NEURAL TECHNOLOGIES & SOFTWARE P. LTD, MUMBAI V. ITO 9(2)(3), MUMBAI

CO 276/MUM/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1514 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-10-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 30-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: BHARDESH DOSHI
• Section: 10B

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6525/MUM/2012 ASSESSMENT YEAR 2009-10 INCOME TAX OFFICER-9(2)(3), ROOM NO.225, 2 ND FLOOR, AAYAKAR BHAVAN, M.K.ROAD MUMBAI-400020 / VS. M/S NEURAL TECHNOLOGIES & SOFTWARE PVT. LTD. 3405/C, OBEROI WOODS MOHAND, GOKHALE ROAD, GOREGAON (E), MUMBAI-400063 ( / REVENUE) ( !'# $ /ASSESSEE) PAN. NO. AABCN1689E C.O. NO.276/MUM/2014 (ARISING OUT OF ITA NO.6525/MUM/2012) ASSESSMENT YEAR 2009-10 M/S NEURAL TECHNOLOGIES & SOFTWARE PVT. LTD. 3405/C, OBEROI WOODS MOHAND, GOKHALE ROAD, GOREGAON (E), MUMBAI-400063 / VS. INCOME TAX OFFICER-9(2)(3), ROOM NO.225, 2 ND FLOOR, AAYAKAR BHAVAN, M.K.ROAD MUMBAI-400020 ( !'# $ /ASSESSEE) ( / REVENUE) PAN. NO.AABCN1689E / REVENUE BY SHRI VIJAY KUMAR SONI-DR !'# $ / ASSESSEE BY SHRI BHARDESH DOSHI % & $ ' / DATE OF HEARING : 19/10/2015 & $ ' / DATE OF ORDER: 19/10/2015 M/S NEURAL TECHNOLOGIES & SOFTWARE PVT LTD. ITA NO.6525/MUM/2012 & C.O. NO.276/MUM/2014 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 31/08/2012 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ASSESSEE HAS ALSO PREFERRED CROSS OBJECTION. 2. FIRST, WE SHALL TAKE UP APPEAL OF THE REVENUE, WHEREIN, ONLY GROUND AGITATED BY THE DEPARTMENT PER TAINS TO DELETING THE DISALLOWANCE OF DEDUCTION U/S 10B OF T HE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) AMOUNTING TO RS.1,70,59,298/- MORE SPECIFICALLY, WHEN THE ASSESS EE DID NOT HAVE APPROVAL OF PRESCRIBED AUTHORITY AS REQUIR ED BY CBDT AND THE GREEN CARD ISSUED BY CHAIRMAN INTER MINISTERIAL STANDING COMMITTEE (IMSC), AS SOFTWARE TECHNOLOGY PARK SCHEME, IS MERELY A CONCESSION PROV IDED BY THE GOVERNMENT TO THE UNITS SET UP ON STP ZONES TO AVAIL CERTAIN FACILITIES ON PRIORITY BASIS BUT DOES NOT H AVE ANY BEARING WITH THE ALLOWANCE AND/OR DISALLOWANCE OF D EDUCTION U/S 10B OF THE ACT. 2.1. DURING HEARING, THE LD. DR, SHRI VIJAY KUMAR SONI, ADVANCED HIS ARGUMENTS, WHICH ARE IDENTICAL TO THE GROUND RAISED. ON THE OTHER HAND, SHRI BADRESH DOSHI, LD. COUNSEL FOR THE ASSESSEE, DEFENDED THE CONCLUSION ARRIVED A T IN THE IMPUGNED ORDER BY CONTENDING THAT THE ISSUE IN HAND IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION F ROM HONBLE JURISDICTIONAL HIGH COURT IN CIT VS WESTERN OUTDOOR INTERACTIVE PVT. LTD. (ITA NOS.1150, 1200 AND 1269 OF 2010) M/S NEURAL TECHNOLOGIES & SOFTWARE PVT LTD. ITA NO.6525/MUM/2012 & C.O. NO.276/MUM/2014 3 ORDER DATED 14/08/2012 (COPY SUPPLIED BY THE ASSESS EE). IT WAS ALSO CONTENDED THAT FOR A.Y. 2008-09, IDENTICAL DEDUCTION WAS GRANTED TO THE ASSESSEE. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE, A PRIVATE LIMITED COMPANY, I S ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT, REGISTERED WITH SOFTWARE TECHNOLOGY PARK OF INDIA (STPI), INVOLVED IN SOFTWARE DEVELOPMENT WITH VERY HIGH ANALYTICAL MATHEMATICAL AND STATISTICAL CONTENTS. THE ASSESSEE COMPANY DEVELOPS COMPUTER SOFTWARE BROADLY IN THE AREAS OF BUSINESS FINANCIAL SERVICES AND INSURANCE SECTOR IN MARKET RISK MANAGE MENT, CREDIT RISK MANAGEMENT, OPERATIONAL RISK MANAGEMENT , SOFTWARE FOR IMPLEMENTING MEASURING, CONTROLLING, R EPORTING AND MANAGING RISK AND REGULATORY COMPLIANCE WITH TH E BASEL- 2 CAPITAL ADEQUACY ACCORD, PRODUCTION AND IMPLEMENT ATION OF SIMULATION SOFTWARE FOR ARTIFICIAL FX MARKET CREATI ON FOR TRAINING PURPOSES WITH AN OBJECT TO TEACH THE HEDGI NG STRATEGY AND MANAGING FX EXPOSURE IN REAL TIME, DEVELOPMENT OF COMPUTER SOFTWARE FOR RISK MANAGEMEN T OF TREASURY ACTIVITIES AND USED SEVERAL ARTIFICIAL INT ELLIGENT TOOLS AND TECHNOLOGIES SUCH AS NEURAL NETWORKS, GENETIC ALGORITHMS, BIONOMIC ALGORITHMS AND OTHER MACHINE LEARNING TECHNIQUES. AS PER THE ASSESSEE, THE MANAGING DIREC TOR HAS DOCTORAL DEGREE IN ADAPTIVE ESTIMATION AND NEURAL L EARNING PROCEDURES FROM INDIAN INSTITUTE OF TECHNOLOGY, MUM BAI AND HAD BEEN RESPONSIBLE FOR APPLYING SEVERAL CUTTING A S M/S NEURAL TECHNOLOGIES & SOFTWARE PVT LTD. ITA NO.6525/MUM/2012 & C.O. NO.276/MUM/2014 4 TECHNOLOGIES IN THE AREA OF RISK MANAGEMENT/EXPOSUR E MANAGEMENT. THE ASSESSEE, DURING THE YEAR HAD TURNO VER OF RS.3,14,83,809/- AND PROFIT OF BUSINESS WAS RS.1,52,56,117/-. THE LD ASSESSING OFFICER DISALLO WED RS.1,70,59,298/-, CLAIMED AS DEDUCTION U/S 10B OF T HE ACT WITH A REMARK THAT THE ASSESSEE COMPANY IS NOT APPR OVED BY THE PRESCRIBED AUTHORITY, AS REQUIRED FOR ELIGIBILI TY FOR DEDUCTION U/S 10B OF THE ACT AND MERELY INDULGE INT O NORMAL BUSINESS OF EXPORT OF COMPUTER SOFTWARE. THE STAND OF THE ASSESSEE WAS THAT THE APPROVAL OF THE UNIT ARE REGI STERED IN STP/ESTP, GRANTED BY THE DESIGNATED OFFICER FROM TH E MINISTRY OF COMMUNICATION & TECHNOLOGY INSTEAD OF B OARD OF APPROVAL. 2.3. ON APPEAL, BEFORE THE LD. FIRST APPELLATE AUT HORITY, THE CLAIMED DEDUCTION WAS GRANTED TO THE ASSESSEE A GAINST WHICH, THE REVENUE IS AGGRIEVED AND IS IN APPEAL BE FORE THIS TRIBUNAL. 2.4. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, UNDER THE FACTS NARRATE D HEREINABOVE, WE NOTE THAT EVEN BEFORE THE LD. ASSES SING OFFICER, NECESSARY DETAILS LIKE STP REGISTRATION, G REEN CARD, AGREEMENT OF SOFTWARE EXPORT WITH STPI, QUARTERLY/A NNUAL PERFORMANCE REPORT WERE FURNISHED BY THE ASSESSEE. THE M/S NEURAL TECHNOLOGIES & SOFTWARE PVT LTD. ITA NO.6525/MUM/2012 & C.O. NO.276/MUM/2014 5 ASSESSING OFFICER HAS NOT DISPUTED THE ACTIVITIES O F SOFTWARE DEVELOPMENT OF THE ASSESSEE. CERTAIN ADDITIONAL EV IDENCES WERE FILED BEFORE THE LD. FIRST APPELLATE AUTHORITY IN THE FORM OF CIRCULARS, NOTIFICATIONS, LETTER WITH RESPECT TO DELEGATION OF POWER TO THE DIRECTOR STPI/IMSC WITH RESPECT TO GRA NTING PERMISSION, WHICH WERE FORWARDED FOR THE COMMENTS O F THE AO UNDER RULE 46A OF THE RULES. THE ASSESSING OFFI CER WAS OF THE VIEW THAT GREEN CARD IS MERELY A CONCESSION, PROVIDED BY THE GOVERNMENT, TO SET UP UNITS IN STP ZONES TO AVAIL CERTAIN FACILITIES ON PRIORITY BASIS AND WAS OF THE VIEW THAT FOR CLAIMING DEDUCTION U/S 10B, THE ASSESSEE IS EXPECTE D TO OBTAIN APPROVAL OF CEO OF STPI, AS REQUIRED IN CBDT INSTRUCTIONS DATED 18/10/2010. THE ASSESSEE FILED FURTHER COMMUNICATION, PURSUANT TO THE REPORT OF THE ASSESS ING OFFICER. AGAIN, REMAND REPORT WAS SOUGHT FROM THE ASSESSING OFFICER. ADMITTEDLY, THERE IS NO DISPUTE WITH RESPE CT TO FULFILLMENT OF OTHER CONDITIONS AS PROVIDED U/S 10B OF THE ACT FOR CLAIMING SUCH DEDUCTION. THE STAND OF THE ASSE SSEE IS THAT AUTOMATIC ROUTE IS AVAILABLE TO THE UNITS, WHI CH ARE HAVING INVESTMENT LESS THAN 100 MILLIONS AS IS THE CASE OF THE ASSESSEE, THEREFORE, THE APPROVAL BY THE DIRECTOR O F STPI IS SUFFICIENT TO CLAIM THE DEDUCTION U/S 10B OF THE AC T. EVEN, THE GREEN CARD IS ISSUED BY THE DESIGNATED OFFICER ON BEHALF OF THE SECRETARY, GOVT. OF INDIA, MINISTRY OF INFORMAT ION TECHNOLOGY AND CHAIRMAN INTER MINISTERIAL STANDING COMMITTEE. IT IS ALSO NOTED THAT FOR A.Y. 2008-09 , THE CLAIM OF THE ASSESSEE, IDENTICALLY, WAS ALLOWED AND THE C LAIMED DEDUCTION AMOUNTING TO RS.3,24,70,565/- WAS GRANTED U/S M/S NEURAL TECHNOLOGIES & SOFTWARE PVT LTD. ITA NO.6525/MUM/2012 & C.O. NO.276/MUM/2014 6 10B OF THE ACT. THIS FACTUAL MATRIX WAS NOT CONTROV ERTED BY THE REVENUE. IN VIEW OF THIS FACTUAL POSITION, UNLE SS AND UNTIL, CONTRARY FACTS ARE BROUGHT TO OUR NOTICE, TH E DEPARTMENT IS NOT EXPECTED TO DENY THE CLAIMED DEDU CTION. OUR VIEW IS FORTIFIED BY THE DECISION DATED 14/08/2 012 FROM HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF WE STERN OUTDOOR INTERACTING PVT. LTD. (IT APPEAL NO.1150, 1200 AND 1269 OF 2010). THE HONBLE HIGH COURT IN THIS CASE HELD THAT THE RELIEF GRANTED IN THE FIRST ASSESSMENT YEAR IN WHICH CLAIM WAS MADE AND ACCEPTED THEN THE INCOME TAX OFFICER C ANNOT WITHDRAW THE RELIEF FOR SUBSEQUENT YEARS, MORE SPEC IFICALLY, SO, WHEN THE REVENUE HAS NOT EVEN SUGGESTED THAT TH ERE WAS ANY CHANGE IN THE FACTS WARRANTING A DIFFERENT VIEW FOR SUBSEQUENT YEARS. WE FIND THAT THERE IS NO CHANGE I N FACTS AND IDENTICAL FACTS ARE EXISTING WHICH WERE AVAILAB LE FOR A.Y. 2008-09, THEREFORE, IT IS NOT OPEN TO THE DEPARTMEN T TO DENY CLAIMED DEDUCTION. WE FURTHER OBSERVE THAT IN THE ABSENCE OF RECTIFICATION FROM IMSC, NO GREEN CARD CAN BE ISSUE D BY THE DESIGNATED OFFICER. IT IS JUST LIKE A SINGLE WINDOW SYSTEM AND TO AVOID CONSTRAINS TO THE ASSESSEE AND FURTHER TO MITIGATE THE HARDSHIP FOR THE DEVELOPMENT OF SOFTWARE, SUCH TYPE OF FACILITIES ARE PROVIDED TO ENTREPRENEURS, THEREFORE , WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN IN THE IMPUGNED O RDER. THE ORDER OF THE LD. FIRST APPELLATE AUTHORITY IS A FFIRMED, RESULTING INTO, DISMISSAL OF APPEAL OF THE REVENUE. 3. SO FAR AS, THE CROSS OBJECTION (C.O. NO.276/MUM/2014, (ARISING OUT OF ITA NO.6525/MUM/ M/S NEURAL TECHNOLOGIES & SOFTWARE PVT LTD. ITA NO.6525/MUM/2012 & C.O. NO.276/MUM/2014 7 2012), IS CONCERNED, IT WAS NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, THE C.O. OF THE ASSESSEE I S DISMISSED AS NOT PRESSED. FINALLY, THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 19/10/2015. SD/- SD/- ( RAJESH KUMAR ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER % MUMBAI; ( DATED : 19/10/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 1$ ( *+ ) / THE CIT, MUMBAI. 4. 0 0 1$ / CIT(A)- , MUMBAI 5. 34 .$ ! , 0 *+' *! 5 , % / DR, ITAT, MUMBAI 6. 6' 7% / GUARD FILE. / BY ORDER, /3+$ .$ //TRUE COPY// / (DY./ASSTT. REGISTRAR) , % / ITAT, MUMBAI.