The ACIT.(OSD)Circle-5, Ahmedabad V. M/s. Oxygen Healthcase Reaserch Pvt.Ltd., Ahmedabad

ITA 1214/AHD/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5952 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 30-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 01-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: SANJAY MAJMUDAR
• Keywords: Services rendered outside India; Competent authority
• Section: 10B

Judgement Text

, MH MHMH MH IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER !# I.T.A. NOS. 1214 & 2907/AHD/2012 ( / ASSESSMENT YEAR : 2008-09 & 2009-10) ACIT (OSD), CIRCLE -5, AHMEDABAD. # VS. M/S. OXYGEN HEALTHCARE RESEARCH PVT. LTD., 15/A, SEEMA SOCIETY, NR. MEMNAGAR FIRE STATION, NARANPURA, AHMEDABAD. $ # % & # PAN/GIR NO. : AAACO 7229 C ( !$' / APPELLANT ) .. ( ($' # RESPONDENT ) !$') # APPELLANT BY : SHRI V. K. SINGH, SR.D.R. ($'*) / RESPONDENT BY : SHRI SANJAY MAJMUDAR, A.R. + ,*-. / DATE OF HEARING 09/01/2018 /012*-. / DATE OF PRONOUNCEMENT 26/02/2018 3# O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER : THESE ARE TWO APPEALS BY THE REVENUE AGAINST THE SEPARATE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XI, AHMEDA BAD, VIDE APPEAL NOS. CIT(A)-XI/344/ACIT.CIR-5/10-11 DATED 09 /03/2012 AND CIT(A)-XI/355/WD-5(2)/11-12 DATED 12/10/2012 FOR AS SESSMENT YEARS (AYS) 2008-09 AND 2009-10. 2. SINCE IN BOTH APPEALS PARTIES ARE SAME AND ISSUE S ARE COMMON ONLY AMOUNT AND ASSESSMENT YEARS ARE DIFFERENT. THEREFOR E, FOR THE SAKE OF ITA NOS.1214 & 2907/AHD/2 012 ACIT(OSD) VS. M/S. OXYGEN HEALTHCARE RESEARCH PVT. LTD. ASST.YEAR 2008-09 & 2009-10 - 2 - CONVENIENCE, WE WOULD LIKE TO DISPOSE OF BOTH THE A PPEALS BY WAY OF A COMMON ORDER. FOLLOWING GROUNDS HAVE TAKEN BY THE D EPARTMENT IN BOTH APPEALS: 2.1 IN ITA NO.1214/AHD/2012 FOR AY 2008-09: LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECT ING THE AO TO ALLOW THE ASSESSEES CLAIM OF DEDUCTION OF RS.1,14,25,859 /- U/S.10B OF THE I.T. ACT. 2.2 IN ITA NO.2907/AHD/2012 FOR AY 2009-10: LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELEIN G THE DISALLOWANCE OF DEDUCTION U/S.10B OF THE ACT OF RS.4,34,55,797/- . 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- THE ASSESSEE COMPANY IS CARRYING ON THE BUSINESS O F RESEARCH & DEVELOPMENT ACTIVITIES RELATING TO DRUGS AND HEALTH CARE SERVICES. FROM THE COMPUTATION OF INCOME FILED ALONGWITH AUDITED F INANCIAL STATEMENT AND TAX AUDIT REPORT, IT IS NOTICED THAT THE COMPAN Y HAS INCOME FROM BUSINESS OF RESEARCH & DEVELOPMENT ACTIVITIES OF RS .1,14,25,859/- WHICH HAS BEEN CLAIMED AS EXEMPT U/S.10A AND THE TA XABLE INCOME FROM BUSINESS HAS BEEN COMPUTED AT RS.NIL. TO ASCERTAIN THE VERACITY AND GENUINENESS OF EXEMPTION CLAIM, VARIOUS DETAILS WER E CALLED FOR BY THE LD. AO. FROM THE ANALYSIS OF VARIOUS FACTS AND INFORMAT ION ON RECORD , FACTS CONSIDERED AND DETAILS FURNISHED BY THE ASSESSEE DU RING ASSESSMENT PROCEEDINGS, IT TRANSPIRED THAT ASSESSEE MAY NOT BE ELIGIBLE FOR EXEMPTION U/S.10B AND HENCE, CLARIFICATION REGARDING EXEMPTIO N U/S.10B CALLED FOR ON 22/11/2010 AS TO WHY CLAIM FOR DEDUCTION U/S.10B SHOULD NOT BE REJECTED. THE SAME IS REPRODUCED BELOW: ITA NOS.1214 & 2907/AHD/2 012 ACIT(OSD) VS. M/S. OXYGEN HEALTHCARE RESEARCH PVT. LTD. ASST.YEAR 2008-09 & 2009-10 - 3 - YOU ARE REQUESTED TO FURNISH THE FOLLOWING INFORMA TION/EXPLANATION & DOCUMENTS:- 1) EXPLAIN WHY THE CLAIM OF THE ASSESSEE FOR DEDUC TION U/S. 10B SHOULD NOT BE DISALLOWED AS THE ASSESSEE HAS NOT MA DE EXPORT OF ANY ARTICLE, THING OR COMPUTER SOFTWARE DURING THE PERIOD RELEVANT TO A. Y. 2008-09. 2) FURNISH INVOICE-WISE PROOF OF EXPORTS, IF ANY, MADE BY THE ASSESSEE. 3) DOCUMENTARY EVIDENCES DULY CERTIFIED BY THE CUS TOMS AUTHORITY TO SHOW THAT EXPORT, IF ANY, HAS BEEN MADE BY THE A SSESSEE. 4) PROOF OF FOREIGN EXCHANGE, IF ANY, HAVING BEEN REALIZED BY THE ASSESSEE WITHIN THE PRESCRIBED TIME PERIOD. 5) TILL DATE, THE ASSESSEE HAS NOT FURNISHED AUD ITOR'S REPORT IN FORM NO. 56G. FURNISH THE SAME, IF ANY. 6) PROOF OF UNDERTAKING HAVING BEEN APPROVED BY TH E COMPETENT AUTHORITY AS 100% EXPORT ORIENTED UNDERTAKING. 7) IT IS SEEN THAT IN THE STATEMENT OF 'COMPUTATI ON OF INCOME', THE DEDUCTION HAS BEEN CLAIMED U/S. 10A, WHEREAS AS PER LETTER DATED 01.11.2010 SUBMITTED, IT APPEARS THAT THE ASSESSEE HAS CLAIMED U/S. 10B. KINDLY EXPLAIN THE DISCREPANCY'. 3. THE ASSESSEE VIDE REPLY DATED 30.11.2010 WITH PARA WISE WHICH IS AS UNDER:- 1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A QUES TION WAS ASKED WHY THE CLAIM OF THE ASSESSEE U/S. 10B SHOULD NOT B E DISALLOWED AS THE ASSESSEE HAS NOT MADE EXPORT OF ANY ARTICLE, TH ING OR COMPUTER SOFTWARE DURING THE PERIOD RELEVANT TO A.Y. 2008-09 . IN THIS CONNECTION, THE ASSESSEE WOULD LIKE TO SUBMIT THE F OLLOWING FOR YOUR PERUSAL. (A) THE ASSESSES COMPANY IS BASICALLY ENGAGED IN PR OVIDING BACK OFFICE SERVICES. THUS, THE ASSESSES COMPANY IS PROVIDING INFORMATION TECHNOLOGY ENABLED SERVICES AS BACK OFF ICE OPERATIONS FOR ITS PARENT AND ACCORDINGLY IT IS EXP ORTING SERVICES OF RESEARCH AND DEVELOPMENT ON CONTRACT CHEMISTRY, BIOLOGY AND COMBINATION CHEMISTRY THROUGH COMPUTER NETWORK. (B) THE CBDT HAS SPECIFICALLY NOTIFIED THE INFORMAT ION TECHNOLOGY ENABLED PRODUCTS OR SERVICES INCLUDING BACK OFFICE OPERATIONS AS PART OF THE SERVICES FOR CONSIDERING THE ITEMS U/S. 10B IN CUSTOMIZED ELECTRONIC DATA OR PRODUCT OR SERVICES O F SIMILAR ITA NOS.1214 & 2907/AHD/2 012 ACIT(OSD) VS. M/S. OXYGEN HEALTHCARE RESEARCH PVT. LTD. ASST.YEAR 2008-09 & 2009-10 - 4 - NATURE. THUS, FOR THE PURPOSE OF CONSIDERING THE SE RVICES PROVIDED BY THE ASSESSEE COMPANY, IT IS VERY MUCH C OVERED U/S.10B OF THE ACT AS PER THE NOTIFICATION OF CBDT. (C) AGAIN, THE ASSESSEE HAS RECEIVED PERMISSION FRO M THE DEVELOPMENT COMMISSIONER, KANDLA SPECIAL ECONOMIC Z ONE, MINISTRY OF COMMERCE, GOVT. OF INDIA. AS PER THE SA ID PERMISSION, THE SERVICES PROVIDED BY THE ASSESSEE A RE VERY MUCH COVERED U/S. 10B. (D) AGAIN THE EXPORTS OF THE SERVICES ARE COVERED U NDER THE DEFINITION OF SECTION 10B, AND THE ASSESSEE COMPANY IS SOLELY ENGAGED IN EXPORT OF SERVICES FOR THE FINANCIAL YEAR IN QUESTI ON, THE QUESTION OF ANY DISALLOWANCE U/S. 10B SHOULD NOT ARISE. FROM THE ABOVE, IT IS TO BE STATED THAT THE ENTIRE CLAIM OF THE ASSESSEE IS VERY MUCH JUSTIFIED U/S. 10B OF THE I. T. ACT, 1961. 4. THE ASSESSEES REPLY WAS CONSIDERED BUT NOT ACCE PTABLE BECAUSE AS PER DETAILS AVAILABLE ON RECORD, IT IS CLEAR THAT A SSESSEE HAS NOT EXPORT ANY ITEM AS PER ABOVE REFERRED EXPLANATION-2. IT IS CLE AR FROM THE EXPLANATION THAT ANY COMPUTER PROGRAMME RECORDED ON ANY DISC, T APE, PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE; COVERED IN SOFTWARE EXPORT. THE ASSESSEE COMPANY IS NOT INVOLVED/CARRIED OUT AN Y SUCH TYPE OF EXPORT BUSINESS WHICH IS COVERED IN SECTION 10B OF THE I.T . ACT. IT IS ALSO CLEAR FROM THE RETURN THAT THE ASSESSEE HAS CLAIMED DEDUC TION IN HIS RETURN U/S.10A OF THE ACT FOR THE CURRENT YEAR AS WELL AS IN PREVIOUS YEAR ALSO. BUT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2008-09, THE ASSESSEE COMPANY CLAIMED DEDUCTION U/S.10B OF THE A CT. 5. LD. AO FURTHER STATED, IT IS CLEAR THAT THE ASSE SSEE COMPANY HAS NOT EXPORTED ANY SOFTWARE AND ASSESSEE COMPANY HAS ALSO NOT FILED REQUIRED ITA NOS.1214 & 2907/AHD/2 012 ACIT(OSD) VS. M/S. OXYGEN HEALTHCARE RESEARCH PVT. LTD. ASST.YEAR 2008-09 & 2009-10 - 5 - REPORTS TIMELY AS PER PROVISIONS OF EXPLANATION-5 O F SECTION 10B OF THE I.T. ACT, WHICH IS REPRODUCED AS UNDER: 'THE DEDUCTION UNDER SUB-SECTION (1) SHALL NOT BE A DMISSIBLE FOR ANY ASSESSMENT YEAR BEGINNING ON OR AFTER THE 1ST DAY O F APRIL, 2001, UNLESS THE ASSESSEE FURNISHES IN THE PRESCRIBED FORM27, AL ONG WITH THE RETURN OF INCOME, THE REPORT OF AN ACCOUNTANT, AS DEFINED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288, CERTIFYING TH AT THE DEDUCTION HAS BEEN CORRECTLY CLAIMED IN ACCORDANCE WITH THE PROVI SIONS OF THIS SECTION'. 5.2 FURTHER, ACCORDING TO SUB-SECTION 8(IV) OF SECT ION 10B OF THE I.T. ACT THE ASSESSEE COMPANY HAS NOT PRODUCE ANY APPROVAL T AKEN BY APPROPRIATE AUTHORITY AS PER PROVISION OF THIS SECT ION, WHICH READS AS BELOW ; 'HUNDRED PER CENT EXPORT-ORIENTED UNDERTAKING' MEAN S AN UNDERTAKING WHICH HAS BEEN APPROVED AS A HUNDRED PER CENT EXPOR T-ORIENTED UNDERTAKING BY THE BOARD APPOINTED IN THIS BEHALF B Y THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY S ECTION 14 3E OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 ( 65 OF 1951), AND THE RULES MADE UNDER THAT ACT' 5.3 ON BASIS OF ABOVE REASON, THE CLAIM OF THE ASSE SSEE COMPANY FOR DEDUCTION U/S.10-B IS NOT GENUINE AND IT IS HEREBY REJECTED AND THE WHOLE EXERCISE SEEMS TO BE A WELL LAID DEVICE TO DI VERT UNACCOUNTED MONEY UNDER THE GUISE OF PURPORTED EXPORT EARNINGS FROM SALE OF SOFTWARE AND TO DEFRAUD REVENUE BY SHOWING INCOME A S EXEMPT U/S.10B OF THE I.T. ACT. 6. FINALLY LD. AO MADE AN ADDITION OF RS.1,14,25,85 9/-. 7. AGAINST THE SAID ADDITION, ASSESSEE PREFERRED FI RST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO ALLOWED THE APPEAL OF THE ASSESSEE. 8. NOW APPELLANTS APPEAL IS BEFORE US. ITA NOS.1214 & 2907/AHD/2 012 ACIT(OSD) VS. M/S. OXYGEN HEALTHCARE RESEARCH PVT. LTD. ASST.YEAR 2008-09 & 2009-10 - 6 - 9. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. IN THIS CASE, LEARNED AO REJECTED THE CLAIM OF THE ASS ESSEE THAT ASSESSEE COMPANY IS NOT INVOLVED/CARRIED OUT ANY SUCH OF EXP ORT BUSINESS WHICH IS COVERED U/S.10B OF THE I.T. ACT. AS PER SECTION 10B SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLISHED 100% EXPORT ORIENTED U NDERTAKING AND DEDUCTION OF SUCH PROFIT AND GAINS AS PER DERIVED E XPORT ORIENTED UNDERTAKING FROM THE EXPORT OF ARTICLES AND THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF 10 CONSECUTIVE ASSESSMENT YEAR BRIN GING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH UNDER TAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMPUTER SOFTWARE, AS THE CASE MAY BE, SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE. 10. ON THE OTHER HAND, LD. CIT(A) GAVE RELIEF TO TH E ASSESSEE ON THE BASIS THAT ASSESSEE WAS HAVING UNIT IN SEZ AND SAME WAS APPROVED BY THE DEVELOPMENT COMMISSIONER, KANDLA SPECIAL ECONOMIC Z ONE AS 100% EXPORT ORIENTED UNIT AND THE SAME WAS RATIFIED BY T HE BOARD OF APPROVALS FOR EOU SCHEMES AND HOLD THAT THE ASSESSEES CASE I S COVERED BY THE CBDT INSTRUCTION BEARING FILE NO.178/19/2008-ITA-I DATED 09/03/2009. 11. IN OUR CONSIDERED OPINION, BOTH THE LOWER AUTHO RITIES HAVE BEEN FAILED TO ASCERTAIN THAT WHAT ASSESSEE IS ACTUALLY DOING AND JUST BURY THE LEAD. ASSESSEE IS CLAIMING THAT HE HAS BEEN DOING R ESEARCH AND DEVELOPMENT IN PHARMACEUTICAL IN THE EXPORT DRUG RE LATED SERVICES. ASSESSEE CLAIMED THAT THEY FALL IN THE CATEGORY OF BACK OFFICE OPERATION AND IN THE AUDIT REPORT IT IS ALSO MENTIONED THAT A SSESSEE IS DOING RESEARCH ITA NOS.1214 & 2907/AHD/2 012 ACIT(OSD) VS. M/S. OXYGEN HEALTHCARE RESEARCH PVT. LTD. ASST.YEAR 2008-09 & 2009-10 - 7 - AND DEVELOPMENT WORK RELATED TO DRUGS AND HEALTHCAR E. BUT BOTH AUTHORITIES HAVE NOT ASCERTAINED TO THE EFFECT THAT WHAT ACTUALLY ASSESSEE IS DOING. THEREFORE, WE SET ASIDE THE ORDERS OF THE CI T(A) IN BOTH APPEALS AND REMIT THIS MATTED BACK TO THE FILE OF THE LD. A O TO DECIDE THE NATURE OF BUSINESS OF THE COMPANY. AO WILL ALSO ASCERTAIN THA T HOW ASSESSEE CAN GET BENEFIT UNDER SECTION 10B AND ACCORDINGLY, WILL DECIDE THE MATTER AS PER LAW. 12. IN THE RESULT, BOTH THE APPEALS FILED BY THE DE PARTMENT IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 26/02/2018 SD/- SD/- ( ) 4 5 ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 26/02/2018 PRITI YADAV, SR.PS !'# $#! # COPY OF THE ORDER FORWARDED TO : 1. !$' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 67- + 8- / CONCERNED CIT 4. + 8- 4!5 / THE CIT(A)-XI, AHMEDABAD. 5. 9:;-67 !.!672 ! / DR, ITAT, AHMEDABAD 6. ;<=, # GUARD FILE. % & / BY ORDER, (9-- //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD