchand Khairati Ram Trust v. DIT(E) (2015) 377 ITR 650 (Del-HC) : 2015 TaxPub(DT) 2886 (Del-HC), CIT v. Delhi Press Patra Prakashan Ltd. (2013) 355 ITR 14 (Del) : 2013 TaxPub(DT) 1873 (Del-HC), CIT v. Tata Communication Internet Services Ltd. (2012) 251 CTR 290 (Del) : 2012 TaxPub(DT) 789 (Del-HC), CIT v. Jagson International Ltd. (2008) 214 CTR 227 (Del) : 2008 TaxPub(DT) 1238 (Del-HC), CIT v. Paul Brothers. (1995) 216 ITR 548 (Bom-HC) : 1995 TaxPub(DT) 140 (Bom-HC), CIT v. Western Outdoor Interactive (P) Ltd. (2012) 349 ITR 309 (Bom-HC) : 2012 TaxPub(DT) 3202 (Bom-HC), Direct Information (P) Ltd. v. ITO (2012) 349 ITR 150 (Bom-HC) : 2012 TaxPub(DT) 797 (Bom-HC), CIT v Saurashtra Cement and Chemicals (1980) 123 ITR 669 (Guj) : 1980 TaxPub(DT) 545 (Guj-HC), G.B. Bros and Konda Rajagopala Chetty v. ITO (2004) 267 ITR 774 (AP) : 2004 TaxPub(DT) 48 (AP-HC), CIT v. Bhilai Enginering Corporation (1982) 133 ITR 687 (MP-HC) : 1982 TaxPub(DT) 606 (MP-HC), Ace Multi Axes Systems Ltd. v. DCIT [ITA No. 477/2013, dated 28-7-2014 (Kar)] : 2014 TaxPub(DT) 3360 (Karn-HC), CIT v. Defree Engineering (P) Ltd. (2017) 244 Taxman 217 (SC) : 2017 TaxPub(DT) 0129 (SC), Sterilite Industries (India) Ltd. v. ACIT (2013) 209 Taxman 76 (Mad) (Mag-HC) : 2013 TaxPub(DT) 1387 (Mad-HC) and CIT v. P.S. Velusamy (2016) 243 Taxman 408 (Mad-HC) : 2016 TaxPub(DT) 5150 (Mad-HC), CIT v. Hearland Delhi Transcription, ITA No. 300/2011 (Del), dated 18-7-2014, NDS Services Pay-TV Technology (P) Ltd. 33 Taxmann.com 414 (Bang), Dy. CIT v. LG Soft India (P) Ltd. ITA Nos. 623 & 847/B/2010, dated 19-5-2020, Samsung India Software Operations (P) Ltd. v. Addl. CIT ITA No. 399/Bang/2012, CIT v. Nippon Electronics (India) Pvt. Ltd. (1990) 181 ITR 518 (Karn) : 1990 TaxPub(DT) 516 (Karn-HC), Vintage Cards and Creations v. ACIT (1997) 59 ITD 563 (Pune) : 1997 TaxPub(DT) 0498 (Pune-Trib), Ghodavat Pan Masala India (P) Ltd. v. JCIT (2008) 108 TTJ 905 (Pune-Trib) : 2008 TaxPub(DT) 2384 (Pune-Trib), ITO v. Laxmi Packers (2007) 14 SOT 303 (Mum-Trib) : 2007 TaxPub(DT) 1639 (Mum-Trib), CIT v. P. K. Engineering and Forging (P) Ltd. (1997) 87 Taxman 101 (Cal) : 1997 TaxPub(DT) 137 (Cal-HC), AGS Timber & Chemical Industries Pvt. Ltd. v. CIT (1998) 233 ITR 207 (Mad) : 1998 TaxPub(DT) 170 (Mad-HC), Madras Machine Tools Manufacturers Ltd. v. CIT (1975) 98 ITR 119 (Mad) : 1975 TaxPub(DT) 98 (Mad-HC), Kerala State Cashew Dev. Corpn. v. CIT (1994) 205 ITR 19 (Ker) : 1994 TaxPub(DT) 298 (Ker-HC), CIT v. Tyresoles Concessionaries Pvt. Ltd. (1995) 213 ITR 660 (Bom) : 1995 TaxPub(DT) 769 (Bom-HC), CIT v. Dandeli Ferro Alloy (P) Ltd. (1995) 212 ITR 1 (Bom) : 1995 TaxPub(DT) 817 (Bom-HC), Aggarwal & Co. v. Dy. CIT (2016) 160 ITD 540 (Asr-Trib) : 2016 TaxPub(DT) 4238 (Asr-Trib), (2016) 391 ITR 274 (SC) : 2016 TaxPub(DT) 5139 (SC), CIT v. Yokogawa India Ltd. Scientific Atlanta India Technology (P) Ltd. v. Asstt. CIT (2010) 129 TTJ 273 (Chennai) : 2010 TaxPub(DT) 1449 (Chen-Trib), Pr. CIT v. Cincom Systems India (P) Ltd. 2019) 103 Taxmann.com 161 (Del : 2019 TAxPub(DT) 497 (Del-HC)

FAVOUR : In assessee's favour.

A.Y. : 2013-14 & 2014-15

INCOME TAX ACT, 1961

Section 10AA

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