2012 (8) TMI 709 - HC - Income Tax

Disallowance of exemption u/s. 10A - unit of assessee at SEEPZ Mumbai - reopening of assessment u/s 147 - Held that - As decided in CIT Versus Paul Brothers 1992 (10) TMI 5 - BOMBAY HIGH COURT where a benefit of deduction is available for a particular number of years on satisfaction of certain conditions under the provisions of the Income Tax Act, then unless relief granted for the first assessment year in which the claim was made and accepted is withdrawn or set aside, the Income Tax officer cannot withdraw the relief for subsequent years. More particularly so, when the revenue has not even suggested that there was any change in the facts warranting a different view for subsequent years. In this case for the assessment years 2000-01 and 2001-02 the relief granted u/s 10A to SEEPZ unit has not been withdrawn and there is no change in the facts which were in existence during the assessment year 2000-01 vis a vis the claim to exemption under section 10A. Therefore, it is not open to the department to deny the benefit of Section 10A for subsequent assessment years i. e. assessment years 2002-03 and 2003-04 and 2004-05 - no need to reopen the assessment - in favour of assessee.

Summary

Issues:
- Appeal against common order of Income Tax Appellate Tribunal regarding exemption under Section 10A of the Income Tax Act for assessment years 2002-2003, 2003-04, and 2004-05.
- Justification for allowing exemption to the assessee company's unit at SEEPZ Mumbai despite non-compliance with Section 10A(2)(ii) requirements.

Analysis:
1. The appellant revenue contested the Tribunal's decision to grant exemption to the assessee company's SEEPZ unit under Section 10A of the Income Tax Act for the assessment years in question. The main argument was that the SEEPZ unit was formed by splitting the Fort unit, evidenced by both units developing the same software product, exporting to the same party, and receiving common remittances. The appellant also argued that each assessment year is independent, and the concept of res judicata does not apply in tax matters, allowing the revenue to take a different view in subsequent years.

2. In response, the respondent-assessee relied on legal precedents to support their claim for exemption under Section 10A. Citing cases like Commissioner of Income Tax v. Paul Brothers and M/s. Direct Information Private Ltd. v. ITO, the respondent argued that once a benefit of deduction is granted for specific years without withdrawal, it cannot be denied for subsequent years unless there is a change in facts. The respondent emphasized that the SEEPZ unit was independently functioning, not formed by splitting the Fort unit, as confirmed by the Commissioner of Income Tax (Appeals) and the Tribunal.

3. The High Court considered the arguments presented and referenced the legal principles established in previous judgments. Relying on the decisions in Paul Brothers and Director of Information Pvt. Ltd., the Court upheld the Tribunal's decision, emphasizing that unless relief granted for the first assessment year is withdrawn or set aside, the Income Tax officer cannot deny the relief for subsequent years. Since the relief for the SEEPZ unit was not withdrawn for the initial assessment years, and there was no change in relevant facts, the benefit of Section 10A could not be denied for the subsequent assessment years. The Court concurred with the findings of fact by the lower authorities that the SEEPZ unit was not formed by splitting the Fort unit.

4. Consequently, the Court concluded that the formulated question did not raise any substantial legal issue in the given circumstances. Therefore, the appeal was dismissed, and no costs were awarded.