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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI RAJESH KUMAR
PER AMIT SHUKLA, JM :
The aforesaid appeal has been filed by the Revenue against the impugned order dt. 31.8.2012 passed by the CIT(A)-20, Mumbai for the quantum of assessment passed u/s 143(3) for the A.Y 2009-10, on the following grounds :
“1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance of the deduction u/s.10B of the I.T Act amounting to Rs.50,10,459/-
The Ld. CIT(A) has erred in allowing the deduction u/s.10B even though the assessee did not have approval of prescribed authority as required in CBDT's letter F.No.178/19/2008-ITA-J dated 18.10.2010
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The Learned CIT(A) has failed to appreciate that the green card issued by the Chairman inter Ministerial Standing Committee(IMSC),as software Technology Park Scheme is merely a concession provided by the government to the units set up in STP zones to avail certain facilities on priority basis, it does not have any bearing with the allowance and/or disallowance of deduction u/s. 10B of the Act.”
At the outset, the ld. Counsel for the Assessee submitted that the ld. CIT(A) has decided the issue of claim of deduction u/s 10B in favour of the Assessee, following the decision of the ITAT Delhi Bench in the case of M/s. Valiant Communication Ltd. in ITA No. 2706/Del/2008 and M/s. Regency Creations Ltd. in ITA No. 1588/Del/2010 dt. 5.5.2011. Now, the said decisions of the Delhi Tribunal stands reversed by the decision of the Hon’ble Delhi High Court in the same case of CIT vs. Regency Creations Ltd. & Valiant Communications Ltd. reported in [2013] 353 ITR 326.
Explaining the brief facts, the ld. Counsel submitted that the Assessee is an export oriented unit and received all its revenue by export of services in foreign exchange. It had claimed deduction of Rs. 50,10,459/- u/s 10B on the basis of Audit report. The Assessing Officer denied the claim of deduction u/s 10B on the ground that the Assessee undertaking needs to be approved as 100% EOU by the Board appointed in this behalf by the Central Government in exercise of powers conferred by Sec. 14 of the Industries (Development & Regulation) Act, 1951. In this case, the Assessee has not sought approval from the Board and, instead informed that it has been issued a green card by the Designated Officer, Secretary to the Government of India, Ministry of Information and Technology, who is the Chairman of Inter Ministerial Standing Committee on Software Technology Park Scheme. The Director of STPI has given approval for 100% EOU. However, the Assessing Officer
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held that the said approval should be given by the proper authority. The ld. CIT(A), following the decision of the Tribunal in the case of M/s. Regency Creations Ltd. decided the issue in favour of the Assessee.
Alternately, the ld. Counsel submitted that the Assessee is otherwise eligible for claim of deduction u/s 10A as all the conditions laid down for the eligibility criteria for Sec. 10A stands fulfilled. In support of his contention he filed a copy of the audit report certified by the Auditor in Form 56F for the claim dt. 11.1.2016 for which it has necessary approval. Thus, he submitted that alternately, the Assessee’s claim u/s 10A should be entertained and same can be examined by the Assessing Officer afresh.
The ld. DR submitted that so far as allowability of deduction u/s 10B which was claimed by the Assessee and allowed by the ld. CIT(A), now stands reversed by the decision of the Hon’ble Delhi High Court, therefore, the Revenue’s appeal on this score should be allowed. Regarding the alternate plea of the ld. Counsel that claim of deduction should now be examined u/s 10A, he submitted that this plea or ground has neither been raised before the Assessing Officer nor the ld. CIT(A), therefore, the same cannot be raised at this stage. Further, the Assessee has neither filed any cross objection nor has taken any additional ground, therefore, such an oral plea made by the ld. Counsel cannot be entertained and Revenue’s appeal should be allowed.
We have considered the rival contentions and perused the relevant finding given in the impugned order. The Assessee had claimed deduction u/s 10B on the ground that it has been registered and approved under the STP scheme of the Government of India as 100% EOU for the period of 5 years
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effective from 7.3.2007 to 6.3.2012. The AO noted that in terms of Explanation II(iv) to Sec. 10B, 100% EOU has been defined as an undertaking which has been approved as 100% EOU by the Board appointed in this behalf by the Central Government in view of Sec. 14 of Industries (Development & Regulation) Act, 1951 and rules made thereunder. The Assessee’s unit has not been approved by the said authority and instead, the Assessee’s case has been that it has been granted permission from STPI issued by the Director, STPI working under the Ministry of Communication and Information Technology, therefore, it is entitled for claim of deduction as 100% EOU. The ld. CIT(A) had allowed the claim following the decision of the Delhi Tribunal in the case of M/s. Regency Creations Ltd. Now the said decision stands reversed by the Hon’ble Delhi High Court as stated above, wherein the Hon’ble High Court held that approval under STP scheme cannot be deemed approval for the purpose of Sec. 10B and it must be approved by the Board appointed by the Central Government. Respectfully following the decision of the Hon’ble Delhi High Court, we hold that the Assessee is not eligible for claim of deduction u/s 10B and accordingly, the decision of the ld. CIT(A) on this score is reversed and the ground raised by the Revenue is treated as allowed.
Now, coming to the alternate contention raised by the ld. Counsel that the Assessee is otherwise eligible for deduction u/s 10A and, therefore, the matter should be set aside for examining this issue of claim afresh. Such a plea as contended by the ld. Counsel can be entertained even without there being any appeal or cross objection which has been objected by the ld. DR. On consideration of the peculiar facts and circumstances of the case where the Assessee’s claim for deduction u/s 10B was allowed by the ld. CIT(A) following certain judicial decision, now stands reversed. In this manner the
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Assessee was debarred from making any other claim or raise any alternative plea uptil the stage of first appellate authority. Thus, the Assessee cannot be precluded from taking a fresh plea for which it may otherwise be eligible for claim of deduction under different provision when the eligibility criteria and conditions, as prescribed under a given provision are fulfilled. Even though the Assessee may not have filed any cross objection or appeal, but the parties are entitled to raise the ground or oral plea even when it has not been set forth in the memorandum of appeal, provided that firstly, it is arising out of facts and material on record and secondly, opportunity of hearing is provided to both the parties. The Tribunal is well within the power to entertain a ground or plea beyond those incorporated in the memorandum of appeal and this view has been laid down by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. reported in 229 ITR 383 which has further explained and reiterated by the Hon’ble Gauhati High Court in the case of Assam Company (India) Ltd. reported in 256 ITR 423. The relevant observation of the Hon’ble High Court reads as under :
“Whether or not the applicant-company can be permitted to raise that plea only on the ground that it had not preferred any appeal or cross-objection against the order of the Commissioner of Income-tax (Appeals) is the question which now engages the attention of this court. It need not be over- emphasised that the Appellate Tribunal Rules framed by the Tribunal in exercise of its power under section 255(5) of the Act are wholly for the purpose of regulating its own procedure and the procedure of the Benches of the Tribunal. The rules therefore embody the principles of procedure to be followed by the Tribunal and its Benches for the discharge of its functions, The scheme of the Rules read as a whole does not suggest that the Rules in any way have the effect of curtailing or circumscribing the power, authority and jurisdiction of the Tribunal in dealing with matters at its disposal. We have not been able to read any prohibition in the rules totally precluding the Tribunal from considering any ground beyond those mentioned in the memorandum of appeal filed by a party, whether the assessee or the Department, in the absence of an appeal or cross-objection
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by the other side projecting the new ground. It is a settled principle of law that procedural law is the hand maid of justice and has to be so interpreted to advance the cause of justice and not to thwart it. Considering the language used in section 254(1) of the Act conferring powers on the Tribunal which is in the widest possible terms, we feel guided in this regard by the emphatic observations of the apex court contained in its decision of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383. We have also taken note of the observations of the apex court to the effect that the purpose-of the assessment proceeding before the taxing authority is to assess correctly the tax liability of an assessee in accordance with law. We consider it to be a solemn duty of the taxing authorities to correctly assess the tax liability of an assessee by duly following the relevant provision of law and therefore do not countenance an inflexible and mechanical adherence to the law of procedure and, in the process deny an assessee a benefit to which it is otherwise entitled in law. In our considered opinion, that could not have been the purpose of framing the Appellate Tribunal Rules. There cannot be any estoppel against law.
We are therefore not in favour of granting such a primacy to the rules of procedure so as to wipe off a substantial right otherwise available to the assessee in law. We find this view of ours also reinforced by the language of rule 11 which does not require the Tribunal to be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal provided the party who may be affected thereby had sufficient opportunity of being heard on that ground. In taking this view, we are conscious about the observations of the Madras High Court and the Calcutta High Court made in the decisions relied upon by learned counsel for the Revenue but we are, in the facts and circumstances of the case, persuaded to accept the observations of the apex court made in this regard in the case of National Thermal Power Co. Ltd. [1998] 229 ITR 383. We are therefore of the view that it is permissible on the part of the Tribunal to entertain a ground beyond those incorporated in the memorandum of appeal though the party urging the said ground had neither appealed before it nor had filed a cross-objection in the appeal filed by the other party. We must however hasten to add that in order to enable either the assessee or the Department to urge a ground in the appeal filed by the other side, the relevant facts on which such ground is to be founded should be available on record. In the absence of such primary facts, in our opinion, neither the assessee nor the Department can be permitted to urge
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any ground other than those which are incorporated in the memorandum of appeal filed by the other party. In other words, if the assessee or the Department, without filing any appeal or a cross-objection seeks to urge a ground other than the grounds incorporated in the memorandum of appeal filed by the other side, the evidentiary facts in support of new ground must be available on record.
For the view that we have taken as above, we hold that the Tribunal erred in not considering the contention of the assessee-applicant company that the warehouse charges was covered by sub-clause (iv) of section 35B(1)(b) of the Act only on the ground that the applicant-company had not filed any appeal or cross-objection. We therefore answer the question referred, in the affirmative and remand the proceeding to the Tribunal for consideration of the said contention of the applicant-assessee on merits.”
Accordingly, we are inclined to accept the additional plea raised by the ld. Counsel before us, that its claim for eligibility of deduction u/s 10A needs to be examined afresh. Accordingly, we remit the matter to the file of the Assessing Officer to see, whether the Assessee is eligible for claim of deduction u/s 10A or not and examine the eligibility criteria of the Assessee and whether the conditions laid down u/s 10A stands fulfilled and accordingly decide this issue afresh and in accordance with the provisions of the law. Thus, with this direction the appeal of the Revenue is treated as partly allowed for statistical purpose.
In the result, the appeal of the Revenue is partly allowed for statistical purpose.
Order pronounced in the open court on 20th January, 2016.
Sd/- Sd/- (RAJESH KUMAR) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date : 20th January, 2016
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Copy to : 1) The Appellant 2) The Respondent 3) The CIT(A)-20, Mumbai 4) The ITO – 9(2)(3), Mumbai 5) The D.R, “B” Bench, Mumbai 6) Guard file By Order
Dy./Asstt. Registrar I.T.A.T, Mumbai *SSL*