Visu International Ltd, Hyd, Hyderabad v. DCIT, Cir-3(3), Hyderabad

ITA 696/HYD/2011 | 2006-2007
Pronouncement Date: 15-07-2011 | Result: Allowed

Appeal Details

RSA Number 69622514 RSA 2011
Assessee PAN AABCV1500A
Bench Hyderabad
Appeal Number ITA 696/HYD/2011
Duration Of Justice 2 month(s) 25 day(s)
Appellant Visu International Ltd, Hyd, Hyderabad
Respondent DCIT, Cir-3(3), Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 15-07-2011
Assessment Year 2006-2007
Appeal Filed On 20-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A' HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT & SHRI CHANDRA POOJARI ACCOUNTANT MEMBER I.T.A. NO. 696/HYD/2011 (ASSESSMENT YEAR : 2006-07) M/S. VISU INTERNATIONAL LTD. HYDERABAD PAN: AABCV1500A V . DY. CIT CIRCLE 3(3) HYDERABAD APPL IC ANT RESPONDENT APPELLANT BY: MR. P. MURALI MOHAN RAO RESPONDENT BY: MR. PARNEET SINGH SACHDEV O R D E R PER CHANDRA POOJARI AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME-TAX-III HYDERABA D DATED 28.3.2011 FOR THE ASSESSMENT YEAR 2006-07. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF GLOBAL EDUCATIONAL CONSULTA NCY AND SOFTWARE DEVELOPMENT. FOR THE ASSESSMENT YEAR 2006-07 THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 29.11.2006 DECLARING A TOTAL INCOME OF RS. 1 45 00 885. THE RETU RN WAS PROCESSED U/S. 143(1) ON 29.11.2007. THE CASE HAS BEEN SELECTED FOR SCRUTINY AND A NOTICE U/S. 143(2) WAS I SSUED ON 5.10.2007. 3. THE ASSESSING OFFICER VIDE HIS ORDER DATED 31.12.200 8 MADE THE ADDITIONS OF RS. 10 69 409 ON ACCOUNT OF DISALLOWANCE UNDER SECTION 40(A)(IA) AND RS. 16 67 8 40 AND RS. 16 67 840 ON ACCOUNT OF ADDITION U/S. 10B OF THE INCOME- TAX ACT 1961. I.T.A. NO. 696/HYD/2011 M/S. VISU INTERNATIONAL LTD. ==================== 2 4. THE CIT-III HYDERABAD BY VIRTUE OF POWERS VESTED I N HIM U/S. 263 OF THE INCOME-TAX ACT 1961 CALLED FOR THE ASSESSMENT RECORDS OF THE ASSESSEE-COMPANY FOR A.Y. 2006-07 AND IT WAS NOTICED BY THE CIT THAT THE ORDER U/S. 143(3) DATED 31.12. 2008 PASSED BY THE ASSESSING OFFICER IS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR THE REAS ON THAT EXEMPTION ALLOWED U/S. 10B OF THE I.T. ACT IS NOT IN O RDER AS THE COMPANY WAS NOT APPROVED AS A 100% EXPORT ORIENTED UNDERTAKING BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT AS ENVISAGED IN CLAUSE 4 TO EXPLANA TION 2 OF SECTION 10B OF THE I.T. ACT 1961. ACCORDINGLY TH E CIT-III HYDERABAD TREATED THE ORDER PASSED BY THE ASSESSING O FFICER U/S. 143(3) DATED 31.12.2008 AS ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF THE REVENUE. THE CIT HAS ISSUED A SHO W CAUSE NOTICE U/S. 263 DATED 11.3.2010 AND THERE WAS NO RES PONSE FROM THE ASSESSEE-COMPANY. FURTHER LETTERS WERE ISSU ED AFFORDING OPPORTUNITY TO THE ASSESSEE VIDE LETTERS DAT ED 27.8.2010 10.11.2010 AND 14.12.2010. IN RESPONSE T HERE TO THE ASSESSEES COUNSEL SRI P. MURALI MOHAN RAO APPEA RED AND FURNISHED THE SUBMISSIONS VIDE LETTER DATED 23.3.2011 . 5. BEFORE THE CIT-III HYDERABAD THE LEARNED COUNSEL F OR THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY IS AN 10 0% EOU ISSUED BY STPI. THE STPI ALSO STATED THAT THEY WERE EMPOWERED TO GRANT APPROVAL FOR SETTING UP OF 100% EOUS UNDER STP SCHEME. AS PER EOU POLICY UNDER THE PROV ISIONS OF EXIM POLICY (1992-97) APPLICABLE TO EOU AND EPZ S HALL ALSO APPLY TO STP SCHEME AND ACCORDINGLY ALL THE STPI UN ITS ARE ELIGIBLE FOR DEDUCTION U/S. 10A OR 10B. IF ANY PARTI CULAR UNIT IS NOT ELIGIBLE FOR DEDUCTION U/S. 10B IT MAY BE ALLO WED TO CLAIM EXEMPTION U/S. 10A OF I.T. ACT. SINCE THE DEDUC TION U/S. I.T.A. NO. 696/HYD/2011 M/S. VISU INTERNATIONAL LTD. ==================== 3 10B IS ALLOWED IN THE PREVIOUS A.Y. 2005-06 THE SAM E CANNOT BE DENIED IN THE SUBSEQUENT YEAR ON THE BASIS THAT THE ASSESSEE IS NOT A 100% EOU FOR THE REASON THAT NECESSA RY RATIFICATION APPROVAL IS NOT AVAILABLE WITH THE ASSESSEE - COMPANY. THE ASSESSEE RELIED ON THE TRIBUNAL DECISI ON RENDERED IN THE CASE OF ITO V. REGENCY CREATIONS LTD. HENCE THE ASSESSEE COMPANY IS ELIGIBLE TO CLAIM DEDUCTION U/ S. 10B OF THE IT ACT FOR THE A.Y. 2006-07. 6. HOWEVER THE CIT-III HYDERABAD HELD THAT SECTION 10B O F THE ACT PROVIDES FOR 100% DEDUCTION ON PROFITS AND GAIN S DERIVED BY AN 100% EOU FROM EXPORT OF ARTICLES OR THIN GS FOR COMPUTER SOFTWARE MANUFACTURED OR PRODUCED BY IT. EXPLANATION 2 TO SECTION 10B DEFINES 100% EOU AS UNDERTAKING WHICH HAS BEEN APPROVED AS 100% EOU BY TH E BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNM ENT IN EXERCISE OF POWERS CONFERRED BY SECTION 14 OF THE IN DUSTRIES DEVELOPMENT & REGULATION ACT 1951 AND RULES MADE UNDE R THAT ACT. 7. THE CIT FURTHER HELD THAT IN THE CASE OF THE ASSESSEE THERE IS NO SPECIFIC APPROVAL OF THE ASSESSEE AS A 1 00% EOU BY THE BOARD REFERRED TO IN CLAUSE 1 OF EXPLANATION TO SE CTION 10B. THE ASSESSEE HAS STARTED A 100% EOU UNDER STP SCHEME VIDE APPROVAL GRANTED BY STPI. THIS DOES NOT MEAN THAT THE ASSESSEE IS A 100% EOU WITHIN THE MEANING OF SECTION 10B. 100% EOU UNDER THE STP SCHEME CANNOT BE EQUATED WITH THE 100% EOU APPROVED BY THE BOARD U/S. 14 OF THE IDAR ACT. THE CONDITIONS THAT GOVERN THE UNITS SET U P UNDER THE STP SCHEMES ARE DIFFERENT FROM THAT OF THE UNI TS SET UP AS 100% EOUS AND SO APPROVED BY THE BOARD. IT IS VERY I.T.A. NO. 696/HYD/2011 M/S. VISU INTERNATIONAL LTD. ==================== 4 CLEAR THAT FOR AVAILING EXEMPTION FROM TAX THE STATUTORY REQUIREMENTS HAVE NECESSARILY TO BE SATISFIED. THE STA TUTORY APPROVAL BY THE BOARD AS 100% EOU HAS TO BE OBTAINED FOR AVAILING EXEMPTION U/S. 10B WHICH IS MISSING. IF THE PLEA OF THE ASSESSEE THAT AN STP UNIT BEING AN 100% EOU IS ELIG IBLE FOR EXEMPTION U/S. 10B IS ACCEPTED THE AMENDMENT BROU GHT OUT BY THE FINANCE ACT 1993 EXTENDING THE BENEFIT U/S. 10A TO THE STP FROM 1 ST APRIL 1994 BECOMES REDUNDANT AND SUPERFLUOUS. IF A STP UNIT IS OTHERWISE ELIGIBLE FOR EXEMPTION U/S. 10B ON THE GROUND OF ITS BEING 100% EOU THERE WA S POSSIBLE NO REASON FOR THE LEGISLATURE TO BRING ABOUT A N AMENDMENT EXTENDING THE BENEFITS OF SECTION 10A TO THE U NITS UNDER STP SCHEME. THE CIT PLACED RELIANCE ON THE DEC ISION OF THE ITAT HYDERABAD B BENCH IN THE CASE OF INFOTECH ENTERPRISES V. JCIT (85 ITD 325) (HYD). ACCORDINGL Y THE CIT HELD THAT THE ASSESSEE-COMPANY IS NOT ENTITLED FOR EXEMPTI ON U/S. 10B OF THE ACT. 8. REGARDING THE CONTENTION OF THE ASSESSEE THAT IMSC JAS COMMUNICATED TO THE CBDT THAT IN THE OPINION OF THE DEPARTMENT OF INFORMATION AND TECHNOLOGY W.E.F. 1.4.19 99 THE STP SCHEME IS GOVERNED BY THE FOREIGN TRADE POLICY AND THE APPROVALS ISSUED FOR SETTING UP STP UNIT BY THE DESIGNA TED OFFICERS OF DIT (JURISDICTIONAL DIRECTORS STPI) UNDE R DELEGATED POWERS IN TERMS IF THE HAND-BOOK OF PROCEDURES MEANT APPROVAL UNDER STP SCHEME AND NO FURTHER RATIFICATION OF APPROVALS IS REQUIRED FROM THE IMSC AND ACCORDINGLY ALL THE APPLICATIONS FOR SETTING UP OF STP UNIT APPROVED BY THE DIRECTORS STPI AFTER 31.3.1999 STAND AUTOMATICALLY APP ROVED UNDER THE STP SCHEME THE CIT-III HYDERABAD HELD THAT THERE IS NO EVIDENCE OF SUCH COMMUNICATION FROM THE CBDT TI LL DATE. I.T.A. NO. 696/HYD/2011 M/S. VISU INTERNATIONAL LTD. ==================== 5 HOWEVER THE CBDT VIDE INSTRUCTION NO. 2 IN F. NO. 178 /19/ 2008-ITAT DATED 9.3.2009 AND ITS CORRIGENDUM DATED 8.5.2009 CLARIFIED AS UNDER: THE MATTER REGARDING VALIDITY OF APPROVALS GIVEN B Y THE DEVELOPMENT COMMISSIONERS HAS BEEN EXAMINED IN THE BOARD. IT HAS BEEN DECIDED THAT AN APPROVAL GRANTE D BY THE DEVELOPMENT COMMISSIONER IN CASE OF AN 100% EOU UNI T WILL BE CONSIDERED VALID ONCE SUCH APPROVAL IS RATIFIED BY THE BOARD OF APPROVAL FOR EOU SCHEME. 9. IN VIEW OF THE ABOVE THE CIT-III HYDERABAD HELD THAT THE APPROVAL OBTAINED FROM STPI CANNOT BE EQUATED WITH AN APPROVAL ISSUED/RATIFIED BY THE BOARD. IN THE ASSESS EES CASE NEITHER HAS ANY APPROVAL BEEN OBTAINED FROM THE BOARD CONSTITUTED FOR THE PURPOSE NOR IS THE APPROVAL OBTAINE D BY THE STPI PLACED BEFORE THE DEVELOPMENT COMMISSIONER FOR RATIFICATION BY THE BOARD. REGARDING THE ASSESSEES CO NTENTION THAT EXEMPTION U/S. 10B CANNOT BE DENIED AS THE SAME WAS ALLOWED IN THE PREVIOUS YEAR THE CIT HELD THAT EACH ASSESSMENT YEAR IS AN INDEPENDENT PROCEEDING. AS THE STATUTORY REQUIREMENT IS MISSING IN THE ASSESSEES CASE THE EXEMPTION U/S. 10B IS DENIED AND ACCORDINGLY DIRECTE D THE ASSESSING OFFICER TO BRING THE PROFITS TO TAX. AGGRIEVE D THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 10. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THE CIT - III HYDERABAD ERRED WHILE PASSING THE ORDER U/S. 2 63 FOR THE A.Y. 2006-07 WHEREIN THE INCOME OF THE ASSESSEE WAS R EVISED BY ENHANCING THE INCOME OF THE ASSESSEE-COMPANY WHIC H IS NOT CORRECT AND NOT JUSTIFIED. THE ASSESSING OFFICE R HAS ALREADY CONSIDERED ALL THE INFORMATION FURNISHED BY TH E ASSESSEE-COMPANY AND COMPLETED U/S. 143(3) AND ONCE THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) THE ORDER CANNOT I.T.A. NO. 696/HYD/2011 M/S. VISU INTERNATIONAL LTD. ==================== 6 BE REVISED ENHANCING THE INCOME BY MAKING CHANGE OF OPINION U/S. 263 WHICH IS NOT CORRECT AND JUSTIFIED. WHERE TH ERE ARE TWO VIEWS POSSIBLE AND WHERE ONE VIEW HAS BEEN CONS IDERED THE CHANGE OF OPINION CANNOT BE MADE AND THE ORDER CAN NOT BE REVISED. THE TOTAL INCOME OF THE ASSESSEE HAS BEEN RE VISED ON THE CONTENTION THAT THE ASSESSEE-COMPANY HAS NOT OBTAINED CERTIFICATE OF THE INTER-MINISTERIAL COMMITTEE GRANTING AP PROVAL FOR EOUS WHICH IS NOT CORRECT AND NOT JUSTIFIED. THE CIT IS NOT CORRECT IN STATING THAT THE ASSESSEE HAS NOT FURNISHED E VIDENCE REGARDING RATIFICATION BY THE BOARD OF APPROVAL FOR EOU SCHEME. THE ASSESSEE COMPANY ALREADY SUBMITTED THAT IT IS A 100% EOU ISSUED BY STPI. THE STPI ALSO STATED THAT THEY ARE EMPOWERED TO GRANT APPROVAL FOR SETTING UP OF 100% EOUS UNDER STP SCHEME. AS PER EOU POLICY UNDER THE PROVI SIONS OF EXIM POLICY (1992-97) APPLICABLE TO EOUS AND EPZ SHA LL ALSO APPLY TO STP SCHEME AND ACCORDINGLY ALL THE STPI UN ITS ARE ELIGIBLE FOR DEDUCTION U/S. 10A OR 10B OF THE ACT. IF ANY PARTICULAR UNIT IS NOT ELIGIBLE FOR DEDUCTION U/S. 10B IT MAY BE ALLOWED TO CLAIM THE EXEMPTION U/S. 10A OF THE ACT. 11. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT SINCE THE DEDUCTION U/S. 10B IS ALLOWED TO THE ASSE SSEE- COMPANY IN PREVIOUS ASSESSMENT YEAR I.E. 2005-06 T HE SAME CANNOT BE DENIED IN THE SUBSEQUENT YEAR ON THE PRESUMPTI ON THAT THE ASSESSEE IS NOT A 100% EOU FOR THE REASON THA T NECESSARY RATIFICATION APPROVAL IS NOT AVAILABLE WITH TH E ASSESSEE-COMPANY. THE LEARNED COUNSEL FOR THE ASSES SEE PLACED RELIANCE ON THE DECISION IN ITO VS. REGENCY C REATIONS LTD. ACCORDINGLY THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ORDER OF THE CIT-III HYDERABAD IS I.T.A. NO. 696/HYD/2011 M/S. VISU INTERNATIONAL LTD. ==================== 7 ERRONEOUS AND THE SAME MAY BE QUASHED. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLOWING DECI SIONS: A) DCIT V. BHRIGUS SOFTWARE INDIA P. LTD. (ITA NO. 665/HYD/07 ITAT HYD BENCH B ORDER DATED 30.10.09). B) PRITHVI INFORMATION SOLUTIONS LTD. V. ITO (ITA NO. 225/HYD/05 ITAT HYDERABAD BENCH 'B ORDER DATED 12.10.2007). C) AZAD TOBACCO FACTORY (P) LTD. V. CIT & OTHERS (1997) (225 ITR 1002) (ALL.) D) MAYOR & CO. V. CIT &ANR. (2004) (248 ITR 162) (P&H) . E) MEHRA INTERNATIONAL V. CIT (2004) (273 ITR 8)(ALL.) F) BAJAJ TEMPO LTD. VS. CIT (196 ITR 188) (SC) G) CIT V. SOUTH ARCOT SOC. (176 ITR 117 119) (SC) H) CIT VS. UP CO-OP. FED. (176 ITR 435 441) (SC) I) BROACH SOC V. CIT (177 ITR 418 422) (SC) J) CIT V. STRAWBOARD (177 ITR 431 434) (SC) K) NEW SHORROCK V. CIT (30 ITR 338) L) CIT V. SUNDARA (18 ITR 259 271) 12. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER RELIED O N THE ORDER OF THE ITAT HYDERABAD B BENCH IN I.T.A. NO. 710/HYD/2010 FOR A.Y. 2005-06 ORDER DATED 31.3.2011 AND SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR O F THE ASSESSEE BY THE ABOVE DECISION. ACCORDINGLY HE SUB MITTED THAT THE ORDER OF THE CIT MAY BE QUASHED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 13. ON THE OTHER HAND THE LEARNED DR RELIED ON THE ORDER OF THE CIT-III HYDERABAD. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THR OUGH THE ORDER OF THIS TRIBUNAL IN THE CASE OF VIRINCI TECHNOL OGIES LTD. IN I.T.A. NO. 710/HYD/2010 ORDER DATED 31.3.2011 WH EREIN IDENTICAL ISSUE CAME UP FOR ADJUDICATION BEFORE THIS T RIBUNAL. I.T.A. NO. 696/HYD/2011 M/S. VISU INTERNATIONAL LTD. ==================== 8 THIS TRIBUNAL ADJUDICATED THE ISSUE IN FAVOUR OF THE A SSESSEE BY HOLDING AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN THE EARLIER YEARS AS WELL AS IN THE SUBSEQU ENT YEARS TO THE ASSESSMENT YEARS UNDER CONSIDERATION THE DEPARTMENT APPEARS TO HAVE ALLOWED 10B DEDUCTION TO THE ASSESSEE AFTER VERIFYING ALL THE REQUIRED DETAILS AND AFTER GETTING EXPLANATION FROM THE ASSESSEE. THE CIT ASSUMED HIS JURISDICTION ONL Y ON THE BASIS OF A CLARIFICATION ISSUED BY THE CBDT ON 9.3.2009 WHICH IS VERY MUCH LATER TO THE ORDER PASSED BY THE ASSESSING OFFICER ON 6.12.2007. IN OUR OPINION THE CIT IS NOT CORRECT IN ASSUMING THE DEDUCTION UNDER SECTION 10 WHEN THE DEPARTMENT ALLOWED DEDUCTION BOTH IN THE EARLIER YEAR AS WELL AS IN THE SUBSEQUENT YEARS FOR THE SAME UNIT AND ALSO THE CIT IS NOT CORRECT IN ASSUMING HIS JURISDICTION BY FOLLOWING THE CLARIFICATION ISSUED BY THE CBDT ON 9.3.2009 WHICH IS NOT BEFORE THE ASSESSING OFFICER WHILE ALLOWING THE DEDUCTION UNDER SECTION 10B OF THE ACT. IT IS ONLY A CHANGE OF OPINION BY THE CIT . ON CHANGE OF OPINION THE CIT CANNOT ASSUME HIS JURISDICTION UNDER SECTION 263 OF THE ACT. IN VIEW OF THE ABOVE WE CANCEL THE ORDER OF THE CIT UNDER SECTION 263 OF THE ACT AND RESTORE THAT THE ORDER O F THE ASSESSING OFFICER. 15. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BEN CH OF THIS TRIBUNAL THE ORDER OF THE CIT-III HYDERABAD IS QUASHED AND THE ORDER OF THE ASSESSING OFFICER IS HEREBY RESTO RED. 16. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JULY 2011. SD/- (G.C. GUPTA) VICE PRESIDENT SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD DATED 15 TH JULY 2011 TPRAO I.T.A. NO. 696/HYD/2011 M/S. VISU INTERNATIONAL LTD. ==================== 9 COPY FORWARDED TO: 1. M/S. VISU INTERNATIONAL LTD. C/O. M/S. P. MURALI & CO. CHARTERED ACCOUNTANTS 6-3-655/2/3 1 ST FLOOR SOMAJIGUDA HYDERABAD-500 082. 2. THE DCIT CIRCLE 3(3) HYDERABAD. 3. THE CIT-III HYDERABAD. 4 THE ADDL. CIT RANGE-3 HYDERABAD. 5. THE DR A BENCH ITAT HYDERABAD `