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Facts
The assessee, M/s Wipro Technology Services Limited, claimed deduction under Section 10A for profits derived from its units set up in Software Technology Parks in Mumbai and Chennai. The Assessing Officer disallowed the deduction, stating that the units were interlinked and it was unascertainable which unit performed the activity or from which server the service was exported.
Held
The Tribunal noted that the assessee had provided sufficient evidence, including STPI and customs approvals, audited accounts, tax audit reports, and CBDT notifications, to establish the nature of services rendered and the eligibility for deduction. The Tribunal also relied on previous decisions in the assessee's own case for earlier assessment years where similar claims were allowed.
Key Issues
Whether the disallowance of deduction under Section 10A of the Income-tax Act by the Assessing Officer was justified, considering the evidence provided by the assessee regarding the nature and export of services.
Sections Cited
Section 10A, Section 143(3), Section 144C, Section 10B, Section 155(11A)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
for A.Y. 2008-09 is filed by the Dy. Commissioner of Income Tax, 9(3), Mumbai, [the learned Assessing Officer] against the appellate order passed by the Commissioner of Income-tax (Appeals)-21, Mumbai [the learned CIT (A)] dated 17th September, 2013, in appeal filed by assessee against the assessment order passed by Addl. CIT, Range 9(1), Mumbai under Section 143(3) read with section 144C of the Income-tax Act, 1961 (the Act) dated 27th December, 2011, was partly allowed. The learned Assessing Officer is aggrieved
The learned Assessing Officer has raised following grounds of appeal:-
“1. Whether on the facts and the circumstances of the case and in law the Ld. CIT(A) erred in deleting the disallowance of deduction of s.25,50,44,366/- u/s.10A made by the Assessing Officer without appreciating the facts and evidences discussed by the Assessing Officer in his assessment order dated 27.12.2011 2. The appellant prays that the order of the CIT(A) on the grounds be set aside and that of the Assessing Officer be restored.
3. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”
Brief facts of the case shows that M/s City Technology Services Limited, which got amalgamated with Wipro Technologies Services Limited and M/s Wipro Technologies Services Limited filed its return of income on 30th September, 2008, declaring total income of ₹26,48,48,055/- being claiming deduction under Section 10A of the Act of ₹25,50,44,366/-. The return of income was picked up for scrutiny and the claim of deduction under Section 10A of the Act was examined.
The learned Assessing Officer examined the claim of the assessee and denied the same holding that assessee has only explained the nature of services, so it is not clear to him whether the work is to be done be eligible units or non-eligible units. Further, it was also not clear how the 10A units exported services as no correspondence between the customer and eligible units was produced. Separate work orders for eligible units and non-eligible
The assessee aggrieved preferred the appeal before the learned Commissioner of Income-tax (Appeals). The assessee made a detailed submission mentioned in paragraph no.4.2 of the order of the learned Commissioner of Income-tax (Appeals). The learned CIT (A) found that assessee has been allowed deduction under Section 10A of the Act from A.Y. 2005-06 and 2006-07. The first time deduction was disallowed in A.Y. 2007-08. On appeal for that year, the learned CIT (A) has allowed the claim of the assessee vide order dated 13th March, 2012. On perusal of the para no.3.4 of that order he found that the learned Assessing Officer has disallowed the claim for this year also based on Assessing Officer’s finding for A.Y. 2007-08, his findings are as under:-
“4.3 I have considered the finding of the Assessing Officer and rival submission of the appellant, carefully. I find that appellant has been allowed deduction u/s.10A right from the AY 2005-06 to 2006-07. However, in AY 2007-08 deduction has been disallowed which has been disapproved by the CIT(A) and claim of the appellant has been allowed in appeal No.CIT(A)-20/ACIT9(3)/IT-317/2010-11 dated “3.4 I have perused the assessment order, remand report of the Assessing Officer and written submissions of the appellant. Though the appellant has taken 10 ground of appeal but they are clubbed together as in sum and substance they deal with denying the claim of deduction uls 10A of the IT Act, 1961. The Assessing Officer in its assessment order has disallowed the same on the following grounds:- a. Units of the assessee are interlinked b. It is unascertainable as to which unit must have actually carried out the activity and from which server the service was exported c. The units cannot said to be independent. d. Procedural requirement not fulfilled u/s. 10A of the I.T.Act, 1961 as Form No.56G was revised. e. Allocation of telecommunication expenses on the basis of user points as against actual units shows that the assessee cannot establish as to which unit exactly performs the quantum of service 3.36 As mentioned earlier, the additional evidences filed were forwarded to the Assessing Officer for comments. The report/comment was received vide letter dated 06.01.2012, the copy of which was made available to the appellant who had submitted its comments. a. STPI and customs approvals b. Audited accounts c. Tax audit report and the TPO's order d. CBDT's communication pursuant to Notification No. SO 890(E) dated 26.09 2000 treating support services alt eligible for deduction u/s. 10A of the 1.T.Act, 1961.
In the above background, it is not fair on the part of the Assessing Officer to hold that the appellant's activities are not ascertainable. Computer software has been defined in Explanation 2 to Section 10A and includes any service as may be notified by the Hon'ble CBDT and the Hon'ble CBDT vide its Notification quoted supra has identified "support centers" as one of the service eligible for deduction. Thus, the appellant does qualify for deduction u/s. 10A as regards Explanation 2 to section 10A is concerned.
3.3.7. Coming to the next issue of location of units, It is observed that the appellant had produced license dated 19.07.2005 issued by the Commissioner of Customs to highlight that it was a "custom bounded premises" meant to be used as a 100% EOU/STPI unit. The fact that the Mumbai STPI and non-STPI are in the same building is not material as there is 3.3.8 As regards the STPI unit at Chennai, the same is also approved as "custom bonded wear-house premise and it is on the first floor while the non-STPI unit is at the ground floor of the building. Thus, the appellant had produced adequate evidences of separation of the units which cannot be dismissed or ignored.
3.3.9. The next issue on which the deduction u/s. 10A was disallowed was in respect of submission of revised Form Nu 56F, the appellant has filed detailed reasons for revising the Form No.56F which is not repeated. The assessing Officer has taken a hyper technical view. There is no vested right to a mistake and there is no bar of the Law for correction of mistakes and omissions.
3.3.10. This next objection of the Assessing Officer was that the common tele-communication expenses were allocated by the appellant on the basis of user points as against the actual expenditure, it is observed that the Assessing officer has not disputed that the method of allocation on the basis of user point is not a reasonable method. In any case, the fact that there has been an allocation of common expenditure does not lead to the conclusion that the appellant is unable to establish as to which unit has 3.3.11 To sum up the appellant has been able to meet each and every objection of the Assessing Officer while denying deduction under Section 10A of the Income-tax Act, 1961 through proper evidences filed at assessment stage as well as additional evidences filed at appellate proceedings. As such, it is held that the conditions to obtain deduction under Section 10A is fulfilled and, therefore, ground of appeal no.5 to 14 is allowed.
4.4 Thus, with a view to maintain judicial consistency, the decision of Ld. Predecessor CIT(A) is to be followed. Further, during this year, Assessing Officer has not brought on record any substantial ground which can reveal not fulfillment of terms and conditions prescribed u/s.10A. He has merely pointed out lack of some clarity which cannot be a solid basis for denial of such claim. If it is not clear whether work is done by 10A units or such unit has actually exported the services, it was the responsibility of the Assessing Officer to make further investigation and establish the fact that no services has been exported by 10A units. Merely on the basis of some doubts, all the evidences possessed by the appellant for claiming such deduction cannot be disregarded. Thus, in the background of earlier decision and on account of un- 4.5 As regards, quantum of deduction, claim of the appellant is also sustainable because appellant has submitted a letter for extension of time for receiving balance export proceeds outstanding as on 30.09.2008. This letter is in accordance with RBI master Circular Nos.9/2006-07 dated 1.7.2006 and 9/2007-08 dated 2.7.2007. As per the claim of the appellant. entire balance export proceeds of ₹.3,94,17,539/- has been received on or before 23.01.2009 hence as per provision of Section 155(11A), appellant is entitled for entire deduction. It is however, pertinent to mention that this new fact has been submitted during the course of appellate proceedings which authenticity is required to be verified by the Assessing Officer, hence it is in the interest of justice, both for Assessing Officer and appellant, to direct Assessing Officer to re-verify the facts and evidences and allow the entire claim of deduction, if sale proceeds have been received within the provision of law u/s.155(11A) of the 1.T.Act. If such allowance is not legally tenable because of any new fact or evidences on record. Assessing Officer can deny the balance amount by pointing out such contrary facts or evidences on record in a speaking manner.
By this appellate order, the learned Assessing Officer is aggrieved. The learned CIT Departmental Representative vehemently supported the order of the learned Assessing Officer. He submitted that units of the assessee are interlinked and does not ascertainable as which unit has carried out activity and from which servers the services are exported. He submits that units cannot be said to be independent and further form no.56G was revised. His further claim is that allegation of telecommunication expenses is made on the basis of user points which assessee could not establish and therefore, which unit exactly performs the quantum of services is not known. He further submitted that the learned CIT (A) has allowed the claim of the assessee based on the order of the earlier assessment year. However, the claim of the assessee is required to be decided with respect to the fulfillment of the conditions for each year. He further relied upon the decision of the Hon'ble Supreme Court in case of CIT vs. Calcutta Agency Limited 90 ITR 191, he submitted that facts necessary to support the claim of the assessee are required to be established by the assessee for each year.
The learned Authorized Representative submitted that issue arise in the case of A.Y. 2007-08, which was relied upon by the learned CIT (A) was carried by the learned Assessing Officer before the Bangalore Bench in ITA
The learned CIT (A) in rejoinder referred to the provision of Section 10B of the Act and submitted that the assessee has not exported software product and therefore, deduction is rightly disallowed.
We have carefully considered the rival contentions and perused the orders of the lower authorities. According to the Provisions of Section 10Aof the Act, the deduction of the profit and gains derived by an undertaking from export of computer software for a period of 10 consecutive
In the result, the appeal of the learned Assessing Officer is dismissed.
Order pronounced in the open court on 26.03. 2024.