|DATE:||(Date of pronouncement)|
|DATE:||February 27, 2012 (Date of publication)|
|Click here to download the judgement (dsl_software_10B_frivolous_appeal_costs.pdf)|
Only way to prevent Dept from filing frivolous appeals is by imposing heavy costs
The assessee set up a 100% EOU unit in AY 1993-94 and claimed 5 year deduction till AY 1997-98 as was then allowable u/s 10B. By the IT (SA) Act, 1998, s. 10B was amended w.e.f. 1.4.1999 to allow deduction for 10 years from the date the eligible unit started software development. Accordingly, the assessee claimed s. 10B deduction for AY 1999-2000 to 2001-02. The AO held that as the deduction under the amended provision was allowable only for the “unexpired period”, it was necessary that as on the date of the amendment, there was “unexpired period” and as the assessee’s entitlement had ended in AY 1997-98, it was not eligible for further relief. The CIT (A) & Tribunal allowed the claim on the ground that there was nothing in the Act to provide that the units which have fully availed the exemption u/s l0-B will not get the benefit of the amended provision. On appeal by the department, HELD dismissing the appeal while passing strictures and imposing heavy costs:
(i) It is clear from the amended s. 10B that the benefit of tax holiday is extended for a period of ten consecutive assessment years beginning with the assessment year in which the undertaking begins to manufacture or produce articles. The object behind the amendment is to give added thrust to exports. lf the assessee has already availed the benefit under the unamended provision and 10 years have expired as of 01.04.1999, the assessee would not be entitled to the said benefit. If 10 years from the date of production has not expired prior to 01.04.1999, he would be entitled for the remaining unexpired period. The department’s stand that if the 5 year period had expired as of the date of the amendment, the benefit is not available runs counter to the intention with which the amended provision was enacted and negates it.
(ii) This case shows how the department is filing appeals without proper application of mind and wasting the precious time of the Court and the tax payer’s money. Even if the AO was overzealous in passing the assessment order, there was no need to file an appeal to the High Court. This is not an isolated case. The department is filing appeals mechanically either for the purpose of statistics or to save their skins without application of mind. In the process, a person eligible to tax holiday has been denied the benefit and made to contest the proceedings. If the object of extending the benefits was to give added thrust to exports, the assessee is made to unnecessarily waste his time in fighting the dispute in different forums. The only way to bring reason to the department is by imposing costs so that appropriate action may be taken against the person who has taken a decision to file the appeal and recover the same after enquiry. The department is directed to pay costs of Rs. 1 lakh for wasting the tax payer’s money. lt is open to the authorities to recover the money from the person who has taken a decision to file the frivolous appeal.