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2018 (8) TMI 677

EOU in the month of August 2009 for which approval was granted by STPI in the month of September 2009 in favour of assessee . It was submitted that in the month of December 2009, the assessee relocated its unit to another location for which NOC was received from STPI approving relocation of the unit. - Hon’ble Karnataka High Court in the case of CIT v. Sasken Communications Tech Ltd.(2011 (8) TMI 613 - KARNATAKA HIGH COURT) has held that deduction u/s. 10B of the 1961 Act shall be allowed in case of shifting of the undertaking from one State to another State with due permissions and after shifting if the undertaking has maintained integrity, identity and continuity. Thus , keeping in view our detailed discussions and reasoning, we hold that keeping in view factual matrix as is emanating from records before us, the deduction shall be allowable to the assessee u/s. 10B of the 1961 Act - Benefit of deduction allowed - Decided in favor of assessee. - I.T.A. No.2936/Mum/2016 - 10-8-2018 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Revenue : Shri V.Justin, DR For The Assessee : Shri. Vipul Joshi And Ms. Dinkle Hariya ORDER PER RAMIT KOCHAR, Ac .....

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Act. The assessee in response thereof submitted before the AO that the assessee is entitled for deduction u/s. 10B of the 1961 Act. The assessee submitted opinion from M/s Dilip K. Sheth & Co. , Chartered Accountants that the assessee is entitled for exemption u/s 10B of the 1961 Act as under: If the unit is approved by STPI , it would qualify for deduction. It is immaterial whether STPI approves the unit prior to or subsequent to the commencement of business . In our view, even though the Unit of assessee company (EHIPL) had commenced business prior to its registration by STPI, it would qualify for exemption under I.T.Act. The AO observed that further with regard to the question whether exemption prior to approval by STPI would be available, the said CA s opined that :- It is apparent that the profits should be derived by an EOU. Further, a unit would become an EOU when it so approved . It would , therefore, follow that profits derived from the Unit prior to its approval by STPI would not be profits derived by a hundred percent export-oriented undertaking‟. Accordingly , the profits of the Unit would qualify for exemption only from the date of approval of unit as an EOU. .....

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ts filed with STPI, it is seen that the application for registration of new STP unit has been made on 07.08.2009 and the address of the new STP unit shown is the same unit from which the assessee's existing business exists i.e. Karmayog Building, Andheri(E). It is seen the Government has communicated vide letter dated 11.09.2009 for setting up the 100% export oriented STP unit at Karmayog bldg., which is the existing unit, subject to certain terms and conditions. Thereafter, the assessee company has made an application vide letter dated 12.10.2009 to the Assistant Commissioner of Customs, 100% EOU section, New Custom House, Mumbai-38 for grant of license for Private Custom Bonded warehouse for their 100% EOU for computer software under the STPI scheme. The Asstt. Commissioner of Customs, 100% EOU, Mumbai vide letter dated 3.11.2009 has granted permission to manufacture computer software and IT enabled services in Bond under section 65 of the Customs Act, 1962 read with supplementary Regulations under the Manufacture and Other Operations in the Warehouse Regulations, 1966. It is further noted that the assessee company vide letter dated 09.11.2009 has intimated the STPI that it h .....

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ferent business requiring different specialization, being taken up for which setting up of a new unit could be said to have become a business necessity. Hence the new STP unit is not separate and independent. Also, the export of software in the old unit as well as the new unit is made to the same customer. The assessee has only taken the new premises on lease and recruited a few employees. 4.13 In this case, it is to be noted that the main business of the assessee i.e., the work of development of software which is entitled for exemption u/s. 10B, has been undertaken by the existing employees of the old unit, who had been transferred to the new unit. As mentioned above, the employee records clearly show that most of the staff who executed software development work in respect of the new unit were recruited before the new unit came into existence. Hence, in this case, the business itself i.e. the software development activity has been diverted to the new unit and the business of both units remain the same. The assessee company was thus trying to shift the business from the old unit to the new unit to take advantage of tax exemption. Thus it is a case of the same people doing the same .....

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was not formed by splitting up or reconstruction of appellant's existing business and has fulfilled all the conditions as per section 10B of the I.T. Act and therefore, the deduction should be allowed to the appellant company. In support of this, the appellant company filed a copy of the letter issued by the Software Technology Parks of India, Mumbai, Ref. No. STPI/MUM/ VIII(A)(1527)/ 2009(09)/ PM/9380 dated 19.12.2009 the contents of which are reproduced as under : M/s. Everyday Health India Private Ltd., Karmayog Building, 2nd floor, Parsi Panchayat Road, Andheri (East), Mumbai 400 069 SUB : Relocation of STP Unit. This has referenced to your letter no. NIL dated 04.12.2009, regarding permission to relocate operation in another location. This office has issued approval letter no. STP/MUM/VHI(A)/(1527)/2009(09)/SKA/6783 dated 11.09.2009, for the STP unit M/s. Everyday Health India Private Limited. Existing STP Unit Location : Karmayog Building, 2nd floor, Parsi Panchayat Road, ANdheri (East), Mumbai 400 069 We have noted that the company has taken mentioned below location for relocate their operations in one place i.e. New STP location : 102B, Akruti trade centre, 1st floor, .....

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from the financial statements and audit reports submitted by the assessee that the assessee is 100 % Export Oriented Unit and claiming exemption u/s. 10B of the Income Tax, 1961 for the first year of ₹ 16, 38, 470/- in respect of Export Turnover of ₹ 6, 36, 32, 138/-. In this regard, the assessee company filed Report under section 10B of the Income Tax Act 1961 in Form No. 56G dated 12/07/2010 in which has stated that the assessee company is registered as EOU in Software Technology Park of India w.e.f. 11/09/2009 and doing the business from registered office at 102-B. Akruti Trade Centre, Road No. 7, MIDC, Andheri(E), Mumbai 400 093 and engaged in the export of computer software during the year ended on 31st march, 2010. It is also submitted that the assessee claiming exemption u/s. 10 first time in the 9th year out of 10 consecutive assessment years as provided in Section 10B Section 10B of the Income Tax Act, 1961. 4.1 The assessee company has been registered as Export Oriented Unit . The details of foreign remittance have been filed. In support of the claim of exemption of ₹ 16, 38, 470/- u/s. 10B of the I.T. Act, the A.R. of the assessee produced the Auditor&# .....

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arch, 2010. It is also submitted that the assessee claiming exemption u/s. 10 first time in the 9th year out of 10 consecutive assessment years as provided in Section 10B Section 10B of the Income Tax Act, 1961. 4.1 The assessee company has been registered as Export Oriented Unit . The details of foreign remittance have been filed. In support of the claim of exemption of ₹ 16, 38, 470/- u/s. 10B of the I.T. Act, the A.R. of the assessee produced the Auditor's certificate in Form No. 56G enclosing Annexure-A and as per Annexure A to Form No. 56G, the deduction / exemption u/s. 10B of the I.T. Act, 1961 is found to be allowed and therefore, accordingly allowed to the assessee of ₹ 16, 38, 470/- as per assessee's claim in the return of income. Our attention was drawn to page no. 93-98 of paper book filed with tribunal wherein assessment order dated 21.02.2013 passed u/s 143(3) of the 1961 Act for AY 2010-11 is placed. It was submitted that the business activity was setup in financial year 2008-09 in the month of August 2008. The assessee was not registered as 100% EOU with STPI for financial year 2008-09 and hence no deduction was claimed u/s 10B of the 1961 Act fo .....

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T enabled services in Bond under Section 65 of the Customs Act, 1962 read with supplementary Regulations under the Manufacture and Other Operations in the Warehouse Regulations, 1966. The AO while framing assessment for AY 2010-11 under scrutiny assessment u/s 143(3) of the 1961 Act granted relief by way of deduction u/s 10B of the 1961 Act after discussing the facts in details. The relevant extract of the assessment order passed by the AO u/s 143(3) for AY 2010-11 are reproduced hereunder: 4. It is seen from the financial statements and audit reports submitted by the assessee that the assessee is 100 % Export Oriented Unit and claiming exemption u/s. 10B of the Income Tax, 1961 for the first year of ₹ 16, 38, 470/- in respect of Export Turnover of ₹ 6, 36, 32, 138/-. In this regard, the assessee company filed Report under section 10B of the Income Tax Act 1961 in Form No. 56G dated 12/07/2010 in which has stated that the assessee company is registered as EOU in Software Technology Park of India w.e.f. 11/09/2009 and doing the business from registered office at 102-B. Akruti Trade Centre, Road No. 7, MIDC, Andheri(E), Mumbai 400 093 and engaged in the export of computer .....

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t Location : Karmayog Building, 2nd floor, Parsi Panchayat Road, ANdheri (East), Mumbai 400 069 We have noted that the company has taken mentioned below location for relocate their operations in one place i.e. New STP location : 102B, Akruti trade centre, 1st floor, Road no. 7, MIDC, ANdheri (East), Mumbai 400 093. The case has been examined by this and it may be noted that unit is relocating their operations as per letter dated 04.12.2009, In view of above we have No Objection in M/s. Everyday Health India Private Limited to relocate their operation at location :102 B, Akruti Trade Centre, 1st Floor, Road no. 7, MIDC, ANdheri (East), Mumbai 400 093. With regard to AY 2010-11, it is understood that Section 10B deduction has already been granted by the AO being the first year if claim. For the AY 2011-12, AO has not granted Section 10B deduction. Further AO himself mentions that The Asst. Commissioner of Customs, 100% EOU, Mumbai vide letter dated 3.11.2009 has granted permission to manufacture computer software and IT enables services in Bond under section 65 of the Customs Act, 1962 read with supplementary Regulations under the Manufacture and Other Operations in the Warehouse Reg .....

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y a hundred per cent Export Oriented Undertaking, from export of articles or things or computer software manufactured or produced by it. The deduction is available for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software. However, no deduction under section 10B is available after assessment year 2009-10. 2. The deduction under section 10B is available to an undertaking which fulfils all the following conditions:- (i) it manufactures or produces any article or thing or computer software; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence except in the circumstances specified under section 33B of the IT Act. (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. 3. Representations have been received from various quarters as to whether an undertaking set up in Domestic Tariff Area, which is subsequently approved as 100% EOU by the Board appointed by the Central Government in exercise of powers conferred under section 14 of the .....

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xpires in financial year 2005-06 relevant to assessment year 2006-07, prior to its approval as 100% EOU. (iii) Undertaking C‟ is set up in Domestic Tariff Area in the financial year 2000-01 relevant to assessment year 2001-02 and engaged in the business of providing computer related services, other than those notified by the Board for the purposes of section 10B. In financial year 2002-03, it acquires more than 20% of old plant and machinery and starts manufacturing computer software. It also gets approval as 100% EOU in financial year 2002-03. Undertaking C‟ shall not be eligible for deduction under section 10B, as there has been transfer of old plant and machinery. (iv) Undertaking D‟ is set up and starts producing computer software in financial year 2003-04 relevant to assessment year 2004-05. It gets approval as 100% EOU in financial year 2006-07 relevant to assessment year 2007-08. It shall be eligible for deduction under section 10B from assessment year 2007-08. However, the deduction shall not be available after assessment year 2009-10. (v) Undertaking E‟ is set up and starts producing computer software prior to 31-3-1994. It gets approval as 100% EOU .....

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ompany is not hit by the Section 10A(2) of the Act as it could not be said that it is formed by splitting up or reconstruction of business already in existence nor it is brought on records that there is transfer to a new business of machineries or plant previously used for any purpose. The circular no 1 of 2005 issued in context of Section 10B of the Act which is reproduced below supports the stand of the assessee company : Certain clarification regarding Tax holiday under section 10B of the Income-tax Act to 100% Export Oriented Undertaking CIRCULAR NO. 1/2005, DATED 6-1-2005 1. Section 10B of the Income-tax Act provides for 100% deduction of profits derived by a hundred per cent Export Oriented Undertaking, from export of articles or things or computer software manufactured or produced by it. The deduction is available for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software. However, no deduction under section 10B is available after assessment year 2009-10. 2. The deduction under section 10B is available to an undertaking whic .....

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on shall be available only for the remaining period of ten years i.e. from assessment year 2005-06 to assessment year 2009-10. This deduction under section 10B for assessment year 2005-06 shall be restricted to the profits derived from exports, from and after the date of approval of the DTA unit as 100% EOU. (ii) Undertaking B‟ set up in Domestic Tariff Area, begins to manufacture or produce computer software in financial year 1996-97 relevant to assessment year 1997-98. It gets approval as 100% EOU in financial year 2007-08 relevant to assessment year 2008-09. No deduction under section 10B shall be admissible to undertaking B as the period of 10 years expires in financial year 2005-06 relevant to assessment year 2006-07, prior to its approval as 100% EOU. (iii) Undertaking C‟ is set up in Domestic Tariff Area in the financial year 2000-01 relevant to assessment year 2001-02 and engaged in the business of providing computer related services, other than those notified by the Board for the purposes of section 10B. In financial year 2002- 03, it acquires more than 20% of old plant and machinery and starts manufacturing computer software. It also gets approval as 100% EOU .....

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