Criteria for claiming deduction u/s 80JJAA for employees of the software industry

Karnataka High Court
The Commissioner Of Income-Tax vs Texas Instruments India Pvt Ltd on 21 April, 2021 Author: Satish Chandra Govindaraj
 
 IN THE HIGH COURT OF KARNATAKA AT BENGALURU
 DATED THIS THE 21ST DAY OF APRIL, 2021
 PRESENT
THE HON'BLE MR. JUSTICE SATISH CHANDRA SHARMA
 AND
 THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ

 I.T.A. No.141 OF 2020
 C/W
 I.T.A. No.151 OF 2020

IN I.T.A. NO.141 OF 2020
BETWEEN:

1. THE COMMISSIONER OF INCOME-TAX
 LTU, 7TH FLOOR, BMTC BUILDING
 80 FEET ROAD, KORAMANGALA
 BENGALURU-560095

2. THE ADDL. COMMISSIONER OF
 INCOME-TAX, LTU, 7TH FLOOR
 BMTC BUILDING, 80 FEET ROAD
 KORAMANGALA, BENGALURU-560095 ... APPELLANTS

(BY SRI. K.V. ARAVIND,ADVOCATE-PH)
AND:
TEXAS INSTRUMENTS INDIA PVT. LTD.,
BAGMANE TECH PARK
NO.66/3, ADJACENT TO LRDE
BYRASANDRA, C.V.RAMAN NAGAR
BENGALURU-560093 ... RESPONDENT

(BY SRI. PERCY PARDIWALLA, SR. COUNSEL FOR
 SRI. T. SURYANARAYANA, MS. TANMAYEE RAJKUMAR AND
 MS. MAHIMA GOUD, ADVOCATE OF M/S KING & PATRIDGE-PH)

THIS APPEAL IS FILED UNDER SECTION 206A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 06.03.2020 PASSED IN IT(TP)A NO.169/BANG/2014, FOR THE ASSESSMENT YEAR 2008-2009 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO.169/BANG/2014 DATED 06.03.2020 FOR ASSESSMENT YEAR 2008-2009 ANNEXURE-C AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ADDL. COMMISSIONER OF INCOME TAX, LTU, BENGALURU.

IN I.T.A. NO.151 OF 2020
BETWEEN:

1. THE COMMISSIONER OF INCOME-TAX
 LTU, 7TH FLOOR, BMTC BUILDING
 80 FEET ROAD, KORAMANGALA
 BENGALURU-560095

2. THE JOINT COMMISSIONER OF
 INCOME-TAX, LTU, 7TH FLOOR
 BMTC BUILDING, 80 FEET ROAD
 KORAMANGALA, BENGALURU-560095 ... APPELLANTS

(BY SRI. K.V. ARAVIND,ADVOCATE-PH)
AND:
TEXAS INSTRUMENTS INDIA PVT. LTD.,
BAGMANE TECH PARK
NO.66/3, ADJACENT TO LRDE
BYRASANDRA, C.V.RAMAN NAGAR
BENGALURU-560093 ... RESPONDENT

(BY SRI. PERCY PARDIWALLA, SR. COUNSEL FOR
 SRI. T. SURYANARAYANA, MS. TANMAYEE RAJKUMAR AND
 MS. MAHIMA GOUD, ADVOCATE OF M/S KING & PATRIDGE-PH)

THIS APPEAL IS FILED UNDER SECTION 206A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 06.03.2020 PASSED IN IT(TP)A NO.149/BANG/2014, FOR THE ASSESSMEN YEAR 2008-2009 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO.149/BANG/2014 DATED 06.03.2020 FOR ASSESSMENT YEAR 2008-2009 ANNEXURE-C AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRM THE ORDER PASSED BY THE ADDL. COMMISSIONER OF INCOME TAX, LTU, BENGALURU.
 
 THESE APPEALS COMING ON FOR HEARING AND HAVING BEEN RESERVED FOR ORDERS ON 05.03.2021, THIS DAY, SURAJ GOVINDARAJ J., PRONOUNCED THE FOLLOWING:

 JUDGMENT

1. The respondent is in the business of manufacture and export of computer software. It filed returns of income for the Assessment Year 2008-09 on 30.09.2008, declaring an income of Rs.98,03,41,570/- which was processed on 8.06.2011, determining the total income of the same amount. Returns were taken up for scrutiny after issuance of statutory notice under Section 143(2) on 14.09.2009.

I.T.A. NO.141 OF 2020 c/w I.T.A. NO.151 OF 2020

2. The Assessee had claimed deduction of Rs.7,57,22,069/- under Section 80JJ(AA) of Income Tax Act for the Assessment Year 2008-

2009 in respect of employment of new workmen for the said year. In terms thereof, the Assessee could claim a deduction of additional amounts paid to new regular workmen employed in the previous year on the workmen satisfying the definition under Section 2(s) of the Industrial Disputes Act, 1947.

3. The Assessee had also sought for deduction in computing the income chargeable under the head "profits and gains of business or profession", as regards the amounts paid towards lease rental on lease finance of cars obtained by the Assessee and had contended that there was no tax liability to be paid thereof nor any deduction at source required to be done I.T.A. NO.141 OF 2020 c/w I.T.A. NO.151 OF 2020 thereon since the same is not covered under Section 194-C or under Section 194-I of the Income Tax Act.

4. The Assessing Officer vide final order dated 25.01.2012 had held that the Assessee was not eligible for any deduction under Section 80JJ(AA) of the Act. The Assessing Officer also held that since the Assessee had not deducted tax at source on the lease rentals for the cars/vehicles in terms of Section 194-C of the Act, the expenditure claimed in the computation of income was disallowed and added back to the total income of the Assessee under Section 40(a)(ia) on the ground that the workmen as regards whom the Assessee had sought for deduction under Section 80JJ(AA) had not completed 300 days of employment during the previous year, the incentive under Section I.T.A. NO.141 OF 2020 c/w I.T.A. NO.151 OF 2020 80JJ(AA) was only payable and/or could be claimed if the workman had worked for 300 days within the previous year and not otherwise. The continuation of the working of the workmen in the Assessment Year (AY) and calculating the employment during the previous year and Assessment year to arrive at 300 days was not permissible.

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