Comm Lab India, Secunderabad, ... vs Department Of Income Tax

These two appeals are preferred by the Revenue against the Order of the Ld. CIT(A)-VI, Hyderabad dated 30.10.2014 whereby he directed the A.O. to consider the alternative claim of the assessee for deduction under section 10A of the I.T. Act, 1961.

2. The assessee in the present case is a partnership firm which is engaged in the business of software development and e-learning. The return of income for the A.Y. 2010-2011 was filed by it on 09.07.2010 declaring total income of Rs.6,53,510 after claiming deduction of Rs.34,95,030 under section 10B of the Act and for A.Y. 2011-2012 the return of income was filed on 19.07.2011 declaring total income of Rs.6,79,147 after claim deduction of Rs.1,63,20,501 under section 10B of the Act. During the course of assessment 2 ITA.No.121 & 122/Hyd/2015 M/s. Comm Lab India, Secunderabad.

proceedings the claim of the assessee for deduction under section 10B was examined by the A.O. and on such examination, he held that the assessee was not entitled for deduction under section 10B for the following reasons :

1. "The assessee has not been recognized as 100% Export Oriented Undertaking (EOU) by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by the Sec.14 of the Industries (Development and Regulation) Act, 1951 and the rules made under the Act.

2. After considering the information available and also the facts of the case, it is held that the deduction claimed U/s.10B at Rs. 34,95,030/- is not allowable in the assessee's case, as the assessee-firm is not approved as a 100% Export Oriented Undertaking by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by Sec.14 of the Industries (Development and Regulation) Act, 1951 (65 of 1951) and the rules made under that Act, in terms of clause (iv) of Explanation 2 to Sec. 1OB of the I.T. Act, 1961.

3. The assessee has started as 100% EOU under the STP Scheme vide approval granted by STPH/IMSC/2003-

2004/1190/9607 dt. 31.12.2003. This does not amount to recognition of the assessee as 100% export oriented undertaking with the meaning of the provisions of Sec.l0B. 100% export oriented undertaking under the STP Scheme cannot be equated with the 100% EOU approved by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by Sec.14 of Industries (Development & Regulation) Act, 1951 (65 of 1951) and the rules made under that 3 ITA.No.121 & 122/Hyd/2015 M/s. Comm Lab India, Secunderabad.

Act. Supposing the plea of the assessee that an STP unit being an 100% EOU is eligible for exemption U/s.10B is accepted, the amendment brought out by the Finance Act, 1993 extending the benefit U/s.10A to the STP unit is otherwise eligible for exemption U/s.10B on the ground of its being 100% EOU, there was possibly no reason for the Legislature to bring about an amendment extending the benefits of Sec.10A to the units under STP Scheme.

Reliance in this regard is placed on the decision of the Hon'ble Jurisdictional Tribunal in the case of Infotech Enterprises Ltd (85 ITD 325).

4. Reference in this regard may be made to the CBDT's Instruction (No.2 F.No.178/ 19/2008-ITAT, dt.09.03.2009 and corrigendum dt.08.05.2009) which clarified as under :-

"The matter regarding validity of approvals given by the Development Commissioner has been examined in the Board. It has been decided that an approval granted by the Development Commissioner in case of an 100% EOU unit will be considered valid once such approval is ratified by the Board of Approval for EOU Scheme."

5. In the light of the discussion made above, the approval accorded by STPI cannot be equated with that approved/ratified by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by Sec.14 'of the Industries (Development and Regulation) Act, 1951 (65 of 1951). In this view of the matter, the assessee is not entitled for claim of deduction U/s.10B of the I.T. Act, 1961 and the same is accordingly denied.

6. Reference in this regard may also be made to the High Court of Delhi at New Delhi pronounced on 17.09.2012 in ITA 4 ITA.No.121 & 122/Hyd/2015 M/s. Comm Lab India, Secunderabad.

Nos.69/2008, 783/2009, 1239/2011 of CIT and ITA Nos.2002/2010, 438/2012, 439/2012, 440/2012, 441/2012 of Regency Creation Ltd clarified as under :

"Though the considerations which apply for granting approval under sections 10A and 10B may to an extent, overlap, yet the deliberate segregation of these two benefits by the statute reflects parliamentary intention that to qualify for benefit under either, the specific procedure enacted for that purpose has to be followed.

There is nothing in any of the circulars or instructions relied on by the Tribunal in all the orders, implying that approval for purposes of an STP also entitled the unit to a benefit under section 10B."

The claim of the assessee for deduction under section 10B accordingly was disallowed by the A.O. in the assessment completed under section 143(3) vide order dated 30.03.2013 and 27.02.2014 for both the assessment years under consideration.

3. Against the orders passed by the A.O. under section 143(3), appeals were preferred by the assessee before the Ld. CIT(A). During the course of appeal proceedings before the Ld. CIT(A), additional ground was filed by the assessee for both the assessment years under consideration raising an alternative claim that it is entitled for deduction under section 10A. The additional evidence in the form of certificate in the prescribed Form 56F was also filed by the assessee in support of its claim for deduction under section 10A. Keeping in view this new alternative claim raised by the assessee for the first time before him and the additional evidence filed in support thereof for both the assessment years under consideration, 5 ITA.No.121 & 122/Hyd/2015 M/s. Comm Lab India, Secunderabad.

remand report was sought by the Ld. CIT(A) from the A.O. In the remand report submitted to the Ld. CIT(A), the A.O. objected to the new alternative claim raised by the assessee for deduction under section 10A on the ground that the same should have been made by the assessee by filing a revised return as held by the Hon'ble Supreme Court in the case of Goetz (India) Ltd., 284 ITR 323. The Ld. CIT(A) however admitted the additional ground raised by the assessee relating to its alternative claim for deduction under section 10A for both the assessment years under consideration relying inter alia on the decision of the Tribunal in the case of Chicago Pneumatic India Ltd., vs. DCIT 15 SOT 252 (Mum.) wherein it was held that the new claim raised by the assessee for the first time before the appellate authority could be entertained and the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd., (supra) laying down the proposition that such claim could be made by the assessee only by way of filing a revised return is applicable only for the proceedings before the A.O. Accordingly, the Ld. CIT(A) directed the A.O. to consider the alternative claim of the assessee for deduction under section 10A for both the assessment years under consideration in accordance with law after examining of all the relevant aspects. Aggrieved by the order of the Ld. CIT(A), the Revenue has preferred the present appeals before the Tribunal.

4. We have heard both the parties and also perused the relevant material on record. It is observed that the issue involved in the present case is squarely covered by the decision of the Tribunal rendered in the case of M/s. Vivera IT Applications Consulting (P) Ltd., Hyderabad vs. ITO, Ward 3 (2), Hyderabad vide its order dated 10.10.2014 passed in 6 ITA.No.121 & 122/Hyd/2015 M/s. Comm Lab India, Secunderabad.

ITA.No.129/Hyd/2014. In the said case, a similar alternative claim made by the assessee for deduction under section 10A instead of deduction under section 10B for the first time before him was not entertained by the Ld. CIT(A) on the ground that the required report of the auditor in Form 56F for claiming deduction under section 10A had not been submitted by the assessee. Before the Tribunal, the assessee however submitted the report of the auditor in Form 56F and taking the same on record, the Tribunal restored the issue to the file of the A.O. with a direction to consider and decide the alternative claim of the assessee for deduction under section 10A relying on the decision of Coordinate Bench of the Tribunal in the case of Cloud Softek in ITA.No.483/Hyd/2013 dated 13.09.2013 wherein it was held that if the assessee is held to be not entitled to deduction under section 10B, his alternative claim for deduction under section 10A should be considered. The ratio of these decisions of the Tribunal, in our opinion, is clearly applicable in the present cases and respectfully following the same, we uphold the impugned order of the Ld. CIT(A) directing the A.O. to consider the alternative claim of the assessee for deduction under section 10A for both the years under consideration in accordance with law on merit.

5. In the result, appeals of the Revenue are dismissed.

Order pronounced in the open Court on 27.05.2015.

Sd/- Sd/- (ASHA VIJAYARAGHAVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 27th May, 2015 VBP/- 7 ITA.No.121 & 122/Hyd/2015 M/s. Comm Lab India, Secunderabad.

Copy to

1. The Income Tax Officer, Ward 10(2), Room No.514, Block-A, 5th Floor, I.T. Towers, A.C. Guards, Hyderabad.

2. M/s. Comm Lab India, Plot No.30, 2nd Floor, Sarvasukhi Cly, Nehru Nagar, West Marredpally, Secunderabad.

3. CIT(A)-VI, Hyderabad.

4. CIT-V, Hyderabad.

5. D.R. I.T.A.T. "A" Bench, Hyderabad.

6. Guard File