TMI Blog2017 (5) TMI 1366X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of the Tribunal in the case of Clarion Technologies Pvt. Ltd. Vs. Dy. Commissioner of Income Tax (2014 (11) TMI 141 - ITAT PUNE ) has held that where the assessee is not eligible to claim deduction u/s. 10B for want of approval from the competent authority, as specified under the said section and if the assessee is eligible to claim deduction u/s. 10A subject to fulfillment of all mandatory conditions as set out in the section, the alternate claim of assessee can be considered. We deem it appropriate to remit this issue back to the file of Assessing Officer to consider assessee’s claim of deduction u/s. 10A of the Act. The Assessing Officer shall verify assessee’s eligibility for claiming deduction u/s. 10A. While considering assessee’s alternate claim u/s. 10A, the Assessing Officer shall afford due opportunity of hearing to the assessee, in accordance with law. - ITA No. 111/PUN/2015 - - - Dated:- 24-5-2017 - Shri D. Karunakara Rao, Am And Shri Vikas Awasthy, JM Assessee by : Shri Krishna Gujrathi Revenue by : Shri S.P. Walimbe ORDER Per Vikas Awasthy, JM This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Healthcare Management Services Pvt. Ltd. 11.38% 7 Coral Hubs Ltd. (Vishal Information Technologies Ltd.) 41.66% 8 eClerx Services 42.14% 9 Cepha Imaging Private Ltd. 17.54% Arithmetic Mean 21.59% The Assessing Officer determined ALP of international transactions at ₹ 11,11,87,778/- and made transfer pricing adjustment of ₹ 1,04,61,139/- 2.2 Further, the Assessing Officer disallowed deduction u/s. 10B claimed by the assessee on the premise that the assessee is not 100% Export Oriented Unit (EOU) approved by the Board appointed by the Central Government as envisaged in Explanation 2(iv) to section 10B of the Act. 2.3 Aggrieved by the assessment order dated 28-03-2013, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) directed the Assessing Officer to exclude Infosys BPO Ltd. and eClerx Services from the list of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment to the operating margins of comparable companies be allowed to arrive at the arm's length price. 6) On the facts and in the circumstances of the case and in law, the honourable CIT (Appeal) II, Pune erred in confirming the disallowance of deduction made by learned AO of ₹ 86,07,141/- claimed by the appellant under Section 10B of the Income Tax Act, 1961 in its return of income, for alleged non fulfilment of condition of having approval as a 100% EOU from the Development Commissioner as specified under explanation 2(iv) of Section 10B of the Act. The appellant hereby prays that the deduction under section 10B may be allowed. 7) On the facts and in the circumstances of the case and in law, the honourable CIT (Appeal) II, Pune erred in confirming the rejection of alternate claim of the appellant that in case the deduction under Section 10B is disallowed, it should be allowed deduction of ₹ 86,07,141/- under Section 10A of the Act. 8) The appellant hereby reserves the right to add, amend, alter or raise any additional ground or grounds of appeal or delete or withdraw any of the ground of appeal/s. 4. Shri Krishna Gujrathi appearing on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the assessees have failed to obtain approval from the Board as envisaged u/s. 10B of the Act have made alternate claim of deduction u/s. 10A, the Tribunal has accepted alternate submissions subject to assessee fulfilling all the conditions set out in section 10A of the Act. The ld. AR in support of his submissions placed reliance on the following decisions of the Tribunal : i. Clarion Technologies Pvt. Ltd. Vs. Dy. Commissioner of Income Tax, 2014 (11) TMI 141 ITAT, Pune; ii. Expert Net Cad Solutions Pvt. Ltd. Vs. The Asstt. Commissioner of Income Tax, 2016 (7) TMI 8 ITAT, Pune. 5. On the other hand Shri S.P. Walimbe representing the Department vehemently defended the findings of Commissioner of Income Tax (Appeals). The ld. DR submitted that provisions of sections 10A and 10B grant benefit to the assessee under different situations. Grant of deduction u/s. 10A and 10B are not an alternative to each other. If the assessee is eligible to claim deduction u/s. 10A then the assessee should have claimed the same in the return of income. Now, after rejection of claim of deduction u/s. 10B, the assessee cannot switchover the claim of deduction u/s. 10A by merely mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and had excluded Vishal as a comparable for the reason as quoted below:- ... that it had a very low employment cost and very high cost on account of venture payment, which suggested that its business model was that of an outsourcing company and in view of this functional difference, Vishal Ltd. could not be considered as a comparable. The decision rendered in the case of Rampgreen Solutions Pvt. Ltd. Vs. Commissioner of Income Tax (supra) was not available before the Commissioner of Income Tax (Appeals) as it is subsequent to the date of passing of impugned order. The ld. AR of the assessee has filed a revised computation of average margin of comparables after exclusion of Coral Hubs Ltd. As per the computation sheet submitted by the ld. AR the margins of assessee are within 5% variation of actual transaction. Taking into consideration the entirety of facts, we deem it appropriate to remit this issue back to the file of Assessing Officer to re-consider the inclusion/exclusion of Coral Hubs Ltd. in the list of comparables in the light of decision rendered in the case of Rampgreen Solutions Pvt. Ltd. Vs. Commissioner of Income Tax (supra). The Assessing Officer while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006 has clarified that where the units have been approved by STPI they are eligible to claim deduction u/s. 10A of the Act. The ld. AR referred to CBDT instructions dated 31-03-2006 at page 368 of the paper book. 11. A perusal of the impugned order shows that the assessee had raised this plea of alternate claim of deduction u/s. 10A before the Commissioner of Income Tax (Appeals) and the Assessing Officer. The Assessing Officer rejected alternate plea of deduction u/s. 10A primarily on the ground that the claim was not made through return of income. The Commissioner of Income Tax (Appeals) rejected alternate claim of the assessee on the premise that switching over of claim of deduction from section 10B to section 10A cannot be accepted, as objectives of both the sections are different. The objections raised by Assessing Officer can well be understood as the Assessing Officer has no power to examine a claim if not made in return of income. The powers of Tribunal are not impinged to entertain the claim of assessee if not made in the return of income [Goetze (India) Ltd. Vs. CIT, 284 ITR 323 (SC)]. The Commissioner of Income Tax (Appeals) has erred in rejecting the claim of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 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 registered with the STPI. The Hon ble Delhi High Court directed the lower authorities to consider the claim of 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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