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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Ms. Annapurna Gupta & Ms. Suchitra Kamble
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH (Conducted Through Virtual Court) Before: Ms. Annapurna Gupta, Accountant Member And Ms. Suchitra Kamble, Judicial Member ITA No. 412/Ahd/2015 Assessment Year 2010-11
Quickstart Resource The Dy. CIT, Management India Pvt. Circle-2(1)(2), Ltd. (now known as Talent Vs Vadodara Anywhere Services Pvt. (Respondent) Ltd.) “Vadodara Hyper”, Dr. Vikram Sarabhai Marg, Alkapuri, Vadodra- 390007, PAN No: AAAFQ1992K (Appellant)
Appellant by : Shri Shri Yogesh G. Shah, A.R. Respondent by : Shri Dinesh Singh, Sr. D.R. Date of hearing : 17-02-2022 Date of pronouncement : 06-05-2022 आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:-
The present appeal has been filed by the Assessee against the order passed by the Dispute Resolution Panel, Ahmedabad, (in short referred to as CIT(A)), dated 30-10-2014, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the “Act”) pertaining to Assessment Year (A.Y) 2010-11.
I.T.A No. 412/Ahd/2015 A.Y. 2010-11 Page No 2 Quickstart Resources Management India Ltd. vs. DCIT 2. At the outset, it was pointed out that the solitary issue involved in the appeal related to denial of exemption to profits derived by the assessee from its unit located in Software Technology Park (STPI), Gandhinagar jurisdiction, as per the provisions of Section 10A of the Act. The denial of exemption, it was stated, was on account of and for the period, the expansion/new unit of the assessee, originally registered under STPI Gandhinagar jurisdiction, was allegedly not granted approval by STPI. While the assessee was found to have shifted to a new address during the impugned year in January 2010 and undertaken activities therefrom, the new/expansion unit was found by the Assessing Officer (AO) to have been approved by the STPI only in the subsequent year, in April 2010.The new/expansion unit was also noted by the AO to have raised export bills from September 2009, even prior to shifting there in January 2010. Accordingly therefore the AO denied the assessee grant of exemption to the profits generated from activities carried out in the new/expansion unit from September 2009 onwards ,which amounted to Rs. 1,56,32,460/-,rejecting the assesses contention that the approval though granted in April 2010 ,should be treated as relating back to January 2010 when the assessee had initially applied for approval but the grant of the same was delayed on account of certain discrepancies noted in the application filed, which took some time to correct in a fresh application filed thereafter.
The specific facts relating to the issue are The assessee had been registered under the STPI Gandhinagar jurisdiction with its address located at 101-102, Sampatti, Sardar Baug Lane, Alkapuri, Vadodara-390007., vide letter of permission dated 19/10/2006 Information sought from the Director STPI, Gandhinagar, Gujarat,by notice issued u/s 133(6) of the Act revealed that on a number of occasions the
I.T.A No. 412/Ahd/2015 A.Y. 2010-11 Page No 3 Quickstart Resources Management India Ltd. vs. DCIT assessee had shifted its location and sought approval for the expansion units, for which approval had been granted. The letter of permission granted latest in time related to the address, First Floor, “Vadodara Hyper”, Dr. Vikram Sarabhai Marg, Alkapuri, Vadodra- 390007,and the permission had been granted vide letter dated 21/04/2010. The assessee, however was noted to have shifted to this location during the impugned year itself, in January 2010. The assessee, it was noted, though had shifted its premises in January 2010 but the internet bills of the assessee revealed that it had been working from the said premises from September 2009 onwards.
The assessee carried the matter before the DRP who in turn held that the assessee was not entitled to exemption of profits from the turnover of its new units on account of approval for the same having been granted subsequently but at the same time also held that the calculation of disallowance of the A.O. from September 2009 onwards was not based on facts and noted that the bills/invoices raised by the assessee revealed that it had commenced its operation from January 2010 onwards only. The A.O. was therefore directed to rework the disallowance, who accordingly restricted the disallowance of, exemption to the extent of Rs. 56,04,930/- as against Rs.1,56,32,460/- proposed by him.
Aggrieved by the same, the assessee has now come up in appeal before us raising the following grounds: Your appellant being aggrieved by the order dated 30l December 2014 passed by the learned Deputy Commissioner of Income-tax, Circle 2(1 )(2), Baroda, (learned AO) prefers
I.T.A No. 412/Ahd/2015 A.Y. 2010-11 Page No 4 Quickstart Resources Management India Ltd. vs. DCIT an appeal against the same on the following grounds, which are without prejudice to each other : 1. The learned AO erred in law and on facts by denying the deduction claimed under section 10A of the Act for the period January to March 2010 amounting to Rs. 56,04,930. 1.1 The learned AO erred in law and on facts in considering that the appellant does not have approval of Software Technology Park of India, Gandhinagar ('STPI') for its new unit located at "First floor Vadodara Hyper, Dr. Vikram Sarabhai Marg, Alkapuri, Vadodara" ("Vadodara Hyper") with effect from January 1, 2010. 1.2 The learned AO erred on facts in considering the date of STPI approval as April 21, 2010, for Vadodara Hyper. 1.3 The learned AO erred on facts in mentioning in the impugned order that the appellant accepted that it has no STPI approval for its Vadodara Hyper for the period from January 1,2010 to March 31, 2010. 1.4 The learned AO failed to appreciate the fact that the Software Export Declaration (softex) Forms filed with STPI for the months January 2010 to March 2010, has been approved by STPI, which in itself proves that appellant's Vadodara Hyper unit was approved from January 1, 2010. 1.5 The learned AO failed to appreciate the fact that the appellant filed the application for approval of its Vadodara Hyper premises in the month of January 2010 itself and the delay in approval was because of the reasons beyond its control. 1.6 The leaned AO erred on facts that delay in getting approval from STPI was because of non-fulfillment of the conditions laid down by the STPI. However, the delay was only due to some procedural lapses and that too beyond the control of the appellant. 1.7 The learned AO erred in law and on facts by relying on the CBDT Circular No. 1/2005 dated January 6, 2005. The said circular was specifically for 100% export oriented units and claiming deduction under section 10B of the Act. 2. Without prejudice to above, the learned AO erred in law and on facts by not giving proper effect to the directions issued by the Hon'ble Dispute Resolution Panel, Ahmedabad (DRP). 2.1 The learned AO erred in law and on facts by mentioning in the impugned order that the appellant has misinterpreted the directions given by Hon'ble DRP. 2.2 The learned AO erred in law and on facts by not restricting the disallowance under section 10A of the Act to the income derived from the export done from its Vadodara Hyper unit, as directed by Hon'ble DRP, which was from February to March 2010 and also evident from the sales invoices raised by the appellant. 2.3 The learned AO erred in law and on facts by not splitting appellant's profit and loss into eligible and non-eligible unit.
Before us, Ld. Counsel for the assesee reiterated the contentions made before the A.O./DRP to the effect that
I.T.A No. 412/Ahd/2015 A.Y. 2010-11 Page No 5 Quickstart Resources Management India Ltd. vs. DCIT since it had applied for grant of approval to STPI in January 2010 only but was granted the same in April 2010, the approval should be treated as relating back to January 2010 onwards. That the delay occurred on account of procedural discrepancies noted by the STPI in the application for approval furnished by the assessee which took sometime to correct for reasons beyond the control of the assessee. That as soon as the procedural discrepancies were corrected a fresh application was filed to STPI who thereafter granted approval to the assessee. That for the procedural lapses it had been penalized by the STPI which penalty also stood paid and All its invoices, relating to software export, from January 2010 onwards stood approved by the STPI, meaning thereby that it was recognized as an approved unit by the STPI itself from January 2010 onwards. That in view of the above though the approval was granted in April 2010 it should be deemed to have been granted from the date of application filed by the assessee before the STPI i.e. January 2010.
To substantiate its contention, our attention was drawn to the following documents. (i) Letter of Permission granted by STPI dated 19/10/2006 placed before us at paper book page no. 10 to 13. (ii) Application filed by the assessee to STPI date 06.01.2010 for grant of approval to expansion of its premises of the work located at new address: First Floor “Vadodara Hyper”, Dr. Vikram Sarabhai Marg, Alkapuri, Vadodara-390007, placed before us at paper book page no. 2 to 17.
I.T.A No. 412/Ahd/2015 A.Y. 2010-11 Page No 6 Quickstart Resources Management India Ltd. vs. DCIT (iii) Letter from STPI addressed to the assessee dated 11.01.2010 pointing out discrepancies in the application submitted by the assessee dated 06.01.2010, placed before us at paper book page no. 28. (iv) Assessees letter dated 05.03.2010 to STPI along with all enclosures rectifying discrepancies noted earlier by STPI in its original application 2006 placed before us at paper book page no. 27 to 38. (v) Application to STPI filed by the Assessee dated 19.04.2010 2006 placed before us at paper book page no. 43 submitting that the penalty levied had been duly paid and furnish application in the prescribed format along with necessary documents. (vi)Approval for expansion issued by the STPI dated 21.04.2010 placed before us at paper book page no. 14 to 16. (vii) Softex(Software Export Declaration) Form filed with STPI by the assessee for the month of January 2010 to March 2010 2006 placed before us at paper book page no. 44 to 79, along with letter of STPI addressed to RBI certifying the valuation of software exported.
Ld. Counsel for the assessee further relied on the following case laws in support of his contention of retrospective application of approval. 1. Director of I.T. (Exemption) v/s Vishwa Hindu Parishad 82 Taxmann.com 135 (Delhi) and 248 taxmann.com 290 (Delhi ITAT)
National Dairy Development Board v/s Addl. CIT 114 TTJ 145 (Ahmedabad)
Claris Lifesciences Ltd. v/s ACIT (Ahmedabad ITAT) 112 1TD 307
Ld. D.R. on the other hand relied on the order of the authorities below.
I.T.A No. 412/Ahd/2015 A.Y. 2010-11 Page No 7 Quickstart Resources Management India Ltd. vs. DCIT 10. We have heard the rival contentions carefully and gone through all the documents and case laws referred to before us. 11. The short issue for adjudication before us is whether in the facts and circumstances of the case before us, the approval granted to the assessee’s expansion unit in the succeeding year i.e. in April 2010 can be said to relate back to the period when it commenced its activities in the expansion unit and applied for approval to STPI i.e. in January 2010 in the impugned year, so as to make it eligible for grant of exemption to profits generated from the export activities carried out in the said unit in the period January 2010 to March 2010.
On going through the order of the A.O. and the DRP we find that the solitary reason for holding that the approval granted by letter dated April 2010 cannot be treated as retrospective was that the approval letter did not so specifically mention and further that the Circular No. 1 Of 2005 of the CBDT would apply wherein it has been allegedly clarified that assessees are eligible to claim of exemption only from the year in which they are granted approval. The relevant findings of the A.O. at para 5.4 of his order to this effect are as under: 5.4. The reply furnished by the assessee has been duly considered. However, the same was not found tenable. In its reply, the assessee had accepted the fact that it had no approval for new location for the period from 01.01.2010 to 31,03.2010. Further, It is important to mention herewith that in its above reply, the assessee has itself stated that the delay in approval from the STPI was due to discrepancies / lacuna find out by the STPI In the application of the assessee company. It shows that the delay in getting approval from the STPI was because of non fulfillment of the conditions laid down by the STPI. Since, in view of the CBDT circular No. 1 /2005 dated 6th January 2005, the receipt of the assessee is eligible for exemption u/s 1QA of the Act from the date of approval of STPI,
I.T.A No. 412/Ahd/2015 A.Y. 2010-11 Page No 8 Quickstart Resources Management India Ltd. vs. DCIT Therefore, the entire receipts of the assessee, for the period for which, the assessee has no approval from STPI, is not eligible for exemption u/s 10 A of the Act.
Reaffirmed by the DRP at para 16.1 of its order as under: 161. Basically the assesee's objection is twofold:- regarding the disallowance itself and quantification of the disallowance. The Assessee argued that it had applied for the approval w,e,f January 1, 2010 and approval has been granted on 21 April, 2010 only on account of procedural lapses. As per the assessce, approval is deemed to be received from date of the application i.e. January 1, 2010. We are not convinced by this argument. The approval letter issued by the STPI authorities do not mention any thing about the approval being retrospectively effective. It is not for the DRP to second-guess the intention of the approving, authority particular when the language of the letter has no ambiguity. The assessee could have obtained a clarification from the approving authority rather than asking the AO or the DRP to find out the true intent of the approval. We also agree with the AO that circular no 1/2005 would apply in the assesee's case though the circular mentions only section 10B and not section 10A. The assesses has not brought to our knowledge any circular specifically on 10A which provides contrary to circular 1/2005, Therefore we uphold the AO’s action in disallowing the claim of deduction u/s 10 A with respect to the income from Vadodara Hyper unit.
We are not in agreement with the findings of the DRP/AO in this regard. The facts on record before us itself demolish the case of the Revenue. The very simple uncontroverted fact, that of the assessee’s software exports from this expansion unit pertaining to this very period which is in dispute before us i.e. January 2010 to March 2010, being certified for valuation by the STPI, Gandhinagar itself,
I.T.A No. 412/Ahd/2015 A.Y. 2010-11 Page No 9 Quickstart Resources Management India Ltd. vs. DCIT establishes that the approval granted to the expansion unit in April 2010 was operational from Jan., 2010. If this was not the case the exports relating to this disputed period would not be certified by the STPI at all.
It is to be understood that approval as a STPI unit is for the purposes of availing admissible facilities and privileges under the provisions of the STPI scheme as envisaged in the foreign trading policy of the country. The purpose of this scheme being largely to encourage units to make exports and earn valuable foreign exchange for the country. The moment the STPI, Gandhinagar, in the present case, certifies the value of exports made by the assessee for submission to RBI ,as per Rules prescribed under the STPI Act in this regard, there is no doubt regarding the fact of the assesses expansion unit being approved for this period. When under the STPI Act the assessee is being treated as an approved unit for this period which is in dispute before us, which is a glaring and undisputed fact, we cannot fathom as to why this fact escaped the attention of the Revenue authorities below who did not care to look beyond the date of the letter granting approval to the unit. Therefore we find that the objection of the Revenue to the approval granted to the assessee unit being retrospective, has no legs to stand upon and is controverted by the fact of the STPI, Gandhinagar itself treating the assessee unit as approved in the said period by certifying its export invoices raised during the period as required under the scheme for submission to RBI.
16 Even otherwise, on considering the entire facts and circumstances leading to the grant of approval, it is obvious that the approval was in pursuance to the initial application filed by the assessee in January 2010. The later application filed in April 2010 only cured certain deficiencies/discrepancies noted by the STPI in
I.T.A No. 412/Ahd/2015 A.Y. 2010-11 Page No 10 Quickstart Resources Management India Ltd. vs. DCIT the earlier application filed, for which it was duly penalized also by the Director STPI.
The lapses/discrepancies noted in the assesses application filed in January 2010, communicated to it by the STPI vide letter dated 11.01.2010, were to the following effect: 1. Your Custom Bonding License has been expired on 21.11.2009 2. Lease agreement should be on Judicial Stamp Paper. 3. All Pending MPR’s & QPR’s (if any)
As is evident from the above the lapses noted related to custom bonding license having expired on 21.112009, lease agreement not being on judicial stamp paper and on account of any pending monthly or quarterly progress reports i.e. MPR and QPR.
From the documents filed before us, and which were filed to both the AO/DRP also, we find that the assessee renewed its custom bonding license for further period of one year up to 21.11.2010. Copy of the letter of the Central Excise and Customs division, dated 22.02.2010, to this effect placed at paper book page no. 37 evidences this fact. Therefore for the disputed period i.e. January to March 2010, the assessee had custom bonding license. The lease agreement was also submitted on judicial stamp paper, entered into on 5th March 2010, which lease was for a period of 9 years with effect from 7.09.2009. The letter of the party which had given their premises on lease to the assessee i.e. M/s. Aarav Reality Pvt. Ltd., dated 5th March 2010, stating to this effect is placed before us at paper book page no. 38. Therefore for the disputed period the expansion unit was taken on lease by the assessee. As for the pending reports, it
I.T.A No. 412/Ahd/2015 A.Y. 2010-11 Page No 11 Quickstart Resources Management India Ltd. vs. DCIT was stated that due to the shifting of premises it resulted in the following lapses. Therefore it is evident that the discrepancies which were noted in the original application filed in January 2010 were removed effective January 2010 i.e. for the disputed period i.e. Jan., to March 2010. The assessee had cured all defects relating to the disputed period. Further, the assessee was issued a show cause notice for taking action against it for violating the Rules and Regulations prescribed, as noted by the Director STPI from the original application filed by the assessee. And after all the defects were cured by the 5th March 2010 and on the assesses undertaking to abide with all Rules thereafter, it was penalized with a fine of Rs.10,000/-. Vide order dated 12.04.2010 placed before us paper book at page no. 39 to 42. The relevant portion of the order is as under: Order I have gone through the written statement submitted by the Noticee unit. The Show Cause Notice was issued to the unit as the unit had violated the policy and procedural norms in (i) obtaining approval & custom bonding formalities for the additional location 1st Floor, Vadodara Hyper, Dr. Vikram Sarabhai Marg, Alkapuri, Vadodara-390 007 prior to shifting of the unit location and (ii) de- bonding of unit location (i) 101-102,1st Floor, SampattiSardarBaug Lane, Alkapuri, Vadodara-390 007 and (ii) 201-202, 2nd floor, SampattiSardarBaug Lane, Alkapuri, Vadodara-390 007 prior to leasing. As the urathave violated the Foreign Trade Policy norms, I hereby impose a penalty of Rs. 10,000/- (Rupees Ten Thousand only) for violation of Foreign Trade Policy procedure/norms.
If the original form was irrelevant as is the case of the Revenue, there was no occasion for the assessee to be penalized for violating prescribed Rules. The violation was undoubtedly noted from the application filed by the assessee in January 2010 for approval of expansion Unit and it pertained to more particularly the expansion Unit not being approved as a bonded warehouse by the Customs
I.T.A No. 412/Ahd/2015 A.Y. 2010-11 Page No 12 Quickstart Resources Management India Ltd. vs. DCIT and Central Excise authority as on the date of seeking approval i.e. January 2010. If the approval was with effect from April 2010,then the fact of the expansion unit not being approved so from January 2010 onwards would not tantamount as violation of prescribed Rules and Regulations so as to penalize the assessee. Even otherwise, the assessee having cured all defects from January 2010 onwards, paid penalty for the defects also, the fresh application filed in April 2010 is to be treated for all purposes in continuation of its original application filed in January 2010 .And the approval so granted by STPI vide letter dated April 2010 is therefore to be treated as in pursuance to the original application filed in January 2010.Which is how even the STPI authorities have treated it by certifying invoices relating to the January –March 2010 period.
We have also gone through the Circular of 2005, which the Revenue contends operates against the assessee and we find that the scope of the said circular is with respect to exemptions claimed u/s. 10B of the Act and not 10A under which the assesse has claimed exemption. Also, we find that in response to representations received by the CBDT, whether Domestic Tariff Area (DTA) Units converted to export oriented unit (EOU) are eligible to exemption u/s 10B, it was clarified by way of the said Circular that such units shall be eligible to exemption, that too from the year of conversion and for the period remaining in the block of 10 Years since it began manufacturing as a new unit under DTA. The scope of operation of this circular is totally different and has no applicability to the facts of the case where the issue is whether the approval granted in lieu of renewed application filed can be treated as retrospective from the date of original application filed.
I.T.A No. 412/Ahd/2015 A.Y. 2010-11 Page No 13 Quickstart Resources Management India Ltd. vs. DCIT 22. In view of the above, we have no hesitation in holding that the assessee was approved as a STPI unit from Jan., 2010 onwards and was therefore eligible to claim the profits generated from turnover of the said unit as exempt under the provisions of Section 10A of the Act. The A.O. is therefore directed to grant the assessee exemption to its profits of Rs. 56,04,930/-
In effect, appeal of the assessee is allowed in above terms. Order pronounced in the open court on 06 -05-2022
Sd/- Sd/- (SUCHITRA KAMBLE) (ANNAPURNA GUPTA) JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER Ahmedabad: Dated 06/05/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद