TMI Blog2007 (3) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... the company is exporting software. It claimed 100% exemption u/s. 10A of the IT Act. At the time of assessment, it was noticed by the Assessing Officer that the undertaking was engaged in export of software from the STP location at Basavashwaranagar, Bangalore. It was registered on 3rd January, 2002. For the first time, deduction was claimed in the asst. Year 2002-03. It has been noticed by the Assessing Officer that the company was formed on conversion of a partnership firm M/s. Foresee Information Systems on 04.7.2001. Originally, the firm was called as M/s. Foresee Software Consultants formed on 29.11.1993, which was reconstituted in September, 1994. Its name was changed in August, 1995 as M/s. Foresee Information Systems. In financial y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision of Section 10A is applicable in respect of newly established industrial undertakings in free trade zones. Apparently, it is a provision for the purpose of newly established undertakings. Firstly, the undertaking of the assessee company is not a newly established undertaking as held by the Assessing Officer because the firm was already in existence. Before claiming benefit of section 10A of the IT Act, the firm was exporting software and getting relief u/s. 80HHE of the IT Act. The firm, after conversion into a company, cannot be said to be a new undertaking for the purpose of claiming exemption u/s 10A of the Act. Alternatively, it was submitted that if it is to be treated as a new unit, in that event, the provision of section 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax u/s. 10B will be available for them. Further reliance was placed on the Board's Circular No. 1/2005 dated 6.1.2005 where it has been stated that existing DTA unit, which was subsequently approved as 100% EOU unit by the Board shall be eligible for deduction u/s. 10B of the Act and in such a case, the remaining period of ten consecutive asst. years shall be considered for exemption. Learned counsel has further placed reliance on the decision of the Tribunal in the case of M/s Infosys Technologies Ltd. in ITA No. 140/Bang/2001 where it has been held that profit from sale of software is eligible for deduction u/s 10A not at the time of manufacture but at the time when it is sold. Since the product was sold through STPI unit, the same wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estic Tariff Area, which is subsequently opproved as 100% EOU by the Board appointed by the Central Government in exercise of powers conferred under section 14 of the Industries (Development and Regulation) Act, 1951, is eligible for deduction under section 10B of the Income-tax Act. 4. The deduction shall be available only from the year in which a unit has got the approval as 100% EOU and shall be available only for the remaining period of ten consecutive assessment years, beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as a DTA unit, 5. To clarify the above position certain illustrations are given as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below:- Existing DTA units, may also apply for conversion into an EOU/EHTP/STP/BTP unit, and income tax benefits under section 10B will be available under the scheme for plant, machinery and equipment already installed. Existing DTA units, may also apply for conversion into an EOU/EHTP/STP/BTP unit. On conversion, they would get income tax concessions but limited to the period of 10 year from original Act whichever is earlier. For this purpose, the DTA unit may apply to the Development Commissioner/Designated Officer concerned in the same manner as applicable to new units . It is settled law that the Circular issued by Board is binding on the Income-tax Authorities. Therefore, in our opinion, learned CIT(A) was justified i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequent upon the conversion of the firm into a company. It is only a transformation as the erstwhile firm was converted into a company under part IX of the Companies Act. This view finds support from the Bombay High Court judgment in the case of CIT v. Texspin Engineering and Manufacturing Works reported at 263 ITR 245 (Bombay). Moreover, as mentioned in the Circular No. 8 dated 27.8.2002, the sub-section (9) has been introduced to prevent trading in incentives by shell companies formed only for that purpose. The provision was not intended to bring within its purview cases of genuine business reorganization while maintaining major portion of ownership or beneficial interest with the same persons who were the owners of the business before su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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