M/S. NORTH SHORE TECHNOLOGIES PVT. LTD.,NEW DELHI vs ITO, NEW DELHI

Income Tax Appellate Tribunal, DELHI BENCH ‘E’ : NEW DELHI

Before: HON’BLE, SHRI G.D. AGRAWAL & SHRI KULDIP SINGH

For Appellant: Shri Piyush Kaushik, Advocate

For Respondent: Shri U.C. Dubey, Senior DR

Hearing: 09.11.2017

PER KULDIP SINGH, JUDICIAL MEMBER :

The Appellant, M/s. North Shore Technologies Private Limited (hereinafter referred to as ‘the assessee company’) by filing the present appeal sought to set aside the impugned order dated 09.07.2014 passed by the Commissioner of Income-tax (Appeals)-XVI, New Delhi qua the assessment year 2010-11 on the grounds inter alia that :-

“1. That on the facts and circumstances of the case and in the law, the CIT (A) has grossly erred in confirming the disallowance of exemption u/s 10A of Rs.49,94,913/- as made by the AO.

2. That alternatively without prejudice to the above, the CIT (A) has grossly erred in not directing the AO to allow assessee the credit for brought forward losses for past assessment years AY 2004- 05 & AY 2005-06 being a legal entitlement of assessee u/s 72 of the Act.”

Briefly stated the facts necessary for adjudication of the controversy at hand are : assessee company was incorporated on 26.10.1999 and had set up a Software Technology Unit registered with Software Technology Park of India (STPI).

Assessee company claimed exemption under section 10A of the Income-tax Act, 1961 (for short ‘the Act’) to the tune of Rs.49,94913/-. During the assessment proceedings, the AO called upon audit report wherein the date of commencement of manufacture or production was given as 30.03.2000. AO, after treating the business of the assessee company having been commenced during the previous year 1999-2000, the first assessment year considered as AY 2000-01. AO on the basis of material brought on record proceeded to conclude that AY 2000-01 being the first year of exemption u/s 10A of the Act, the last year of exemption would be AY 2009-10 and not AY 2010-11 as claimed by the assessee company and thereby disallowed the exemption of Rs.49,94,913/- claimed u/s 10A by the assessee company.

Assessee company carried the matter by way of filing appeal before the ld. CIT (A) who has confirmed the addition by dismissing the appeal. Feeling aggrieved, the assessee company has come up before the Tribunal by challenging the impugned order passed by ld. CIT (A).

We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.

Undisputedly, assessee company was incorporated on 26.10.1999 and had set up a software technology unit registered with STPI. It is also not in dispute that the assessee company being a 100% export oriented unit and registered under STPI is entitled for exemption u/s 10A of the Act. It is also not in dispute that the assessee company has raised first invoice of US $ 1050 on 31.03.2000. It is also not in dispute that the assessee company has not claimed any exemption u/s 10A for AY 2000-01.

In the backdrop of the facts and circumstances of the case, the sole question arises for determination in this case is :-

“as to whether the assessee company has commenced manufacture or production on 30.03.2000 as has been held by AO/CIT (A) and has not been found to be ineligible for exemption qua AY 2010-11?”

AO/CIT (A have taken the date of production as 30.03.2000 from the audit report furnished by the assessee company during assessment proceedings.

Ld. AR for the assessee contended that the token invoice dated 30.03.2000, available at page 10 of the paper book, was issued as cost for trial verification whereas the date of commencement of production of sale in global market as per letter issued to the Assistant Director, STPI, Noida, available at page 7 of the paper book, is 30.04.2000.

Hon’ble High Court of Delhi while deciding the identified issue in case cited as CIT vs. Nestor Pharmaceuticals Ltd. – (2010) 231 CTR 0337 held that “trial production is different from commercial production and the benefit of exemption provision is allowable from the date of commercial production.”

10.

Identical issue has also come up before the coordinate Bench of the Tribunal in case cited as Sandvik Asia Pvt. Ltd. vs. JCIT in 2469/PN/2012 order dated 04.12.2015 wherein it is held that, “the assessee is at liberty to claim deduction u/s 10B of the Act from end of the year of his choice.”

11.

When the assessee company itself has not claimed exemption for AY 2000-01, incubatory period, cannot be considered as production period merely on the basis of token invoice issued for trial verification of its cost. Even otherwise, the letter issued by the assessee company dated 30.04.2000 to Assistant Director, STPI, Noida intimating date of commencement for production of sale in global market as 30.04.2000 has not been disputed by the Revenue rather entire assessment has been made on the basis of token invoice dated 31.03.2000 issued for trial verification by the assessee company.

12.

Furthermore, section 10B of the Act is categoric enough to provide liberty to the assessee company to choose the claim of deduction u/s 10A in respect of newly established 100% export oriented unit. So, we are of the considered view that when the assessee company has only issued the first token invoice of US $ 1050 as cost for trial verification and has opted to avail of the exemption u/s 10A in AY 2001-02 when production for global market was commenced on 30.04.2000, the year under assessment i.e. AY 2010-11 is the 10th year of exemption available to the assessee company.

13.

So, following the decision rendered by Hon’ble High Court in case cited as Nestor Pharmaceuticals Ltd. (supra) and order passed by the coordinate Bench of the Tribunal in case cited as Sandvik Asia Pvt. Ltd. (supra) and in view of the provisions contained u/s 10B of the Act, we are of the considered view that ld. CIT (A) has erred in confirming the disallowance made by the AO on account of exemption claimed u/s 10A of the Act. Consequently, the appeal filed by the assessee is hereby allowed. Order pronounced in open court on this 7th day of December, 2017. Sd/- sd/- (G.D. AGRAWAL) (KULDIP SINGH) PRESIDENT JUDICIAL MEMBER Dated the 7th day of December, 2017/TS

M/S. NORTH SHORE TECHNOLOGIES PVT. LTD.,NEW DELHI vs. ITO, NEW DELHI