ITO, WARD - 7(2), KOLKATA, KOLKATA vs. M/S. WIZARD ENTERPRISES PVT. LTD., KOLKATA

As the issues involved are identical in all the assessment years under appeal, both the appeals of the revenue and cross objections of the assessee are taken up together and disposed off by this consolidated order for the sake of convenience.

The revenue has raised the following grounds in both the appeals:- ITA No. 628/Kol/2011 A.Y 2007-08 (by the revenue) “1. That the ld. CIT(Appeals)-VIII, Kolkata has erred on facts and in law in deleting the disallowance made by the AO, of the exemption claimed by the assessee u/s. 10B, on the ground that the assessee company did not have any ‘Certificate of Approval’ from the Board of Approval appointed in that regard by the Central Government and also the A.R of the assessee, during the course of scrutiny proceedings, could not submit any ratification obtained from the ‘Board of Approval’ as required as per the clarification of the CBDT dated 09.03.09.”

The assessee has raised the following grounds in both the COs:-

The only issue to be decided in these appeals of revenue and cross objections of the assessee is as to whether the assessee is entitled for claim of deduction u/s. 10B/10A of the Act in respect of profits derived from its call centre operations from unit registered with STPI as Software Technology Park of India [ in short ‘STPI’] as 100% export oriented unit [EOU].

The brief facts of this issue are that the assessee claimed exemption u/s. 10B of the Act from its call centre operation in the return of income. The assessee started its call centre operation w.e.f 16-02-2006. The assessee claimed deduction u/s. 10B of the Act for the assessment year 2006-07 ( being the first year of its claim), which was accepted by the ld.AO u/s. 143(1) of the Act. Before the ld.AO the assessee produced the following documents in support of its claim for the assessment years under consideration:- “i) Copy of letter of permission as 100% Export Oriented Unit under STP Scheme for the I.T. Enabled Services issued by the Director, STPI, Kolkata (Sponsored by the Ministry of Communication & Information Technology, Govt. of India vide LoP No. STPK: DIR:441: 2005-06: 1548 dt.10.01.06.

The ld.AO observed that the assessee did not have certificate of approval from the Board as 100% Export Oriented Unit (EOU)/ undertaking approved by the Board appointed in this behalf by the Central Government and in accordance with section 14 of the Industries (Development & Regulation) Act (IDRA), 1951 and the rules made under that Act for the purpose of getting exemption allowable u/s. 10B of the Act. Accordingly, the assessee was asked to show cause why the deduction u/s. 10B should not be denied. In response to the same, the assessee argued that the power to grant of approval u/s. 14 of the Industries (Development & Regulation) Act (IDRA), 1951 has been delegated to the Development Commissioner and approval granted by the Development Commissioner shall be considered valid for the purpose of exemption u/s. 10B. He also stated that “in the case of units under EHTP/STP Scheme necessary approval/permission shall be granted by the officer designated by the Ministry of Communication and Information Technology, Deptt. of Information Technology for the purpose instead of Development Commissioner by the Inter Ministerial Standing Committee(IMSC) instead of BOA (Board of Approval). He also stated that in the instant case approval under the STP Scheme is granted by the designated officer, Deptt. Of Information Technology and by the Inter Ministerial Standing Committee (IMSC). He further argued that the approval granted to the assessee under STP Scheme complies with all the requirements contemplated u/s. 10B of the Act when read with Industrial (Development) & Regulations) Act, 1951, Foreign Trade Policy 2004-2009, Hand Book procedure (vol.-1) and Appendix to the Hand Book. In other words, it was argued that as the unit of the assessee at Kolkata was approved as 100% Export Oriented Unit (EOU) under the STP Scheme, it must be held that it was so approved as 100% EOU by the Board referred to clause (i) of Explanation to section 10(B) of the Act. The ld. AO not being satisfied with the ITA No.628/K/2011 5 CO No.134/K/2013 ITA No.65/K/2012 CO No.133/K/2013-C-AM M/s. Wizard Enterprise Pvt.Ltd

None appeared on behalf of the revenue, but adjournment petition filed by the revenue is rejected by the bench as the Learned Senior DR had sought adjournment for 16 cases out of 21 cases listed in the bench. So we proceed to dispose off the appeals and cross objections after hearing the ld.AR and perusing the materials available on record on merits.

The ld.AR vehemently supported the orders of the ld.AO in granting deduction and the submissions made therein. He also placed his reliance on the decision of the ITAT Chandigarh in the case of Bebo Technologies (P) Ltd Vs. JCIT in ITA Nos. 1115/Chd/2008, 116/Chd/2009 dated 29-04-2011 reported in 2011 (4) TMI 870-ITAT, Chandigarh, in support of its contention.

We have heard the ld.AR and perused the materials available on record including the paper book as filed by the assessee before us. The facts as stated herein above remain undisputed and hence the same are not reiterated for the sake of brevity. We find from page 43-46 of the assessee’s paper book containing an agreement entered into by the assessee for software export technology park with the

We find from page 47-48 of the paper book regarding copy of the green card issued by the designated officer, Govt. of India, Deptt. Of Information Technology and Chairman, Inter-ministerial standing Committee on software technology park scheme vide green card number STPK/233/06 dated 16th Feb., 2006 as an unit approved under the STP scheme of the Govt. of India as 100% export oriented unit to carry out IT enabled services (call centre). It would be pertinent to reproduce the same herein below:- “ Sl No. 6047 Green Card No.STPK/233/06 Dated the February 16th 2006 SOFTWARE TECHNOLOGY PARK(STP) UNIT HAS BEEN APPROVED UNDER THE STP SCHEME OF THE GOVT. OF INDIA AS A 100% EXPORT ORIENTED UNIT FOR COMPUTER SOFTWARE. THIS UNIT IS ENTITLED TO TOP PRIORITY TREATMENT FROM ALL CONCERNED CENTRAL AND STATE GOVERNMENT DEPARTMENTS AND OTHER ORGANISATIONS IN ALL MATTERS RELATING TO THE PROJECT ITA No.628/K/2011 7 CO No.134/K/2013 ITA No.65/K/2012 CO No.133/K/2013-C-AM M/s. Wizard Enterprise Pvt.Ltd

We also find lot of force in the alternative argument made by the ld.AR that the assessee company being registered with STP is entitled for claiming deduction u/s. 10A of the Act. In this connection, the CBDT’s instruction no. 1/2006 dated 31-03- 2006 assumes great significance. The same is reproduced herein below for better appraisal :- “ SECTIONS 10A AND 10B

It is not in dispute that a call centre operation has been duly notified as IT enabled services and thereby eligible for deduction for 100% export oriented unit contemplated u/s. 10A/10B of the Act.

We also find from page 51 of the paper book containing a letter dt. 02-09-2011 addressed to the assessee by Software Technology Parks of India (STPI), Ministry of Communication & Information Technology, Dept of IT, Govt. of India, Kolkata regarding registration for setting up STP unit ( 100% Export Oriented Unit under STP scheme). The same is reproduced here in below for the sake of convenience:- “Software Technology Parks of India Ministry of Communication & Information Technology, Dept of IT, Govt. of India Plot No.5/1 DP Sector-V, Salt Lake, Kolkata-700 091 Ph: 91-33-2367-3598/99-2367 3798/99, Fax 91-33- 2367-3597 Email:infor@kol.stp.in/URLhttp://www.kol.stp.in To The Director Wizard Enterprises Pvt. Ltd. 5, Lake Avenue, Kolkata - 700026 SUB: YOUR STP UNIT APPROVAL RATIFICATION REG. REF: Your letter dt: 29.08.2011 Sir, With reference to above and discussions with your officials, the facts w.r.t, your STP unit registration is produced below:

It was also brought to our attention by the ld.AR that the Instruction (F.No.178/19/2008-IT-I) dated 9th March’ 2009 issued by CBDT clarifies that the power to grant approval u/s. 14 of industrial (Development & Regulations) Act, 1951 has been delegated to Development Commissioners and approval granted by the Development Commissioner shall be considered valid for the purpose of exemption u/s. 10B. It would be pertinent to note that in the instant case approval under the STP scheme is granted by the Designated Officer, Department of Information Technology and by the Inter-ministerial Standing Committee (IMSC). Hence, the approval granted under STP Scheme complies with all the requirements contemplated u/s. 10B of the Act when read with Industrial (Development & Regulations) Act, 1951, Foreign Trade Policy 2004-2009, Hand book of Procedures (Volume-I) & Appendix to the Handbook. We also find that the ld.AR further argued before us that to the best of his knowledge the order passed under similar circumstances by the ld.CIT(A)-II,

We also find glaring similarities between Section 10A and 10B of the Act as below:-

We find that the assessee is also entitled for benefit of deduction u/s. 10A of the Act in the facts and circumstances of the case, though the assessee had not claimed the same under that section in the return of income. In this regard, we would like to place reliance on the decision of the co-ordinate bench of the ITAT Mumbai in the case of ITO Vs. Accentia Technologies Limited in ITA No. 1871/Mum/2011 dated 08- 05-2014, wherein it was held that : “6. Having regard to the circumstances of the case the learned CIT(A) called for a remand report. Upon obtaining the remand report he noticed the following undisputed facts i.e., (a) there is no dispute regarding the amount which is claimed as exempt under section 10A of the Act, (b) there is no dispute that the assessee is entitled to claim exemption under section 10A of the Act and all the criteria regarding the said claim has been met by the assessee, and (c) There is also no dispute regarding the fact that in the return of income the assessee claimed deduction of the amount admissible as deduction under section 10A by mentioning it as section 10B of the Act. Thus the only dispute that exists is whether the claim of the assessee regarding deduction under section 10A is allowable if the claim was made under section 10B in the return of income.

We also find that the contents of audit report in form no. 56F and 56G together with the computation mechanism remains the same for claiming the deduction u/s. 10A/10B of the Act. It was argued alternatively by the ld.AR that the decision of the ld.AO is to educate the assessee of its rights and entitlements as per law and cannot take advantage of ignorance of assessee. In this regard, he cited the relevant extract of the decision of the Hon’ble Bombay High Court in the case of Sanchi Software & Solutions Pvt. Ltd Vs. CIT reported in (2012) 349 ITR 404 (Bom), wherein it was held as under:- “Income-tax Department cannot take advantage of the assessee’s mistakes in not claiming the exemption in the Income-tax Return and not deny him exemption. The entire object of administration of tax is to secure the revenue for the development of the country and not to charge the assessee more tax than that which is due and payable by the assessee.”

We find that the decision of the Hon’ble Jurisdictional High Court in the case of CIT Vs. India Capacitors Ltd reported in 180 ITR 641 also supports this proposition. We further find that the alternative argument of the ld.AR has got lot of force as it may be appreciated that there was no mala fide intention on the part of the assessee in not claiming the deduction under the correct section. In fact, it could be appreciated that the assessee had only run the risks of not having been able to avail the benefit of justice and not gained anything by not claiming deduction under the correct section. The Hon’ble Supreme Court in the case of CIT Vs. Mahalaxmi Sugar Mills Co. Ltd reported in (1986) 160 ITR 920(SC) has observed as under:- "There is a duty cast on the Income-tax Officer to apply the relevant provisions of the Indian Income-tax Act for the purpose of determining the true figure of the assessee's taxable income and the consequential tax liability_ That the assessee fails to claim the benefit of a set-off cannot relieve the Income-tax Officer of his duty to apply section 24 in an appropriate case." ITA No.628/K/2011 14 CO No.134/K/2013 ITA No.65/K/2012 CO No.133/K/2013-C-AM M/s. Wizard Enterprise Pvt.Ltd

In view of above facts and circumstances and judicial precedents relied upon hereinabove, we hold that the assessee is entitled to claim the benefit of deduction under the provisions of section 10A as well as section 10B of the Act. Hence we find no infirmity in the impugned orders of the ld.CIT(A) in deleting the disallowance as made by the ld.AO on this issue. We uphold the impugned orders of the ld.CIT(A). Hence, the grounds raised by the department in both the appeals are dismissed.

In view of aforesaid facts and circumstances and judicial precedents as relied upon by the ld.AR before us, the grounds of cross objections as filed by the assessee before us are allowed.

In the result, the appeals of the revenue are dismissed and cross objections of the assessee are allowed as stated above. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 04 - 03 - 2016