ITO Ward - 3(2), Hyderabad V. M/s. Reasonsoft Technologies (India) P. Ltd, Hyderabad

ITA 1135/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66566 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 13-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Depreciation; Additional evidence; Bonafide mistake
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1135/HYD/2011 ASSESSMENT YEAR: 2007-08 INCOME-TAX OFFICER, APPELLANT WARD 3(2), HYDERABAD VS. M/S REASONSOFT TECHNOLOGIES INDIA (P) LTD., RESPO NDENT HYDERABAD (PAN AACCR 9793 G) APPELLANT BY : SMT. VIDISHA KALRA RESPONDENT BY : SHRI A.V. RAGHURAM DATE OF HEARING : 23/11/2012 DATE OF PRONOUNCEMENT : 07/12/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER OF THE CIT(A)-IV, HYDERABAD DATED 29/03/2011 FOR THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF PROVIDING BPO SERVICES. DURING T HE YEAR UNDER CONSIDERATION, IT CARRIED OUT THE BUSINESS OF CONSU LTANCY, PROJECT DEVELOPMENT, PROFESSIONAL SERVICES AND ACCOUNTING W ORK, DONE AS PER THE AGREEMENT WITH M/S REASON SOFT INC. USA. DU RING THE YEAR, IT HAD A NET PROFIT OF RS. 2,49,38,316/- FROM ITS O PERATIONS, AND AFTER CLAIMING DEPRECIATION, THE GROSS TOTAL INCOME WAS SHOWN AT RS. 2,42,05,438/-, WHICH WAS CLAIMED EXEMPT U/S 10B OF THE IT ACT. ITA NO. 1135/HYD/2011 M/S REASONSOFT TECHNOLOGIES (INDIA) PVT. LTD. 2 3. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HA D RAISED A SINGLE INVOICE FOR US $ 8,49,000/-, AGAINST WHICH I T HAD RECEIVED PAYMENTS TO THE TUNE OF RS. 3,77,00,293/- BOTH IN A DVANCE AND PARTLY AFTER RAISING THE SAID INVOICE. DURING THE A SSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED THAT THE EXTRAC T OF THE ICICI BANK ACCOUNT, AS ALSO THE COPY OF THE VIJAYA BANK A CCOUNT, TO SUPPORT SUCH CLAIM. HOWEVER, THE ASSESSEE DID NOT F URNISH THE COPIES OF FIRCS TO RELATE THE RECEIPTS TO THE PURPO RTED EXPORT OF SOFTWARE. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER EXAMINED THE ELIGIBILITY OF THE ASSESSEE FO R DEDUCTION U/S 10B. HE NOTED THAT AS PER THE COPY OF THE LETTER IS SUED BY THE DIRECTOR, STPI, HYDERABAD DT. 26/02/2007, THE ASSES SEE HAS BEEN APPROVED AS 100% EOU UNDER THE STPI SCHEME FOR THE DEVELOPMENT OF THE COMPUTER SOFTWARE AT ITS PREMISES AT 501 & 5 02, ADITYA CENTRE, AMEERPET, HYDERABAD. HOWEVER, DESPITE BEING CATEGORICALLY REQUIRED TO FURNISH THE COPY OF THE APPROVAL OF T HE BOARD APPOINTED BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY SECT. 14 OF THE INDUSTRIES (DEVELOPMENT AND REGULAT ION) ACT, 1951 (65 OF 1951) AND THE RULES MADE UNDER THE SAID ACT, IN ACCORDANCE WITH THE PROVISIONS OF CLAUSE IV OF EXPLANATION II TO SECT. 10B, THE ASSESSEE FAILED TO FURNISH THE SAME. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE COULD NOT EVEN SUBMIT THE RATIFI CATION BY THE DEVELOPMENT COMMISSIONER, AS ENVISAGED IN INSTRUCTI ON DATED 09/03/2009 (FILE NO. 178/19/2008-ITA-1). ACCORDINGL Y, HE CONCLUDED THAT THE ASSESSEE HAD FAILED TO JUSTIFY I TS ELIGIBILITY FOR CLAIMING DEDUCTION U/S 10B OF THE ACT, BESIDES FAIL ING TO FURNISH THE FIRCS IN RESPECT OF THE REMITTANCES RECEIVED BY IT. THE CLAIM OF ITA NO. 1135/HYD/2011 M/S REASONSOFT TECHNOLOGIES (INDIA) PVT. LTD. 3 DEDUCTION U/S 10B WAS THEREFORE CONSIDERED AS NOT S UBSTANTIATED WITH NECESSARY DOCUMENTATION AND NOT ALLOWED. 5. ON FURTHER APPEAL BEFORE THE CIT(A), IT WAS SUBM ITTED THAT THE ASSESSEE HAD SUBMITTED ITS STPI REGISTRATION LETTER DATED 26/02/2007, WHEREBY THE ASSESSEE WAS APPROVED AS A 100% EOU UNDER THE STPI SCHEME FOR DEVELOPMENT OF COMPUTER S OFTWARE, BESIDES, THE BANK STATEMENTS WERE ALSO SUBMITTED TO PROVE THE REMITTANCES FOR ITS BUSINESS TRANSACTIONS. IT WAS F URTHER SUBMITTED THAT WHILE FURNISHING THE RETURN OF INCOME, THE ASS ESSEE UNDER A BONAFIDE MISTAKE HAD CLAIMED RELIEF U/S 10B, AS AGA INST WHAT WAS ADMISSIBLE TO THE ASSESSEE U/S 10A. IT WAS ALSO SUB MITTED THAT THE ASSESSEE HAS BEEN RECOGNIZED AS A 100% EOU, INVOLVE D IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND IT HAD OBTAINE D A VALID LICENSE, WHICH WAS EXPRESSLY VERIFIED BY THE ASSESS ING OFFICER. THE LEARNED AR OF THE ASSESSEE AVERRED THAT HAVING IDEN TIFIED THE ASSESSEE AS AN ENTITY POSSESSING STP LICENSE AS A 1 00% EOU, THE ASSESSING OFFICER SHOULD HAVE AUTOMATICALLY PROVIDE D AN OPPORTUNITY TO CORRECT THE MISTAKE IN ITS MAKING AN INADVERTENT CLAIM OF DEDUCTION U/S 10B. HE ARGUED THAT THE ASSESSING OFF ICER OUGHT TO HAVE APPRECIATED THAT THE APPROVAL FROM THE DEVELOP MENT COMMISSIONER WAS REQUIRED ONLY FOR ENTITIES, WHICH FUNCTIONS SPECIFICALLY UNDER EXPORT PROCESSING ZONE, WHILE, I N RESPECT OF ENTITIES SUCH AS THE ASSESSEE, A SPECIFIC APPROVAL FROM STPI ONLY IS REQUIRED. 6. WITH REGARD TO THE DEDUCTION IN RESPECT OF AMOUN TS EVIDENCED BY THE 23 FIRCS, WHICH WAS SUBMITTED AS ADDITIONAL EVIDENCE DURING THE COURSE OF APPELLATE PROCEEDINGS, THE CIT(A) DIR ECTED THE ITA NO. 1135/HYD/2011 M/S REASONSOFT TECHNOLOGIES (INDIA) PVT. LTD. 4 ASSESSING OFFICER TO ALLOW DEDUCTION AFTER NECESSAR Y VERIFICATION WITH THE CONCERNED BANK STATEMENTS. 7. WITH RESPECT TO THE GROUND RAISED BEFORE THE CIT (A) THAT THE ASSESSING OFFICER OUGHT TO HAVE GIVEN OPPORTUNITY T O FURNISH THE NECESSARY CERTIFICATES/DOCUMENTS TOWARDS THE CLAIM OF DEDUCTION U/S 10B, BEFORE DISALLOWING THE SAME, THE CIT(A) CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER. THE ASSESSEE REP LIED ON 25/03/2011, IN REPLY TO THE REMAND REPORT, IT WAS S TATED THERE IN COPY B 8. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AS WELL AS THE REMAND REPORT OF THE ASSESSING OFFIC ER, HELD AS FOLLOWS: 8.2 IN THE CASE OF DCIT V S. VALLIANT COMMUNICATION S LTD., 2010-TIOL-452-ITAT-DEL, THE CLAIM OF THE ASSESSEE F OR DEDUCTION U/S 10B HAD BEEN DENIED ON THE GROUND THA T IT HAD NOT OBTAINED THE STATUTORY APPROVAL AS ENVISAGED UN DER EXPLANATION 2(IV) TO SEC. 10B, FROM THE BOARD APPOI NTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY SEC. 14 OF THE INDUSTRIES (DEVELOPMENT & REGULATION) ACT, 1951 AND RULES MADE UNDER THE SAID ACT. HOWEVER, ON A CONSIDERATION OF FACTS, THE HONBLE I TAT ENDORSED THE VIEW OF THE CIT(A) THAT THE DECISION O THE HONBLE ITAT HYDERABAD IN THE CASE OF INFOTECH ENTERPRISES LTD. VS. JCIT, 85 ITD 325 COULD NOT BE APPLIED IN VIEW OF TH E FACT THAT THE SAID DECISION WAS RENDERED PRIOR TO INSTRUCTION S NO. 1 DTD. 31/03/2006 ISSUED BY THE CBDT AND THE MINUTES OF IN DUSTRIES MINISTERIAL COMMUNICATION VIDE LETTER DATED 23/03/2 006 ISSUED BY THE MINISTRY OF COMMUNICATION AND TECHNOLOGIES. 9. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US AN D HAS RAISED THE FOLLOWING GROUNDS OF APPEAL 1. THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH ON FAC TS AND LAW. ITA NO. 1135/HYD/2011 M/S REASONSOFT TECHNOLOGIES (INDIA) PVT. LTD. 5 2. THE CIT(A) ERRED IN ALLOWING THE APPEAL OF THE A SSESSEE IN SPITE OF NON-COMPLIANCE TO THE STATUTORY OBLIGATION S. 3. THE CIT(A) SHOULD HAVE CONFIRMED THE ADDITION/DI SALLOWANCE MADE U/S 10B SINCE THE ASSESSEE FAILED TO PRODUCE T HE RATIFICATION BY THE DEVELOPMENT COMMISSIONER AS E NVISAGED IN INSTRUCTION DATED 09/03/2009. 4. THE CIT(A) ERRED IN APPLYING THE DECISION IN THE CASE OF DCIT VS. VALLIANT COMMUNICATIONS LTD. WHEN THE FACT S OF THE ASSESSEES CASE DO NOT SQUARELY FIT IN THE FACTS OF THE ABOVE CASES. 10. THE LEARNED DR SMT. VIDISHA KALRA FILED INSTRUC TION F.NO. 178/19/2008-ITA-I, DATED 9 TH MARCH, 2009, WHICH IS AS FOLLOWS: SECTION 10B OF THE INCOME-TAX ACT PROVIDES FOR EXE MPTION OF INCOME IN CASE OF HUNDRED PER CENT EXPORT ORIENTED UNDERTAKINGS SUBJECT TO PRESCRIBED CONDITIONS. EXPL ANATION 2(IV) BELOW TO THE SAID SECTION DEFINES A 'HUNDRED PER CENT EXPORT ORIENTED UNDERTAKING' AS AN UNDERTAKING SO A PPROVED BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL G OVERNMENT UNDER SECTION 14 OF THE INDUSTRIES DEVELOPMENT AND REGULATION ACT, 1951. SUBSEQUENT TO THE DELEGATION OF THIS POW ER BY THE MINISTRY OF COMMERCE AND INDUSTRIES TO THE DEVELOPM ENT COMMISSIONERS, SUCH APPROVALS TO 100 PER CENT EOUS ARE NOW BEING GRANTED BY THE DEVELOPMENT COMMISSIONERS, WHI CH ARE LATER RATIFIED BY THE BOARD OF APPROVALS. THE MATTER REGARDING VALIDITY OF APPROVALS GIVEN BY DEVELOPMENT COMMISSIONERS HAS BEEN EXAMINED IN THE BOARD. IT HAS BEEN DECIDED THAT AN APPROVAL GRANTED BY THE DEVELOPMENT COMMISSIONER IN THE CASE OF AN HUNDRED PERCENT EXPORT ORIENTED UNIT WILL BE CONSIDERED VALID, ONCE SUCH AN APPROVAL IS RATIFIED BY THE BOARD OF APPROVAL FOR E OU SCHEME . 11. WE HAVE HEARD THE LEARNED DR SMT. VIDISHA KALRA AND THE LEARNED COUNSEL FOR THE ASSESSEE SHRI AV RAGHURAM A ND PERUSED THE RECORD AS WELL AS THE ORDERS OF THE AUTHORITIES BEL OW. WE FIND THAT ITA NO. 1135/HYD/2011 M/S REASONSOFT TECHNOLOGIES (INDIA) PVT. LTD. 6 THE ISSUE IS SQUARELY COVERED BY THE DECISION OF TH E ITAT, HYDERABAD IN THE CASE OF ITO VS. M/S SELECTSYS INDIA PVT. LTD . IN ITA NO. 1617/HYD/2011 FOR AY 2008-09, VIDE ORDER DATED 11/0 1/2012, WHERE THE JM WAS ONE OF THE PARTY. THE COORDINATE B ENCH IN THE SAID CASE HELD AS UNDER:- 5. NONE APPEARED ON BEHALF OF THE ASSESSEE IN SPI TE OF ISSUING NOTICE. WE HAVE HEARD THE LEARNED DR ON THI S ISSUE AND PERUSED THE MATERIAL ON RECORD. BEFORE THE CIT(A), THE ASSESSEE PRODUCED THE REGISTRATION FROM STP OF INDI A WHICH WAS NOTIFIED BY THE MINISTRY OF COMMERCE, GOVERNMEN T OF INDIA VIDE NOTIFICATION NO. 33/(RE)/92-97 DATED 22.3.1994 . THE NOTIFICATION STATES THAT THE SOFTWARE TECHNOLOGY PA RK (STP) SCHEME IS A 100% EOU SCHEME. FURTHER THE ASSESSEE P RODUCED COPY OF THE ORDER OF THE TRIBUNAL IN THE CASE OF K. SUDHA RANI CITED SUPRA. PLACING RELIANCE ON THIS ORDER, THE CI T(A) ALLOWED THE CLAIM OF THE ASSESSEE BUT THE ASSESSING OFFICER HAS NO OCCASION TO CONSIDER THE SAME. HENCE, IN OUR OPINIO N, IT IS JUST AND FAIR TO SEND THE ISSUE TO THE FILE OF THE ASSES SING OFFICER TO CONSIDER THE MATERIAL. ACCORDINGLY, THE ORDER OF T HE CIT(A) IS SET ASIDE AND THE MATTER IS REMITTED BACK TO THE FI LE OF THE ASSESSING OFFICER FOR PASSING A DE NOVO ORDER IN TH E LIGHT OF THE MATERIAL PRODUCED BY THE ASSESSEE. THE ASSESSEE IS DIRECTED TO PRODUCE NECESSARY MATERIAL BEFORE THE ASSESSING OFF ICER. 12. SINCE THE ISSUE UNDER CONSIDERATION IS MATERIAL LY IDENTICAL TO THAT OF THE CASE DECIDED BY THE COORDINATE BENCH IN THE CASE OF M/S SELECTSYS INDIA PVT. LTD. (SUPRA), RESPECTFULLY FOL LOWING THE SAME, WE SET ASIDE THE ORDER OF THE CIT(A) AND THE MATTER IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR PASSING A DE NOVO ORDER IN THE LIGHT OF THE MATERIAL PRODUCED BY THE ASSESSEE. THE ASSESSEE IS DIRECTED TO PRODUCE NECESSARY MATERIAL BEFORE THE A SSESSING OFFICER. ITA NO. 1135/HYD/2011 M/S REASONSOFT TECHNOLOGIES (INDIA) PVT. LTD. 7 13. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 7 TH DECEMBER, 2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGH AVAN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED: 7 TH DECEMBER, 2012. KV COPY TO:- 1) ITO, WARD 3(2), ROOM NO. 726, 7 TH FLOOR, IT TOWERS, AC GUARDS, HYDERABAD 500 004. 2) M/S REASONSOFT TECHNOLOGIES (INDIA) PVT. LTD., 501 & 502, ADITYA TRADE CENTRE, AMEERPET, HYDERABAD 500 038. . 3) THE CIT (A)-IV, HYDERABAD 4) THE CIT-III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.