DCIT, CHENNAI vs. M/S. SOFT LOGIC SYSTEMS PVT. LTD., CHENNAI

आदेश / O R D E R

PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER:

These are the appeals filed by the Revenue against the Orders of Commissioner of Income Tax (Appeals)-15, Chennai, for the A.Y. 2007-08, 2008-09 and the A.Y. 2009-10 against the orders of 9.3.2016 in appeal no.ITA No.138, 139 & 140/CIT(a)-15/14-15. Since the common issue is , 2022 & 2050/Mds/2016 :- 2 -: involved in the above appeals, they are clubbed, heard together and disposed off in common order for the sake of convenience.

2.0 The deduction claimed by the assessee u/s.10B for AY 2007-08 was Rs.3,36,697/-, AY 2008-09 was Rs.83,73,098/-. All the AYs were completed originally u/s. 143(3) and allowed the deduction claimed by the assessee u/s.10B. Subsequently, the assessments were re-opened for incorrect claim of deduction u/s.10B for want of ratification of approval from the Board under EOU Scheme.

3.0 All the grounds of the appeal are related to the deduction u/s.10A of Income Tax Act (in short ‘the Act’) allowed by the Ld.CIT(A) entertaining the alternate claim, made by the assessee during the appellate proceedings. The assessee filed return of income originally claiming the deduction u/s 10B as the assessee has set up 100% EOU under the STPI scheme and obtained approval from the Director, STPI, vide letter dated 24.3.2003. The approval was renewed vide letter dated 10.5.2008 for the period of 5 years. The case was selected for scrutiny and the assessments were completed u/s. 143(3). In the Returns of Income the assessee claimed the deduction u/s.10B which was allowed by the Assessing Officer (in short ‘AO’) in the assessment made u/s 143(3) originally.

Subsequently, the AO re-opened the assessments for incorrect claim of deduction u/s.10B. The AO found that the assessee has obtained approval for 100% EOU in STPI Scheme and obtained the approval from the Director, STPI. As per the CBDT Instruction No.2/2009 dated 09.03.2009, the approval granted by the Development Commissioner has to be ratified , 2022 & 2050/Mds/2016 :- 3 -: by the Board of approvals (BOA) for EOU scheme. The AO called for the ratification of BOA but the assessee could not furnish the same and made an alternate claim for deduction u/s.10A of the Act. The AO rejected the alternate claim made by the assessee and withdrawn the deduction allowed u/s.10B of the Act. On appeal, Ld.CIT(A) directed the AO to allow the alternative claim made by the assessee u/s.10A of the Act placing reliance on the decision of the Hon’ble jurisdictional High Court in the case of CIT v. Heartland KG information Ltd. [2013] 39 taxmann.com 132 (Madras).

4.0 Aggrieved by the Order of the Ld.CIT(A), the Revenue is on appeal before us.

During the appeal, the Ld. DR argued that the Ld. CIT(A) should not have considered the alternate claim of the assessee u/s.10A in the absence of any such claim in the return of income. The facts in the case of CIT v. Heartland KG information Ltd. [2013] 39 taxmann.com 132 (Madras) are distinguishable from the assessee’s case. Further, the Ld. DR submitted that the deduction u/s.10(B) & u/s.10(A) are allowed in different situations subject to satisfactory compliance of the conditions in the respective sections of the IT Act. It is not a mere Audit Report and the quantum of deduction. The Ld. DR further argued that the Ld.CIT(A) should have given an opportunity to the AO before allowing the deduction u/s 10A. On the other hand, the Ld.AR relied on the orders of the Ld. CIT(A). , 2022 & 2050/Mds/2016 :- 4 -:

5.0 We have heard the rival submissions and perused the material placed on record.

The assessee claimed deduction u/s.10B but could not furnish the ratification of the Board of approval as required in STPI scheme for 100% EOU schemes. Therefore, the AO has rejected claim of the assessee u/s.10B of the Act. The assessee is STPI unit and is eligible for deduction u/s.10A of the Act alternatively. However, for claiming deduction u/s.10A the assessee has to satisfy the conditions laid down in the Sec.10A in respect of Audit Report, quantum of deduction number of years, realization of foreign exchange, date of commencement, etc., as specified in Sec.10A. The Appellate Authority is empowered to consider the additional/alternate claim of the assessee during appellate proceedings if the claim is legally valid. This view is supported by decision in the case of Prudhvi Progress and Shareholders Pvt. Ltd. 349 ITR 336 relied upon by the assessee. Therefore, we are in agreement with the order of the Ld. CIT(A) for entertaining the alternate claim. However, whether the assessee has satisfied the conditions for granting relief u/s 10A or not, is required to be verified from the assessment records and additional information if any required by the A.O. Unless, the assessee satisfies all the conditions for granting the deduction u/s 10A, the same cannot be allowed. This aspect required to be verified by the A.O. Therefore, we are of the considered opinion that the issue should be go back to the file of the AO to verify whether the assessee has satisfied the conditions laid down u/s.10A or not, for granting the relief. In case, the assessee , 2022 & 2050/Mds/2016 :- 5 -: satisfies the conditions as specified in Sec.10A and entitled for deduction, we direct the AO to allow the deduction. Accordingly, the issue is remitted back to the file of the Assessing Officer, for consideration of the claim u/s 10A on merits.

6.0 In the result, the appeal of the Revenue for A.Y. 2007-08, 2008-09 and 2009-10 are allowed for statistical purposes.

Order pronounced in the Open Court on 26th May, 2017, at Chennai.