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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI B.R. BASKARAN & SHRI SANJAY GARG
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the Revenue against the order dated 07.03.2013 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.
The Revenue has taken the following grounds of appeal:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing to allow exemption u/s. 10A of I.T. Act, 1961 without appreciating that neither A.O. nor CIT(A) has done any comparative study about the genuineness and reasonableness of expenses and profit earned.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that the assessee has declared very high and abnormal profit and claimed it as exempt u/s 10A, this aspects needs detailed investigation especially in view of the fact that USA firm and the assessee has common direct control jointly by one individual and his relatives.
3. The appellant prays that the order of Ld.CIT(A) on the above ground be set aside and matter be restored to the Assessing Officer.
2 M/s. Unno Source Corporation 4. The appellant craves leave to amend or to alter, any ground or add a new ground, which may be necessary." M/s Unno Source Corporation USA which was owned by Mr. Pranav Gundaria, his wife and
The brief facts of the case are that during the assessment proceedings, the Assessing Officer (hereinafter referred to as the AO) observed that the total expenses of the assessee for the year under consideration were Rs.2.34 crores as against income received of Rs.7.04 crores and thus the assessee showed a high net profit ratio. The AO further noted that the assessee had only one client M/s Unno Source Corporation USA which was owned by Mr. Pranav Gundaria and his wife and Mr. Janak Bhalaria and his wife. On examining the monthly usage of telephone/internet by the assessee, the A.O concluded that the assessee had incurred paltry expenses and that it was not possible to generate a turnover of Rs.7.04 crores based on the incurring of such expenses. The AO also noted that as per transfer pricing report, the number of employees of the assessee concern was 80 but the salary register showed only 52 and observed that the assessee had not been able to prove the technical competence of any of the workers who provided the IT enabled services for civil engineering. The AO also took exception to the expenses incurred by the assessee towards foreign travel, partner's remuneration, depreciation on office premises, purchase of iPhone etc. The AO also observed that the salary paid to employees was within the range of Rs.11,000/- to Rs.15,000/- in the city of Mumbai. The AO then concluded that no actual business was done and the entire set up was created to claim tax-free income in India and therefore proceeded to deny the exemption claimed by the assessee u/s 10A. Being aggrieved by the order of the AO, the assessee preferred appeal before the Ld. CIT(A). The assessee made a detailed submission in support of its claim and also furnished the additional evidences as mentioned in para 4.2 of the impugned order. The Ld. CIT(A) forwarded the said evidences to the AO for verification and comments. The AO thereafter conducted the investigation in 3 M/s. Unno Source Corporation respect of the evidences submitted by the assessee and came to the following conclusion: “The firm has produced voluminous data regarding drawings in paper form and softcopy in form of 9 CDs. The said CDs has been verified by me and to the best of my knowledge the same contains drawings, and work of clients of the assessee firm. The firm was registered with STPI and has produced returns filed with the STPI. The assessee firm has produced purchase of various soft-wares which are useful requirement in the line of designing like Tekla Software, CAD/CAM Software etc., The firm has filed client wise, project wise, date wise, inbound and outbound use of Internet space. The firm uses cost effective MTNL triband facility which is much cheaper than other options. As regards various expenses the firm has produced various Internet connection bills of MTNL, TATA etc., which has been used for the business. As regards, salary to staff it is seen that the assessee has 2 units one at Mumbai and at Nasik, total strength of the firm in human resource is totaling to about 88 employees. From the details of employees and qualifications, it is seen that the employees are all qualified to do the requisite firms work."
Relying upon the remand report of the AO, the Ld. CIT(A) allowed the claim of the assessee observing that the assessee had satisfied the conditions for eligibility to claim exemption under section 10A of the Act. He has observed that the assessee’s claim has also been allowed for the two assessment years following its inception. The assessee has duly proved by various evidences that the business was actually carried out by the assessee and that there were 88 employees employed by the assessee and they were having the requisite expertise and qualification required for the work of the assessee and that the assessee had actually carried out the business during the relevant financial year. All the claims have been duly verified by the AO and in view of this, he deleted the addition.
We do not find any infirmity in the order of the Ld. CIT(A) arrived at after consideration of the relevant facts and the evidences submitted which is also based on the verifications conducted by the AO during the remand proceedings. The order of the Ld. CIT(A) is therefore upheld.
Order pronounced in the open court on 11.12.2015.