Bhushan Sakpal- Ld. AR for the Assessee. Jyotilakshmi Nayak - Ld.DR for the Revenue.

1. Aforesaid appeal by revenue for Assessment Year [in short referred to as ‘AY’] 2014-15 contest the order of Ld. Commissioner of Income- Tax (Appeals)-24, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No.CIT(A)-24/A.CIT-15(1)(2)/IT-206/2017-18 dated 22/10/2018 on following grounds of appeal:-

1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was correct in allowing the deduction u/s.10AA in respect of profits of SEZ unit by virtue of the provisions of the Special Economic Zone, 2005, considering that the activity of importing goods and its export amounted to providing of 'services' as per the provisions of section 10AA of the Act as the word 'service' must be taken from the SEZ Act, 2005, ignoring that the definition of services could not be imported from SEZ Act."

2. On the facts and in the circumstances of the case and in law, Ld.CIT(A) erred in assuming that the definition of 'services' from SEZ Rules to include trading which has been given in a different context without confining the provisions of the Income Tax Act which is a self contained code and particularly in view of section 27 of the SEZ Act which clearly stipulates that 'the provisions of Income Tax Act 1961, as in force for the time being, shall apply to, or in relation to, the Developer or entrepreneur for carrying on the Second Schedule' and in view of the fact that the necessary modifications have already been incorporated in the Income Tax Act?"

3. The appellant prays that the order of the CIT(A), Mumbai on the above grounds be set-aside and that of the assessing officer be restored."

2. The Ld. Authorized Representative for Assessee (AR), at the outset, submitted that Ld. CIT(A) has merely followed the order of the Tribunal rendered in assessee’s own case for earlier assessment years and therefore, there being no change in facts and circumstances, the appeal is liable to be dismissed. The Ld. DR could not controvert the aforesaid fact.

3. Facts on record would reveal that assessee being resident corporate assessee stated to be engaged in import & export, was assessed for year under consideration u/s.143(3) r.w.s. 144C(4) of the Act on 06/01/2017 wherein deduction u/s. 10AA for Rs.181.44 Lacs, as claimed by the assessee, was denied in view of the conclusion that the assessee was not engaged in manufacturing or production of articles or goods. The definition of service as provided in clause 2(z) of SEZ Act, in the opinion of Ld. AO, could not be imported to Section 10AA of the Act and therefore, the deduction as claimed by the assessee would not be allowable.

4. Upon further appeal, Ld. CIT(A) allowed the claim of the assessee by observing as under: -

2.4. I have given my careful consideration to the rival submissions, perused the material on record and duly considered the factual matrix of the case as also the applicable legal position.

2.4.1. The only effective ground is against the action of the ld. AO in not allowing deduction claimed by the appellant u/s. 10AA of the Act. A similar issue was also adjudicated in the appellant’s own case vide ITAT order in ITA No.2753/Mum/2015 dated 13/07/2016 for A.Y. 2011-12 and ITA Nos. 6198/M/2016 & 6199/M/2016 for A.Y. 2012-13 & 2009-10 and CIT(A) order appeal No.55/IT-76/2017-18 dated 02/02/2018 for A.Y. 2013-14 and there being no change in the facts and circumstances in the present appeal, respectfully following the same, the ground raised is allowed in favour of the appellant.” As evident Ld. CIT(A) has merely followed the orders of Tribunal passed in assessee’ s own case for AYs 2009-10, 2011-12 and 2012-13. Similar view was taken by Ld. CIT(A) for AY 2013-14. Nothing has been brought on record to demonstrate any change in facts and circumstances. In fact, the revenue was under appeal against the appellate order for 2013-14 before this Tribunal vide ITA No. 2855/Mum/2018 order dated 02/12/2019, wherein the view taken by Tribunal in earlier years was followed and revenue’s grounds were dismissed. Therefore, respectfully following the consistent view of Tribunal, we dismiss the appeal.

Reasons for delay in pronouncement of order

5.1 Before parting, we would like to enumerate the circumstances which have led to delay in pronouncement of this order. The hearing of the matter was concluded on 12/02/2020 and in terms of Rule 34(5) of Income Tax (Appellate Tribunal) Rules, 1963, the matter was required to be pronounced within a total period of 90 days. As per sub-clause (c) of Rule 34(5), every endeavor was to be made to pronounce the order within 60 days after conclusion of hearing. However, where it is not practicable to do so on the ground of exceptional and extraordinary circumstances, the bench could fix a future date of pronouncement of the order which shall not ordinarily be a day beyond a further period of 30 days. Thus, a period of 60 days has been provided under the extant rule for pronouncement of the order. This period could be extended by the bench on the ground of exceptional and extraordinary circumstances. However, the extended period shall not ordinarily exceed a period of 30 days.

5.2 Although the order was well drafted before the expiry of 90 days, however, unfortunately, on 24/03/2020, a nationwide lockdown was imposed by the Government of India in view of adverse circumstances created by pandemic covid-19 in the country. The lockdown was extended from time to time which crippled the functioning of most of the government departments including Income Tax Appellate Tribunal (ITAT). The situation led to unprecedented disruption of judicial work all over the country and the order could not be pronounced despite lapse of considerable period of time. The situation created by pandemic covid-19 could be termed as unprecedented and beyond the control of any human being. The situation, thus created by this pandemic, could never be termed as ordinary circumstances and would warrant exclusion of lockdown period for the purpose of aforesaid rule governing the pronouncement of the order. Accordingly, the order is being pronounced now after the re-opening of the offices.

5.3 Faced with similar facts and circumstances, the co-ordinate bench of this Tribunal comprising-off of Hon’ble President and Hon’ble Vice President, in its recent decision titled as DCIT V/s JSW Limited (ITA Nos. 6264 & 6103/Mum/2018) order dated 14/05/2020 held as under: -

7. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 7th January 2020,this order thereon is being pronounced today on 14th day of May, 2020, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders, provides as follows:

(5) The pronouncement may be in any of the following manners: —

(a) The Bench may pronounce the order immediately upon the conclusion of the hearing.

(b) In case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date for pronouncement.

(c) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily (emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board.

8. Quite clearly, “ordinarily” the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression “ordinarily” has been used in the said rule itself. This rule was inserted as a result of directions of Honable jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that “We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment”. In the ruled so framed, as a result of these directions, the expression “ordinarily” has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any “extraordinary” circumstances.

9. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon’ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Honable Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that “In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown”. Honable Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, “It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”, and also observed that “arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020”. It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus “should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure...”.

The term ‘force majeure’ has been defined in Black’s Law Dictionary, as ‘an event or effect that can be neither anticipated nor controlled’ When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an “ordinary” period.

10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system.

Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Honable Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon’ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed “while calculating the time for disposal of matters made time bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”. The extraordinary steps taken suo motu by Hon’ble jurisdictional High Court and Hon’ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words “ordinarily”, in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was required to be carried out on the facts of this case.

Deriving strength from the ratio of aforesaid decision, we exclude the period of lockdown while computing the limitation provided under Rule 34(5) and proceed with pronouncement of the order.

Conclusion

6. The appeal stands dismissed.

This order is pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details of the same on the notice board.

Sd/- Sd/-

(Amarjit Singh) (Manoj Kumar Aggarwal)

Judicial Member Accountant Member

Mumbai; Dated : 06/07/2020