M/s. Arackal Digital Solutions P. Ltd, Trivandrum V. The ITO, Trivandrum

CO 5/COCH/2016

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2316 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 05-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 16-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: DANIAL MOBESH
• Section: 143(3); 10B

Judgement Text

ITA NO . 9/C/2016 & C NO.O 5/C/2016 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI B P JAIN , A M & G EORGE GEORGE.K , J M ITA NO . 09/COCH/2016 (ASST YEAR 2007 - 08 ) & CROSS OBJECTION NO. 05/COCH/2016 THE INCOME TAX OFFICER WARD 1(1), TRIVANDRUM VS ARACKAL DIGITAL SOLUT IONS P LTD 2 ND FLOOR NILA TECHNOPARK TRIVANDRUM 695 581 ( APPELLANT /RESPONDENT ) (RESPONDENT /CROSS OBJECTOR ) PAN NO. AACCA9123B ASSESSEE BY SH DANIAL MOBESH REVENUE BY SH K P GOPAKUMAR SR DR DATE OF HEARING 4 TH MAY 2016 DATE OF PRONOUNCEMENT 5 TH MAY 2016 OR D ER PER BENCH : THIS APPEAL , AT THE INSTANCE OF THE REVENUE AND THE CROSS OBJECTION PREFERRED BY THE ASSESSEE ARISE OUT OF THE CIT(A)S ORDER DATED 20.10.2015. THE RELEVANT ASSESSMENT YEAR IS 2007 - 08. 2 WE SHALL FIRST T AKE UP FOR ADJUDICATION THE REVENUES APPEAL IN ITA NO.09/COCH/2016 . ITA NO . 9/C/2016 & C NO.O 5/C/2016 2 3 THE SOLITARY ISSUE THAT IS RAISED IN THE REVENUES APPEAL IS WHETHER THE CIT(A) IS JUS TIFIED IN DIRECTING THE AO TO CONSIDER THE ASSESSEES CLAIM FOR DEDUCTION U/S 10A OF THE I T A CT. 4 BRIEFLY FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS A COMPANY, ENGAGED IN THE BUSINESS OF EXPORT OF COMPUTER SOFTWARE. THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR WAS FILED DECLARING NI L INCOME AFTER CLAIMING DEDUCTION U/S 10B OF THE I T ACT AMOUNTING TO RS. 43, 40,103/ - . THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 11.12.2009. LATER, 148 NOTICE WAS ISSUED FOR THE REASON THAT THE ASSESSEE WA S NOT ENTITLED TO THE BENEFIT OF DEDUCTION U/S 10B OF THE I T ACT . IN THE COURSE OF REASSESSMENT PROCEE DINGS , THE ASSESSEE SUBMITTED THAT IT IS A COMPANY HAVING 100% EXPORT ORIENTED UNIT AND HAS OBTAINED NECESSARY APPROVAL FROM THE DIRECTOR, SOFTWARE TECHNOLOGY PARKS OF INDIA, TRIVANDRUM . THEREFORE, IT WAS SUBMI TTED THAT IT WAS ENTITLED FOR DEDUCTION U/S 10B OF THE ACT. HOWEVER, THE REASSE SSMENT WAS COMPLETED ON 4.3.2013 REJECTING THE CLAIM OF DEDUCTION MADE U/S 10B OF THE ACT BY RELYING ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS REGENCY CREATIONS LTD REPORTED IN 255 CTR 63. 5 AGGRIEVED BY THE REASSESSMENT COM PLETED, THE ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE FIRST APPELLATE AUTHORITY HELD THAT THE AO HAD CORRECTLY DENIED THE CLAIM OF DEDUCTION U/S 10B OF THE ACT. HOWEVER, ITA NO . 9/C/2016 & C NO.O 5/C/2016 3 THE CIT(A) CONSIDERED THE ALTERNATIVE PLEA OF THE ASSESSEE NA MELY WHETHER THE ASSESSEE IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 10A OF THE ACT. THE CIT(A ) DIRECTED THE AO TO EXAMINE WHETHER THE ASSESSEE HAD FULFILLED THE CONDITIONS PRESCRIBED FOR CLAIMING THE BENEFIT OF DEDUCTION U/S 10A OF THE ACT AND IF SO, ALLOW THE CLAI M . 6 AGGRIEVED BY THE ABOVE DIRECTIONS OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. AT THE VERY OUTSET, T HE LD COUNSEL FOR THE ASSESSEE SU BMITTED THAT ON IDENTICAL FACTS IN THE CASE OF ACIT VS FIRMUSOFT SOLUTIONS P LTD IN ITA NO. 244/COCH/2015 (ORDER DATED 22 . 1 .2 016) AND IN THE CASE OF M/S Q BURST TECHNOLOGIES P LTD IN ITA NOS. 172 & 173/COCH/2015 (ORDER DATED 17 TH NOV 2015) , T HE T RIBUNAL HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY REJECTING THE APPEAL S OF THE REVENUE. THE LD DR WAS UNABLE TO CONTROVERT THE ABOVE SUBMISSIONS OF THE ASSESSEE. 7 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECO RD. IN THE INSTANT CASE , IN THE RETURN OF INCOME FILED, THE ASSESSEE HAD CLAIMED DEDUCTION U/S 10B OF THE ACT. THE CLAIM OF DEDUCTION U/S 10B OF THE ACT WAS WITHDRAWN IN THE REASSESSMENT ORDER DATED 4.3.2013 , BY FOLLOWING THE DICTUM LAID DOWN BY THE HON BLE DELHI HIGH COURT IN THE CASE OF REGENCY CREATIONS LTD (SUPRA). THE CIT(A) CONFIRMED THE ACTION OF THE AO IN MAKING THE DISALLOWANCE OF DEDUCTION U/S 10B OF THE ACT BASED ON THE JUDGMENT OF THE HONBLE DELHI ITA NO . 9/C/2016 & C NO.O 5/C/2016 4 HIGH COURT, CITED SUPRA. HOWEVER, THE CIT( A) CONSIDERED THE ALTERNATIVE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10A OF THE ACT AND REMANDED THE CASE TO THE AO TO EXAMINE WHETHER THE ASSESSEE HAD SATISFIED THE CONDITIONS PRESCRIBED FOR GETTING BENEFIT OF DEDUCTION U/S 10A OF THE ACT. ON IDENTICA L FACTS IN THE CASE OF FIRMUSOFT SOLUTIONS P LTD., (SUPRA) THE TRIBUNAL HAD DISMISSED THE APPEAL OF THE REVENUE. THE RELEVANT PORTION OF THE TRIBUNALS ORDER READ AS UNDER: 6 WE HAVE HEARD THE LD DR AND PERUSED THE MATERIAL ON RECORD. IN THE RETURN OF IN COME, THE ASSESSEE HAD CLAIMED DEDUCTION U/S 10B OF THE ACT. THE CLAIM OF DEDUCTION U/S 10B OF THE ACT WAS WITHDRAWN IN THE REASSESSMENT ORDER DATED 9.3.2013 BY FOLLOWING THE DICTUM LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF REGENCY CREATION S LTD (SUPRA). THE FIRST APPELLATE AUTHORITY HAS CONFIRMED THE ACTION OF THE AO IN MAKING THE DISALLOWANCE OF DEDUCTION U/S 10B OF THE ACT BASED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT, CITED SUPRA. HOWEVER, THE FIRST APPELLATE AUTHORITY HAS ALLOW ED THE ALTERNATIVE CLAIM FOR DEDUCTION U/S 10A OF THE ACT BASED ON THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF CWP TAYLOR IN ITA NO. 695/COCH/2008(ORDER DATED 28.7.2009). THE CIT(A) HAS ALSO VERIFIED THE FACTS RELATING TO THE COMPLIANC E OF ALL THE CONDITIONS PRESCRIBED UNDER SECTION 10A OF THE ACT ( IN PARA 3.6.8 OF THE IMPUGNED ORDER). BASED ON THE VERIFICATION OF FACTS, THE CIT(A) DIRECTED THE AO TO ALLOW DEDUCTION U/S 10A OF THE ACT. THE FOLLOWING JUDGMENT OF THE HONBLE DELHI HIGH COURT AND ORDERS OF THE ITAT HAVE HELD THAT WHEN DEDUCTION U/S 10B IS DENIED, IT IS THE DUTY OF THE REVENUE TO EXAMINE WHETHER THE ALTERNATIVE CLAIM OF DEDUCTION U/S 10A CAN BE GRANTED ON FACTS AND CIRCUMSTANCES OF THE CASE: I) FAST BOOKING (I) PVT LTD V S DCIT IN ITA 334/2015 ( JUDGMENT DATED 2.9.2015)(DELHI HIGH COURT JUDGMENT ) II ) M/S DEVICE DRIVEN (INDIA) P LTD (ITA NO. 282/COCH/2013 (ORDER DT 29.11.2013) III ) CRONOS CONSULTING INDIA P LTD VS ACIT (ITA NO. 105/COCH/2014 (ORDER DT 6.6.2014) 7 FURTHER, WE NOTICE THAT THE AO, IN THE REMAND REPORT HAS NOT STATED THAT THE ASSESSEE HAS NOT SATISFIED THE CONDITIONS PRECEDENT TO CLAIM DEDUCTION U/S 10A OF THE ACT. THE AO HAD ONLY RAISED A TECHNICAL OBJECTION NAMELY, THE ASSESSEE IS NOT ENTITLED DEDUCTION U/S 1 0A OF THE ACT , SINCE, THE CLAIM WAS NOT MADE IN THE RETURN OF INCOME FILED. ITA NO . 9/C/2016 & C NO.O 5/C/2016 5 HOWEVER, WE NOTICE THAT THE CLAIM OF DEDUCTION U/S 10B OF THE ACT WAS MADE IN THE RETURN OF INCOME AND THE REVENUE WAS GRANTING THE DEDUCTION U/S 10B OF THE ACT IN THE PREVIOUS ASSESSMENT YEARS. ONLY WHEN THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF REGENCY CREATIONS LTD, CITED SUPRA, WAS PRONOUNCED, THE CLAIM OF DEDUCTION U/S 10B WAS DENIED IN THE ASSESSMENT CONCLUDED. WHEN THE CLAIM OF DEDUCTION U/S 10B WAS DENIE D, THE AO OUGHT TO HAVE EXAMINED WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT. THE CBDT CIRCULAR NO.14 (XL - 35) DATED 11.4.1955 HAS CLARIFIED THAT THE REVENUE SHALL NOT TAKE ADVANTAGE OF IGNORANCE OF THE ASSESSEE AS TO HIS RIGHTS AND T HE OFFICERS ARE DUTY BOUND TO GRANT DEDUCTION LEGALLY AVAILABLE TO THE ASSESSEE. THE CIT(A) ALSO RELIED THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS TECHNOVATE E SOLUTION P LTD REPORTED IN 354 ITR 110 WHEREIN IT WAS HELD THAT REGIST RATION WITH SOFTWARE TECHNOLOGY PARKS OF INDIA IS SUFFICIENT TO ALLOW DEDUCTION U/S 10A OF THE ACT .THE COPIES OF THE CERTIFICATE OF REGISTRATION ISSUED BY STPI AND THE CERTIFICATE OF THE CHARTERED ACCOUNTANT IN FORM 56F WERE EXAMINED BY THE CIT(A) AND NO DEFECT WAS POINTED OUT BEFORE US. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) IS JUSTIFIED IN ALLOWING THE ALTERNATIVE CLAIM OF DEDUCTION U/S 10A OF THE ACT. IT IS ORDERED ACCORDINGLY. 8 IN THE INSTANT CASE, THE CIT(A) HAS NOT STRAIGHTAWAY ALLOWE D THE ALTERNATIVE CLAIM OF THE ASSESSEE U/S 10A OF THE ACT. ON THE CONTRARY, THE C IT (A) HAS REMANDED THE MATTER TO THE AO TO VERIFY WHETHER THE ASSESSEE HAD SATISFIED THE CONDITIONS PRESCRIBED FOR CLAIMING BENEFIT U/S 10A OF THE ACT. IN VIEW OF THE ORDERS OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF FIRMUSOFT SOLUTIONS P LTD (SUPRA) AND IN THE CASE OF M/S Q BURST TECHNOLOGIES P LTD (SUPRA), WHICH ARE IDENTICAL TO THE FACTS OF THE INSTANT CASE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND WE UPHOLD THE SAME A S CORRECT AND IN ACCORDANCE WITH LAW. IT IS ORDERED ACCORDINGLY. ITA NO . 9/C/2016 & C NO.O 5/C/2016 6 CROSS OBJECTION NO. 05/COCH/2015: 9 THE GROUNDS RAISED IN THE CROSS OBJECTION ARE ESSENTIALLY SUPPORTING THE ORDER OF THE CIT(A). SINCE WE HAVE DISMISSED THE APPEAL FILED BY THE REVENUE, THE CROSS OBJECTION FILED BY THE ASSESSEE REQUIRES NO ADJUDICATION AND THE SAME IS DISMISSED. 10 IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF MA Y 2016 . SD / - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 5 TH , M AY 2016 RAJ* ITA NO . 9/C/2016 & C NO.O 5/C/2016 7 COPY TO: 1 . APPE LLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN