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2014 (11) TMI 141 - ITAT PUNEClaim of exemption u/s 10B - Development and export of computer software – Held that:- The assessee is a 100% EOU is approved by the Director, STPI and therefore it should be taken as a substantive compliance with the prescription contained in Explanation 2(iv) below section 10B of the Act – In THE COMMISSIONER OF INCOME TAX Versus REGENCY CREATIONS LTD. [2012 (9) TMI 627 - DELHI HIGH COURT] similar issue has been decided - admittedly, the 100% EOU of the assessee does not enjoy any specific approval from the authority referred to in Explanation 2(iv) below section 10B of the Act – the decision relied upon by the assessee in COMMISSIONER OF INCOME TAX Versus TECHNOVATE E SOLUTIONS PVT LTD [2013 (3) TMI 372 - DELHI HIGH COURT] cannot be followed as the issue deals with the provisions of section 10A of the Act and not with section 10B of the Act, which is the subject-matter of controversy in the present case, thus, so far as the action of the lower authorities in holding that the 100% EOU of the assessee was not entitled for the benefit of section 10B of the Act is concerned is upheld – Decided against assessee. Alternate claim to allow deduction u/s 10A – Held that:- In the past years assessee has been allowed the claim of deduction u/s 10B of the Act - the stand of the Revenue that assessee cannot be allowed the benefits of section 10A of the Act merely because the prescribed Audit Report in Form No.56F was not filed in the return of income, is quite erroneous - Pertinently, after denial of deduction u/s 10B of the Act in the assessment order, the earliest opportunity for the assessee to stake claim for deduction u/s 10A of the Act was before the CIT(A) - section 10A of the Act provides a deduction of such profits and gains derived by an undertaking from export of articles or things or computer software manufactured or produced by it - The assessee claimed that it has undertaken export of computer software manufactured by it and its unit is registered with Director, STPI - The approval granted by Director, STPI has been held to be a sufficient compliance with requirements of section 10A(2)(i)(b) of the Act even as per the CBDT vide Instruction No.1 of 2006 dated 31.03.2006 - prima-facie the 100% EOU of the assessee, being registered with STPI, is eligible to stake claim for deduction u/s 10A of the Act, provided the other conditions laid down in section 10A of the Act are satisfied – the matter is remitted back to the AO for verification of claim of deduction u/s 10A – Decided in favour of assessee. Mark up of expenses to different units - Whether the CIT(A) has erred in holding that the profit is a markup of 20% on the expenditure attributable to Bangalore and Ahmedabad units and the same will not be eligible for deduction u/s 10B or 10A in respect of the profits – Held that:- The fact of the present case does not suggest that the support centers at Ahmedabad and Bangalore carry out any other business - The activities being carried out can, at best be, considered as supporting activities to the activity of software development and exports effectuated from the STPI unit at Pune - The finding of the CIT(A) that the specific jobs being executed by the Ahmedabad and Bangalore centers are inseparable part of software development and export unit at Pune coupled with the findings of the AO that the Bangalore and Ahmedabad centers do not have separate account books, expenditure or turnover reflects that the two centers cannot be said to be any other ‘businesses’ being run by the assessee - the stand of the CIT(A) in holding that the profits are required to be attributed to the Bangalore and Ahmedabad centers and only the resultant profit shall be eligible for the deduction u/s 10B or 10A of the Act is not justified – Decided in favour of assessee.
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