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Income Tax Appellate Tribunal, ‘D’ BENCH, AHMEDABAD
Consolidated Appeals (2)
Sl. ITA No(s) Asset. Appeal(s) by No(s) Year(s) Appellant vs. Respondent Appellant Respondent 1. 1086/Ahd/2017 2010-11 DCIT M/s. Intra Action Software Circle-3(3), B-5, Mantra, Opp. Ahmedabad Shradha Petrol Pump Judges Bunglows Road, Ahmedabad-380015 PAN No. AABFI3315F Sl. C.O. No(s) Asset. Appeal(s) by No(s) Year(s) Appellant vs. Respondent Appellant Respondent 2. 08/Ahd/2018 2010-11 M/s. Intra Action Software DCIT B-5, Mantra, Opp. Circle-3(3), Shradha Petrol Pump Ahmedabad Judges Bunglows Road, Ahmedabad-380015 PAN No. AABFI3315F Revenue by : Shri Virendra Ojha, CIT DR. Assessee by : Shri Bhavin Marfatia, AR सुनवाई क� तार�ख/Date of Hearing : 20.08.2020 घोषणा क� तार�ख /Date of Pronouncement : 19.10.2020 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The appeal has been filed by the Revenue and the Cross Objection has been filed by the assessee for A.Y. 2010-11 which are arising from the order of the CIT(A)-3, Ahmedabad dated 22.02.2017, in the proceedings under section 144r.w.s. 263 of the Income Tax Act, 1961 (in short “the Act”).
C.O. No. 08/Ahd/2018 AY: 2010-11
The inter connected issue raised by the Revenue is that the Learned CIT(A) erred in allowing the deduction under Section 10A of the Act amounting to Rs. 2,98,00,647/-.
The facts in brief are that the assessee in the present case is a partnership firm and engaged in the business of computer software development and IT enabled services. The assesseeis also registered with Software Technology Park of India (STPI),Gandhinagar. The assessee for the year under consideration filed its return of income declaring incomeat NIL after claiming the deduction of Rs.2,98,00,647/- under the provisions of Section 10A of the Act which was also accepted by the AO in the assessment framed under Section 143(3) of the Act vide order dated 31stOctober 2012.
However, the Learned CIT under Section 263 of the Act perceived that the order framed by the Learned AO under Section 143(3) of the Act dated 31stOctober 2012 as erroneous insofar prejudicial to the interest of revenue for the reasons thatthe assesseewas not located within the area of STPI Gandhinagar but situated in Ahmadabad. Thus, the assessee failed to comply with the condition prescribed under Section 10A(2)(i)(b) of Act. Accordingly, the assessee is not eligible for claiming deduction under Section 10(A) of the Act.
The assessee before the Learned Commissioner of Income Tax under Section 263 of the Act submitted that it is not necessary that unit (assessee) has to be located/situated within the area of Software Technology Park. What is required for claiming deduction under Section 10A of the Act is that unit has to be registered withSoftware Technology Park.
Furthermore, all the conditions as specified for Software Technology Park registration have been duly complied by the assessee. As such, the unit of the C.O. No. 08/Ahd/2018 AY: 2010-11 assessee can be located/situated at any place but the same should be registered with the Software Technology Park.
However the Learned CIT disagreed with the contention of the assessee by observing that the conditions as specified under Section 10A(2)(i)(b) of the Act i.e. business of manufacturing of computer software to be carried out in STP as notified by the Govt. of Indiahave not been complied with and, therefore, the assessee is not eligible for deduction. Accordingly, the Learned CIT under Section 263 of the Act set aside the assessment order framed by the AO under Section 143(3) of the Act dated 31st October 2012 for de novo assessment.
In view of the above, the AO issued notice under Section 143(2) dated 08thJune 2015 to the assessee for de novo assessment. Subsequently, the AO issued the show causenotice to the assessee under Section 142(1) of the Act dated 03rdJuly 2015 proposing the disallowance of the deduction claimed by it under Section 10A of the Act. However, there was no compliance from the side of the assessee. Thus, the AO, in the absence of any documentary evidence, disallowed the claim of the assessee for the deduction under Section 10A of the Act amounting to Rs. 2,98,00,647/- and added the same to the total income.
Aggrieved assessee preferred an appeal to the Learned CIT(A).
The assessee before the Learned CIT(A) submitted that the provisions of Section 10A of the Act does not require the assessee to be situated within the area of Software Technology Park. What is required is that the assessee should be registered with the Software Technology Park scheme and it should commence manufacturing & producing computer software on or after 1stApril 1994 which has been duly fulfilled.
C.O. No. 08/Ahd/2018 AY: 2010-11 11. The assessee further submitted that, it has been registered with jurisdictional office of STPI after due compliance of all necessary requirements which is situated at InfocityGandhinagar. It has been granted registration in the 29thMay year 2003 w.e.f. 2003 vide sanction letter no- STIPG/EXIM/IAS/383/3047 which is renewed from 22nd August 2003. Further the GandhinagarSoftware Technology Park is a regulatory authority looking after the implementation of the scheme under its jurisdiction. As such the provision of Section 10(2)(i)(b) does not mandate that the unit should be situated at the premises where office of the STPI designated officer is located.The assessee further submitted that Ministry of Commerce vide Notification No- 33/(RE)/92- 97 dated 22ndMarch, 1994 also clarified that STP unit may be situated at any place as permitted by the designated officer. The assessee in support of his contention also filed a clarification letter dated 13.10.2015 issued by the Director of Software Technology Park of India, Gandhinagar.
The Learned CIT(A) after considering the submission of the assessee allowed the deduction claimed by it under Section 10A of the Act by observing as under:
11.1 The assessee firm made 100% export sale. Its accounts have been duly verified by qualified Chartered Accountant who has certified that the assessee is eligible for exemption under Section 10B of the Act. 11.2 All the payment against export has been received through banking channel after duly certified by RBI, STPI and Chartered Accountant in Form 56F.
11.3 The Central Government of India vide Notification No. 33/(RE)/92-97 dated 22ndMarch 1994 distinguished between the provisions of Section 10A and 10B of the Act. As per Clause 2.2 of impugned notification ‘a STP may be individual unit’ which also has a custom bond unit within the jurisdiction of STPI
C.O. No. 08/Ahd/2018 AY: 2010-11 director. In such case the provision of Section 10B of the Act is applicable on the assessee. Thus, the assessee firm fulfilled the condition of Section 10B of the Act and, therefore, it is eligible of deduction under Section 10B instead of Section 10Aof the Act.
11.4 In the first initial Assessment Year 2004-05, the AO vide order dated 03rdMarch 2011 allowed the claim of deduction under Section 10A of Act to the assessee.Thereafter the assessee claimed deduction continuously under Section 10A of the Act without any dispute upto A.Y. 2009-10 i.e. upto immediate preceding A.Y. 11.5 The CBDT vide Circular No.- 149/194/2004/TPL dated 06thJanuary 2015 directed that the registration with STPI is sufficient for claiming deduction under Section 10B of the Act.
Being aggrieved by the order of the Learned CIT(A) the Revenue is in appeal before us.
The Learned DR before us vehemently supported the order of the AO. On the contrary, the Learned AR before us filed a Paper Book running from pages 1 to 55 and submitted that there is no requirement for the assessee to function from the area of Software Technology Park as alleged by the AO. The Learned AR further submitted that it is sufficient enough to claim the deduction under Section 10A of the Act if the assessee is registered with the STPI which has been duly done in the present case. The Learned AR in support of his contention drew our attention on page 24 to 29 of the Paper Book where the copy of the registration certificate was placed which was renewed vide sanction letter dated 22ndAugust 2008, the copy of the same placed on page 30 to 31 of Paper Book.
C.O. No. 08/Ahd/2018 AY: 2010-11 14. The Learned AR also drew attention on the clarification letter issued by the Director of Gandhinagar Software Technology Park placed on page 32-33 of the Paper Book wherein it was stated that as per Notification No. 33/(RE)/92-97 dated 22ndMarch 1994 issued by Ministry of Commerce Government of India an individual unit may also be treated as STP unit. The assessee registered underSTP scheme is a valid STP unit. The Learned AR vehemently supported the order of the Learned CIT(A).
We have heard the rival contentions of both the parties and perused the materials available on record. The assessee, for claiming the deduction under Section 10A of the Act requires to fulfill certain conditions. Among various conditions, one of the condition which is in dispute is reproduced as under:
“(2) This section applies to any undertaking which fulfils all the following conditions, namely :— (i) it has begun or begins to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year— (a) *********** (b) commencing on or after the 1st day of April, 1994, in any electronic hardware technology park, or, as the case may be, software technology park; (c) ***************”
The above condition has been interpreted by the Assessing Officer that the undertaking claiming deduction under Section 10A of the Act should be located in any Electronic Software Technology Park. As per the AO, the Gandhinagar Software Technology Park is in Gandhinagar whereas the assessee is located in Ahmedabad. Accordingly, the AO was of the view that the assessee has not fulfilled the above condition and, therefore, ineligible for deduction under Section 10A of the Act.
C.O. No. 08/Ahd/2018 AY: 2010-11 17. However, the Learned CIT(A) disregarded the contention of the AO by observing that it is not necessary that the assessee should be located within any Software Technology Park. As such the registration with the Software Technology Park is sufficient compliance for complying with the condition as discussed above.
Now the controversy arises, whether it is one of the precondition for the assessee to be located in the electronic Software Technological Park for claiming the deduction under Section 10A of the Act. Indeed, the assessee is located in Ahmedabad whereas the office of Software Technology Park is in Gandhinagar. But, we find that the Director of GandhinagarSoftware Technology Park has clarified vide letter dated 13thOctober 2015 that the unit located in any area can be registered with it after complying the necessary conditions. The relevant extract of the clarification reads as under: “As per Point No. 2.2 of Notification No. 33/(RE)/92-97 Dated 22nd March 1994 of Ministry of Commerce, Govt. of India “A STP unit may be an individual unit by itself or it may be one of such units located in an area designed as STP Complex by the Department of Electronics” (Copy enclosed) Hence M/s. Intraaction Software was a valid STP unit registered under STP scheme for the unit location B/5 Mantra Opp. Amrapali – III, Opp. Shradda Petrol Pump, Judges Bunglows Road, Bodakdev, Ahmedabad registered vide Letter of Permission No. STPIG/EXIM/S/IAS/383/3047 dated 29.05.2003.”
From the above it is transpired that it is not necessary for the assessee to be situated within the area of Software Technology Park. As such unit/undertaking located within the jurisdiction of the designated officerof Software Technology Park can be registered on standalone basis.
We also note that Delhi Tribunal in the case of Xerox India Ltd. vs. ACIT reported in [2010] 127 TTJ 84 (Delhi) has taken a view that the registration with C.O. No. 08/Ahd/2018 AY: 2010-11 Software Technology Park is sufficient compliance for claiming the deduction under Section 10A of the Act. The relevant extract of the order reads as under: “24. In this case, we find that findings of facts recorded in the order of learned CIT(A) have not been controverted by the learned Departmental Representative for the Revenue. We further find that in this case, in the relevant assessment year, the notification issued by Government of India dt. 22nd March, 1994 was relevant where in para 2.2 the software technology park as used in s. 10A has been defined. We are of the opinion that the AO has not properly analyzed the contents of para 2.2 of this notification as well as subsequent approvals given to assessee's unit by the Government on the basis of para 2.2 of the notification. While properly analyzing para 2.2 of the notification, the CIT(A) has rightly observed that there is no requirement of the notification that a particular unit is to be located inside a park but it is enough if the unit at a particular location is notified as STP. In the present case of the assessee, there is the approval of Government of India which indicates that the assessee's unit would be located in Gurgaon. Hence, we are of the opinion that the CIT(A) in his well reasoned and well discussed order after analyzing the provisions of s. 10A as well as the notification and subsequent approvals of the Government of India in the case of assessee has rightly concluded that the assessee fulfils all the requirements of s. 10A and is covered within the definition given in Expln. 2(vii) to this section and so the CIT(A) rightly held that the assessee is entitled to exemption claimed under s. 10A of IT Act and has further rightly deleted the impugned addition. Accordingly, the order of CIT(A) in this regard is upheld. Ground No. 1 of the appeal of the Revenue is rejected.”
Moving forward it is pertinent to mention that Revenue itself has allowed deduction under Section 10A of the Act to the assessee for first time in the A.Y. 2004-05. In subsequent assessment years, the assessee by following the same claimed deduction under Section 10A and Revenue has not disputed the same. However, in the year under consideration the AO disallowed the deduction only after Learned Commissioner set aside the Assessment Order under Section 263 of the Act. Hence, it is transpired that the Revenue was convinced to the fact that assessee is eligible for deduction under Section 10A.
In view of the above, we do not find any infirmity in the order of the Learned CIT(A)and accordingly we decline to interfere in the order. Hence, the ground of appeal of the Revenue is dismissed.
C.O. No. 08/Ahd/2018 AY: 2010-11 21. In the result, the appeal filed by the Revenue is dismissed.
Coming to CO No. 08/Ahd/2018 A.Y. 2010-11(Assessee’s Appeal):-
At the outset, we note that the CO filed by the assessee is supporting the order of the ld. CIT-A, thus, the same does not require any separate adjudication. Hence, we dismiss the same as infructuous.
In the combined results, the appeal filed by the Revenue and the CO filed by the assessee are dismissed. Order pronounced in the Court on 19th October,2020 at Ahmedabad.