VNS Makro Technologies Pvt. Ltd., Hyderabad V. ACIT, Hyderabad

ITA 1057/HYD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9907 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-12-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 28-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: D V ANJANEYALU
• Keywords: Application of stay; Wrong claim; Reassessment proceedings
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER SA NO.56/H/2010 ARISING OUT IN ITA NO.1057/H/2010 ASSESSMENT YEAR 2007-08 M/S VSN MAKRO TECHNOLOGIES (P) LTD. HYDERABAD (PAN AABCV 4969 M) VS THE ACIT, CIRCLE 3(3), HYDERABAD (APPELLANT) (RESPONDENT) ITA NO.1057/H/2010 ASSESSMENT YEAR 2007-08 M/S VSN MAKRO TECHNOLOGIES (P) LTD. HYDERABAD (PAN AABCV 4969 M) VS THE ACIT, CIRCLE 3(3), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.V. ANJANEYALU RESPONDENT BY : SHRI V. SRINIVAS, CIT O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER PASSED BY THE CIT (A)IV, HYDERABAD DATED 30. 6.2010 AND PERTAINS TO THE ASSESSMENT YEAR 2007-08. THE ASSESSEE ALSO FILED STAY PETITION SEEKING THE STAY OF DISPUTED OUTSTANDING DEMAND AT RS.1,29,88,313/- . 2. THE GRIEVANCE IN THE ASSESSEE APPEAL IN ITA NO .1057/H/2010 IS WITH REGARD TO DENIAL OF EXEMPTION U/S 10B OF TH E IT ACT. 3. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT. IT CLAIMED DEDUC TION U/S 10B OF THE ACT AT RS.2,87,03,825/-. IT WAS NOTICED BY THE ASSESSI NG OFFICER THAT THE ITA NO.1057/H/2010 & SA 56/H/2010 VSN MAKRO TECHNOLOGIES (P) LTD., HYDERABAD 2 2 ASSESSEE WAS REGISTERED WITH THE STPI AS 100% EOU. FOR AVAILING THE EXEMPTION U/S 10B, THE UNDERTAKING IS REQUIRED TO B E 100% EOU AND IT HAS TO BE APPROVED BY BOARD APPOINTED IN THIS BEHAL F BY THE CENTRAL GOVT. U/S 14 OF THE INDUSTRIES (DEVELOPMENT AND REGULATIO N ACT 1951). SINCE THE ASSESSEE HAS NOT GOT THE APPROVAL FROM THE BOARD AS 100% EOU INSTEAD IT WAS APPROVED UNDER STPI SCHEME THAT ITSELF CANNOT B E EQUATED WITH AS APPROVED BY THE BOARD AS HELD IN THE CASE OF INFOT ECH LIMITED VS. CIT (85 ITD 325). ACCORDINGLY, THE DEDUCTION U/S 10B WAS D ENIED BY THE LOWER AUTHORITIES. AGAINST THIS THE ASSESSEE IS IN APPEA L BEFORE US. 4. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTE D THAT THERE WAS A WRONG CLAIM BY THE ASSESSEE U/S 10B INSTEAD O F 10A IN THE RETURN OF INCOME. THIS HAS BEEN ACCEPTED BY THE DEPARTMENT F ROM THE ASSESSMENT YEARS 2003-04 UPTO 2006-07. IN THESE YEARS, THE AS SESSMENTS WERE MADE U/S 143(3) OF THE ACT. ONLY IN THIS ASSESSMENT YEA RS 2007-08 THE CLAIM OF THE ASSESSEE WAS DENIED. 5. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE AR GUED THAT THE ASSESSING OFFICER SHOULD HAVE BROUGHT TO THE NOTICE OF THE ASSESSEE THAT THE CLAIM WAS MADE IN THE WRONG FORM AND SHOULD HAVE AD VISED IT TO RECTIFY THE SAME, AS THE DEPARTMENT ITSELF HAD BEEN ACCEPTING S UCH CLAIM FOR LAST SEVERAL YEARS. HE AVERRED THAT THE ASSESSING OFFIC ER IGNORED THE CIRCULAR NO.14(XL-35) DATED 11.4.1995 IN THIS REGARD. HE AL SO CITED THE DECISIONS IN THE CASE OF ANCHOR PRESSINGS (P) LTD. VS. CIT (U P) (161 ITR 159) ( S C) CLAIMING THAT IT IS THE ITOS DUTY TO GRANT RELIEF EVEN IF THE ASSESSEE THAT OMITS TO CLAIM SUCH RELIEF. HE ALSO PLACED RELIANC E ON THE JUDGEMENT OF THE HONBLE ALLAHABAD HC IN SUBHASH CHANDRA SARVESH KR. VS. CIT (132 ITR 619) TO ARGUE THAT EVEN IF A FORMAL CLAIM WAS NOT M ADE IN THE RETURN, IT SHOULD BE GRANTED, IF NECESSARY PARTICULARS ARE ON RECORD. HE RELIED ON THE JUDGEMENT OF HONBLE HIGH COURT OF CALCUTTA IN CIT VS. SHRI BAJRANG ITA NO.1057/H/2010 & SA 56/H/2010 VSN MAKRO TECHNOLOGIES (P) LTD., HYDERABAD 3 3 ELECTRIC STEEL COMPANY (P) LTD. (181 ITR 427) TO CL AIM THAT THE SPECIAL DEDUCTION U/S 80J CAN BE CLAIMED FOR THE FIRST TIME IN THE REASSESSMENT PROCEEDINGS IN PURSUANCE OF AN ASSESSEE ORDER, EVEN IF IT WAS NOT CLAIMED IN THE ORIGINAL ASSESSMENT ORDER. 6. HE SUBMITTED THAT IN VIEW OF THE DECISION IN THE CASE OF CIT VS, KANPUR COAL SYNDICATE (53 ITR 225), THE POWERS OF THE APPELLATE AUTHORITY ARE CO TERMINUS WITH THAT OF THE ASSESSIN G OFFICER. HE AVERRED THAT THERE WAS NO DISPUTE WITH REGARD TO EXPORT TUR NOVER, WHICH IS AN ELIGIBLE DEDUCTION, BOTH U/S 10B AND 10A, AND THERE FORE, THE ASSESSING OFFICER SHOULD HAVE ALLOWED THE CLAIM U/S 10A EVEN THOUGH THE CLAIM HAD BEEN MADE BY THE ASSESSEE U/S 10B. 7. FURTHER, HE PLACED RELIANCE ON THE FOLLOWING JUDGEM ENTS : 1. CIT VS. KANPUR COAL SYNDICATE (53 ITR 225) 2. NATIONAL POWER CO. LTD. VS. CIT (229 ITR 383) (S C) 3. ANCHOR PRESSINGS P LTD. VS. CIT (UP) 161 ITR 159 ( S C) 4. GOETZE INDIA LTD. VS. CIT (284 ITR 323) 5. CIT VS. KHAITAN CHEMICALS & FERTILIZERS (38 DTR 86) (DEL.) 6. CIT VS. LUCKNOW PUBLIC EDUCATIONAL SOCIETY (38 DTR 80) 7. CIT VS. MAHALAKSHMI TEXTILES LTD. (66 ITR 710 ) (SC ) 8. CIT VS. VALLY COTTON TRADERS (P) LTD. (288 ITR 400) 8. HE ALSO RELIED ON FOLLOWING ORDERS OF THE TRIB UNAL: 1. ORDER DATED 11.9.2009 IN THE CASE OF OUR WEB STUDIO SOFTWARE SOLUTIONS (P) LTD., FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO.671/H/2009 A BENCH (HYD.) 2. ITO VS. HOTLINE KG INFORMATION LTD. (131 TTJ 216) ( AGRA.) ITA NO.1057/H/2010 & SA 56/H/2010 VSN MAKRO TECHNOLOGIES (P) LTD., HYDERABAD 4 4 3. ITO VS. TAMILNADU MINERAL LTD. (124 ITD 156) (RD ME MBER) (CHEN.) 9. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REP RESENTATIVE SUBMITTED THAT THE ASSESSEE FAILED TO SATISFY THE R EQUIREMENT OF SECTION 10B AND SECTION 10A & B ARE OPERATED IN A DIFFERENT REGULATORY CONTEXT AND AS SUCH THE ASSESSING OFFICER DENIED EXEMPTION CLAI MED BY THE ASSESSEE. THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT BOTH THE CLAIMS ARE SUBSTANTIAL AND THAT OMISSION TO MAKE THE CORRECT C LAIM IS ONLY TECHNICAL BREACH WILL BE APPARENT FROM RECORD. ACCORDING TO LEARNED DEPARTMENTAL REPRESENTATIVE THE APPELLATE AUTHORITY CANNOT USE P LENARY POWER TO SUBSTITUTE FORM 56F IN THE PLACE OF 56G WHEN THE A SSESSEE HAS NOT OBTAINED THE CONCERNED APPROVALS FROM THE CENTRAL G OVT. FAILURE TO OBTAIN THE PRESCRIBED RECTIFICATION OF THE GOVT. OR OBTAIN ING FROM WRONG AUTHORITY IS NOT A MERE TECHNICAL BREACH, BUT AN OMISSION TO MEET BASIC CONDITION. HE SUBMITTED THAT EVEN IT WAS POSSIBLE TO HOLD THAT THE FORM 56F AND 56G ARE SUBSTITUTABLE BECAUSE A COMMON FACT ON EXPORTS ARE INVOLVED, IT CANNOT BE SAID THAT THE DIRECTOR, STPI AND BOARD U/S 14 OF INDUSTRIAL ACT 1951 ARE SUBSTITUTABLE. HE RELIED ON THE ORDER OF THE T RIBUNAL IN THE CASE OF INFOTECH VS. CIT (85 ITD 325) (HYD.). HE SUBMITTED THAT IT IS NOT CORRECT TO SAY THAT IN EARLIER YEARS, THE DEPARTMENT HAS ACCEP TED ASSESSEES CLAIM U/S 10B AND THE SAME IS TO BE EXAMINED WITH REFEREN CE TO EACH ASSESSMENT YEAR. EVEN IF THERE IS ANY MISTAKE COMM ITTED BY THE DEPARTMENT IN EARLIER YEARS, IT IS OPENED TO THE DE PARTMENT TO RECTIFY THE SAME. THERE IS A DIFFERENCE BETWEEN ACCEPTANCE OF THE CLAIM AND OMISSION TO LOOK INTO A CLAIM. IN EARLIER YEAR THERE MAY BE NON EXAMINATION OF THE ISSUE THAT ITSELF DOES NOT ENTITLE TO THE ASSESSEE TO GRANT RELIEF AS IT IS IN THE ASSESSMENT YEAR UNDER CONSIDERATION. HE SUBMITTED T HAT THE VARIOUS CASE LAW CITED BY THE ASSESSEES COUNSEL CANNOT BE APPLI ED TO THE PRESENT FACT OF THE CASE. IN THOSE CASES WHICH ARE RELIED UPON BY THE LEARNED AR IS TO THE EFFECT THAT EVEN IF NO FORMAL CLAIM WAS MADE IN THE RETURN, IT SHOULD BE ITA NO.1057/H/2010 & SA 56/H/2010 VSN MAKRO TECHNOLOGIES (P) LTD., HYDERABAD 5 5 GRANTED IF NECESSARY PARTICULARS AVAILABLE ON RECOR D. THIS STAND WOULD HAVE BEEN CORRECT BUT ONLY IF REQUIRED CONDITIONS P RESCRIBED IN LAW ARE SATISFIED. THERE IS NOTHING TO SUGGEST THAT EXPORT S AND FURNISHING OF FORM 56F/56G ARE THE ONLY PRESCRIBED PARAMETERS. THE LE GISLATURE IN ITS WISDOM PRESCRIBED A REGIME OF APPROVALS BY SEPARATE AUTHORITIES. EACH AUTHORITY HAS ITS SEPARATE MANDATE. AS NOTICED IN THE CASE OF INFOTECH ENTERPRISES LTD. (85 ITD 325) THE RESPECTIVE APPROV ING AUTHORITIES ARE NOT INTERCHANGEABLE. TO OVERLOOK THIS ASPECT WOULD NOT BE A MERE INTERPRETATION OF THE STATUTE, RATHER IT WOULD AMOU NT TO GOING BEYOND THE STATUTE. IT IS ALSO BEEN NOTICED IN THE ABOVE DECI SION THAT ALTHOUGH SOME CONDITIONALITIES WERE COMMON AND OVERLAPPING BETWEE N 10A AND 10B UNITS, OTHER CONDITIONALITIES LIKE SATISFACTION OF EMPLOYMENT CRITERIA, FOREIGN EXCHANGE ETC. ARE APPARENTLY DIFFERENT. UNDER THE CIRCUMSTANCES, IT HAS BEEN HELD THAT TO HOLD TWO APPROVALS AS SUBSTITUTAB LE WOULD AMOUNT TO HOLDING THAT THERE WAS AN AMOUNT OF REDUNDANCY OR S UERFLUOUSNESS IN THE RESPECTIVE SECTIONS. THERE IS NOTHING IN THE FACT S OF THIS CASE TO WARRANT A DEPARTURE FROM THE BINDING PRECEDENT CREATED BY 85 ITD 325 (HYD.) A SUBSEQUENT DECISION OF THE HYDERABAD BENCH DATED 3 0.10.2009 IN ITA NO.1750/HYD/2008 FOR THE ASSESSMENT YEAR 2005-06 I N THE CASE OF SMT. K. SUDHA RANI LACKS PRECEDENT VALUE BECAUSE IT DID NOT CONSIDER THE EARLIER AND ELABORATELY REASONED ORDER OF THE ITAT BENCH AT 85 ITD 325. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIALS AVAILABLE ON RECORD. THE CONTENTION OF THE ASSESSE ES COUNSEL IS THAT THE ASSESSEE IS 100% EOU ENTITLED FOR EXEMPTION U/S 10A AND WRONGLY CLAIMED THE DEDUCTION U/S 10B AND IT WAS A TECHNICA L MISTAKE IN CLAIMING DEDUCTION U/S 10B. THE ASSESSEES COUNSEL FURTHER ARGUED THAT THE ASSESSEE HAS FULFILLED ALL THE REQUIREMENTS OF PROV ISIONS OF SECTION 10A. HOWEVER, THIS CLAIM OF THE ASSESSEE NOT EXAMINED BY THE LOWER AUTHORITIES AND THEY STICK TO ONE CONTENTION THAT THE ASSESSEE CLAIM U/S 10B IS NOT ITA NO.1057/H/2010 & SA 56/H/2010 VSN MAKRO TECHNOLOGIES (P) LTD., HYDERABAD 6 6 ALLOWABLE. WE ARE AGREEING WITH THE DEPARTMENT THA T THE CONDITION FOR ALLOWANCE OF DEDUCTION U/S 10A AND 10B ARE STOOD ON DIFFERENT FOOTING. HOWEVER, THE DEPARTMENT CANNOT THRUST UPON THE ASSE SSEE TO AVAIL DEDUCTION U/S 10B ONLY. IF THE ASSESSEE ENTITLED F OR DEDUCTION U/S 10A INSTEAD OF 10B, THAT CLAIM REQUIRED TO BE EXAMINED BY THE ASSESSING OFFICER IN ALL FAIRNESS. THE ISSUE OF ALLOWANCE OF DEDUCTI ON U/S 10A THOUGH ASSESSEE MADE A CLAIM BEFORE THE LOWER AUTHORITIES HAS NOT EXAMINED BY THE ASSESSING OFFICER. IN THE FACTS AND CIRCUMSTAN CES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT IT SHALL BE IN THE INTE REST OF JUSTICE TO SET ASIDE THE ISSUE IN THE GROUNDS OF APPEAL OF THE ASSESSEE TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE IN ACC ORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE, A ND ALSO TO GIVE A SPECIFIC FINDING WHETHER THE ASSESSEE IS ENTITLED T O DEDUCTION U/S 10A OF THE ACT OR NOT. THE ASSESSEE MAY FILE ANY EVIDENCE IN SUPPORT OF ITS CLAIM FOR DEDUCTION BEFORE THE ASSESSING OFFICER. WE MAK E IT CLEAR THAT OUR OBSERVATIONS HEREIN ABOVE SHALL NOT HAVE ANY BEARIN G ON THE DECISION OF THE ASSESSING OFFICER WITH REGARD TO THE MERITS OF THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10A OF THE ACT. WE DIRECT ACCORDINGL Y. 11. COMING TO THE STAY APPLICATION, SINCE WE HAV E SET ASIDE THE ISSUE INVOLVED IN THE APPEAL TO THE FILE OF ASSESSI NG OFFICER FOR FRESH CONSIDERATION, THE STAY APPLICATION HEREIN HAS BECO MES INFRUCTUOUS. THE SAME IS DISMISSED AS INFRUCTUOUS. 12. IN THE RESULT THE ASSESSEE APPEAL IS ALLOWED FOR STATISTICAL PURPOSE AND THE SA STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.1.2011. SD/- ` SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 13 TH JANUARY, 2011 ITA NO.1057/H/2010 & SA 56/H/2010 VSN MAKRO TECHNOLOGIES (P) LTD., HYDERABAD 7 7 COPY FORWARDED TO: 1. M/S ANJANEYULU & CO. CA, 30 BHAGYALAKSHMI NAGAR, GANDHI NAGAR, HYD. 80. C/O M/S VSN MAKRO TECHNOLOGIES (P) LTD. HYDERABAD 2. THE ACIT CIRCLE 3(3), HYDERABAD 3. CIT(A)- IV, HYDERABAD. 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP