Principal Commissioner of Income Tax, Thiruvananthapuram v. Paragon Biomedical India (P) Ltd. (now Cliniface Clinical Research (P) Ltd.)

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** **THE HONOURABLE MR.JUSTICE S.V.BHATTI** **&** **THE HONOURABLE MR.JUSTICE VIJU ABRAHAM MONDAY, THE 6[TH] DAY OF SEPTEMBER 2021 / 15TH BHADRA, 1943** **ITA NO. 25 OF 2018** **AGAINST THE ORDER/JUDGMENT IN ITA 334/2016 OF I.T.A.TRIBUNAL,COCHIN BENCH,** **ERNAKULAM** ## **APPELLANT/APPELLANT/RESPONDENT/REVENUE:** THE PRINCIPAL COMMISSIONER OF INCOME TAX THIRUVANANTHAPURAM. BY ADV SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEP ## **RESPONDENT/RESPONDENT/APPELLANT/ASSESSEE:** M/S. PARAGON BIOMEDICAL INDIA (P) LTD. B-16, 'GAYATHRI', TECHNOPARK CAMPUS,KARIAVATTOM, TRIVANDRUM- 695 581. NOW KNOWN AS M/S.CLINIFACE CLINICAL RESEARCH (P) LTD. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 06.09.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **ITA NO. 25 OF 2018** **-2-** ## **J U D G M E N T** ## S.V.BHATTI,J. Heard the learned Standing Counsel Mr.Christopher Abraham for the appellant. No representation for the respondent. 2. The Principal Commissioner of Income Tax, Thiruvananthapuram aggrieved by the order dated 04.10.2017 in I.T.A No.334/Coch/2016 has filed the instant appeal before this Court. The subject matter of the appeal relates to the return filed for the Assessment Year 2011-12. The appellant raises the following substantial questions of law: “i)Has not the tribunal erred in holding that the respondentAssessee is eligible for deduction u/s 10A of the Act in spite of the fact that the assessee had made the claim for such deduction before the CIT(A) and had not made any such claim in its Return of Income? ii)Is not the decision of the tribunal upholding the order of the CIT(A) allowing the respondent's alternate claim for deduction u/s. 10A in the circumstances of the case, contrary to the principles laid down by the Apex Court in 284 ITR 323 (SC)? iii)Is not observation of the Tribunal:"When the deduction u/s. 10B was denied the AO ought to have examined whether the assesseee is eligible for deduction/s 10A of the Act” frivolous and opposed to the law , facts and circumstances of the case and also in the light of the decisions of the Hon'ble Supreme Court in the case of CIT Vs.Ramakrishna Deo {[1959] 35 ITR 312(SC)}?” **ITA NO. 25 OF 2018** **-3-** 3. M/s.Paragon Biomedical India (P) Ltd/Assessee in the return filed for the year 2011-12, claimed deduction under Section 10B of Income Tax Act, 1961 (for short, 'the Act'). The Assessing Officer through the order dated 29.03.2014 (Annexure-A) disallowed the claim of the Assessee under Section 10B of the Act and finalised the assessment. The Assessee, aggrieved thereby filed appeal before the Commissioner of Income Tax (Appeals) (for short, 'the CIT(Appeals)'), changed the claim for deduction from Section 10B to Section 10A of the Act, this change of claim was accepted by the Appellate Authority and the CIT (Appeals) recorded the following findings: “for the detailed reasons discussed in paras 3.1 to 3.4 of the order passed for the AY 2010-11, appeal filed for the year under consideration against the claim of deduction made u/s. 10B of the Act which in turn been rejected by the Assessing Officer is also dismissed since the Assessing Officer has rightly disallowed the deduction made u/s. 10B in accordance with the hon'ble Delhi High Court decision in the case of CIT vs. Regency Creations Ltd. However, considering the fact that the appellant is also entitled for deduction u/s.10A as discussed in paras 4.1 to 4.8 of the order passed for the AY 2010-11, it is held that the appellant is entitled for deduction u/s.10A of the Act for the year under consideration as well and accordingly the Assessing Officer is hereby directed to work out the deduction u/s. 10A to which the appellant is entitled **ITA NO. 25 OF 2018** **-4-** for and allow the same as pleaded. Thus, appeal on these grounds are partly allowed.” 4. The Revenue filed ITA No.334/Coch/2016 before the Income Tax Appellate Tribunal, Cochin (for short, ‘the Tribunal’) and the Tribunal in Paragraph 4 of the order, prefaced the question falling for consideration before the Tribunal which reads thus: “The only issue raised in the Revenue's appeals is whether the CIT(A) is justified in allowing the alternative claim of the assessee u/s.10A of the I.T Act.” The Tribunal referred to the view taken by the Co-ordinate bench in Ms.QBurst Technologies Pvt.Ltd, which is to the following effect: “8. We have heard the rival submissions and perused the material on record. In the return of income, the assessee had claimed deduction under section 10B of the Act. The claim of deduction under section 10B of the Act was withdrawn in the assessment order passed for both the assessment years by following the dictum laid down by the Hon'ble Delhi High Court in the case of Regency Creations Ltd. (supra). The first appellate authority has confirmed the action of the Assessing Officer in making the disallowance of deduction under section 10B of the Act based on the judgment of the Hon'ble Delhi High Court, cited supra. However, the first appellate authority has allow the alternative claim for deduction under section 10A of the Act based on the order of the coordinate Bench of the Tribunal in the case of CWP Taylor in ITA No.695/Coch/2008 (order dated 28.7.2009). The CIT(A) has also verified the facts relating to the compliance of all the conditions prescribed under section 10A of the Act (in para 3.6.8 for A.Y. 2010-11). Based on **ITA NO. 25 OF 2018** **-5-** the verification of facts, the CIT(A) directed the Assessing Officer to allow deduction under section 10A of the Act. The following judgment of the Hon'ble Delhi High Court and orders of the ITAT have held that when deduction u/s 10B is denied, it is the duty of the revenue to examine whether the alternative claim of deduction u/s 10A can be granted on facts and circumstances of the case: i)Fast Booking (I) Pvt Ltd vs. DCIT in ITA 334/2015 judgment dated 2.9.2015 (Delhi High Court judgment) ii) M/s. Device Driven (India) P. Ltd. (ITA No. 282/Coch/2013 (order dt 6.6.2014) iii) Cronos Consulting India P Ltd vs. ACIT (ITA No.15/Coch/2014. 9. Further, we notice that the Assessing Officer in the remand report has not state that the assessee has not satisfied the conditions precedent to claim deduction under section 10A of the Act. The Assessing Officer has only raised a technical objection namely, the assessee is not entitled deduction under section 10A of the Act, since, the claim was not made in the return of income filed. However, we notice that the claim of deduction under section 10B of the Act was made in the return of income and the revenue was granting the deduction under section 10B of the Act in the previous assessment years. Only when the judgment of the Hon'ble Delhi High Court in the case of Regency Creations Ltd, cited supra, was pronounced, the claim of deduction under section 10B was denied in the assessment concluded. When the claim of deduction under section 10B was denied, the Assessing Officer ought to have examined whether the assessee is eligible for deduction under section 10A of the Act. The CBDT circular no. 14 (XL-35) dated 11.4.1955 has clarified that the revenue shall not take advantage of ignorance of the assessee as to his rights and the officers are duty bound to grant deduction legally available to the assessee. The CIT(A) also relied the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Technovate E Solution P Ltd reported in 354 ITR 110 wherein it was held that **ITA NO. 25 OF 2018** **-6-** registration with Software Technology Parks of India is sufficient to allow deduction under section 10A of the Act. The copies of the certificate of registration issued by STPI and the certificate of the Chartered Accountant in form 56F are also enclosed in the paper book filed by the assessee for the respective assessment years. On examination of the certificates of registration under STPI and the certificate of the Chartered Accountant in form 56F, we are of the view that the CIT(A) is justified in allowing the alternative claim of deduction under section 10A of the Act. It is ordered accordingly." and held that the finding recorded by CIT(Appeals) are sustainable in law. Stated very briefly, there is no dispute between the Revenue and the Assessee that the Assessee in the return filed for the subject year, claimed exclusion of income under Section 10B of the Act. For the reasons recorded by the Assessing Officer, the claim under Section 10B of the Act was negatived and implied accepted by the Assessee in further stages of the matter. It is also not in dispute that without filing a revised return, which the Assessee is entitled to under the Act, an alternative plea i.e., claim under Section 10A was introduced by the Assessee before the CIT(appeals). The alternative plea found favour with the CIT(Appeals) for the reasons stated in Annexure-B order and directed extending the computation benefit under Section 10B of **ITA NO. 25 OF 2018** **-7-** the Act. The order in Annexure-B was confirmed by the Tribunal. Hence the appeal at the instance of the Revenue. 5. Mr.Christopher Abraham contends that the CIT(Appeals) erred in law by entertaining alternative plea at the appellate stage and such view was confirmed by the Tribunal. The procedure available in such circumstances, to the Assessee is to file a revised return, bringing the case under Section 10A of the Act. Each one of the exclusions, deductions, allowances are primarily appreciated by the Assessing Officer by references to the claim as made hence, it is for that purpose, the revised return is the method by referring to which the benefit under Section 10A could have been claimed by the Assesseee and considered by the Revenue. The CIT(Appeals) now directs consideration of Assessee's claim under Section 10A, leaving no option to the Assessing Officer, as if the finding recorded by the Assessing Officer on the availability of benefits under Section 10A was denied by the Assessing Officer and such finding was reversed by the Appellate Authority. Now the original authority is called upon to issue effect order. He places **ITA NO. 25 OF 2018** **-8-** reliance on the judgment of Supreme Court reported in **Goetze (India) Ltd V. Commissioner of Income Tax[1]** . This is a short judgment, hence we prefer to excerpt the judgment in its entirety: ## 1. Leave granted. 2. The question raised in this appeal relates to whether the appellant assessee could make a claim for deduction other than by filing a revised return. The assessment year in question was 1995-96. The return was filed on November 30, 1995, by the appellant for the assessment year in question. On January 12, 1998, the appellant sought to claim a deduction by way of a letter before the Assessing Officer. The deduction was disallowed by the Assessing Officer on - the ground that there was no provision under the Income tax Act to make amendment in the return of income by modifying an application at the assessment stage without revising the return. (Emphasis supplied) 3. This appellant's appeal before the Commissioner of Income-tax (Appeals) was allowed. However, the order of the further appeal of the Department before the Income-tax Appellate Tribunal was allowed. The appellant has approached this court and has submitted that the Tribunal was wrong in upholding the Assessing Officer's order. He has relied upon the decision of this court in National Thermal Power Company Ltd. v. CIT [1998] 229 ITR 383, to contend that it was open to the assessee to raise the points of law even before the Appellate Tribunal. 4. The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is 1[2006] 284 ITR 323(SC) **ITA NO. 25 OF 2018** **-9-** limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income-tax Act, 1961. There shall be no order as to costs.” 6. The circumstances surrounding the controversy are not in dispute, hence by keeping in view, what is stated above, we are of the view that acceptance of the case of assessee under Section 10 A of the Act by the CIT(Appeals), without there being a revised return is illegal and untenable. The expression of the Standing Counsel in the above judgment is clear to the point that without a revised return by the Assessee the claims cannot be modified. Hence ground interference against the order under appeal is made out. The questions of law are answered in favour of Revenue and against the Assessee. Appeal is allowed as indicated above. Sd/- **S.V.BHATTI JUDGE Sd/VIJU ABRAHAM JUDGE** JS ## **ITA NO. 25 OF 2018** **-10-** ## **APPENDIX** ## **APPELLANT'S ANNEXURES:** **ANNEXURE A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S. 143(3) DATED 18.03.2013** **ANNEXURE B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS), DATED 29.03.2016** **ANNEXURE C COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH IN ITA NO.249/COCH/2016 DATED 04.10.2017**