THE PRINCIPAL COMMISSIONER OF INCOME TAX, VADODARA 1 vs. M/S. WEB GAZER SOFTWARE COMPANY

This Tax Appeal under Section 260A of the Income Tax Act, 1961 (for short ‘the Act, 1961) is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Ahmedabad dated 24.02.2021 in the ITA No.1559/Ahd/2017 for the A.Y. 2009-10 by which the appeal preferred by the Revenue came to be dismissed.

The Revenue has proposed the following questions of law for the consideration of this Court: “(a) Whether in the facts and circumstances of the case and in law, the Hon’ble ITAT is justified in deleting the addition of Rs.39,20,823/- made by the Assessing Officer on account of disallowance of exemption u/s. 10B of the Act, even though the assessee has flouted the prerequisite condition laid down for claiming due exemption u/s. 10B of the Act regarding authority granting approval as a 100% Export Oriented Undertaking (EOU)? (b) Whether in the facts and circumstances of the case and in law, the Hon’ble ITAT is justified in not upholding the addition of C/TAXAP/82/2022 ORDER DATED: 17/01/2022 Rs.39,20,823/- made by the Assessing Officer on account of disallowance of exemption u/s. 10B of the Income Tax Act claimed by the assessee, event though the assessee has failed to get the approval from the Board as defined u/s. 14 of the Industries (Development & Regulations) Act, 1951 as mandated under Explanation to Section 10B of the Act or from the Development Commissioner under the Ministry of Commerce and Industry as mentioned in CBDT Instruction dated 09.03.2009 in this respect and accordingly the assessee was not eligible for claiming exemption u/s. 10B of the I.T. Act? (c) Whether in the facts and circumstances of the case and in law, the Hon’ble ITAT is justified in holding that a valid claim of the assessee cannot be deprived merely because the assessee has not made such claim in return of income filed u/s 139 of the I.T. Act without appreciating that Hon’ble Supreme Court in the case of the Assessing Officer otherwise than by filing a revised return? (d) Whether in the facts and circumstances of the case and in law, the Hon’ble ITAT is justified in holding that the reopening is not valid, without appreciating the fact that reopening of the case on the basis of factual error pointed out by the Audit party is permissible under the law as held by the Hon’ble Supreme Court in the case of CIT Vs. P.V.S. Beedies Pvt. Ltd. (1999) 237 ITR 13 (SC)? (e) Whether in the facts and circumstances of the case and in law, the Hon’ble ITAT is justified in allowing the grounds challenging the validity of assessment completed u/s. 143(3) r.w.s. 147 of the Act ignoring the fact that assessee has claimed deduction u/s 10B of the Act without obtaining approval of the Competent Authority as mandated under the provisions of Section 10B of the Act?”

We have heard Mr. Varun Patel, the learned Senior Standing Counsel appearing for the Revenue and Mr. Manish J. Shah, the learned counsel appearing for the respondent – assessee.

It appears that the Appellate Tribunal while dismissing

The issue pertains to the assessment year 2008-09 and concerns the respondent-assessee's deduction of Rs. 67.08 lacs (rounded off) claimed under Section 10B of the Income Tax Act, 1961 ['the Act' for short]. The contention of the Revenue is that, the assessee had not produced the approval by the Board appointed for such purpose by the Central Government in exercise of powers conferred under Section 14 of the Industries (Development and Regulation) Act, 1951, as required under Explanation 2 Clause (iv) to Section 10B of the Act.

Learned counsel Mr. Patel for the Revenue vehemently contended that the assessee had obtained such approval certificate from the Director, Software Technology Park of India, which may be a Government of India Authority cannot substitute the authority prescribed in Clause (iv) to the said explanation.

This contention we are not inclined to examine in view of the fact that, admittedly, in the first year of claim of the assessee under Section 10B of the Act i.e. the assessment year 2007-08, such claim was granted. In the subsequent assessment years also, i.e. in the assessment years 2010-11 and 2011-12, such claim was made and accepted by the Department. We may notice that Section 10B pertains to special provisions in respect of newly established hundred per cent export-oriented undertakings. Sub- section (1) of Section 10B provides for deduction of profits and gains derived by a hundred per cent export-oriented undertaking from the export of articles or things or computer software for a period of ten consecutive years beginning with assessment relevant to the previous year in which the undertaking begins to manufacturer, produce articles or things or computer software from the total income of the assessee. Thus, the provision envisaged is for a period of ten consecutive years commencing from the first year during which the undertaking begins to manufacture or produce articles, things or computer software, as the case may be. When the Revenue therefore, did not question the certification by the Director, Software Technology Park of India, in the initial year of the claim made by the assessee as well as in the subsequent years, it would not be open for the Revenue to pick one year out of a total of ten consecutive years for different treatment that too without offering any explanation for the same. We would refer to Gujarat High Court Judgement in case of Saurashtra Cement & Chemical Industries Ltd. vs. Commissioner of Income Tax, Gujarat-V reported in 123 ITR 669 and a later judgement in Tax Appeal No. 1367 of 2010 dated 14.09.2011 in case of Commissioner of Income Tax vs. M/s. T.J.Agro Fertilizers Pvt. Ltd.

In the result, tax appeal is dismissed.” C/TAXAP/82/2022 ORDER DATED: 17/01/2022

Mr. Shah, the learned counsel appearing for the assessee other C/TAXAP/82/2022 ORDER DATED: 17/01/2022 High Court seems to have taken contrary view. We dismissed this appeal only keeping in mind the aspect of consistency. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J) NEHA