Assessee & Revenue have right to File cross objection before ITAT

Brief about the case

The Delhi High Court Has Held In the case of Fast Booking (I) Pvt. Ltd.  Vs Dy. Commissioner Of Income Tax that both the assessee as well as the department have a right to file an appeal/cross-objections before the Tribunal. The ITAT ought to have accepted the cross objections filed by the assessee. The benefit of Section 10B of the Act, the certification by the Board was mandatory and that such exemption could not be granted on the basis of the certificate issued by the Joint Director.

The assessee being in the business of software development had registered itself with the Software Technology Park of India (STPI), Noida. Further, the assessee claimed deduction u/s 10B on the basis of having been duly approved as a hundred percent export oriented unit (‘EOU’) by the Joint Director, STPI, Ministry of Communication and Information Technology, Government of India. The AO, however, disallowed the claim on the ground that certification of the assessee as EOU ought to have been by the statutory Board referred to in the Explanation to Section 10B of the Act and not by the Joint Director.

The assessee took up the matter to CIT (A) and got the decision in its favour.

The Revenue further took up the matter to the ITAT which denied the benefit of section 10B to the assessee. On subsequent knowledge of similar facts in other cases whereby deduction u/s 10A was admitted, the assessee then filed cross objections before the ITAT. The ITAT declined to permit the assessee to maintain the cross objections. Thereby, the assessee knocked the door of Delhi High Court which was of the view that ITAT was in error in declining to examine the cross objections filed by the appellant assessee.

Facts of the case:

• The assessee’s claim of deduction u/s 10B was rejected by the AO on the ground that certification of the assessee as EOU ought to have been by the statutory Board referred to in the Explanation to Section 10B of the Act and not by the Joint Director.
• The CIT (A) however accepted the deduction following the ITAT Delhi bench in case of Valiant Communication Ltd. v. DCIT. But the revenue appealed against it to ITAT.
• The ITAT in Valiant Communications Ltd. (supra) was carried in appeal by the Revenue before the Delhi High Court which opined that for the purposes of availing the benefit of Section 10B of the Act, the certification by the Board was mandatory and that such exemption could not be granted on the basis of the certificate issued by the Joint Director.
• In the present case, the ITAT restored the order of the AO disallowing the claim made by the Assessee under Section 10B of the Act. While taking up the cross-objections, although the delay in filing was condoned, the ITAT declined to permit the Assessee to maintain the cross objections by following the decision of the Coordinate Bench of the ITAT in ITO v. Neetee Clothing (P)Ltd. [2010] 129 TTJ 342 (ITAT [Del]), on the ground that since the Assessee had not urged the plea of being entitled to the benefit under Section 10 A of the Act before the CIT (A), it could not be permitted to urge such plea for the first time before the ITAT.
• The assessee thereafter filed an application with the Delhi High Court contending that the CIT(A) and the Tribunal had not gone into the merits of the alternative claim for entitlement under Section 10A. The assessee herein filed cross objections which were not accepted by the ITAT resulting into the matter coming to the High Court.
• The powers of the ITAT while hearing appeals and cross objections have been explained by this Court in CIT v. Edward Keventer (Successors) Pvt. Ltd. (1980) 123 ITR 200 whereby if a party appeals, he is the party who comes before the Appellate Tribunal to redress a grievance alleged by him. If the other side has a grievance, he has a right to file a cross-appeal.
• The Delhi High Court finally pronounced that ITAT was in error in declining to examine the cross objections filed by the appellant assessee.

Contention of the Revenue

The revenue asserted that the claim of the assessee for alternative deduction u/s 10A instead of 10B was not acceptable because such plea was not made before the CIT(A) and therefore such cross objection cannot be admitted by the ITAT.

Contention of the Assessee

The Assessee’s urged that the CIT(A) and the Tribunal had not gone into the merits of the alternative claim for entitlement under Section 10A. This fact is apparent from a reading of the order of CIT (A) as well as that of the Tribunal in the order impugned.

Held by High Court

• Relying upon the decision in cases of CIT v. Edward Keventer (Successors) Pvt. Ltd. (1980) 123 ITR 200 as well as NTPC v. CIT(1998) 229 ITR 383 SC explaining the powers of ITAT the Hon’ble High Court declared that both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal.
• It was, therefore, open to the Appellant Assessee herein to seek support of the order of the CIT (A) on the ground which was not urged before the CIT (A) as long as it was not going to be adverse to the case of the Appellant i.e. the Revenue before the ITAT.
• The ITAT ought to have accepted the cross objections filed by the assessee.