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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ : NEW DELHI
Before: SHRI R.S. SYAL & SHRI KULDIP SINGH
Date of Hearing : 23.10.2017 Date of Order : 23.10.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : At the very outset, the ld. Senior DR for the Revenue submitted that there is a delay of 13 days in filing the appeal before the Tribunal and sought to condone the delay. Keeping in view the reasonable cause given in the application, the delay of 13 days in filing the present appeal is hereby condoned. 2. The Appellant, Income-tax Officer, Ward 13 (2), New Delhi (hereinafter referred to as ‘the revenue’) by filing the present appeal sought to set aside the impugned order dated 28.07.2014 passed by the Commissioner of Income-tax (Appeals)-XVI, New Delhi qua the assessment year 2010-11 on the grounds inter alia that :-
“1. On the facts and circumstances of the case, the Ld. CIT (A) has erred in allowing the deduction u/s 10A of the Act of Rs.1,62,92,156/- to the assessee by not appreciating the fact that the assessee has not purchased the assets (Plant & machinery and building) but the same have been taken on lease from the company to which the assessee has direct affiliation.
On the facts and circumstances of the case, the Ld. CIT(A) has erred in not appreciating the fact that the assessee could not prove that the material assets were never put to use by the lessor company though the lessor company is in same business and was having clientage for the same business during the FY 2007-08.
On the facts and circumstances of the case, the Ld. CIT(A) has erred in giving relief to the assessee in the shadow of Circular No. 694 dated 22.11.1994 which deals with quite different issues other than those mentioned in the assessment order.
On the facts and circumstances of the case, the Ld. CIT(A} has erred in not considering the provision of the sec 10A (2)(iii) of the Act wherein it is mentioned that it is not formed by the transfer to a new business of machinery or plant previously used for any purpose." although it has been well established by the AO that the same has been used by the lessor and was leased to the assessee company which is a affiliated company of the lessor.
5. On the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the deduction u/s 10A of the Act on the ground that the lessor had never claimed deduction u/s 10A, though never such point
was placed by the assessee before the AO and no report was called for from the AO u/r 46A while admitting the additional evidence.
On the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the deduction by not considering the fact that the assessee has failed to file any evidence which could prove its claim and that business of the assessee is not a reconstruction of the already existing business and violated the provisions of sec.10B(2}(ii) and (iii) of the Act.” 3. Briefly stated the facts necessary for adjudication of the controversy at hand are : assessee company being incorporated on 26.03.2007 is into second year of its working being engaged in the business of information technology software. Assessee has declared total export sales of software to the tune of Rs.13,50,00,000/- and profit before tax to the tune of Rs.1,24,00,000/- after claiming statutory adjustment and deduction u/s 10A of the Income-tax Act, 1961 (for short ‘the Act’) to the tune of Rs.1,62,00,000/- and consequently shown the income at Rs.10,92,920/-. Assessing Officer has not accepted the submissions made by the assessee in view of the provisions contained u/s 10B (2)(ii) & (iii) of the Act. AO also followed the earlier years assessment order passed by his predecessors in case of the assessee and proceeded to conclude that since it is a case of previously used plant and machinery, the assessee has violated the provisions of section 10B(iii) of the Act and as such, is not eligible for exemption claimed by u/s 10A of the Act and thereby disallowed the deduction to the tune of Rs.1,62,92,156/- claimed by the assessee u/s 10A of the Act.
4. Assessee carried the matter by way of filing appeal before the ld. CIT (A) who has allowed the deduction u/s 10A by allowing the appeal filed by the assessee by following his own order for AY 2009-10. Feeling aggrieved, the Revenue has come up before the Tribunal by way of 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.
6. Undisputedly, assessment year 2010-11 is the second year of working of the assessee company having been incorporated on 26.03.2007 engaged in the business of information technology software. Ld. AR for the assessee company contended that identical issue has come up before the Tribunal for AY 2009-10 and has since been decided in favour of the assessee by remitting the case back to the ld. CIT (A). 7. When it is not in dispute that new STPI undertaking cannot be treated as reconstruction of business already in existence, leasing out of a portion of its assets to the assessee, the assessee cannot be said to have defeated the provisions stipulated u/s 10A which creates a bar of deduction on the undertakings formed by a reconstruction or by splitting out of an existing business. So, ld. CIT (A), on the basis of material placed before him, has rightly came to the conclusion that new undertaking of the assessee has comprehensively explained that there is no transfer to a new business or machinery or plant previously used for any purpose and that STPI approval was accorded on 23.04.2008 and the assessee has taken plant and machinery on lease. All these facts have been duly considered by ld. CIT (A) who has relied upon the decision rendered by the coordinate Mumbai Bench of the Tribunal wherein the word “reconstruction” has been explained. 8. However, ld. CIT (A) has nowhere referred to the lease deed vide which assessee company claimed to have took plant and machinery on lease nor any such lease deed has been relied upon by the assessee company during assessment proceedings by way of filing comprehensive submissions. So, we are of the considered view that aforesaid findings given in the preceding paras are subject to the production of the lease deed and following the decision rendered by the coordinate Bench of the Tribunal in assessee’s own case for AY 2009-10, this issue is remitted back to the ld. CIT (A) to examine the claim of the assessee in view of the lease agreement stated to have been entered into between NSGPL and assessee. So, this case is remitted back to ld. CIT (A) to decide afresh after ascertaining the actual nature of transaction in view of section 10A (ii) & (iii) of the Act in the light of lease deed set up by the assessee for taking plant and machinery on lease. Consequently, appeal of the Revenue is allowed for statistical purposes. Order pronounced in open court on this 23rd day of October, 2017.