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Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This is the appeal filed by the assessee against the order of CIT(A)-1, Pune, dated 30-08-2016 for the Assessment Year 2009-10.
Grounds raised by the assessee are as under :
“1. The Ld.CIT(A) erred in upholding the reassessment proceedings though the Ld AO had reopened the assessment made u/s.143(3) on 28- 11-2011 on the basis of same set of facts and merely on the basis of change of opinion. 2. Without prejudice to Ground No.1, the Ld.CIT(A) erred in holding that the assessee was entitled to deduction u/s.10A only in respect of profit earned between 01-01-2009 and 31-03-2009 and not for the entire year though there is no such provision in the Income Tax Act. 3. The appellant craves leave to revise, modify, alter or delete any of the above grounds or to add new Grounds of Appeal.”
Briefly stated relevant facts are that the assessee is a company
and is engaged in the outsourcing of software development. Assessee
filed its return of income on 02-11-2009 declaring total income at Nil
and claimed deduction of Rs.47,32,885/- u/s.10B of the Act.
Assessment u/s.143(3) of the Act was made on 28-11-2011 determining
the income at Rs.3,94,861/-. Thereafter, the case was reopened
u/s.148 of the Act on 10-03-2014. During the assessment proceedings,
AO noticed that assessee failed to comply with the conditions specified
in section 10B of the Act. Further, the alternate claim made by the
assessee u/s.10A of the Act and the same was not considered
favourable as per the discussion given in Para No.5 of the assessment
order. Considering the fact that the alternate claim is raised for the
first time without filing the return of income, AO denied the alternate
claim of the assessee relying on the decision of Hon’ble Supreme Court
in the case of Goetze India Ltd. Vs. CIT 157 Taxmann 1 relied on by the
assessee. Eventually, the AO assessed the income of the assessee at
Rs.39,48,610/- vide his order u/s.143(3) r.w.s.147 of the Act, dated
27-03-2015. Contents of Para No.5.8 of the AO’s order are relevant and
the same are extracted below :
“5.8 In view of the above discussion the contention of the assessee hereby rejected and the case is decided as per the law. For claiming deduction u/s.10B of the Act, the assessee should be a 100% Export Oriented Unit (EOU) as specified under explanation 2(iv) below to the section 10B of the Act which defines a “hundred percent export oriented undertaking” as a undertaking so approved by the Board appointed in this behalf by the Central Government under section 14 of the Industries Development and Regulation Act, 1951. Subsequent to the delegation of this power by the Ministry of Commerce and Industries to the Development Commissioners, such approvals to 100% EOUs are now being granted by the Development Commissioners which are later ratified by the Board of Approval. However the assessee is not approved by Development Commissioner hence deduction under section 10B of the Act at Rs.47,32,885/- is hereby disallowed and added to the total income of the assessee. The undersigned is satisfied that the assessee has furnished inaccurate particulars of income and hence penalty proceedings u/s.271(1)(c) are separately initiated.”
During the First Appellate Proceedings, the assessee challenged
the validity of reopening of the assessment on the basis of same set of
facts and on the basis of mere change of opinion and made elaborate
submissions. The CIT(A) called for comments of the AO. Assessee also
submitted the counter comments for the same. Para No.4 of the order
of CIT(A) contains the submissions of the assessee, comments of the AO
and the counter comments of the assessee. Eventually, the CIT(A) held
the reassessment made by the AO as valid. Further, assessee raised
the ground relating to allowability of claim of deduction u/s.10B of the
Act before the CIT(A). CIT(A) upheld the allowability of claim of
deduction u/s.10B of the Act. However, with regard to the alternate
claim of deduction made by the assessee u/s.10A of the Act, he
restricted the deduction to only 3 months, i.e. from 1-01-2009 to 31-03-
2009 (Date of STPI approval on 01-01-2009) relying on the decision of
Clarion Technologies Pvt. Ltd. Vs. DCIT – ITA No. 2554/PN/2012 &
connected appeals, dated 30-10-2014
Aggrieved with the order of CIT(A), the assessee is in appeal before
the Tribunal with the grounds mentioned above.
Narrating the above facts of the case, Ld. Counsel for the assessee
submitted that assessee is located in the STPI unit. This is the first
year of claim of deduction u/s.10B of the Act. Bringing my attention to
page Nos. 46 and 47 of the paper book, Ld. Counsel submitted that the
same constitutes certificate of approval dated 01-01-2009 and the same
is valid upto 31-12-2013 (i.e. 4 years). Ld. Counsel explained the
significance of date of approval and submitted that approval is STPI
unit specific and the date of approval need not be taken as the cut off
date for the purpose of allowing the deduction u/s.10A/10B of the Act.
He also brought my attention to a case where approval was given to a
case which involves claim of deduction u/s.35(2AB) of the Act and also
brought my attention to the judgment of Delhi High Court in the case of
CIT Vs. Sundan Vikas (India) Ltd. 22 taxmann.com 19 (Del.) and
submitted that the cut off dates mentioned in the certificate issued by
Department of Scientific & Industrial Research is irrelevant. The claim
u/s.35(2AB) of the Act has to be allowed for the entire year and not on
proportionate basis. The said judgment has kept reliance to another
judgment of Gujarat High Court in the case of CIT Vs. Claris
Lifesciences Ltd. 174 Taxman 113 (Gujarat) which is again relevant for
the similar proposition that the cut off date mentioned in the certificate
issued by DSIR is of no relevant. Referring to these judgments, Ld.
Counsel for the assessee submitted that the deduction is to be allowed
to the assessee for the entire year and for the entire expenditure
incurred on Research & Design facilities.
Ld. Counsel for the assessee also drew my attention to the
decision of Coordinate Bench of the Tribunal in the assessee’ own case
in ITA No.185/PN/214, order dated 30-12-2015 for the A.Y. 2010-11
and submitted that the claim of the assessee was allowed in the
subsequent year. Thus, it is the case of the assessee that deduction
u/s.10A is allowable, in principle. The cut off date mentioned on the
certificate issued by STPI authorities is of no significance or relevance in
view of the above referred jugdments/decision.
Ld. DR for the Revenue relied on the order of the AO dutifully.
I heard both the parties on the limited issue of granting
proportionate deduction u/s.10A of the Act merely relying on the cut off
date appearing on the certificate issued by the STPI authorities. On
similar facts, the various judgments and the Tribunal in assessee’s own
case has decided the issue and held that the cut off date mentioned on
the certificates are of no relevance. Therefore, I am of the view that the
claim made by the assessee u/s.10A of the Act has to be allowed for the
entire year. In my view, the settled legal proposition delivered in the
context of claim of deduction u/s.35(2AB) of the Act holds good for the
purpose of claim of deduction u/s.10A of the Act as well. As such, the
Tribunal in assessee’s own case in ITA No.185/PN/2014, dated
30-12-2015 for the A.Y. 2010-11, has already held that, in principle,
the assessee is entitled to claim of deduction u/s.10A of the Act.
Accordingly, the grounds raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced on this 26th day of March, 2018.
Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 26th March, 2018. Satish
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Pune 3. आयकर आयु� / The CIT-1, Pune 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / 5. DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune