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2016 (9) TMI 387 - ITAT CHENNAI

2016 (9) TMI 387 - ITAT CHENNAI - TMI - Eligibility to claim deduction under section 10B - whether the assessee is eligible to claim deduction under section 10B of the Act for the assessment year 2011-12 since the assessee got the approval from STPL for setting up of 100% EOU on 07.10.2010 and signed the agreement with STPL on 18.11.2010? - Held that:- Consedring the case of ITO v. Cat Labs Pvt. Ltd [2014 (2) TMI 1247 - ITAT PUNE] wherein, it is apparent that the overwhelming view of various Ben .....

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elopment & Regulation) Act, 1951. Thus we set aside the order passed by the ld. PCIT and hold that the Assessing Officer has rightly allowed deduction under section 10B of the Act. - Decided in favour of assessee. - I T.A. No. 544/Mds/2016 - Dated:- 27-7-2016 - Shri Chandra Poojari, Accountant Member and Shri Duvvuru RL Reddy, Judicial Member For The Appellant : Shri M. Karunakaran, Advocate For The Respondent : Smt. Parminder, CIT ORDER PER DUVVURU RL REDDY, JUDICIAL MEMBER: This appeal filed b .....

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, the case of the assessee was selected for scrutiny and notice under section 143(2) of the Act dated 03.08.2012 was served on the assessee. Notice under section 142(1) of the Act was also issued on 06.11.2013. In response thereto, the assessee filed various information called for. After verification of details furnished by the assessee, the assessment was completed under section 143(3) of the Act by accepting the returned income of the assessee. 3. On verification of records, the ld. PCIT has o .....

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t with the STPL. Therefore, the ld. PCIT was of the opinion that the assessee is not eligible to claim deduction under section 10B of the Act for service rendered before November, 2010. 4. Further, from the profit and loss account, the ld. PCIT has observed that the assessee had shown only meagre amount for salary and it is also noticed that the assessee paid professional charges to M/s. Reluisend Technology P. Ltd. to the tune of ₹.6,04,950/-. On scrutiny of the details, he further observ .....

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annot be defined as 100% EOU which is eligible to claim exemption under section 10B of the Act. 5. With the above observations, the ld. PCIT was of the opinion that the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interest of Revenue, a notice under section 263 of the Act dated 31.01.2016 was issued to the assessee asking it to show-cause as to why the assessment order for the assessment year 2011-12 should not be set aside and revised under section 263 o .....

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ment order. 6. Aggrieved, the assessee is in appeal before the Tribunal. 7. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The main issue for adjudication is whether the assessee is eligible to claim deduction under section 10B of the Act for the assessment year 2011-12 since the assessee got the approval from STPL for setting up of 100% EOU on 07.10.2010 and signed the agreement with STPL on 18.11.2010. 8. Admittedly, vide Ref. No. ST .....

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ssee has not received the approval from the Board appointed on this behalf by the Central Government in view of Explanation 2 to section 10B of the Act and therefore, the assessee s undertaking cannot be defined as 100% EOU to claim exemption under section 10B of the Act. By considering various decisions of the Benches of the Tribunal, the Pune Benches of the Tribunal in the case of ITO v. Cat Labs Pvt. Ltd. in I.T.A. No. 131/PN/2013 for the assessment year 2009-10 dated 26.02.2014 has observed .....

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the Central Government u/s.14 of the Industries (Development and Regulation) Act, 1951. Further, the 100% EOU as per STPI is not at par with the 100% EOU approved by the Board appointed u/s.14 of the IDRA, 1951 by the Central Government. Relying on the decision of the Hyderabad Bench of the Tribunal in the case of Infotech Enterprises Ltd. (Supra) the Assessing Officer disallowed the claim. We find on an appeal filed by the assessee, the Ld.CIT(A) allowed the claim of deduction u/s.10B of the b .....

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formed by the Government for Control, monitoring and regulation of software exports and not from the Board appointed on behalf of the Central Government u/s 14 of the Industries (Development & Regulation) Act, 1951, despite the fact that in similar facts and circumstances this deduction has been allowed in earlier assessment years." From the perusal of the assessment order it is abundantly clear that the AO has mainly relied on the nonfulfillment of condition provided in the section, t .....

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the Central Government in excise of power conferred by section 14 of the Industries (Development & Regulation) Act, 1951 (65 of 1951, and the rules made under that Act). As the appellant had taken the approval of 100% export oriented unit from the STPI, a technical body of Ministry of Information & Technology formed for the purpose of control, monitoring and regulation of software exports, it was held by the AO that the status of EOU for the purpose of deduction u/s 10B cannot be recogni .....

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gnition equivalent to the Board constituted under Industries Development & Regulation) Act. The appellant has placed reliance on different judgments, as can be seen from the submissions quoted above, which has approved the allowability of this deduction on the basis of STPI registration and it was also claimed that the above referred judgments have been given after taking into account the judgment of Infotech Enterprises Ltd. relied upon by the AO. The appellant has claimed that all the cond .....

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onsidered to be saying that the AO was of the opinion that the appellant is not engaged in the manufacturing of software. However, the above inference of the AO seems to be lacking any conviction. She has only referred to the salary of directors to conclude that the appellant is not engaged in the business of manufacturing of software, despite the fact that in the submission made before her, which has been quoted in the assessment order, it is evident that the appellant had claimed before the AO .....

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nition available in the section in Explanation 2 of section 10B clearly says that a computer software means any computer programme recorded on any disk, tape, perforated media, or other information storage device or any customized electronic data or any product or service of similar nature will constitute software which are exported or transmitted from India to any place outside India by any means. The AO has not examined any of these claims of the appellant before saying in an ambiguous manner .....

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ew of the above and the fact that the submissions of the appellant has remained uncontroverted, demonstrating that the appellant is engaged in the activity of manufacturing of softwares, it has to be held that the aforesaid finding of the AO is not correct. Therefore, it has to be considered in the facts of the case available on record that the appellant is engaged in the business of software manufacturing and export. Now coming to the main objection of the AO that the approval is not under sec. .....

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ent and serving the same purpose is required to be considered, is required to examined. For this purpose, the appellant has referred to a comparative table giving reference to the benefit of section 10B in Foreign Trade Policy of 2004-2009 vis-a-vis Export Import Policy, 2002-2007 and Export Import Policy 1992-1997, to bring the point to the fore that the Government has accepted the grant of benefit u/s 10B under the approval granted by STPI. The appellant has also claimed that the Assessing Off .....

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lhi 'H' Bench given in the case of DCIT Vs. Valliant Communications Ltd. (ITA No. 2706/Del/2008/ A.Y. 2005-06). The appellant has also placed reliance on the decision of ITAT Delhi 'F' Bench given in the case of Regency Creations Ltd. Vs. ACIT Cir.15(1), New Delhi, ITA No. 1588/Del/2010/A.Y. 2007-08); ITAT, Ahmedabad 'B' Bench given in the case of ITO Ward 4(1) Vs. EEnfochip Ltd. (ITA No. 2311/Ahd/2008/A.Y. 2005-06); ITAT Delhi 'H' Bench decision given in the case .....

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f Communication & Technology and the Instruction issued by the CBDT on a similar issue for registration u/s 10A, also looks correct. Instruction No. 1 of 2006 of the CBDT dated 31.3.2006, is in respect of sec. 10A but in this Instruction it has been accepted that confusion existed in respect of the authorities whose approval should be considered to be fulfilling the conditions prescribed in sec. 10A and in view of the same the Instruction directed the Assessing Officer as under: "6. The .....

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claim of the deduction u/s 10A of the Income tax Act, shall not be denied to STP units only on the ground that the approval/ registration to such unit has been granted by the Directors of Software Technology Parks. However, it has to be ensured that all other conditions specified in sec. 10A are fully satisfied before allowing any such claim." The Tribunals have in the judgments relied upon by the appellant, after 2006 have come to the conclusion that the registration granted by STPI should .....

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ratification of STPI approval is required from BOA formed by Ministry of Commerce u/s 14 of Industries (Development & Regulation) Act, 1951. For the above reason, the Tribunals have found that the decision of Infotech Enterprises Ltd., 85 ITD 325 (Hyd) will not be applicable after 2006. In view of the discussions made above, from which it is apparent that the overwhelming view of the Tribunals have been to treat the approval granted by the STPI to be enough for the fulfillment of condition p .....

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The Tribunal in the above relied cases have also allowed the benefit on the 'principle of consistency', which is applicable in this case also. It was demonstrated by the AR that similar benefit u/s 10B was allowed by AO in earlier assessment years and no action to withdraw the same has been taken. Thus on this basis also Ground No. 1 is required to be allowed." 7.1 We find although the tax effect was more than the prescribed monetary limit the Revenue has not filed any appeal agains .....

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