RSA Number | 55521114 RSA 2010 |
---|---|
Bench | Bangalore |
Appeal Number | ITA 555/BANG/2010 |
Duration Of Justice | 10 month(s) 7 day(s) |
Appellant | E2 Solutions India Pvt. Ltd.,, Bangalore |
Respondent | ITO, Bangalore |
Appeal Type | Income Tax Appeal |
Pronouncement Date | 28-02-2011 |
Appeal Filed By | Assessee |
Order Result | Allowed |
Bench Allotted | A |
Tribunal Order Date | 28-02-2011 |
Assessment Year | 2005-2006 |
Appeal Filed On | 20-04-2010 |
Judgment Text |
PAGE 1 OF 8 ITA NO.555/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K J.M. AND SHRI A MOHAN ALANKAMONY A.M ITA NO.555/BANG/2010 (ASSESSMENT YEAR 2005-06) M/S E2 SOLUTIONS INDIA PVT. LTD. NO.16F API BHAVAN MILLER TANK BED AREA VASANTHANAGAR BANGALORE-52. - APPELLANT VS THE INCOME TAX OFFICER WARD-11(1) BANGALORE. - RESPONDENT APPELLANT BY : SHRI PADAM CHAND KHINCHA C .A. RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI ADD L. CIT ORD ER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER OF LEARNED CIT(A)-I BANGALORE DA TED 15/01/2010. THE ASST. YEAR CONCERNED IS 2005-06. 2. GROUND NOS.1.1 AND 5.1 ARE GENERAL IN NATURE AN D NO ADJUDICATION IS CALLED FOR. HENCE THE SAME ARE DI SMISSED. 3. GROUND NOS.3.1 AND 4.1 RELATE TO LEVY OF INTERES T U/S 234B AND 234C OF THE I T ACT. PAGE 2 OF 8 ITA NO.555/BANG/2010 2 3.1 LEVY OF INTEREST U/S 234B AND 234C ARE MANDATOR Y AND CONSEQUENTIAL IN NATURE. THEREFORE THE SAME ARE D ISMISSED. 4. IN OTHER GROUNDS NAMELY 2.1 TO 2.5 THE PRAYER OF THE ASSESSEE IS THAT THE DEDUCTION U/S 10A IS TO BE GRA NTED AS CLAIMED. 5. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE B USINESS OF PROVIDING SOFTWARE SERVICES. FOR THE CONCERNED ASS T. YEAR RETURN OF INCOME WAS FILED ON 21.10.2005 DECLARING AN INCOME OF RS.1 25 590/- AFTER CLAIMING A DEDUCTION OF RS.2 60 801/- U/S 10A OF THE ACT. THE CLAIM OF DEDUCTION U/S 10A WAS MADE FOR THE FIRST T IME DURING THE CONCERNED ASST.YEAR. THE CLAIM WAS SUPPORTED BY ENC LOSING FORM 56F ALONG WITH THE RETURN OF INCOME. THE AO IN THE COU RSE OF SCRUTINY ASSESSMENT PROPOSED TO DISALLOW THE ASSESSEES CLA IM OF DEDUCTION U/S 10A ON THE FOLLOWING GROUNDS:- I) THE COMPANY WAS INCORPORATED ON 20.10.2000 AND CARRYING ON THE BUSINESS IN AN AREA NOT COVERED UNDE R ANY EHTP OR STP OR SPECIAL ECONOMIC ZONE. IN VIEW OF THIS THE CONDITION LAID DOWN U/S 10A(2)(I)(B) & (C) OF THE I T ACT ARE NOT SATISFIED. II) THE COMPANY HAS OBTAINED STPI APPROVAL FOR ESTABLISHMENT OF A STPI UNIT ON 12.7.2004. SUBSEQUENTLY THE PLANT AND MACHINERY PREVIOUSLY USED FOR THE BUSINESS HAVE BEEN TRANSFERRED TO THE STP UNIT TO THE EXTENT OF RS.37 81 309/- WHICH IS MORE THAN 20% OF THE TOTAL PLANT AND MACHINERY OF STP UNIT. THUS THE CONDITION LAID DOWN U/S 10A(2) (III) OF THE I T ACT ARE NOT SATISFIED. PAGE 3 OF 8 ITA NO.555/BANG/2010 3 6. THE ASSESSEE IN HIS REPLY RELIED ON CIRCULAR NO .1 OF 2005 DATED 6.1.2005 AND ALSO THE ORDER OF ITAT IN THE CA SE OF ITO V FORESEE INFORMATION SYSTEMS PVT. LTD. DATED 16.3.2007 AND IT O V AMERICAN DATA SOLUTIONS INDIA PVT. LTD. DATED 9.3.2007. THE OBJECTION OF THE ASSESSEE WAS REJECTED BY THE AO AND CLAIM OF DEDUCTI ON U/S 10A WAS DISALLOWED WHILE COMPLETING THE SCRUTINY ASSESSMENT U/S 143(3) VIDE ORDER DATED 3/12/2007. THE AO WAS OF THE VIEW THAT THE CIRCULAR NO.1/2005 DEAL WITH EXEMPTION TO BE GRANTED TO UNIT U/S 10B AND THEREFORE IT HAS NO APPLICATION TO SECTION 10A. T HE AO HELD THAT SINCE STPI APPROVAL IS DATED 12/7/2004 IT IS A CASE OF E STABLISHMENT OF A NEW UNDERTAKING. HE FURTHER HELD THAT IF IT IS TO BE T AKEN THAT THE ASSESSEE HAS SET UP A NEW UNIT THE ASSESSEE WOULD NOT BE SA TISFYING THE CONDITION LAID DOWN IN SECTION 10A(2)(III). THE AO ALSO REJE CTED THE CONTENTION OF THE ASSESSEE THAT THE EXISTING UNIT WAS CONVERTED I NTO STP UNIT AND THEREFORE IT WAS ENTITLED TO DEDUCTION U/S 10A. T HE TRIBUNAL ORDER CITED BEFORE THE AO WAS NOT FOLLOWED SINCE ACCORDIN G TO HIM THE SAME HAD NOT ATTAINED FINALITY AND APPEAL BEFORE THE HON BLE HIGH COURT IS PENDING CONSIDERATION. 7. AGGRIEVED BY THE ASSESSMENT COMPLETED THE ASSES SEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY. 8. ELABORATE SUBMISSIONS WERE FILED BEFORE THE COM MISSIONER WHICH ARE REITERATED AT PAGES 2 TO 10 AND ALSO FROM PAGES 13 TO 17 OF THE IMPUGNED ORDER OF THE CIT(A). THE CIT(A) FOR HIS REASONS MENTIONED IN PARA 4.2 5.1. 5.2 AND 6.1 DISMISSED THE APPEAL OF THE PAGE 4 OF 8 ITA NO.555/BANG/2010 4 ASSESSEE AND CONFIRMED THE ACTION OF THE AO IN DISA LLOWING THE DEDUCTION U/S 10A OF THE ACT. 9. THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEF ORE US. 10. THE LEARNED AR SUBMITTED THAT THE ISSUE IN QUE STION AS TO WHETHER THE EXISTING UNIT CAN BE CONVERTED INTO STP UNIT AND THEREBY IS ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT IS CONCLU DED IN FAVOUR OF ASSESSEE BY THE FOLLOWING JUDGEMENTS OF THE HONBLE PUNJAB AND HARYANA HIGH COURT AND THE ORDERS OF THE TRIBUNAL:- CIT V EXCEL SOFTECH LTD. ITA NO.156/07 DT.24.7.2008 (P&H); CIT V MAHAVIR SPINNING MILLS LTD. (2008) 303 ITR 35 3 (P&H); ITO V FORESEE INFORMATION SYSTEMS P LTD. 2008-TIOL- 456-ITAT-BAN; ITO V GIGNEXT SOLUTIONS INDIA P. LTD. 2009-TIOL-658 - ITAT-BANG; ACIT V E4E APPLICATION SERVICES P LTD. 2009-TIOL-74 4- ITAT-BANG; ITO V IQURA TECHNOLOGIES P LTD. 2010-TIOL-03-ITAT- BANG; ITO V EXPERT OUTSOURCE P LTD. ITA NOS.896 & 897/BANG/09 DT.17.3.2010 (BANG. ITAT); & INATECH INFOSOLUTIONS P. LTD. V DCIT ITA NO.527/BANG/2010 DT.12.11.2010 (BANG. ITAT). 10.1 HE ALSO RELIED ON THE CBDT CIRCULAR NO.1/2005 DATED 6/1/2005 (272 ITR (ST.) 6). IT WAS SUBMITTED THAT IN THE FOLLOWING CASES IT HAS BEEN HELD THAT THERE IS NO REQUIREMEN T TO MAINTAIN SEPARATE PAGE 5 OF 8 ITA NO.555/BANG/2010 5 BOOKS OF ACCOUNTS AS A NECESSARY PRECONDITION FOR CL AIMING THE BENEFIT OF RELIEF U/S 10A OF THE ACT:- DEPUTY COMMISSIONER OF INCOME-TAX V ARABIAN EXPORTS LTD. (2007) 109 TTJ (MUMBAI) 440; PUNJAB TRACTORS LTD. V DY. CIT (2004) 89 TTJ (CHD) 439; CIT V HINDUSTAN MALLEABLES & FORGINGS LTD. (1991) 1 91 ITR 70 (PAT.); CIT V SREE KRISHNA PULVERSING MILLS (2000) 163 CTR (AP) 151 : (2000) 241 ITR 262 (AP); MAHINDRA SINTERED PRODUCTS LTD. V CIT 177 ITR 111 (BOM.) & JCIT V GEBBS INFOTECH LTD. (2010) TAX CORP. (A.T.) 22873 (MUM.) 11. THE LEARNED DR ON THE OTHER HAND STRONGLY SUPP ORTED THE IMPUGNED ORDERS OF THE INCOME TAX AUTHORITIES. 12. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. AN IDENTICAL ISSUE HAD CROPPED UP BEFORE THIS TRIBUNAL IN WHICH ONE OF US WAS PARTY IN ITA NOS.89 6 & 897/BANG/2009 DATED 17/03/2010 IN THE CASE OF M/S EXPERT OUTSOURC E (P) LTD. IN THAT CASE THE AO HAS DISALLOWED THE CLAIM U/S 10A OF TH E ACT FOR THE FOLLOWING REASONS:- I) THE COMPANY WAS INCORPORATED AND STARTED BUSINESS ACTIVITIES PRIOR TO OBTAINING APPROVAL OF STPI. HENCE THE CONDITIONS LAID DOWN U/S 10A(2)(I)(B) AND (C) OF THE I T ACT 1961 ARE NOT SATISFIED. PAGE 6 OF 8 ITA NO.555/BANG/2010 6 II) IN VIEW OF THE FACT THAT THE APPLICATION OF THE ASSESSEE SOUGHT PERMISSION FROM STPI AUTHORITIES FOR ESTABLISHMENT OF A NEW STP UNIT AND DID NOT CHOOSE THE AVAILABLE OPTION OF CONVERSION OF THE DTA UNIT TO STP UNIT AND BASED ON THE APPROVAL OF THE STPI AUTHORITIES TO SET UP A NEW STP UNIT IT IS TO BE TREATED THAT THE ASSESSEE HAS ESTABLISHED A NEW UNIT. THE PLANT AND MACHINERY PREVIOUSLY USED FOR THE BUSINESS HAVING BEEN TRANSFERRED TO THE STP UNIT TO THE EXTENT OF RS.2 80 154/- WHICH IS MORE THAN 20% OF THE TOTAL PLANT AND MACHINERY THE CONDITION LAID DOWN U/S 10A(2)(III) OF THE I T ACT ARE NOT SATISFIED. III) THE DEDUCTION U/S 10A CANNOT BE GRANTED EVEN IF IT IS HELD THAT THE ASSESSEE DID NOT SET UP A NEW UNIT ON SECURING STP REGISTRATION BECAUSE AS STATED IN THE MARGINAL HEADING OF SECTION 10A THE DEDUCTION IS AVAILABLE FOR UNDERTAKINGS NEWLY ESTABLISHED IN FREE TRADE ZONE ETC. IT CANNOT BE SAID THAT ON OBTAINING REGISTRATION FROM STPI AUTHORITIES THE ASSESSEES UNIT HAS BEEN NEWLY SET UP. AFTER HEARING BOTH THE DEPARTMENTAL REPRESENTATIVE AND THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THE TRIBUNAL IN THE CASE OF M/S EXPERT OUTSOURCE (P) LTD. (SUPRA) HELD AS FOLLOWS:- WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF MAHAVIR SPINNING MILLS LTD. (SUPRA) HELD THAT DEDUCTION U/S 10B WOULD BE AVAILABLE ON CONVERSION OF EXISTING UNIT INTO AN EXPORT ORIENTED UNIT (EOU) . THE CONTENTIONS OF THE REVENUE AUTHORITIES THAT PROVISIONS OF SECTION 10B(2) WERE NOT FULFILLED ON PAGE 7 OF 8 ITA NO.555/BANG/2010 7 CONVERSION OF EXISTING UNIT INTO EOU WERE NEGATIVE BY THE HIGH COURT. THE TRIBUNAL IN THE CASE OF M/S FORESEE INFORMATION SYSTEMS (P) LTD. (SUPRA) HAD HELD THE BENEFIT OF SECTION 10A WOULD BE AVAILABLE EVEN WHEN AN EXISTING UNIT GETS CONVERTED INTO A STP UNIT. RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IS REPRODUCED BELOW:- 6. WE HAVE HEARD BOTH THE SIDES. IT APPEALS THAT LEARNED CIT(A) HAS PASSED A VERY DETAILED ORDER IN THE ASSESSMENT YEAR 2002-03 AND RIGHTLY CAME TO THE CONCLUSION THAT THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 10A OF THE IT ACT. FROM THE ASSESSMENT ORDER WE FIND THAT ACCORDING TO THE AO IT IS NOT A NEW UNDERTAKING FOR THE PURPOSE OF EXEMPTION U/S 10A OF THE IT ACT. FACTUALLY IT IS ALSO CORRECT THAT THE UNDERTAKING WAS ALREADY ENGAGED IN EXPORTING SOFTWARE BEFORE IT BECAME A STP UNIT. THE STP WAS NOTIFIED IN MARCH 1993 BUT NOT IN SOFTWARE TECHNOLOGY PARK. IN THE YEAR 2001 A COMPANY WAS FORMED BY CONVERSION OF THE FIRM AND IT STARTED PRODUCTION IN STP UNIT AFTER GETTING APPROVAL. THEREAFTER ONLY THE UNDERTAKING CLAIMED EXEMPTION U/S 10A OF THE IT ACT. THE CLAIM OF THE ASSESSEE IS SUPPORTED BY BOARD CIRCULAR NO.1/2005 WHERE IT HAS BEEN CLEARLY HELD THAT UNDERTAKING SET UP IN DOMESTIC TARIFF AREA (DTA) WHICH IS SUBSEQUENTLY APPROVED AS 100% EXPORT ORIENTED IS ENTITLED TO RELIEF U/S 10B OF THE IT ACT PROVIDED THE UNDERTAKING SHALL GET RELIEF ONLY FOR THE REMAINING PERIOD OF TEN CONSECUTIVE YEARS BEGINNING WITH ASSESSMENT YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE COMPUTER SOFTWARE AS A DTA UNIT. RESPECTFULLY FOLLOWING THE JUDGEMENT OF THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF MAHAVIR PAGE 8 OF 8 ITA NO.555/BANG/2010 8 SPINNING MILLS LTD. (SUPRA) AND THE ORDER OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S FORESEE INFORMATION SYSTEMS (P) LTD. (SUPRA) WE REJECT THE GROUNDS RAISED BY THE REVENUE. 12.1 IN THE LIGHT OF THE ABOVE REASONING AND THE J UDGEMENTS CITED SUPRA WE HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 10A OF THE ACT. 13. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED ON FRIDAY THE 28 TH DAY OF FEBRUARY 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/25.2./28.2 BY ORDER ASST. REGISTRAR ITAT BANGALO RE.
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