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2016 (3) TMI 740 - ITAT PUNE

2016 (3) TMI 740 - ITAT PUNE - TMI - Deduction under section 10B - STPI unit - Held that:- Admittedly, the assessee before us is 100% EOU unit and has been set up under the STPI Scheme and has requisite approval from STPI. However, for availing deduction under section 10B of the Act, the assessee should be 100% EOU set up as specified under Explanation 2(iv) below section 10B of the Act, which defines 100% EOU as an undertaking so approved by the Board appointed in this behalf by the Central Gov .....

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sessee in respect of allowability of deduction under section 10A of the Act in place of section 10B - Held that:- The issue before us is identical to the issue before the Tribunal in Clarion Technologies (P.) Ltd. Vs. DCIT (2014 (11) TMI 141 - ITAT PUNE) and following the same parity of reasoning, we deem it fit to remand the issue back to the file of Assessing Officer to verify the claim of the assessee for deduction under section 10A of the Act in accordance with law. - Decided in favour of as .....

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d the following grounds of appeal:- The learned Commissioner of Income-tax, Appeals erred in sustaining the action of assessing officer in determining total income of appellant at ₹ 69,57,970 against returned income Rs.NIL. The learned Commissioner of Income-tax, Appeals erred in sustaining the action of assessing officer whereby, the assessing officer disallowed the Appellant claim of exemption u/s.10B of I.T.Act, 1961 amounting to ₹ 69,68,017. The learned Commissioner of Income-tax .....

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section 10A of the Act which was claimed before the Assessing Officer. 4. Briefly, in the facts of the present case, the assessee was 100% Export Oriented Unit (EOU) engaged in outsourcing of software development i.e. in the field of designing, developing and maintaining and book keeping accountancy. For the year under consideration, the assessee had declared total income at Nil after claiming the deduction under section 10B of the Act at ₹ 69,68,017/-. The Assessing Officer denied the cla .....

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ection 10B of the Act. In view of the instructions of CBDT, unit must be approved by the Development Commissioner in case of EOU set up in export processing zone. However, the assessee was not so registered and hence show cause notice was issued to the assessee as to why the deduction claimed under section 10B of the Act should not be withdrawn. The Assessing Officer after referring to the provisions of the Act, noted that the Hon'ble Delhi High Court in CIT Vs. Regency Creations Ltd. report .....

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which start production of goods during previous year relevant to assessment year commencing on or after 1st April, 1994. Since the unit of the assessee was registered under STPI and not having approval from the Development Commissioner as 100% EOU, the assessee having not fulfilled the conditions specified under section 10B of the Act, was found to be not eligible for the aforesaid deduction by the Assessing Officer. The assessee before the Assessing Officer made an alternate plea that in case .....

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section 139(1) of the Act and further, the assessee should furnish in the prescribed form along with return of income, the report of an accountant, as defined in Explanation below sub-section (2) of section 288 of the Act, certifying that the deduction has been correctly claimed in accordance with the provisions of the Act. Since the assessee had not fulfilled either of the conditions, the contention of the assessee in this regard was rejected and the deduction claimed under section 10B of the .....

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claim of deduction under section 10A of the Act was also rejected, where the assessee had not demonstrated with necessary evidence that all the requirements for claiming the deduction under section 10A of the Act were complied with by the assessee. The CIT(A) observed that Form No.56F was furnished only after the claim under section 10B of the Act was proposed to be disallowed by the Assessing Officer and since the deduction under section 10A of the Act was not claimed in the return of income no .....

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learned Authorized Representative for the assessee referred to the green card issued by STPI, copy of which is placed at pages 20 & 21 of the Paper Book and also pointed out that the Pune Bench of Tribunal in ITO Vs. Cat Labs Pvt. Ltd. in ITA No.131/PN/2013, relating to assessment year 2009-10, order dated 26.02.2014 has decided the issue in favour of the assessee in relation to the claim of deduction under section 10B of the Act. 8. The learned Departmental Representative for the Revenue st .....

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to put forth its claim for deduction under section 10A of the Act. The learned Departmental Representative for the Revenue pointed out that the issue is squarely against the assessee, in view of the ratio laid down by the Hon'ble Delhi High Court in CIT Vs. Regency Creations Ltd. (supra). 9. We have heard the rival contentions and perused the record. The issue arising before us is two-fold as the EOU which is set up under STPI Scheme whether can avail the deduction under section 10B of the A .....

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by the Central Government under section 14 of the Industries Development and Regulation Act, 1951. The assessee admittedly is not so registered or approved by the Development Commissioner, which are ratified by Board of approval. In view of the ratio laid down by the Hon'ble Delhi High Court in CIT Vs. Regency Creations Ltd. (supra), which has been applied by Pune Bench of Tribunal in Clarion Technologies (P.) Ltd. Vs. DCIT (supra) , we hold that the assessee is not entitled to the said cla .....

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u/s 10B of the Act because of the presence of Explanation 2(iv) below section 10B of the Act. The assessee has canvassed that it's 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. There is no denying the fact that identical controversy has been considered by the Hon'ble Delhi High Court in the case of Regency Creations Ltd. (supra) and it is on the bas .....

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ated by the Hon'ble Delhi High Court in the case of Regency Creations Ltd. (supra). The other aspect raised by the learned Representative for the assessee to the effect that a conjoint reading of the Exim Policy/Foreign Trade Policy entitles the assessee to the benefits of section 10B of the Act, once the unit is approved as per the Exim Policy. No doubt, such a plea is not found to have been urged before the Hon'ble Delhi High Court, so however, having regard to the judicial discipline, .....

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on the judgement of the Hon'ble Delhi High Court in the case of Regency Creations Ltd. (supra). 11. Before parting, we may also refer to the judgement of the Hon'ble Delhi High Court in the case Technovate E Solutions P. Ltd. (supra) relied upon by the assessee before us. In the case before the Hon'ble Delhi High Court, the issue related to a claim of deduction u/s 10A of the Act. The controversy was as to whether the approval granted by the Director of STPI was a sufficient approval .....

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matter of controversy before us. Therefore, the judgement of the Hon'ble Delhi High Court in the case of Technovate E Solutions P. Ltd. (supra) does not help the assessee in the present case. Therefore, in 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, the same is hereby affirmed." 10. Now, coming to the alternate plea of the assessee in respect of allowability of deducti .....

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r the captioned assessment year within time frame and also furnishing the specified audit report along with return of income. We find that the Pune Bench of Tribunal in Clarion Technologies (P.) Ltd. Vs. DCIT (supra) had consider the alternate plea of the assessee and observed as under:- "16. We have carefully considered the rival submissions. In the present case, in the past years assessee has been allowed the claim of deduction u/s 10B of the Act. In the return of income filed for the ass .....

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oresaid situation, at the time of filing of return of income for the instant assessment year, assessee could not have envisaged the denial of its claim of deduction u/s 10B of the Act, which was being allowed in the past. The aforesaid circumstance clearly establishes the bonafides of the reasons prevailing with the assessee for not having made a claim for deduction u/s 10A of the Act in the return of income. Having regard to the peculiar facts and circumstances of the instant case, in our view, .....

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in Form No.56F. The Hon'ble Delhi High Court in the case of Valiant Communications (supra) in similar circumstances held that the claim of the assessee for deduction u/s 10A of the Act is required to be examined in accordance with law. Pertinently, even in that case assessee had claimed deduction u/s 10B of the Act in the return of income, which was not allowed ultimately in the absence of the unit being approved by the Board appointed by the Central Government, whereas the unit was only reg .....

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dertaking 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. Therefore, prima-facie the 100% EOU of the assessee, being .....

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