TMI Blog2012 (9) TMI 627X X X X Extracts X X X X X X X X Extracts X X X X ..... rations which apply for granting approval under Sections 10-A and 10-B may to an extent, overlap, yet the deliberate segregation of these two benefits by the statute reflects Parliamentary intention that to qualify for benefit under either, the specific procedure enacted for that purpose has to be followed. There is nothing in any of the Circulars or instructions relied on by the Tribunal in all the orders, implying that approval for purposes of an STP also entitled the unit to a benefit under Section 10-B. The orders of the Tribunal are consequently erroneous, and its reasoning, unsupportable - in favour of the revenue - ITA Nos. 69/2008, 783/2009 & 1239/2011, ITA Nos.2002/2010, 438/2012, 439/2012, 440/2012, 441/2012 - - - Dated:- 17-9-2012 - MR. JUSTICE S. RAVINDRA BHAT, MR. JUSTICE R.V. EASWAR, JJ. For Appellant : Ms. Rashmi Chopra, Sr. Standing counsel with Mr. Harpreet Singh Ajmani, Advocate For Respondent: Mr. Kuldip Singh, Advocate. MR. JUSTICE S.RAVINDRA BHAT 1. These appeals have been preferred by the Revenue claiming to be aggrieved by the common orders of the Income Tax Appellate Tribunal (ITAT) in respect of the two assessees, i.e. M/s. Regency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blishment of 100% export oriented software. As per the permission letter dated 7th November, 2006, as placed on the record, we found that STPI had granted registration to the assessee vide letter dated 5.12.2000 for setting up a 100% EOU under Software Technology Park Scheme which was valid for 5 years. The assessee was granted extension to continue the operations under Software Technology Park Scheme up to 31.03.2009. CBDT in its Circular No. 149/194/2004/TPL dated 06.01.2005 and Circular No. 200/20/2006/Income Tax Act, 1961-I dated 31.3.2006 has directed to treat the grant of registration by STPI as valid agency for purposes of Section 10B. 6. In the instant case, the assessee has got approval from STPI, an organization of government duly authorized by CBDT Circular as stated above. Memorandum of Association of the Company in its main object clause clearly states the export of all kinds of goods all over the world. Goods thus includes computer software. Clause 11 of the Incidental objects as set out in memorandum empowers to set up any unit or division by the company for carrying on any business. Thus the setting up of Maxtech iSolution is one of the divisions of assessee is au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove and to inform that no approval/ratification of STPI approval is required from BOA formed by Ministry of Commerce by power conferred under Section 14 of IDR Act, 1951. Inter-Ministerial Standing Committee for EHTPs and ESTPs (IMSC) is competent in grant approval for STPI unit to claim all benefits under 100% EOU Scheme as per Press Note 2 of 1993 (copy enclosed). 5. The facts in respect of M/s Valiant Communications (ITA 2002/2010 Assessment Year 2005-06; ITA 438 to 441/2012 Assessment Years 2003-04, 2004-05, 2006-07 and 2007-08) are that the assessee, like in the case of Regency claimed deduction under Section 10B. It is engaged in the business of manufacturing and export of telecom transmission equipment. It had a registered unit with the Software Technology Park of India as a 100% EOU under Electronic Hardware Technology Park (EHTP) Scheme. The Assessing Officer had rejected the claim, stating that approval from STPI cannot be equated with the approval of the Board appointed under Section 14 of the Industries (Development and Regulation) Act, 1951. The CIT (Appeals) had held that the assessee was entitled to the benefit. The Revenue s appeal before the Tribunal for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere alive to the fact that the power to give approvals was initially with the Inter-Ministerial Standing Committee which was later delegated to the Director STP by the Note No. 5 (1997 Series). The assessees further relied upon the following extract of the CBDT circular dated (Notification under SO 388(E) dated 30.04.1995, which by para 2.10 stated as follows: 2.10 The provisions of paragraphs 96,104,109, 110 and 112 to 117 of Chapter IX of the Export and Import Policy (1992-97) applicable to export oriented units (EOUs) and units in Export Processing Zones (EPZs) shall also apply to the STP units subject to the following modifications: a. The word STP shall be substituted for the word EOU/EPZ EOU OR EPZs wherever they occur, in the paragraphs. b. The words Development Commissioner wherever they occur shall be substituted by the words Chief Executive of the STP Society. c. The word BOA wherever it occurs, shall be substituted by the word IMSC . 9. Learned counsel for the assessee urged that the construction or interpretation to be adopted by the Court should be in consonance with the liberal interpretation of Parliament in promoting growth and developme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as they apply for the purposes of clause (ii) of that sub-section. (3) The profits and gains referred to in sub-section (1) shall not be included in the total income of the assessee in respect of any five consecutive assessment years, falling within a period of eight years beginning with the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things specified by the assessee at his option Provided that nothing in this sub-section shall be construed to extend the aforesaid five assessment years to cover any period after the expiry of the said period of eight years XXXXXXXXXXXXX XXXXXXXXXX Explanation : For the purposes of this section, - (i) "free trade zone" means the Kandla Free Trade Zone and the Santacruz Electronics Export Processing Zone and includes any other free trade zone which the Central Government may, by notification in the Official Gazette, specify 316 for the purposes of this section; (ii) "Relevant assessment years" means the five consecutive assessment years specified by the assessee at his option under sub-section (3); (iii) "Manufacture" includes any - (a) Process, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y consecutive assessment years, falling within a period of eight years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things, specified by the assessee at his option : Provided that nothing in this sub-section shall be construed to extend the aforesaid five assessment years to cover any period after the expiry of the said period of eight years XXXXXXXXXXXXXXX XXXXXXXXXXXXXXX Explanation : For the purposes of this section, - (i) "Hundred per cent export-oriented undertaking" means an undertaking which has been approved as a hundred per cent export-oriented undertaking by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 (65 of 1951), and the rules made under that Act . Notifications, circulars and instructions referred to 11. During the proceedings in this case, the Tribunal as well as the assesse relied upon certain circulars to say that once a software technology park received approval to function as such, since the notified approval was in the Central Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear in which it 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. Further, in the year of approval, the deduction shall be restricted to the profits derived from exports, from and after the date of approval of the DTA Unit as 100% EOU. Moreover, the deduction to such units in any case will not be available after assessment year 2009-10. 5. To clarify the above position, certain illustrations are given as under: (i) Undertaking 'A' is set up in Domestic Tariff Area and starts manufacture or production of computer software in financial year 1999-2000 relevant to assessment year 2000-01. It gets approval as 100% EOU on 10th September, 2004 in the financial year 2004-05 relevant to assessment year 2005-06. Accordingly, it shall be eligible for deduction under section 10B from assessment year 2005-06 i.e., the year in which it fulfills the basic condition of being a 100% EOU. Further, the deduction shall be available only for the remai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of articles or things or computer software manufactured or produced by it. The deduction is available for a 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 such articles or things or computer software. The tax benefit under section 10A is available to an undertaking which fulfils all the following conditions: (i) it has begun or begins to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year - (a) commencing on or after 1st April, 1981, in any Free Trade Zone; or (b) commencing on or after 1st April, 1994, in any Electronic Hardware Technology Park or Software Technology Park; or (c) commencing on or after 1st April, 2001, in any Special Economic Zone; (ii) it is not formed by the splitting up or the reconstruction of a business already in existence except in the circumstances and within the period specified in section 33B of the Income-tax Act; (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. 2. Software Technology Park& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to the notice of the Board that a large number of units registered/approved by the Directors of the STPI are claiming deduction under section 10A whereas the STP scheme requires approval by the Inter-Ministerial Standing Committee of the Department of Electronics. Accordingly, the cases of such claimants have been reopened by the field authorities. 6. The matter has been examined in consultation with the officers of the Department of Information Technology (earlier, Department of Electronics). In view of the ambiguity in the legal status of the approval by Director of STPs, the Inter-Ministerial Standing Committee will meet to consider the approvals by Director of STPs issued in the past. Therefore, with a view to avoid infructuous demand raised in assessment and reassessment of assessees claiming deduction under section 10A, it has been decided that the claim of deduction under section 10A of the Income-tax Act, shall not be denied to STP units only on the ground that the approval/registration to such units has been granted by the Directors of Software Technology Parks. However, it has to be ensured that all other conditions specified in section 10A are fully satisfied befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Secretary, Planning Commission, or his nominee 8. Economic Adviser, Department of Electronics 9. Secretary, Department of Small Scale Industries and Agro and Rural Industries or his nominee 10. Joint Secretary, Department of Electronics, Member-Secretary. Functions of the Inter-Ministerial Standing Committee : (i) The Committee shall consider all applications for setting up of units in the Electronic Hardware Technology Parks (EHTP) under the scheme of special facility (hereinafter referred to as the said scheme framed under the Government of India, Ministry of Commerce, Notification No. 42 (N-8)/1992-97 dt. the 14th Sept., 1992). The Committee shall also consider all applications for setting up of units under Software Technology Park scheme operated under Customs Notification Nos. 138 and 140 dt. 22nd Oct., 1991. The Committee shall consider proposals for industrial licence, foreign technical collaboration agreements and import of capital goods. The Committee shall not consider applications involving foreign equity with or without any other industrial approvals. (ii) The Committee shall review the progress of implementation of letters of intent and industrial lic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme. However, for the Court to conclude that the Interministerial Committee was authorized to issue approval under Section 10-B and that its imprimatur or approval under Section 10-A ought to be deemed as an approval under Section 10-B, there ought to be more direct, or express authorization. 15. Section 10A extends the exemption to the units set up under STP scheme which start production of goods during the previous year relevant to the assessment year commencing on or after 1st April, 1994. The assessee s plea about eligibility of a 100% EOU STP eligible for exemption would render the amendment brought about by the Finance Act, 1993 (extending the benefit under Section 10A of the Act to the STPs from 1st April, 1994) superfluous. There is no reason for Parliament to amend the law, and extend benefits of Section 10A to units under STP scheme and, restrict the benefits to those commencing their operations in the year of account relevant to the Assessment year 1994-95, if a STP unit is otherwise eligible for exemption under Section 10B of the Act on the ground of its being 100 per cent EOU. 16. It is a settled principle of law that unless there is express authorization, in te ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
