M/s. Valiant Communication Ltd, New Delhi V. DCIT, New Delhi

CO 82/DEL/2009

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 4648 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-04-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 20-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 29-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C S AGGARWAL
• Assessee Lawyers: SUKESH JAIN
• Keywords: Business income; Rule of consistency
• Section: 143(3); 10B; 263; 10; 2

Judgement Text

I.T.A. NO.2706 & 82 /DEL/08-09 1/13 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H NEW DELHI) BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.2706 /DEL/2008 ASSESSMENT YEAR : 2005-06 DCIT, M/S VALLIANT COMMUNICATION LTD., CIRCLE-17 (1), 71/1, SHIVA MARG, NEW DELHI. V. NEW DELHI. AND C.O. NO. 82/DEL/2009 (IN I.T.A. NO.2706/DEL/2008) ASSESSMENT YEAR : 2005-06 M/S VALLIANT COMMUNICATION DCIT, LTD.71/1, SHIVA MARG, CIRCLE-17 (1), NEW DELHI. V. NEW DELJI. (APPELLANT) (RESPONDENT) PAN /GIR/NO.AAACV-4250-G APPELLANT BY : SHRI SUKESH JAIN, SR. DR. RESPONDENT BY : SHRI C.S. AGGARWAL, SR. ADVOCATE. ORDER PER BENCH: THIS IS AN APPEAL OF THE REVENUE AND THE CROSS OBJE CTION IS FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST THE ORDER OF LD CIT(A)-XIX, NEW DELHI DATED 26.5.2008 FOR ASSESSMENT YEAR 2005-06. SINCE THE ISSUES ARE INTER-CONNECTED IN BOTH THE APPEALS BOTH ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. . I.T.A. NO2706 & 82/DEL/08-09 2/13 2. FIRST, WE TAKE UP THE APPEAL OF THE REVENUE. TH E GROUNDS RAISED BY THE REVENUE READ AS UNDER:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE OF EXEM PTION U/S 10B OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS.1,70,17,473/-. 2. THE LD CIT(A) HAS ERRED IN LAW AND IN FACTS IN A LLOWING DEDUCTION U/S 10B TO THE ASSESSEE COMPANY WHICH IS IN CONTRAVENTION O F THE STATUTORY REQUIREMENT CONTAINED IN EXPLANATION 2(IV) OF SECTI ON 10B WHICH STIPULATES A MANDATORY CONDITION THAT A HUNDRED PER CENT EXPOR T ORIENTED UNDERTAKING MEANS AN UNDERTAKING BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY S ECTION 14 OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 ( 65 OF 1951)AND THE RULES MADE UNDER THE ACT. 3. THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN P LACING RELIANCE ON INSTRUCTIONS NO.1/2006 (COPY ENCLOSED) WHICH HAS NO BEARING ON SECTION 10B AND WHICH IN FACT HAS BEEN ISSUED FOR THE PURPO SES OF EXPLANATION 9(VII) OF SECTION 10A IN ORDER TO CLARIFY AS TO WHA T WOULD MAN A STP FOR THE PURPOSES OF THAT SECTION. THE VERY SUBJECT OF THE SAID INSTRUCTION READ WITH IT CONTENTS, MAKES ABUNDANTLY CLEAR THE OBJECT, SCO PE AND PURPOSE OF THE SAID INSTRUCTION. IT IN NO WAY, MODIFIES OBVIATES O R AMENDS THE REQUIREMENTS OF EXPLANATION 2(IV) OF SECTION 10B FO R THE PURPOSES OF AN 100% EOU. 4. THE LD CIT(A) HAS ALSO ERRED IN LAW IN IGNORING THE DIRECT AUTHORITIES OF HYDERABAD TRIBUNAL OF INFOTECH ENTERPRISES LTD. V. JCIT (85 ITD 325), WHICH HAS UNDERLINED THE MANDATORY NATURE OF THIS R EQUIREMENT WHICH HAS AN OBJECT AND PURPOSE. 3. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS CLAIMED DEDU CTION U/S 10B IN THE . I.T.A. NO2706 & 82/DEL/08-09 3/13 PRESENT YEAR TO THE EXTENT OF RS.170.17 LAKHS. IT I S NOTED BY THE ASSESSING OFFICER THAT IN ASSESSMENT YEAR 2001-02 AND 2002-03 NO SUCH DEDUCTION WAS CLAIMED U/S 10B BECAUSE THERE WAS BUSINESS LOSS. IN ASSESS MENT YEAR 2003-04 & 2004- 05, THE ASSESSEE HAS CLAIMED DEDUCTION U/S 10B TO T HE EXTENT OF RS.159.44 LAKHS AND RS.403.54 LAKHS RESPECTIVELY. THE ASSESSING OFF ICER HAS REFERRED TO EXPLANATION 2 (IV) TO SECTION 10B AS PER WHICH 100 % EOU HAS BEEN DEFINED WHICH ARE REQUIRED TO BE APPROVED AS A 100% EOU BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVT. IN EXERCISE OF THE POWERS CONFERRED BY SECTION 14 OF THE INDUSTRIES (DEVELOPMENT & REGULATION) ACT, 1 951 AND THE RULES MADE UNDER THAT ACT. THE ASSESSING OFFICER ASKED THE AS SESSEE TO FURNISH A COPY OF STATUTORY APPROVAL AS 100% EOU. IN REPLY, THE ASSES SEE HAS SUBMITTED A COPY OF ACKNOWLEDGEMENT DATED 27.10.1994 OF FILING THE MEMO RANDUM FOR THE MANUFACTURING OF CERTAIN ITEMS CANVASSING IT TO BE A BOARD APPROVAL. IT IS FURTHER NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HA S FILED A COPY OF APPROVAL DATED 16.11.1998 GRANTED WITHIN THE MEANING 100% EO U UNDER EHTP SCHEME ISSUED BY THE DY. DIRECTOR (TECH.) OF STPI (AN AUTO NOMOUS BODY), DEPARTMENT OF ELECTRONICS, GOVT. OF INDIA, NOIDA. THE ASSESSING OFFICER HAS REFERRED TO A TRIBUNAL DECISION RENDERED IN THE CASE OF INFOTECH ENTERPRISES LTD. V. JCIT AS REPORTED IN 85 ITD 325 WHEREIN IT WAS HELD THAT STP UNIT CANNOT AUTOMATICALLY BE REGARDED AS A 100% EOU. BY FOLLOWING THIS TRIBUNAL DECISION, IT WAS HELD BY THE ASSESSING OFFICER THAT IN THE ABSENCE OF SPECIFIC A PPROVAL BY THE BOARD WITHIN SECTION 10B, EXPLANATION-2 (IV) OF THE INCOME TAX A CT, 1961, THE CLAIM OF DEDUCTION U/S 10B IS NOT ALLOWABLE TO THE ASSESSEE COMPANY AND ON THIS BASIS, HE REJECTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10B OF THE ACT. AN ALTERNATIVE CLAIM WAS ALSO MADE BEFORE THE ASSESSIN G OFFICER FOR ALLOWING DEDUCTION U/S 10A BUT THE SAME WAS ALSO REJECTED BY THE ASSESSING OFFICER ON THE BASIS THAT THE ASSESSEE COMPANYS APPROVAL UNDE R EHTP SCHEME, IS DATED 16.11.1998 WHEREAS AS PER THE REQUIREMENT OF SECTIO N 10A, THE ASSESSEE WAS REQUIRED TO COMMENCE MANUFACTURING OR PRODUCING COM PUTER SOFTWARE ON OR AFTER 1.4.1994. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT(A) WHO HAS DECIDED THE ISSUE REGARDING ALLOWING OF DEDUCTION U/S 10B IN . I.T.A. NO2706 & 82/DEL/08-09 4/13 FAVOUR OF THE ASSESSEE AND THE REVENUE IS IN APPEAL AGAINST THE ORDER OF LD CIT(A). 4. LD DR OF THE REVENUE SUPPORTED THE ASSESSMENT OR DER. IT IS SUBMITTED BY HIM THAT SINCE THERE IS NO APPROVAL FROM BOARD AS R EQUIRED AS PER EXPLANATION 2(IV) TO SECTION 10B, DEDUCTION IS NOT ALLOWABLE TO THE ASSESSEE U/S 10B. LD COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER OF TH E LD CIT(A). IT IS SUBMITTED BY HIM THAT ON PAGES 124-126 OF THE PAPER BOOK IS THE APPROVAL GRANTED BY DY. DIRECTOR (TECH), SOFTWARE TECHNOLOGY PARK OF INDIA. IT IS ALSO SUBMITTED THAT IN ASSESSMENT YEAR 2004-05, THE ASSESSMENT WAS COMPLET ED BY THE ASSESSING OFFICER U/S 143(3) AND SUCH ASSESSMENT ORDER IS AVA ILABLE ON PAGES 213 OF THE PAPER BOOK AND IN THAT YEAR, THE RETURNED INCOME OF THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFICER. IT IS ALSO SUBMITTED THA T COMPUTATION OF INCOME FOR THAT YEAR I.E. ASSESSMENT YEAR 2004-05 IS AVAILABLE ON P AGE NO.193 OF THE PAPER BOOK AND AS PER THE SAME, IN THAT YEAR, THE ASSESSE E HAS CLAIMED DEDUCTION U/S 10B OF RS.403.54 LAKHS AND THE SAME WAS ALLOWED BY THE ASSESSING OFFICER IN SCRUTINY ASSESSMENT. IT IS ALSO SUBMITTED BY HIM TH AT HAVING ALLOWED THIS DEDUCTION IN ASSESSMENT YEAR 2004-05, THE ASSESSING OFFICER CANNOT SAY THAT SUCH DEDUCTION IS NOT ALLOWABLE IN SUBSEQUENT YEAR I.E. ASSESSMENT YEAR 2005- 06. IT IS SUBMITTED BY HIM THAT THIS IS AGAINST TH E RULE OF CONSISTENCY. IN THE REJOINDER, IT WAS SUBMITTED BY THE LD DR OF THE REV ENUE THAT IN INCOME TAX, PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE AND HEN CE ON THE BASIS OF ASSESSMENT ORDER FOR ASSESSMENT YEAR 2004-05, THE ISSUE IN DIS PUTE IN THE PRESENT YEAR I..E. IN 2005-06 CANNOT BE DECIDED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GON E THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN DISPUTE WAS DECID ED BY LD CIT(A) AS PER HIS FINDINGS RECORDED ON PAGE NO.20-24 OF HIS ORDER AND THE SAME IS REPRODUCED BELOW FOR THE SAKE OF CONVENIENCE:- . I.T.A. NO2706 & 82/DEL/08-09 5/13 I HAVE CAREFULLY CONSIDERED THE ORDER OF THE ASSES SING OFFICER AND THE WRITTEN SUBMISSION OF THE APPELLANT . THE RELEVANT FACTS RELATED TO THE CLAIM OF DEDUCTION U/S 10B OF THE INCOME TAX ACT, 1961 AR E AS UNDER:- THE APPELLANT IN ITS RETURN OF INCOME FOR THIS ASSE SSMENT YEAR CLAIMED EXEMPTION OF RS.1,70,17,473/- UNDER SECTION 10B OF THE INCOME TAX ACT, 1961. THE ASSESSING OFFICER DENIED THE EXEMPTION UN DER THE SAID SECTION TO THE APPELLANT FOR THE ASSESSMENT YEAR 2005-06. IN THE INSTANT ASSESSMENT YEAR, DISREGARDING THE PA ST APPROVALS GRANTED, THE ASSESSING OFFICER DISALLOWED SUCH CLAIM OF THE APPELLANT SOLELY ON THE ASSUMPTION THAT APPROVAL GRANTED BY DIRECTOR, SOFTW ARE TECHNOLOGY PARK- NOIDA CANNOT BE EQUATED WITH THE APPROVAL FROM THE BOARD APPOINTED U/S 14 OF THE INDUSTRIES DEVELOPMENT AND REGULATION ACT , 1951 AS HAS BEEN PROVIDED IN EXPLANATION 2(IV) OF SECTION 10B OF THE ACT. IN SUPPORT OF THIS CONTENTION, HE RELIED UPON THE DECISION OF THE HON' BLE HYDERABAD BENCH OF THE ITAT IN THE CASE OF INFOTECH ENTERPRISES LTD. V . JCIT REPORTED IN 85 ITD 325 AND HELD IN PARA 4.11 OF THE ORDER OF ASSESSME NT AS UNDER:- IN THE ABSENCE OF SPECIFIC APPROVAL BY THE BOARD W ITHIN THE MEANING OF SECTION 10B, EXPLANATION 2(IV) OF THE AC T, THE CLAIM OF DEDUCTION OF THE ASSESSEE COMPANY IN THIS CASE CANN OT BE LEGALLY ACCEDED TO AND THE SAME DESERVES TO BE REJECTED. THE EXEMPTION U/S THE HEADING OF THE SECTION SUGGES TS, IS IN RESPECT OF NEWLY ESTABLISHED HUNDRED PER CENT EXPORT ORIENTED UNDETAKING. SECTION 10 WAS INSERTED BY THE FINANCE ACT, 1988 W.E.F. 1.4 .1989 AND LATER ON IT WAS AMENDED FROM TIME TO TIME. ACCORDING TO THIS P ROVISION, ANY PROFITS AND GAINS DERIVED BY AN ASSESSEE FROM A HUNDRED PER CENT EXPORT ORIENTED UNDERTAKING SHALL NOT BE INCLUDED IN THE T OTAL INCOME OF THE . I.T.A. NO2706 & 82/DEL/08-09 6/13 ASSESSEE. AS PROVIDED IN CLAUSE (2) OF SECTION 10B, THE EXEMPTION IS AVAILABLE TO UNDERTAKINGS WHICH FULFILL ALL THE FOL LOWING CONDITIONS NAMELY:- I) IT MANUFACTURES OR PRODUCES ANY ARTICLE OR THING ; II) IN RELATION TO AN UNDERTAKING WHICH BEGINS TO M ANUFACTURE OR PRODUCE ANY ARTICLE OR THING ON OR AFTER THE IST DA Y OF APRIL, 1994, ITS EXPORTS OF SUCH ARTICLES AND THINGS ARE NOT LESS TH AN SEVENTY FIVE PER CENT OF THE TOTAL SALES THEREOF DURING THE PREV IOUS YEAR; III) IT IS NOT FORMED BY THE SPLITTING UP, OR THE R ECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE. PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RES PECT OF ANY UNDERTAKING WHICH IS FORMED AS A RESULT OF RE-ESTAB LISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BU SINESS OF ANY SUCH INDUSTRIAL UNDERTAKING AS IS REFERRED TO IN SE CTION 33B IN THE CIRCUMSTANCES AND WITHINTHE PERIOD SPECIFIED IN THA T SECTION; IV) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSIN ESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. THE APPELLANT CLAIMED EXEMPTION U/S 10B OF THE INCO ME TAX ACT, 1961 FOR THE FIRST TIME ONLY INAY 2003-04. THIS CLA IM OF EXEMPTION WAS ALLOWED BY THE ASSESSING OFFICER. IN ASSESSMENT YEAR 2004- 05, AGAIN DEDUCTION WAS CLAIMED U/S 10B AND THE SAI D CLAIM WAS ALLOWED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961. IN THE YEAR CONCERNED, THERE IS NEITHER CHANG E IN FACTS OF THE CASE NOR ANY CHANGYE IN THE POSITION OF LAW. IT APP EARS THAT THE ASSESSING OFFICER HAS RE-APPRECIATED THE PROVISIONS OF LAW TO THE FACTS OF THE INSTANT CASE. HOWEVER, THE ASSESSING O FFICER HAS NOT FOLLOWED THE RULES OF CONSISTENCY. IN THIS REGARD, THE APPELLANT HAS CITED SEVERAL CASE LAWS. ACCORDING TO THE CASES CIT ED, THE . I.T.A. NO2706 & 82/DEL/08-09 7/13 ASSESSING OFFICER WAS DUTY BOUND TO FOLLOW THE RULE OF CONSISTENCY WHEN THERE WAS NO CHANGE IN THE FACTS OF THE CASE. ACCORDING TO THE ADDL. CIT, EOU OF THE APPELLANT IS NOT REGISTERED BY THE BOARD APPOINTED BY THE CENTRAL GOVT. AS LAID DOWN IN EXPLANATION 2(IV) TO SECTION 10B OF THE ACT BUT HAS MERELY OBTAINED CERTIFICATE FROM SOFTWARE TECHNOLOGY PARK, NOIDA WH ICH IS NOT A BOARD APPOINTED BY THE GOVERNMENT OF INDIA. THE UNIT OF APPELLANT COMPANY IS AN ELIGIBLE UNIT I N TERMS OF EXPLANATION 2(IV) OF SECTION 10B OF THE ACT, WHICH PROVIDES AS UNDER:- HUNDRED PER CENT EXPORT ORIENTED UNDERTAKING MEANS AN UNDERTAKING WHICH HAS BEEN APPROVED AS A HUNDRED PE R CENT EXPORT ORIENTED UNDERTAKING BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVT. IN EXERCISE OF POWERS CONFERRED BY SE CTION 14 OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 ( 65 OF 1951) AND THE RULES MADE UNDER THAT ACT. THE SUBMISSION OF THE APPELLANT IS DULY SUPPORTED B Y CLARIFICATION ISSUED BY STPI NOIDA DATED 12.L11.2007 IN THE CASE OF M/S EON TECHNOLOGIES LTD. WHO HAD ALSO CLAIMED DEDUCTION U/ S 10B OF THE ACT. IN FACT, IT HAS BEEN SPECIFICALLY STATED THAT APPROVALS GRANTED BY DIRECTOR, STP IS A VALID APPROVAL FOR THE PURPOSE O F CLAIM OF DEDUCTION U/S 10B OF THE ACT. VIDE NOTIFICATION NO.4 (RE-95/92-97) DATED 30.4.199 5, ISSUED BY THE DIRECTOR GENERAL (FOREIGN TRADE), MINISTRY OF C OMMECE, IN EXERCISE OF POWERS CONFERRED IN SUB SECTION (1) OF SECTION 3 OF FOREIGN TRADE (DEVELOPMENT AND REGULATION) ACT, 199 2 NOTIFIED THE . I.T.A. NO2706 & 82/DEL/08-09 8/13 AMENDED STP SCHEME, PARA 2.3.; OF THE AFORESAID NOT IFICATION PROVIDES THAT THE SCHEME IS ADMINISTERED BY THE DEP ARTMENT OF ELECTRONICS, GOVT. OF INDIA, THROUGH DIRECTORS OF R ESPECTIVE STPS WHICH FORM PART OF THE STPI, A SOCIETY ESTABLISHED BY THE DEPARTMENT OF ELECTRONICS AND REGISTERED UNDER THE SOCIIETIES REGISTRATION ACT, 1860. AN APPLICATION IN THE PRES CRIBED FORMAT FOR ESTABLISHING A STP UNIT5 MAY BE SUBMITTED TO THE CH IEF EXECUTIVE OF STP COMPLEX ALONG WITH THE DETAILS OF THE SOFTWA RE PROJECT. SUCH APPLICATION WILL BE CONSIDERED BY AN INTER MINISTER IAL STANDING COMMITTEE CONSTITUTED UNDER THE CHAIRMANSHIP OF SEC RETARY, DEPARTMENT OF ELECTRONICSL COPY OF REGISTRATION COPY OF REGISTRATION PAPERS OF THE APPELLANT FILED BEFORE THE ASSESSING OFFICER CLEARLY SHOWS TH AT STPI IS DULY AUTHORIZED AUTHORITY ON BEHALF OF INTER MINISTERIAL STANDING COMMITTEE TO GRANT REGISTRATION OF THE UNITS UNDER THE SCHEME OF STPI. COPY OF CLARIFICATION OBTAINED FROM STPI IN THIS CONNECTION HAS ALSO BEEN PERUSED. IT SHOWS THAT THE REGISTRATI ON HAS BEEN GRANTED BY DIRECTOR, STPI ON BEHALF OF INTER MINIST ERIAL STANDING COMMITTEE. THE CBDT HAS ISSUED INSTRUCTION NO.1/200 6 DATED 31.3.2006 ON THIS ISSUE THAT BENEFIT U/S 10A SHOULD NOT BE DENIED TO THE ASSESSEE ONLY ON THE GROUND THAT REGISTRATION H AS BEEN GRANTED BY DIRECTORS OF SOFTWARE TECHNOLOGY PARKS. INSTANCES HAVE BEEN BROUGHT TO THE NOTICE OF THE BO ARD THAT A LARGE NUMBER OF UNITS REGISTERED/APPROVED BY THE DIRECTOR S OF THE STPI ARE CLAIMING DEDUCTION U/S 10A WHEREAS THE STP SCHE ME REQUIRES APPROVAL BY THE INTER-MINISTERIAL STANDING COMMITTE E OF THE DEPARTMENT OF ELECTRONICS. . I.T.A. NO2706 & 82/DEL/08-09 9/13 THE MATTER HAS BEEN EXAMINED IN CONSULTATION WITH T HE OFFICERS OF THE DEPARTMENT OF INFORMATION TECHNOLOGY (EARL9IER, DEPARTMENT OF ELECTRONICS), IN VIEW OF THE AMBIGUITY IN THE LEGAL STATUS OF THE APPROVAL BY DIRECTOR OF STPS, THE INTER MINISTERIAL STANDING COMMITTEE WILL MEET TO CONSIDER THE APPROVALS BY DI RECTOR OF STPS ISSUED IN THE PAST. THEREFORE, WITH A VIEW TO AVOI D INFRUCTUOUS DEMAND RAISED IN ASSESSMENT AND RE-ASSESSMENT OF ASSESSES CLAIMING DEDUCTION U/S 1-A OF THE INCOME TAX ACT, 1961 SHALL NOT BE DENIED TO STP UNITS ONLY ON THE GROUND THAT THE APPROVAL/REGISTRATION TO SUCH UNITS HAS BEEN GRANTE D BY THE DIRECTORS OF SOFTWARE TECHNOLOGY PARKS. HOWEVER, I T HAS TO BE ENSURED THAT ALL OTHER CONDITIONS SPECIFIED IN SECT ION 10A ARE FULLY SATISFIED BEFORE ALLOWING ANY SUCH CLAIM. THE INTER-MINISTERIAL COMMUNICATIONS VIDE LETTER NO .D.O. NO.4(1)/2006 IPHW DATED MARCH 23 RD 2006, ISSUED BY HON'BLE SECRETARY OF MINISTRY OF COMMUNICATIONS & TECHNOLOG IES, STATES THAT: 1. SOFTWARE TECHNOLOGY PARK OF INDIA (STPI) IS A SO CIETY OWNED AND ADMINISTERED BY THE GOVT. OF INDIA AND THEREFOR E IS STATE UNDER ARTICLE 12 OF THE CONSTITUTION OF INDIA. 2. THE STPI DIRECTORS ARE DULY AUTHORIZED AND FULLY EMPOWERED TO ISSUE APPROVALS AS 100% EOUS TO THE UNIT UNDER THE STP SCHEME UNDER DELEGATED POWERS GRANTED AS PER PARA 9 .36 OF THE HANDBOOK OF PROCEDURES (VOL.1) 1997-2002. 3. ALL THE APPROVALS ISSUED BY THE STPI DIRECTORS H AVE THE AUTHORITY OF INTER MINISTERIAL STANDING COMMITTEE ( IMSC). THE IMSC HAS PERIODICALLY REVIEWED THE VARIOUS APPROVAL S GRANTED BY THESTPI DIRECTORS IN ACCORDANCE WITH THE GOVT. O F INDIA . I.T.A. NO2706 & 82/DEL/08-09 10/13 GUIDELINES/NOTIFICATIONS. ALL THE CURRENT APPROVALS GRANTED BY THE STPI DIRECTORS ARE THEREFORE, DEEMED TO BE VALID. THE ASSESSING OFFICER HAS RELIED UPON THE DECISION OF HYDERABAD BENCH OF ITAT IN THE CASE OF INFOTECH ENT ERPRISES LTD. V. JCIT REPORTED IN 85 ITD 325. IT IS SUBMITTE D THAT AFORESAID DECISION HAS NO APPLICATION TO THE FACTS OF THE CAS E OF THE APPELLANT SINCE SAME WAS RENDERED PRIOR TO INSTRUCT ION NO.1 DATED 31.3.2006 ISSUED BY CBDT AND MINUTES OF INDU STRIAL MINISTERIAL COMMUNICATION VIDE LETTER DATED 23.3.20 06 ISSUED BY THE MINISTRY OF COMMUNICATION AND TECHNOLOGIES AS S TATED ABOVE. IN FACT IN THAT CASE AS HAS NOW BEEN PLACED ON RECORD IN ABOVE MENTIONED PARAS BY THE APPELLANT, NO SPECIFIC CLARIFICATION HAD ALSO9 BEEN PLACED ON RECORD. IT IS THUS SUBMITT ED THAT AFORESAID DECISION WAS RENDERED WITHOUT VARIOUS INS TRUCTIONS AND GUIDELINES ISSUED BY THE MINISTRY OF COMMERCE A ND MINISTRY OF COMMUNICATION. IN FACT, AS STATED ABOVE, NOTIFIC ATION ISSUED BY MINISTRY OF COMMERCE SPECIFICALLY STATES THAT EV EN UNDER SECTION 14 OF THE IDRA, EOU WHICH DO NOT FALL UNDER THE AUTOMATIC ROUTE SHALL ONLY APPLY TO THE BOARD. HOWE VER, THE APPELLANT FALLS UNDER AUTOMATIC ROUTE AS EVIDENT FR OM PARA 5 OF THE INDUSTRIAL POLICY, THERE WAS NO SPECIFIC APPROV AL REQUIRED FROM BOARD AND IN FACT, THE APPROVAL OF THE DEVELOP MENT COMMISSIONER ITSELF WAS AN APPROVAL OF THE BOARD IN TERMS OF EXPLANATION 2(4) OF SECTION 10B OF THE ACT. THE CON CERNED JUDGMENT RELIED UPON BY THE ASSESSING OFFICER OF HO N'BLE HYDERABAD ITAT CAME PRIOR TO THE AFORESAID NOTIFICA TION WHICH WAS NOT CONSIDERED BY THE HON'BLE TRIBUNAL AND THER EFORE, CANNOT BE HELD TO BE A VALID DECISION SO AS TO APPL Y THE SAME MECHANICALLY TO THE FACTS OF THE CASE OF THE APPELL ANT. . I.T.A. NO2706 & 82/DEL/08-09 11/13 6. AS PER ABOVE ORDER OF LD CIT(A), WE FIND THAT TH IS ISSUE HAS BEEN DECIDED BY LD CIT(A) ON THE BASIS OF INSTRUCTION NO.1 DATED 31.3.2006 ISSUED BY CBDT AND MINUTES OF INDUSTRIAL MINISTERIAL COMMUNICATION VIDE LETTER DATED 23.3.2006 ISSUED BY THE MINISTRY OF COMMUNICATION AND TECHNOL OGY. REGARDING THE TRIBUNAL DECISION IN THE CASE OF INFOTECH ENTERPRIS ES PVT. LTD. (SUPRA) IT IS OBSERVED BY LD CIT(A) THAT THIS DECISION HAS NO APP LICATION IN THE PRESENT CASE BECAUSE THAT TRIBUNAL DECISION WAS RENDERED PRIOR T O INSTRUCTION NO.1 DATED 31.3.2006 ISSUED BY THE CBDT. BEFORE US, RELIANCE WAS PLACED ON THE TRIBUNAL DECISION RENDERED IN THE CASE OF ITO V. REGANCY CRE SATIONS LTD. IN I.T.A. NO.4006/DEL/2006 DATED 13.4.2006 AND COPY OF THIS T RIBUNAL DECISION HAS BEEN SUBMITTED. IN THIS TRIBUNAL DECISION, IT WAS HELD T HAT REGISTRATION GRANTED BY STPI FOR SETTING UPO OF 100% EOU UNDER SOFTWARE TECHNOLO GY PARK SCHEME IS VALID FOR ALLOWING DEDUCTION U/S 10B. THE RELEVANT PARA O F THIS TRIBUNAL DECISION IS PARA NO.5 WHICH IS REPRODUCED BELOW:- WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT THE ASSESSEE HAS ESTABLISHED A SOFTWARE DIVISION UN DER THE NAME AND STYLE OF MAXTECH SOLUTIONS WHICH WAS APPROVED AND R EGISTERED WITH THE STPI, A UNIT OF MINISTRY OF INFORMATION &N TECHNOLO GY. THIS IS A NODAL AGENCY FOR GRANT OF APPROVAL FOR ESTABLISHMENT OF 1 00% EXPORT ORIENTED SOFTWARE. AS PER THE PERMISSION LETTER DATED 7 TH NOVEMBER, 2006 AS PLACED 0N THE RECORD, WE FOUND THAT STPI HAD GRANTED REGIS TRATION TO THE ASSESSEE VIDE LETTER DATED 5.12.2000 FOR SETTING UP OF A 100% EOU UNDER SOFTWARE TECHNOLOGY PARK SCHEME WHICH WAS VALID FOR 5 YEARS. THE ASSESSEE WAS GRANTED EXTENSION TO CONTINUE THE OPER ATIONS UNDER SOFTWARE TECHNOLOGY PARK SCHEME UP TO 31.3.2009. CB DT IN ITS CIRCULAR NO.149/194/2004/TPL DATED 6.1.2005 AND CIRCULAR NO. 200/20/2006/INCOME TAX ACT, 1961 DATED 31.3.2006 HA S DIRECTED TO TREAT THE GRANT OF REGISTRATION BY STPI AS VALID AGENCY F OR PURPOSES OF SECTION 10B. . I.T.A. NO2706 & 82/DEL/08-09 12/13 7. SINCE THE FACTS ARE IDENTICAL IN THE PRESENT CAS E, THIS TRIBUNAL DECISION RENDERED IN THE CASE OF REGENCY CREATIONS LTD. (SUP RA) IS DIRECTLY APPLICABLE IN THE PRESENT CASE AND RESPECTFULLY FOLLOWING THIS TRIBUN AL DECISION, WE HOLD THAT THE STIP REGISTRATION GRANTED TO THE ASSESSEE ON 16.11. 1998 IS VALID FOR ALLOWING DEDUCTION TO THE ASSESSEE U/S 10B AND HENCE WE DO N OT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD CIT(A) ON THIS ISS UE. WE WOULD ALSO LIKE TO POINT OUT THAT IN AN EARLIER YEAR I.E. ASSESSMENT YEAR 2 004-05, THE ASSESSING OFFICER HIMSELF HAS ALLOWED DEDUCTION U/S 10B TO THE ASSESS EE IN A SCRUTINY ASSESSMENT . IT IS ALSO NOT BROUGHT ON RECORD BY THE REVENUE T HAT THIS ORDER IS REVISED U/S 263 OR REOPENED U/S 147. UNDER THESE FACTS, WE FEEL THA T HAVING DECIDED IN ASSESSMENT YEAR 2004-05 THAT THE ASSESSEE IS ELIGI BLE FOR DEDUCTION U/S 10B, IT CANNOT BE DENIED IN THIS SUBSEQUENT YEAR ON THE BAS IS THAT THE ASSESSEE IS NOT AN 100% EOU FOR THE REASON THAT NECESSARY APPROVAL IS NOT WITH THE ASSESSEE. THIS IS AGAINST THE RULE OF CONSISTENCY. FOR THIS R EASON ALSO, WE DECLINE TO INTERFERE IN THE ORDER OF LD CIT(A). 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 9. NOW, WE TAKE UP THE CROSS OBJECTION OF THE ASSES SEE. 10. THE GROUND RAISED BY THE ASSESSEE IN THE CROSS OBJECTION READ AS UNDER:- IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO THE CL AIM MADE UNDER SECTION 10B OF THE ACT, IF IT IS HELD THAT THE ASSESSEE IS NOT ELIGIBLE TO THE CLAIM OF DEDUCTION U/S 10B OF THE INCOME TAX ACT, 1961 AS IT HAD FAUILED TO COMPLY WITH ANY STATUTORY REQUIREMENT AS ENVISAGED OUNDER THE AFORESAID SECTION, THEN THE DEDUCTION U/S 10A OF THE ACT AS HAD BEEN A LTERNATIVELY MADE BEFORE THE LD ASSESSING OFFICER SHOULD HAVE BEEN DI RECTED TO HAVE BEEN ALLOWED. . I.T.A. NO2706 & 82/DEL/08-09 13/13 11. SINCE THE ISSUE IN DISPUTE IS DECIDED BY US IN FAVOUR OF THE ASSESSEE BY DISMISSING THE APPEAL OF THE REVENUE, THE ALTERNATI VE CLAIM OF THE ASSESSEE FOR ALLOWING DEDUCTION U/S 10A DOES NOT CALL FOR ANY AD JUDICATION. 12. IN THE RESULT, THE CROSS OBJECTION OF THE ASSES SEE IS DISMISSED AS INFRUCTUOUS. 13. IN THE COMBINED RESULT, THE APPEAL OF THE REVEN UE AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. 14. ORDER PRONOUNCED IN THE OPEN COURT ON 23RD APR IL,2010. SD/- SD/- (A.D. JAIN) (A.K. GA RODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 23.4.2010. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).