THE COMMISSIONER OF INCOME TAX-I, vs. AYYAPPA INFRA PROJECTS PVT LTD.,

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH WEDNESDAY, THE 23RD DAY OF AUGUST 2023 / 1ST BHADRA, 1945 WP(C) NO. 673 OF 2014 PETITIONER: SARVAM DIGITAL PROVATE LTD., VII/186A, BUND ROAD, KANNADIKADU, MARADU P.O, ERNAKULAM – 682 304 REPRESENTED BY ITS MANAGING DIRECTOR, JACOB JACOB BY ADV SRI.A.KUMAR RESPONDENTS: 1 UNION OF INDIA REPRESENTED BY THE SECRETARY, MINISTRY OF FINANCE, NEW DELHI 110 001. 2 COMMISSIONER OF INCOME TAX I & II C.R. BUILDING, IS PRESS ROAD, KOCHI 682 018 3 DEPUTY COMMISSIONER OF INCOME TAX CORCLE 4(1), C.R. BUILDING, IS PRESS ROAD, KOCHI 682 018. BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 23.08.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WP(C) No. 673 of 2014 2 DINESH KUMAR SINGH, J. -------------------------------------------- WP(C) No. 673 of 2014 -------------------------------------------- Dated this the 23rd day of August, 2023 J U D G M E N T 1. The petitioner has filed this Writ Petition impugning Ext.P3 Assessment Order and Ext.P7 Revision Order passed by the Commissioner of Income Tax for the assessment year 2008-09. 2. The petitioner claims to be 100% export oriented company engaged in Computer Aided Design (CAD) work, Architectural Drafting, Design Developing, Back Office Engineering Drafting Work for foreign architect firms. Petitioner also claims to be registered with Software Technology Park of India, Ministry of Communications & Information Technology, Department of Information Technology, Government of India, on 27.10.2006, with Registration No.STPT/IMSC/570/P/2006-07/014. Under the Income Tax Act, the Income of a unit in an STP, SEZ, Free Trade Zone when it is covered under the STP Scheme, is eligible for 100% exemption from tax as per Section 10A (2) of the Income Tax Act. The petitioner has placed reliance on certain circulars in support of the contention that the petitioner is also eligible for 100% deduction of Income Tax.

WP(C) No. 673 of 2014 3 3. The petitioner had availed the services of an US Company called M/s. Points and Lines LLC, USA and also outsourced the work of CAD documentation to persons outside India. The petitioner had paid a sum of Rs.23,48,979/- to M/s. Points and Lines LLC, USA for the services rendered by the said US Company. This amount was debited to the Profit & Loss Account for the assessment year 2008-2009 by the petitioner. 4. The petitioner filed Income Tax returns showing a net loss of Rs.10,48,048/-. The return was selected for scrutiny and an order was passed under section 143(3) on 17.12.2010 raising a demand of Rs.5,15,095/-. A sum of Rs.23,48,979/- for the CAD documentation and other charges, the petitioner was required to explain why the expense should not be disallowed as the petitioner did not deduct TDS on the said amount. The assessing authority thereafter added this amount of Rs. 23,48,979/- to the total income and disallowed the expense which was debited in the Profit & Loss Account. Against Ext.P3 Order dated 17.12.2010 passed by the assessing authority, the petitioner filed a Revision Petition under section 264 of the Income Tax Act before the 2nd respondent. The 2nd respondent had dismissed the revision on the ground that the petition is not maintainable for want of fee accompanying the revise at the

WP(C) No. 673 of 2014 4 time of filing. The revision was also dismissed on merits. 5. The High Court allowed this Writ Petition No.11140 of 2012, holding that non payment of requisite fee was only a curable defect and that the petitioner was not given an opportunity to cure the said defect. It is also held that the decision taken by the 2nd respondent on merits without giving an opportunity of hearing to the petitioner as to the merits involved, is not correct or sustainable and the order was set aside and the matter was remanded back to the file of the Commissioner to decide afresh after giving an opportunity to the petitioner to cure the defect. The petitioner was directed to cure the defect and to pay the requisite fee. On remand the impugned order Ext.P7 was passed by the Commissioner of Income Tax. 6. The claim of the petitioner available under Section 10A of the Income Tax Act has been rejected on the ground that the petitioner was not situated in the Software Technology Park, Special Economic Zone, etc. and held that Ext.P2 -Instruction No.1 of 2006 dated 31.03.2006 issued by CBDT would not be applicable in this case of the petitioner. In this case no approval has been granted by the Department of Electronics till date. Therefore the petitioner would not be eligible for exemption under Section 10A.

WP(C) No. 673 of 2014 5 7. After Ext.P2 - Circular dated 31.03.2006 was issued, the petitioner had entered to an agreement with the Director, Software Technology Park of India, Society under the Ministry of Information Technology for the development of Computer Software & I.T. Enabled Services. The said agreement has been recorded as Ext.P1(a) with the Writ Petition. The agreement mentioned that the petitioner has been granted the status of 100% export oriented unit, as defined in Ministry of Commerce Notification No.33/(RE)/92-97 dated 22nd March, 1994, on Software Technology Parks. Before recording the findings by the Commissioner that the petitioner is not entitled for exemption under Section 10(a) as the petitioner’s unit was not situated in the Software Technology Park or Special Economic Zone, this agreement has not been considered by the Commissioner. These could have been two situations:- (a) the agreement was not placed before the Commissioner or, (b) the Commissioner failed to consider the said agreement. 8. In any case, the document is the agreement between the petitioner and the Director of Software Technology Park of India, which has granted the status to the petitioner’s unit being situated within the Software Technology Park. In view thereof, I am of the opinion that the impugned order so far as the finding that the

WP(C) No. 673 of 2014 6 petitioner’s unit is situated within the Software Technology Park and, therefore, not eligible for exemption under Section 10(a) of Income Tax Act is without considering Ext.P1 Agreement. I, therefore, find that said revisional order Exhibit P-7 is unsustainable. In view thereof, the present petition is allowed and the matter is remanded back to the Commissioner, Income Tax I to consider the issue that whether the petitioner is entitled for exemption under Section 10(a) of the Income Tax Act in the light of Ext.P2 Circular dated 31.03.2006 read with Ext.P1 Agreement after giving an opportunity of hearing to the petitioner. The Commissioner is directed to finalize the revisional proceedings afresh in accordance with the law and pass speaking and reasoned order after taking into consideration the agreement and the Circular as the mentioned above. The petitioner is directed to appear before the 2nd respondent on 21.09.2023 for the further proceedings on remand. Sd/- DINESH KUMAR SINGH JUDGE rpr

WP(C) No. 673 of 2014 7 APPENDIX OF WP(C) 673/2014 PETITIONER’S EXHIBITS EXHIBIT P1 TRUE COPY OF THE REGISTRATION CUM MEMBERSHIP CERTIFICATE ISSUED BY THE DIRECTOR OF THE SOFTWARE TECHNOLOGY PARK OF INDIA (STPI). EXHIBIT P1(A) TRUE COPY OF THE AGREEMENT FOR SOFTWARE TECHNOLOGY PARK OF INDIA DATED 23-02-2007 IS PRODUCED HEREWITH AND MARKED. EXHIBIT P2 TRUE COPY OF THE INSTRUCTION NO 1 OF 2006 BEEN ISSUED BY THE CBDT DATED 31-03-2006 (RELEVENT PAGES) EXHIBIT P3 TRUE COPY OF THE ASSESSMENT ORDER DATED 17-12- 2010 EXHIBIT P4 TRUE COPY OF THE REVISION PETITION EXHIBIT P5 TRUE COPY OF THE ORDER IN REVISION DATED 29-03- 2012 EXHIBIT P6 TRUE COPY OF THE SAID JUDGMENT IN WRIT PETITION NO 11140/2012 DATED 23-05-2012 EXHIBIT P7 TRUE COPY OF THE ORDER IN REVISON DATED 31-07- 2013