Celoxis Technologies Pvt. Ltd.,, Pune vs Assessee

Celoxis Technologies Pvt. Ltd., 3, Shreyas Eterna, NDA Pashan Road, Bavdhan, Pune - 411 021. PAN : AABCC7213R .... Appellant

Vs.

Dy. Commissioner of Income Tax, Circle 1(1), Pune. .... Respondent

Assessee by : Mr. Kishor Phadke Department by : Mr. Rajesh Damor Date of hearing : 10-03-2015 Date of pronouncement : 18-03-2015

ORDER

PER G. S. PANNU, AM

The captioned appeal by the assessee is directed against the order of

the Commissioner of Income Tax (Appeals)-I, Pune dated 31.10.2013 which,

in turn, has arisen from an order dated 07.01.2013 passed by the Assessing

Officer u/s 143(3) of the Income-tax Act, 1961 (in short "the Act") pertaining to

the assessment year 2010-11.

2. In this appeal, assessee made an application seeking modification of

the Grounds of Appeal originally filed in the Memo of Appeal. In terms of the

said application, the modified Grounds of Appeal raised by the assessee read

as under :-

"1. The learned CIT(A)-I, Pune erred in law and on facts in confirming ACIT-Circle 1(1) decision of disallowing claim of deduction u/s 10-B of the ITA, 1961, amounting to Rs.67,55,240/-; on the analogy that the STP undertaking of the appellant is not an eligible undertaking as per Explanation-2(iv) of section 10B of the ITA, 1961.

2 ITA No.205/PN/2014 2. Alternatively and without prejudice to Ground No.1; the appellant is entitled to deduction u/s 10A of the ITA, 1961; as the appellant's 100% export oriented unit is approved by the STPI Authorities under the STP Scheme.

3. Alternatively and without prejudice to Ground No.1 & 2; the learned Income Tax Authorities erred in law and on facts in not appreciating that appellant's 100% export oriented unit approved under STP Scheme is eligible for deduction u/s 10A of the ITA, 1961."

3. In so far as the assessee's application for modifying the Grounds of

Appeal is concerned, it was not opposed by the Ld. Departmental

Representative, and therefore the appeal was heard and is being adjudicated

in the context of the aforesaid modified Grounds of Appeal.

4. In brief, the relevant facts are that the appellant is a company

incorporated under the provisions of the Companies Act, 1956 and is, inter-

alia, engaged in the business of software development and software exports.

In the return of income filed for assessment year 2010-11, it claimed a

deduction of Rs.67,55,240/- in terms of section 10B of the Act. The Assessing

Officer rejected the claim of the assessee for the deduction u/s 10B of the Act

on the ground that the unit of the assessee was registered with the Directorate

of Software Technology Park of India (STPI) whereas in terms of Explanation

2(iv) to section 10B of the Act, assessee's 100% Export Oriented Unit (EOU)

was to be approved by a Board appointed in this behalf by the Central

Government u/s 14 of the Industrial Development and Regulation Act, 1951.

The CIT(A) has also affirmed the decision of the Assessing Officer. Not being

satisfied with the order of the CIT(A), assessee is in appeal before us

challenging the aforesaid decision of the lower authorities by way of modified

Ground of Appeal No.1.

5. It was a common point between the parties that the aforesaid issue is

no longer res-integra inasmuch as the Hon'ble Delhi High Court in the case of

CIT vs. Regency Creations Ltd., 353 ITR 326 (Delhi) has upheld a similar 3 ITA No.205/PN/2014

stand of the income-tax authorities in denying the claim of deduction u/s 10B

of the Act. The Pune Bench of the Tribunal in the case of Clarion

Technologies Pvt. Ltd. vs. DCIT vide ITA No.2554/PN/2012 & Others dated

31.10.2014, following the judgement of the Hon'ble Delhi High Court in the

case of Regency Creations Ltd. (supra), also upheld the action of the income-

tax authorities in denying the claim for deduction u/s 10B of the Act in the

absence of the approval by the Board appointed in this behalf by the Central

Government u/s 14 of the Industrial Development and Regulation Act, 1951.

As a consequence, following the aforesaid precedent in so far as the

controversy raised by way of the Ground of Appeal No.1 is concerned, the

same is held against the assessee. Thus, the Ground of Appeal No.1 is

hereby dismissed.

6. The second Ground raised by the assessee is an alternative Ground

whereby assessee has put-forth its claim for deduction u/s 10A of the Act.

The aforesaid Ground is a fresh Ground raised before the Tribunal, which was

hitherto not raised before the lower authorities. In this context, the claim of the

assessee is that since its unit is approved by the Directorate of STPI, the

profits derived therefrom are eligible for the benefits of section 10A of the Act

and in support a reference has been placed on the judgement of the Hon'ble

Delhi High Court in the case of CIT vs. Technovate E Solutions (P.) Ltd.,

(2013) 32 taxmann.com 290 (Delhi). At the time of hearing, the Ld.

Representative for the assessee submitted that once the claim of the

assessee for deduction u/s 10B of the Act is rejected by the income-tax

authorities following the judgement of the Hon'ble Delhi High Court in the case

of Regency Creations Ltd. (supra), the alternative claim of the assessee is

quite justified as the same meets with the requirements of section 10A of the

Act. The Ld. Representative pointed out that in the past years, assessee had

claimed deduction u/s 10B of the Act under similar circumstances, and it was 4 ITA No.205/PN/2014

also being allowed by the income-tax authorities. Therefore, at the time of

filing of the return of income and even in the course of assessment

proceedings, there was no occasion for the assessee to entertain a belief that

the claim u/s 10B of the Act was not allowable. It was pointed out that the

judgement of the Hon'ble Delhi High Court in the case of Regency Creations

Ltd. (supra) was of a date later than the filing of return. Justifying the

additional Ground now sought to be raised, it was pointed out that the factum

of the assessee's unit being approved by the prescribed authority u/s 10A is

already on record. It was also pointed out that the facts necessary to examine

assessee's plea for claim u/s 10A of the Act are substantively already on

record and that the claim u/s 10A of the Act be entertained having regard to

the parity of reasoning laid down by the Hon'ble Supreme Court in the case of

National Thermal Power Co. Ltd. vs. CIT, (1998) 229 ITR 383 (SC). It has

also been pointed out that in somewhat similar circumstances, the Pune

Bench of the Tribunal in the case of Clarion Technologies Pvt. Ltd. (supra) has

accepted assessee's plea for examination of its alternate claim for deduction

u/s 10A of the Act.

7. Before us, the Ld. Departmental Representative pointed out that in this

case the deduction u/s 10A of the Act was not claimed in the return of income

and therefore it could not have been entertained by the Assessing Officer at a

later stage. Accordingly, the plea of the assessee is sought to be opposed.

8. We have carefully considered the rival submissions. In our considered

opinion, assessee cannot be faulted for not staking its claim for deduction u/s

10A of the Act in its return of income because in the earlier years it was

claiming deduction in terms of section 10B of the Act, which was also allowed

by the income-tax authorities. Therefore, the stand of the Revenue that the

claim was not made in the return of income is no ground to shutout the present 5 ITA No.205/PN/2014

plea being raised by the assessee. Nevertheless, assessee is entitled to raise

an additional Ground even before the Tribunal, which was hitherto not raised

before the lower authorities, so far as it relates to a point of law arising from

the facts already on record. In this context, the parity of reasoning laid down

by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd.

(supra) is worthy of notice. In the present context, it is undisputable that EOU

of the assessee is registered with the Directorate of STPI which is a

fundamental condition for allowance of deduction u/s 10A of the Act. In-fact,

under identical circumstances, the Hon'ble Delhi High Court in the case of CIT

vs. Valiant Communication Ltd. in ITA Nos.440 - 441/2012 dated 04.01.2013

considered assessee's alternate claim for deduction u/s 10A of the Act and

directed the income-tax authorities to examine the same, once assessee was

found to have failed in its claim for deduction u/s 10B of the Act. In the case of

Clarion Technologies Pvt. Ltd. (supra), a somewhat similar situation had

arisen and the following discussion of the Tribunal is relevant :-

"16. We have carefully considered the rival submissions. In the present case, in the past years assessee has been allowed the claim of deduction u/s 10B of the Act. In the return of income filed for the assessment year under consideration i.e. 2010-11 also assessee claimed deduction u/s 10B of the Act in relation to the profits derived from its STPI unit. This claim of deduction came to be denied on the ground that the approval from Director, STPI was insufficient and that the assessee was required to take approval from the Board appointed for this purpose by the Central Government, following the judgement of the Hon'ble Delhi High Court in the case of Regency Creations Ltd. (supra). In the aforesaid situation, at the time of filing of return of income for the instant assessment year, assessee could not have envisaged the denial of its claim of deduction u/s 10B of the Act, which was being allowed in the past. The aforesaid circumstance clearly establishes the bonafides of the reasons prevailing with the assessee for not having made a claim for deduction u/s 10A of the Act in the return of income. Having regard to the peculiar facts and circumstances of the instant case, in our view, the stand of the Revenue that assessee cannot be allowed the benefits of section 10A of the Act merely because the prescribed Audit Report in Form No.56F was not filed in the return of income, is quite erroneous. Pertinently, after denial of deduction u/s 10B of the Act in the assessment order, the earliest opportunity for the assessee to stake claim for deduction u/s 10A of the Act was before the CIT(A); and, the assessee made the claim before the CIT(A) along with the prescribed Audit Report in Form No.56F. The Hon'ble Delhi High Court in the case of Valiant Communications (supra) in similar circumstances held that the claim of the assessee for deduction u/s 10A of the Act is required to be 6 ITA No.205/PN/2014

examined in accordance with law. Pertinently, even in that case assessee had claimed deduction u/s 10B of the Act in the return of income, which was not allowed ultimately in the absence of the unit being approved by the Board appointed by the Central Government, whereas the unit was only registered with the STPI. The Hon'ble Delhi High Court directed the lower authorities to consider the claim of deduction u/s 10A of the Act in accordance with law. In the present case also, we find no reason to deny the assessee an opportunity to put-forth its claim for deduction u/s 10A of the Act with regard the profits of its STPI unit, subject of-course to the fulfillment of the prescribed conditions.

17. Section 10A of the Act provides a deduction of such profits and gains derived by an undertaking from export of articles or things or computer software manufactured or produced by it. The assessee claimed that it has undertaken export of computer software manufactured by it and its unit is registered with Director, STPI. The approval granted by Director, STPI has been held to be a sufficient compliance with requirements of section 10A(2)(i)(b) of the Act even as per the CBDT vide Instruction No.1 of 2006 dated 31.03.2006. Therefore, prima-facie the 100% EOU of the assessee, being registered with STPI, is eligible to stake claim for deduction u/s 10A of the Act, provided the other conditions laid down in section 10A of the Act are satisfied. Therefore, in conformity with the judgement of the Hon'ble Delhi High Court in the case of Valiant Communications (supra), we deem it fit and proper to remand the matter back to the file of the Assessing Officer for verifying the claim of the assessee for deduction u/s 10A of the Act as per law. The Assessing Officer shall consider the Form No.56F furnished by the assessee before the CIT(A) and such other material and submissions that the assessee may put-forth in order to justify its claim of deduction u/s 10A of the Act. Needless to say, the Assessing Officer shall allow a reasonable opportunity of being heard to the assessee before adjudicating on the claim of the assessee for deduction u/s 10A of the Act in accordance with law. Thus, on the alternate plea assessee succeeds."

9. Following the aforesaid precedent, in our view, assessee's plea for

claim of deduction u/s 10A of the Act with regard to the profits of the STPI unit

cannot be shutout without appropriate verification. Since such a claim was not

before the lower authorities, we deem it fit and proper to restore the matter

back to the file of the Assessing Officer, who shall allow the assessee an

opportunity to present and substantiate its claim for deduction u/s 10A of the

Act in accordance with the conditions prescribed in the section. The assessee

shall be at liberty to furnish such submissions and material which it may find

appropriate in order to justify its claim for deduction u/s 10A of the Act. The

Assessing Officer shall examine the plea setup by the assessee in accordance

with law and thereafter pass an order afresh with regard to the assessee's 7 ITA No.205/PN/2014

plea for deduction u/s 10A of the Act. Thus, on this aspect assessee

succeeds for statistical purposes.

10. In so far as the Ground of Appeal No.3 is concerned, the same has not

been pressed at the time of hearing and accordingly we dismiss the same as

"Not Pressed".

11. In the result, the appeal of the assessee is partly allowed.

Order pronounced on 18 th March, 2015.

Sd/- Sd/- (SUSHMA CHOWLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER

Pune, Dated: 18 th March, 2015. Sujeet

Copy of the order is forwarded to: - 1) The Assessee; 2) The Department; 3) The CIT(A)-I, Pune; 4) The CIT-I, Pune; 5) The DR "A" Bench, I.T.A.T., Pune; 6) Guard File. By Order //True Copy// Assistant Registrar I.T.A.T., Pune