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Expert Net Cad Solutions Pvt. Ltd. Versus The Asst. Commissioner of Income Tax, Circle - 1, Aurangabad and Vica-Versa

2016 (7) TMI 8 - ITAT PUNE

Eligibility of deduction u/s 10B/10A - STPI unit - whether the assessee was eligible for deduction under section 10B or 10A of the Act? - Held that:- The assessee is admittedly, recognized by the Director of STPI and in view of the ratio laid down by the Hon’ble Delhi High Court in CIT vs. Regency Creations Ltd. (2012 (9) TMI 627 - DELHI HIGH COURT ), we hold that the assessee is not entitled to the claim of deduction under section 10B of the Act. - On the other hand, the assessee once sati .....

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the said deduction under section 10B of the Act are dismissed. Similarly, the appeal filed by the Revenue is against the order of CIT(A) in allowing the claim of deduction under section 10A of the Act is also dismissed. - ITA No.1098/PN/2011, ITA No.1149/PN/2011 - Dated:- 29-4-2016 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Assessee : Shri M.V. Lonkar For The Revenue : Shri Hitendra Ninawe ORDER PER SUSHMA CHOWLA, JM: The cross appeals filed by the assessee and the Revenue a .....

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n holding that the assessee company is not eligible for exemption of ₹ 30,70,367/- u/s 10B of the Income Tax Act, 1961. Hence claim of assessee amounting to ₹ 30,70,367/- may be allowed under section 10B of the Income Tax Act, 1961. 4. The Revenue in ITA No.1149/PN/2011 has raised the following grounds of appeal:- 1) On the facts and circumstances of the case whether CIT(A) is correct in allowing the deduction u/s 10B of the Income Tax Act 1961 even though the assessee is not eligibl .....

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section 10BA through the return of income only. 4) On the facts and in the circumstances of the case, the order of the AO be restored and that of the CIT(A) be vacated. 5. The assessee is in appeal against the order of CIT(A) in not allowing deduction under section 10B of the Act at ₹ 30,70,367/-. 6. The Revenue is in appeal against the order of CIT(A) in allowing deduction under section 10A of the Act, where no such claim was made in the return of income. 7. Briefly, in the facts of the p .....

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y Park Scheme, issue a letter under section 133(6) of the Act calling for information from STPI, Aurangabad. In response, the Asst. Director of STPI, Aurangabad attended personally and furnished the details, which are incorporated at pages 2 and 3 of the assessment order and also furnished the relevant documents related to STPI Scheme. He further submitted that the STPI granted certificate to the assessee under STPI Scheme and the assessee was eligible for deduction under section 10A of the Act .....

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nder section 10B of the Act, it was found that the assessee company was engaged in development of software, which had been exported. Further, the said company was 100% software export oriented unit situated at Software Technology Park, Aurangabad and registered under Software Technology Park Scheme approved by STPI, Aurangabad. The Assessing Officer was of the view that since the assessee was so situated in Software Technology Park under the Software Technology Park Scheme of Aurangabad, he fulf .....

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m of deduction under section 10B of the Act. The reply of the assessee in this regard is reproduced by the Assessing Officer at pages 8 and 9 of the assessment order. Thereafter, the Assessing Officer held that the claim of assessee that he was eligible for claiming deduction under section 10B of the Act was not correct and the second claim made by the assessee that in assessment years 2003-04 and 2004-05 during the scrutiny assessment, the claim of deduction was allowed by the Assessing Officer .....

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er section 10B of the Act and sum of ₹ 30,70,367/- was added to the income of assessee. 8. The CIT(A) considered two aspects of the issue i.e. whether the assessee was eligible for deduction under section 10B or 10A of the Act. The CIT(A) was of the view that where the assessee was registered with STPI and such a concern was not eligible for claim of deduction under section 10B of the Act since the assessee had failed to fulfill the conditions laid down under section 10B of the Act of bein .....

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. 9. The assessee is in appeal against the denial of deduction under section 10B of the Act. 10. The Revenue is in appeal before us against the order of CIT(A) in allowing the claim of deduction under section 10A of the Act though no such claim was made in the return of income. 11. The learned Authorized Representative for the assessee pointed out that the issue raised in the present appeal is squarely covered by the ratio laid down by the Hon ble Bombay High Court in CIT Vs. Western Outdoor Int .....

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allowed to the assessee as no such claim was made in the return of income. 13. We have heard the rival contentions and perused the record. The assessee before us was admittedly a STPI unit registered under Software Technology Park Scheme of STPI, Aurangabad. This factual aspect of it being STPI unit is admitted by both the authorities below and there is no dispute in this regard. The issue arising before us is whether the profits arising on export of computer software by the assessee unit which .....

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in the return of income. The CIT(A) upheld the order of Assessing Officer in denying the claim of deduction under section 10B of the Act. However, the claim of deduction under section 10A of the Act was allowed to the assessee. The assessee is in appeal before us vis-à-vis its claim of deduction under section 10B of the Act and the Revenue is in appeal for allowing claim of deduction under section 10A of the Act by the CIT(A). The first aspect which arises for adjudication is whether the .....

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om 322 (Del), the assessee is not entitled to the claim of deduction under section 10B of the Act. The finding of the Hon ble Delhi High Court in the case of CIT vs. Regency Creations Ltd., (supra) was as under:- In the present case, there is no notification or official document suggesting that either the Inter-ministerial Committee, or any other officer or agency was nominated to perform the duties of the Board (constituted under section 14 of the OR Act), for purposes of approvals under sectio .....

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it to a benefit under section 10B. The orders of the Tribunal are consequently, erroneous, and it s reasoning unsupportable. 15. The Tribunal after taking note of the decision of Hon ble Delhi High Court in CIT vs. Regency Creations Ltd., (supra) observed that the assessee was not entitled to the claim of deduction under section 10B of the Act observing as under:- 10. We have carefully considered the rival submissions. The case set-up by the Revenue is that the undertaking of the assessee has no .....

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ained 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 basis of the said judgement, the lower authorities have denied the claim of the assessee for deduction u/s 10B of the Act. Admittedly, the 100% EOU of the assessee does not enjoy any specific approval from the authority referred to in Explanation 2(iv) below section 10B o .....

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s 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, the Tribunal being inferior to the High Court, cannot disregard the judgement of the High Court in the manner sought to be canvassed before us. The judgement of the Hon ble Delhi High Court in the case of Regency Creations Ltd. (supra) is a solitary decision of a High Court o .....

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ay 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 so as to specify the condition stipulated in section 10A(2)(i)(b) of the Act. The Hon ble High Court referred to the Instruction an .....

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ra) 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. 12. In the proceedings before the CIT(A), assessee raised an alternate plea that it be allowed deduction u/a 10A of the Act in place of section 10B of the Act as the undertaking of the assessee is approved by the Director, STPI. The CIT(A) d .....

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r the assessee has vehemently argued that the CIT(A) has unjustly denied the claim of deduction u/s 10A of the Act. The learned counsel pointed out that the claim of deduction u/s 10B of the Act was made in the return of income as it was allowed in the past years and assessee could not have envisaged its disallowance in the subsequent assessment proceedings; and, therefore the alternate claim of deduction u/s 10A of the Act was raised before the CIT(A) after the Assessing Officer disallowed it d .....

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ot held entitled to the benefits of section 10B of the Act. In this context, reliance has also been placed on the judgement of the Hon ble Madras High Court in the case M/s Heartland KG Information Limited vs. CIT, (2013) 39 taxmann.com 132 (Madras). Reliance has also been placed on the following decisions of the Tribunal in the case of Cloud Softech India Pvt. Ltd. vs. ITO vide ITA No.483/HYD/2013 and ACIT vs. Yashwant Kanetkar vide ITA No.150/Nag/2012, wherein in similar situations it has been .....

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T(A) called for a remand report from the Assessing Officer also, so however, the Assessing Officer declined to examine the same on the ground that the prescribed Audit Report is required to be furnished along with the return of income in order to claim the deduction u/s 10A of the Act. The learned counsel submitted that having regard to the factual matrix the claim of the assessee u/s 10A of the Act has been unjustly shutout. 15. On the other hand, the learned CIT-DR has primarily reiterated the .....

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n relation to the profits derived from its STPI unit. This claim of deduction came to be denied on the ground that the approval from Director, STPI was insufficient and that the assessee was required to take approval from the Board appointed for this purpose by the Central Government, following the judgement of the Hon ble Delhi High Court in the case of Regency Creations Ltd. (supra). In the aforesaid situation, at the time of filing of return of income for the instant assessment year, assessee .....

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y because the prescribed Audit Report in Form No.56F was not filed in the return of income, is quite erroneous. Pertinently, after denial of deduction u/s 10B of the Act in the assessment order, the earliest opportunity for the assessee to stake claim for deduction u/s 10A of the Act was before the CIT(A); and, the assessee made the claim before the CIT(A) along with the prescribed Audit Report in Form No.56F. The Hon ble Delhi High Court in the case of Valiant Communications (supra) in similar .....

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f deduction u/s 10A of the Act in accordance with law. In the present case also, we find no reason to deny the assessee an opportunity to put-forth its claim for deduction u/s 10A of the Act with regard the profits of its STPI unit, subject of-course to the fulfillment of the prescribed conditions. 17. Section 10A of the Act provides a deduction of such profits and gains derived by an undertaking from export of articles or things or computer software manufactured or produced by it. The assessee .....

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ns laid down in section 10A of the Act are satisfied. Therefore, in conformity with the judgement of the Hon ble Delhi High Court in the case of Valiant Communications (supra), we deem it fit and proper to remand the matter back to the file of the Assessing Officer for verifying the claim of the assessee for deduction u/s 10A of the Act as per law. The Assessing Officer shall consider the Form No.56F furnished by the assessee before the CIT(A) and such other material and submissions that the ass .....

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