2015 (4) TMI 841 - HC - Income Tax

Benefits under Section 10A - Software Technology Park (STP) - Whether in the event of an assessee s failure to avail the benefits of a statutory provision, such as Section 10A of the Act, creates an estoppel precluding it from availing such benefits in future? - Held that - The AO, DRP as well as the ITAT concurrently have rejected the appellant s claims under its revised return primarily on the ground that the appellant itself did not treat all 31 units as separate undertakings previously, and in fact, for the subject assessment year as well, it originally adopted its earlier approach. On an examination of the authorities relied upon by the appellant, this Court notices that they are overwhelmingly in its favour and therefore, this Court answers the first question in favour of the appellant. an assessee s treatment of facts in any given manner is not relevant for the purposes of determining liability under the Act. If, on an application of the statutory provision, the party is entitled to the benefits under the Act, the mere circumstance that for the past 5 to 7 years, or even 10 years, it did not claim such benefit would not preclude it from availing it in the assessment year in question. What the appellant cannot resile from is the existence of a given set of facts which it has not challenged earlier. However, if, based on the same set of facts, it now seeks to claim deduction under Section 10A which it had foregone earlier, the appellant s claim must be allowed, provided, of course, the requirements of Section 10A are satisfied. Therefore, in the instant case, in the event that the appellant establishes that the 31 units constitute separate undertakings for the purposes of Section 10A, it would be entitled to the claims made in the revised return. - Decided in favour of assessee. New units claimed to be separate undertakings for the purposes for Section 10A - Held that - since the deduction under Section 10A is available to each undertaking, and given the concurrent finding of fact of lower authorities wherein they have held the material on record to be insufficient to treat each of the 31 units as separate undertakings, this Court holds that no interference on this issue is warranted. Consequently, it is held that the 31 units cannot be treated as separate undertakings for the purposes of availing benefit under Section 10A of the Act. Thus, the second question on the merits of the rejection of the claim for deduction under Section 10-A is answered in favour of the revenue - Decided against the assessee.

Summary

Issues Involved:
1. Whether an assessee is estopped under law from availing the benefits under Section 10A of the Income Tax Act in respect of units for which it had not availed the said benefits previously.
2. Whether the appellant's contention that the new units claimed by it to be separate undertakings for the purposes of Section 10A of the Act is correct.

Issue-wise Detailed Analysis:

1. Estoppel under Law for Availing Benefits under Section 10A:

The appellant argued that the ITAT failed to appreciate that the mere fact that in earlier years, the appellant did not compute the deduction under Section 10A by considering the 31 units as separate undertakings does not operate as an estoppel. The appellant cited several cases, including CIT v. Bharat General Reinsurance, to support the contention that an assessee can resile from an incorrect position already taken in a return of income.

The court found that the authorities relied upon by the appellant overwhelmingly supported its position. The court referenced the Supreme Court's decision in CIT v. C. Parakh & Co., which held that an assessee's treatment of a claim does not determine the treatment under statutory provisions. The court also cited its own decision in Bharat General Insurance, which stated that there is no estoppel in the Income Tax Act, and an assessee can resile from a position taken in a return of income.

The court concluded that an assessee's failure to claim benefits in earlier years does not preclude it from claiming such benefits in subsequent years if the statutory requirements are met. Therefore, the first issue was resolved in favor of the appellant.

2. Correctness of Appellant's Contention on New Units as Separate Undertakings:

The appellant contended that each of the 31 units was set up as an independent viable unit with separate identifiable workforces and investments. The appellant provided evidence such as lease deeds, STPI approval documents, and separate Customs Bond certificates to support its claim.

However, the AO and ITAT rejected the appellant's contentions, noting that there was no material on record to establish that the appellant had treated the 31 units as distinct undertakings. The AO observed that the STPI authorities had treated the new premises as mere extensions of existing units and not as separate undertakings. The AO also noted the lack of evidence for separate bank accounts and separate books of accounts for the 31 units.

The ITAT upheld the AO's findings, emphasizing that the appellant failed to provide the necessary documents to establish that the 31 units were separate undertakings. The ITAT also dismissed the appellant's reliance on the Supreme Court's decision in Textile Machinery Corporation Ltd., stating that the determination of a new undertaking depends on the specific facts of each case.

The court affirmed the concurrent findings of the lower authorities, concluding that the appellant did not provide sufficient evidence to treat the 31 units as separate undertakings. Consequently, the second issue was resolved in favor of the revenue.

Conclusion:

The court answered the first question in favor of the appellant, allowing that an assessee is not estopped from claiming benefits under Section 10A in subsequent years if it had not claimed them earlier. However, the court answered the second question in favor of the revenue, holding that the appellant failed to establish that the 31 units were separate undertakings eligible for deduction under Section 10A. The appeal was dismissed.