TMI Blog2012 (7) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... malities for getting various approvals - there is every possibility that traveling expenses incurred by assessee on the travel of its director were to enable him to attend Board meetings and to file various documents before various authorities - as genuine business expenditure has been incurred CIT(A) was correct to allow the expenditure - in favour of assessee. Disallowance of exemption u/s 10B - Held that:- As assessee had claimed exemption for the profits only from 1.2.2006 to 31.3.2006 and all the conditions for availment of exemption u/s 10B were complied. Therefore no reason to interfere in the order of Ld CIT(A)for allowing the exemption - in favour of assessee. - ITA No.2018/Del/2010 - - - Dated:- 20-7-2012 - I C Sudhir, T S Kapoor, JJ. For Appellant: Shri S K Upadhyaya, Sr. DR For Respondent: Shri Manoj Nagrath, CA ORDER Per: T S Kapoor, AM: This is an appeal filed by revenue against the order of CIT(A) dated 01-02-2010. The grounds of appeal are as under :- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.371402/- made by the A.O on account of disallowance of depreciation cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urced the development of software to M/s I.Q.Resources Pvt. Ltd. Instead of developing or manufacturing itself. 3. The AO also wanted to know the genuineness of exports made by company and also wanted to know whether the unit was eligible for deduction u/s 10B or not. Therefore, the assessee was required to submit certain documents/explanations in support of its claim. After having received documents/informations, confirmations from assessee, the AO held that the unit was not eligible for deduction u/s 10B because of the following reasons and also made the following disallowances: The assessee company has not produced or manufactured the software on its own rather got developed it from M/s I.Q.Resources Pvt. Ltd. The assessee company has failed to comply with the requirement of filing Audit Report with form 56G. The assessee company failed to produce the attested copy of the bills raised from STPI and Customs authority, copy of Softex forms, copy of STPI registration for which software development it was registered and details of software developed by it. (1) Miscellaneous receipts of Rs. 20,000/- 4. During course of assessment proceedings, the assessee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellaneous receipts are not part of profit on account of software development. (2) Depreciation 10. The Ld. AR argued before CIT(A) that appellant had clarified during assessment proceedings that it had not claimed depreciation on building but on the capital expenditure incurred on civil and interior works and furniture in the said premises and he further argued that the expenditure was incurred in the premises from which the appellant company was doing business from January 2006. In support, the Ld. AR submitted license dated 27-01-2006 issued by Central and excise Department, Gurgaon showing the premises as Private Bonded Warehouse of assessee and also certificate of STPI dated 16-01-2006 and green card issued to the appellant company for the period 16-01- 2006 to 15-01-2007 which had shown the said building as address of the assessee. 11. The Ld. AR further argued that there is no requirement in law that for claiming depreciation on interior works and furniture, the premises should be owned by the appellant company or leased out to the appellant company. In this respect, she submitted that even prior to execution of lease agreement the unit was STP unit. In support STP un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and as the land lady, the expenses of her travel to India needed to be borne by her and not by appellant company which is the prospective tenant of the said property. However, in respect of expenditure incurred by Mr. Mukesh Sehgal, who was the director of the company. The Ld. CIT(A) held that it was legitimate business expenditure and in view of the above, he allowed 50% of expenditure of Rs. 5,64,344/- and confirmed the remaining addition of Rs. 2,82,177/-. (3) Exemption u/s 10B (i)The Ld. AR submitted before CIT(A) that the assessee company was given approval on 03-01-2006 for setting up the 100% EOU unit under STP for the development/manufacture and export of computer software. (ii)That that the appellant company has been issued certificate by STPI on 16-01-2006 certifying that assessee is establishing STP unit at Millennium Plaza, 1st Floor, Tower B, Sector-27, Gurgaon. (iii)That the STP unit was licensed as Private Bonded Warehouse for payment of customs duties vide license dated 27-01-2006. (iv) That the appellant had entered into an agreement with RSG Systems Inc., USA for supply of software and technology services in regard with terms and conditions stipulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/2005 dated 06-01-2005 and the details filed by the appellant which were also filed at the assessment stage, the appellant company qualified as an eligible unit for exemption u/s 10B w.e.f 01-02-2006. In this regard, the Ld. AR had filed profit and loss account for two periods, viz. 01-04-2005 to 31-01-2006 and 01-02-2006 to 31-03-2006 before the AO at the assessment stage, copies of which are also filed during the appellate proceedings. As per this, the appellant has shown to have made a net loss of Rs. 47,62,847/- during the period 01-04- 2005 to 31-01-2006 and a net profit of Rs. 77,23,779/- during the period from 01-02-2006 to 31-03-2006. I find that these figures of profit have been worked out without deducting the depreciation as per I.T. Act, which needs to be done to arrive at the correct figure of profit. The AO is, therefore, directed to carefully verify the said computation with regard to their accuracy and authenticity and allow exemption u/s 10B on the profits, if any derived for the period 01-02-2006 to 31-03-2006 as per law. The exemption u/s 10B, if any, to be allowed after the above verification by the AO, cannot in any case exceed Rs. 3,45,010/- which was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business plans of the assessee and moreover, Mr. Mukesh Sehgal was a director of the company and he was one of the persons who could have completed formalities and therefore he pleaded that expenditure were genuine business expenditure and was incurred wholly and exclusively for the purpose of business of assessee. 25. We have heard the rival submissions of both the parties and have gone through the material available on record. We find that Mr. Mukesh Shegal was one of the first director of the company and he had traveled to India for completion of various formalities for getting various approvals. As per Memorandum Articles of Association there are three first directors and one of the directors is a lady director and rest of two are made directors including Mr. Mukesh Sehgal. Generally, in a company minimum two directors are required for holding Board meeting to consider and arrive at various decisions. Therefore, there is every possibility that traveling expenses incurred by assessee on the travel of its director were to enable him to attend Board meetings and to file various documents before various authorities. Therefore, we hold that traveling expenses incurred by Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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