Case Law Details
Brief of the case
Delhi High Court has held In the case of Fast Booking (I) Pvt. Ltd. Vs. DCIT that Under Section 254 Tribunal has inherent power to entertain alternative plea of which was not urged before CIT(A). High Court Directed the Tribunal to consider the Plea of the Assessee that in case he is denied benefit under section 10B than he should be allowed the same under section 10A of which he is satisfying the conditions. High Court Relied on the Delhi High Court Judgments in the case of CIT v. Edward Keventer (Successors) Pvt. Ltd. (1980) 123 ITR 200 & on Supreme Court Judgment in the case of NTPC v. CIT(1998) 229 ITR 383 SC.
Facts of the case
- The Assessee is engaged in the business of software development and is registered with the Software Technology Park of India (STPI) Noida. It claimed deduction under Section 10B of the Act in respect of the profit derived from export of computer software.
- The Assessing Officer (AO) 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 appeals of the Assessee herein were allowed by the CIT (A), since in some other case ITAT allowed approval by the Joint Director, and held that same was sufficient to claim the deduction.
- The assesse filed applications for clarification that even though they may not be entitled to the benefit under Section 10B, it should not be denied the benefit under Section 10A as they satisfied the requirements for availing the benefit under Section 10A.
HELD by ITAT
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 10A of the Act before the CIT (A), it could not be permitted to urge such plea for the first time before the ITAT.
HELD BY HIGH COURT
Court is of the view that ITAT was in error in declining to examine the cross objections filed by the Appellant Assessee. 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 in the following words:
“Now, adverting to the rights of the respondent in an appeal, we start with the basic idea that, 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 (and under the Civil Procedure Code and the I.T. Act of 1961, a memorandum of objections). But, if no such thing is done, he is deemed to be satisfied with the decision. He is, therefore, entitled to support the judgment of the first officer on any ground but he is not entitled to raise a ground which will work adversely to the appellant. In fact such a ground may be a totally new ground, if it is purely one of law, and does not necessitate the recording of any evidence, even though the nature of the objection may be such that it is not only a defence to the appeal itself but goes further and may affect the validity of the entire proceedings. But the entertainment of such a ground would be subject to the restriction that even if it is accepted, it should be given effect to only for the purpose of sustaining the order in appeal and dismissing the appeal and cannot be made use of, to disturb or to set aside, the order in favour of the appellant (See Bamasi v. CIT). This liberty to the respondent is reserved by Rule 27 of the Tribunal Rules.
We have next to consider the powers of the Tribunal while disposing of the appeal. Rule 12, earlier referred to, also lays down that the Tribunal, in deciding an appeal, is not confined to the grounds set forth in the memorandum of appeal or those which the appellant may urge with its leave. It can decide the appeal on any ground provided only that the affected party has an opportunity of being heard on that ground. But it has been laid down in a number of cases that this rule does not enable the Tribunal to raise a ground, or permit the party who has not appealed to raise a ground, which will work adversely to the appellant and result in an enhancement”
The Court is of the view that ITAT was in error in declining to examine the cross objections filed by the Assessee. This court relied order of Supreme Court in NTPC v. CIT(1998) 229 ITR 383 SC which has also explained that the power of the Tribunal in dealing with the appeals under Section 254 of the Act is “ expressed in the widest possible terms”. . It was further observed as under:
“5 … .The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.”
The basis of the Court remanding the matters in Valiant Communication Ltd. v. DCIT in ITA No. 2706/Del/2008, cases to the ITAT was precisely to consider whether the benefit under Section 10A could be granted to those Assessees notwithstanding that they may not be entitled to the benefit under Section 10B. 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 in considering such plea was not going to be persuaded to come to a different conclusion as far as the appeal of the Revenue pertaining to the benefit under Section 10B was concerned.
We set aside the order of ITAT to the extant it declined to examine the Appellant Assessee’s cross objections on merits and restore the case to ITAT for considering alternative plea of Appellant.
