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I.T.O Ward 7 (2) , Kolkata Versus M/s. Wizard Enterprises Pvt. Ltd and vica-Versa

2016 (3) TMI 1020 - ITAT KOLKATA

Eligibility of exemption claimed u/s. 10B on call centre operation - denial of claim on the ground that the assessee company did not have any ‘Certificate of Approval’ from the Board of Approval appointed in that regard by the Central Government - also the assessee could not submit any ratification obtained from the ‘Board of Approval’ as required as per the clarification of the CBDT dated 09.03.09 - Held that:- It is not in dispute that a call centre operation has been duly notified as IT enabl .....

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at in the instant case approval under the STP scheme is granted by the Designated Officer, Department of Information Technology and by the Inter-ministerial Standing Committee (IMSC). Hence, the approval granted under STP Scheme complies with all the requirements contemplated u/s. 10B of the Act when read with Industrial (Development & Regulations) Act, 1951, Foreign Trade Policy 2004-2009, Hand book of Procedures (Volume-I) & Appendix to the Handbook

As find that the contents of audi .....

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ITA No. 65/Kol/2012, C.O No. 133/Kol/2013 - Dated:- 4-3-2016 - Shri Mahavir Singh, Judicial Member, and Shri M. Balaganesh, Accountant Member For The Appellant : None appeared on behalf of the revenue For The Cross Objector/Assessee : Shri Subash Agarwal, Advocate, ld.AR ORDER SHRI M.BALAGANESH, AM Both the appeals of the revenue and respective cross objections of the assessee are arising out of the separate orders of the Learned CIT(A)-VIII, Kolkata in appeal no.329/CIT(A)-VIII/Kol/09-10 dated .....

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f convenience. 3. The revenue has raised the following grounds in both the appeals:- ITA No. 628/Kol/2011 A.Y 2007-08 (by the revenue) 1. That the ld. CIT(Appeals)-VIII, Kolkata has erred on facts and in law in deleting the disallowance made by the AO, of the exemption claimed by the assessee u/s. 10B, on the ground that the assessee company did not have any Certificate of Approval from the Board of Approval appointed in that regard by the Central Government and also the A.R of the assessee, dur .....

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the facts and in circumstances of the case and in law,, the CIT(A) has erred in holding that exemption u/s. 10B is allowable even when the mandatory provision of ratification of the EOU scheme is not fulfilled in violation of the provisions of law. 4. The assessee has raised the following grounds in both the COs:- CO No. 134/Kol/2011 A.Y 2007-08 [ ITA No. 628/Kol/2011] (by the assessee) 1. That on the facts and in circumstances of the case and in law, the Ld. Commissioner of Income tax (Appeals) .....

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Act, 1961 and not under section 10B of the Income Tax Act, 1961 as appellant was approved by the Director under the Software Technology Parks scheme and the said Director was functioning under the delegated authority of the Inter- Ministerial Standing Committee. CO No. 133/Kol/2013 A.Y 2008-09 [ ITA No.65/Kol/2012 ] (by the assessee) 1. That on the facts and in circumstances of the case and in law, the Ld. Commissioner of Income tax (Appeals) ought to have allowed deduction under section 10A of .....

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Act, 1961 as appellant was approved by the Director under the Software Technology Parks scheme and the said Director was functioning under the delegated authority of the Inter-Ministerial Standing Committee. 5. The only issue to be decided in these appeals of revenue and cross objections of the assessee is as to whether the assessee is entitled for claim of deduction u/s. 10B/10A of the Act in respect of profits derived from its call centre operations from unit registered with STPI as Software T .....

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roduced the following documents in support of its claim for the assessment years under consideration:- i) Copy of letter of permission as 100% Export Oriented Unit under STP Scheme for the I.T. Enabled Services issued by the Director, STPI, Kolkata (Sponsored by the Ministry of Communication & Information Technology, Govt. of India vide LoP No. STPK: DIR:441: 2005-06: 1548 dt.10.01.06. ii) Copy of legal agreement dt.20.01.06 made between M/s Wizard Enterprises Pvt. Ltd., a 100% Export Orient .....

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vide no. STPK: DIR:441: 2006-07: 108 dt.03.05.06 informing the company that the export performance under the scheme of STP vide its LoP No STPK: 01 R:441: 2005- 06: 1548 dt. 10.01.06 and the legal agreement executed on 20.01.2006 will be considered as 100% EoU activity with effect from the date of its registration under STP i.e. 10.01.2006. v) Form No. 56G [Rule 16E], a report required u/s 1O B of the Income Tax Act, 1961. vi) Copy of certificate of Importer-Exporter Code (IEC) dt. 12.03.2003. v .....

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the Board appointed in this behalf by the Central Government and in accordance with section 14 of the Industries (Development & Regulation) Act (IDRA), 1951 and the rules made under that Act for the purpose of getting exemption allowable u/s. 10B of the Act. Accordingly, the assessee was asked to show cause why the deduction u/s. 10B should not be denied. In response to the same, the assessee argued that the power to grant of approval u/s. 14 of the Industries (Development & Regulation) .....

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g Committee(IMSC) instead of BOA (Board of Approval). He also stated that in the instant case approval under the STP Scheme is granted by the designated officer, Deptt. Of Information Technology and by the Inter Ministerial Standing Committee (IMSC). He further argued that the approval granted to the assessee under STP Scheme complies with all the requirements contemplated u/s. 10B of the Act when read with Industrial (Development) & Regulations) Act, 1951, Foreign Trade Policy 2004-2009, Ha .....

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iterated its submissions as made before the ld.AO and also made an alternative claim that the assessee is also entitled for deduction u/s. 10A of the Act. All the conditions stipulated therein were duly complied with by the assessee. The ld. CIT(A) by placing his reliance on the earlier order of ld. CIT(A)-II, Kolkata in appeal No.78/A-11/2(2)/05-06 in the case of ARB Software (India) Ltd for the assessment year 2003-04 under similar circumstances had granted the benefit of deduction u/s. 10B of .....

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n record on merits. 9. The ld.AR vehemently supported the orders of the ld.AO in granting deduction and the submissions made therein. He also placed his reliance on the decision of the ITAT Chandigarh in the case of Bebo Technologies (P) Ltd Vs. JCIT in ITA Nos. 1115/Chd/2008, 116/Chd/2009 dated 29-04-2011 reported in 2011 (4) TMI 870-ITAT, Chandigarh, in support of its contention. 10. We have heard the ld.AR and perused the materials available on record including the paper book as filed by the .....

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terms and conditions for setting up of the 100% export oriented Software Technology Park under software export scheme of Ministry of Communications & Information Technology for the execution of IT enabled services and the unit has duly accepted the said terms and conditions vide their letter No. NIL dated 13th January, 2006. AND WHEREAS the unit has been granted the status of 100% export oriented unit as defined in Ministry of Commerce Resolution No. 33/(RE)/92-97 dated 2nd March, 1994 in T .....

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me vide green card number STPK/233/06 dated 16th Feb., 2006 as an unit approved under the STP scheme of the Govt. of India as 100% export oriented unit to carry out IT enabled services (call centre). It would be pertinent to reproduce the same herein below:- Sl No. 6047 Green Card No.STPK/233/06 Dated the February 16th 2006 SOFTWARE TECHNOLOGY PARK(STP) UNIT HAS BEEN APPROVED UNDER THE STP SCHEME OF THE GOVT. OF INDIA AS A 100% EXPORT ORIENTED UNIT FOR COMPUTER SOFTWARE. THIS UNIT IS ENTITLED TO .....

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t is likely to bring. These export benefits would automatically be eligible for deduction u/s. 10B of the Act. Otherwise, the purpose of granting the same for setting up a unit and registering with STP as 100% EOU status would get defeated. 12. We also find lot of force in the alternative argument made by the ld.AR that the assessee company being registered with STP is entitled for claiming deduction u/s. 10A of the Act. In this connection, the CBDT s instruction no. 1/2006 dated 31-03- 2006 ass .....

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tee of the Department of Electronics. Accordingly, the cases of such claimants have been reopened by the authorities. 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 infruc .....

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nts have already been completed, and the claim under section 10A has been disallowed only on the ground that the approval to the STP has not been granted by the Inter-Ministerial Standing Committee in accordance with the Scheme, the demand so arising should be kept in abeyance until further orders. 13. It is not in dispute that a call centre operation has been duly notified as IT enabled services and thereby eligible for deduction for 100% export oriented unit contemplated u/s. 10A/10B of the Ac .....

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, Dept of IT, Govt. of India Plot No.5/1 DP Sector-V, Salt Lake, Kolkata-700 091 Ph: 91-33-2367-3598/99-2367 3798/99, Fax 91-33- 2367-3597 Email:infor@kol.stp.in/URLhttp://www.kol.stp.in To The Director Wizard Enterprises Pvt. Ltd. 5, Lake Avenue, Kolkata - 700026 SUB: YOUR STP UNIT APPROVAL RATIFICATION REG. REF: Your letter dt: 29.08.2011 Sir, With reference to above and discussions with your officials, the facts w.r.t, your STP unit registration is produced below: 1. Your unit 'Wizard Ent .....

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ry of Communication and Information Technology, Department of Information Technology instead of the Development Commissioner and by the Inter-Ministerial Standing Committee (IMSC) instead of BOA: 3. Approval of your unit is granted by Director, STPI as per powers delegated on him by the IMSC. Thanking you. Yours faithfully, Sd/- [Manjit Nayak] Officer- In -Charge Copy to: 1. The Director, STPI-Kolkata / Guwahati 15. It was also brought to our attention by the ld.AR that the Instruction (F.No.178 .....

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-ministerial Standing Committee (IMSC). Hence, the approval granted under STP Scheme complies with all the requirements contemplated u/s. 10B of the Act when read with Industrial (Development & Regulations) Act, 1951, Foreign Trade Policy 2004-2009, Hand book of Procedures (Volume-I) & Appendix to the Handbook. We also find that the ld.AR further argued before us that to the best of his knowledge the order passed under similar circumstances by the ld.CIT(A)-II, Kolkata in the case of ARB .....

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4 of Industrial (Development & Regulation) Act 1951 & Rules made under that Act. It was ultimately held in that case as under:- 39. The Ld. DR for the Revenue before us has failed to point out any contrary evidence to the same. The Ld. counsel for the assessee drew our attention to the gazetted notification in this regard placed at page 16 of the paper book-II under which the powers had been given to consider the application for setting up of units under STP Scheme operated vide custom n .....

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copy of the agreement entered into by the assessee company with STPI on 17.2.2003, a copy of which is enclosed at pages 111 to 113 of the paper book. In view of the above said evidence, upholding the order of CIT(A), we hold that the assessee is entitled to deduction u/s 10B of the Act as a 100% EOU on being registered with STPI. In the entirety of facts and circumstances of the case and in view of our observation in paras hereinabove, we uphold the order of CIT(A) in holding that the assessee .....

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of the co-ordinate bench of the ITAT Mumbai in the case of ITO Vs. Accentia Technologies Limited in ITA No. 1871/Mum/2011 dated 08- 05-2014, wherein it was held that : 6. Having regard to the circumstances of the case the learned CIT(A) called for a remand report. Upon obtaining the remand report he noticed the following undisputed facts i.e., (a) there is no dispute regarding the amount which is claimed as exempt under section 10A of the Act, (b) there is no dispute that the assessee is entitl .....

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in the return of income. The learned CIT(A) observed that section 80A(5) is applicable only when the assessee fails to make a claim in his return of income for any deduction whereas in the instant case the assessee did make the claim though, because of a technical error, the claim was made under section 10B instead of 10A. In his opinion, quoting of wrong section should not deprive the assessee from claiming deduction so long as the other conditions for making such claim are satisfied. He relie .....

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me for claiming the deduction u/s. 10A/10B of the Act. It was argued alternatively by the ld.AR that the decision of the ld.AO is to educate the assessee of its rights and entitlements as per law and cannot take advantage of ignorance of assessee. In this regard, he cited the relevant extract of the decision of the Hon ble Bombay High Court in the case of Sanchi Software & Solutions Pvt. Ltd Vs. CIT reported in (2012) 349 ITR 404 (Bom), wherein it was held as under:- Income-tax Department ca .....

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urther find that the alternative argument of the ld.AR has got lot of force as it may be appreciated that there was no mala fide intention on the part of the assessee in not claiming the deduction under the correct section. In fact, it could be appreciated that the assessee had only run the risks of not having been able to avail the benefit of justice and not gained anything by not claiming deduction under the correct section. The Hon ble Supreme Court in the case of CIT Vs. Mahalaxmi Sugar Mill .....

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