The ITO Ward -3(2), Hyderabad V. M/s. Supreme Netsoft P. Ltd, Hyderabad

ITA 1301/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61926 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 22-05-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 08-07-2011
• Court: TRIBUNAL
• Department Lawyers: K VISWANATHAM
• Assessee Lawyers: BALAJI NAGARAJ
• Keywords: Competent authority
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1301/HYD/2011 ASSESSMENT YEAR 2008-09 THE INCOME TAX OFFICER WARD-3(2) HYDERABAD VS. M/S. SUPREME NETSOFT PVT. LTD., HYDERABAD PAN: AAJCS5043H APPELLANT RESPONDENT APPELLANT BY: SHRI K. VISWANATHAM RESPONDENT BY: SHRI BALAJI NAGARAJ DATE OF HEARING: 28 . 0 5 .2012 DATE OF PRONOUNCEMENT: 22.06.2012 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-IV, HYDERABAD DATED 13.5.2011. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: 2. THE CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE IN SPITE OF NON-COMPLIANCE TO THE STATUTOR Y OBLIGATIONS. 3. THE CIT(A) SHOULD HAVE CONFIRMED THE ADDITION/ DISALLOWANCE MADE U/S. 10B SINCE THE ASSESSEE FAILE D TO PRODUCE THE 'RATIFICATION' BY THE DEVELOPMENT COMMISSIONER AS ENVISAGED IN INSTRUCTION DATED 9.3.2009. 4. THE CIT(A) ERRED IN APPLYING THE DECISION IN THE CASE OF SMT. K. SUDHA RANI VS. ITO IN ITA NO. 1750/ HYD/2008 WHEN THE FACTS OF THE ASSESSEE'S CASE DO N OT SQUARELY FIT IN THE FACTS OF THE ABOVE CASES. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPA NY IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF COMPUTER SOFTWARE AND EXPORT THEREOF OUTSIDE INDIA. DURING THE YEAR IT WA S INTO THE I.T.A. NO. 1301/HYD/2011 M/S. SUPREME NETSOFT PVT. LTD. ====================== 2 BUSINESS OF CONSULTANCY, PROJECT DEVELOPMENT, PROFE SSIONAL SERVICES AND ACCOUNTING WORK DONE AS PER AGREEMENT WITH M/S. SUPREME SOFT INC., USA. DURING THE YEAR IT HAD CLAI MED DEDUCTION OF RS. 43,22,403/ - UNDER SEC. 10B OF THE ACT. 4. THE ASSESSING OFFICER NOTICED FROM THE LETTER ISSUE D BY THE DIRECTOR, STPI HYDERABAD DATED 19.4.2007 THAT THE A SSESSEE COMPANY WAS APPROVED AS A 100% EOU UNDER THE STP SC HEME. FROM THE INFORMATION FILED BY THE ASSESSEE IT WAS N OTICED THAT THE ASSESSEE HAD RAISED FOUR INVOICES FOR US$ 4,47,000 AND ONE INVOICE FOR EURO 494.6. AGAINST THESE INVOICES, THE ASSESSEE HAD RECEIVED PAYMENTS TO THE TUNE OF RS. 1,80,13,145/- BOTH IN ADVANCE AND PARTLY AFTER THE INVOICE WERE RAISED. I N SUPPORT OF ITS CLAIM, THE ASSESSEE HAD FILED COPIES OF THE FICRS R ELATING TO THE RECEIPTS AGAINST EXPORT OF THE SOFTWARE. 5. HOWEVER, ON BEING REQUIRED BY THE ASSESSING OFFICER , THE ASSESSEE FAILED TO SUBMIT THE APPROVAL OF THE BOARD AND THE RATIFICATION BY THE DEVELOPMENT COMMISSIONER, AS EN VISAGED IN THE INSTRUCTION DATED 9.3.2009 (FILE NO. 178/19/2008-IT A-1) IN SUPPORT OF ITS CLAIM FOR THE DEDUCTION U/S. 10B, SO CLAIMED. THE ASSESSING OFFICER, THEREFORE, OPINED THAT THE ASSES SEE HAD FAILED TO GET THE NECESSARY APPROVAL FROM THE BOARD APPOINTED BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFER RED BY SEC. 14 OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 AND THE RULES MADE UNDER THAT ACT. ACCORDINGLY, HE DISALLOW ED THE CLAIM MADE BY THE ASSESSEE. 6. THE LEARNED DR SUBMITTED THAT FOR GRANTING DEDUCTIO N U/S. 10B THE ASSESSEE IS REQUIRED TO BE DULY APPROVED BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY SECTION 14 OF THE INDUSTRIE S (DEVELOPMENT AND REGULATION) ACT, 1951 (65 OF 1957) AND THE RULE S MADE UNDER I.T.A. NO. 1301/HYD/2011 M/S. SUPREME NETSOFT PVT. LTD. ====================== 3 THAT ACT. ACCORDING TO THE DR, THE ASSESSEE IS NOT DULY APPROVED BY THE COMPETENT AUTHORITY TO GRANT DEDUCTION U/S. 10B OF THE ACT. AS THE ASSESSEE HAS NOT FURNISHED NECESSARY APPROVA L OF THE BOARD AS REQUIRED UNDER THE ACT, THE DEDUCTION U/S. 10B C ANNOT BE GRANTED. 7. ON THE OTHER HAND, THE LEARNED AR RELIED ON THE ORD ER OF THE TRIBUNAL IN THE CASE OF VSN MAKRO TECHNOLOGIES PVT. LTD. IN ITA NO. 1057/HYD/2010 FOR ASSESSMENT YEAR 2007-08 DATED 13 TH JANUARY, 2011 WHEREIN AT PARA 10 IT WAS HELD AS FOL LOWS: '10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE CONTENTION OF THE ASSESSEE S COUNSEL IS THAT THE ASSESSEE IS 100% EOU ENTITLED FOR EXEMPTIO N U/S 10A AND WRONGLY CLAIMED THE DEDUCTION U/S 10B AND IT WAS A TECHNICAL MISTAKE IN CLAIMING DEDUCTION U/S 10B. THE ASSESSEE S COUNSEL FURTHER ARGUED THAT THE ASSESSEE HAS FULFILLED ALL THE REQUIREMENTS OF PROVISIONS OF SECTION 10A. HOWEVER, THIS CLAIM OF THE ASSESSEE NOT EXAMINED BY THE LOWER AUTHORITIES AND THEY STIC K TO ONE CONTENTION THAT THE ASSESSEE CLAIM U/S 10B IS NOT A LLOWABLE. WE ARE AGREEING WITH THE DEPARTMENT THAT 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 FO R DEDUCTION U/S 10A INSTEAD OF 10B, THAT CLAIM REQUIRED TO BE EXAMI NED BY THE ASSESSING OFFICER IN ALL FAIRNESS. THE ISSUE OF ALL OWANCE OF DEDUCTION U/S 10A THOUGH ASSESSEE MADE A CLAIM BEFO RE THE LOWER AUTHORITIES HAS NOT EXAMINED BY THE ASSESSING OFFIC ER. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSID ERED OPINION THAT IT SHALL BE IN THE INTEREST OF JUSTICE TO SET ASIDE THE ISSUE IN THE GROUNDS OF APPEAL OF THE ASSESSEE TO THE FILE OF AS SESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE, A ND ALSO TO GIVE A SPECIFIC FINDING WHETHER THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 10A OF THE ACT OR NOT. THE ASSESSEE MAY FILE ANY EV IDENCE IN SUPPORT OF ITS CLAIM FOR DEDUCTION BEFORE THE ASSES SING OFFICER. WE MAKE IT CLEAR THAT OUR OBSERVATIONS HEREIN ABOVE SH ALL NOT HAVE ANY BEARING ON THE DECISION OF THE ASSESSING OFFICE R WITH REGARD TO THE MERITS OF THE CLAIM OF THE ASSESSEE FOR DEDUCTI ON U/S 10A OF THE ACT. WE DIRECT ACCORDINGLY.' 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. IN OUR OPINION, THE CIT(A) HAS ERRED IN GRANTING I.T.A. NO. 1301/HYD/2011 M/S. SUPREME NETSOFT PVT. LTD. ====================== 4 DEDUCTION U/S. 10B WITHOUT DUE APPROVAL FROM THE CO MPETENT AUTHORITY. ACCORDINGLY, IN VIEW OF THE ORDER OF TH E TRIBUNAL CITED ABOVE, WE REMIT BACK THE ISSUE TO THE FILE OF THE A SSESSING OFFICER IN SIMILAR LINES TO EXAMINE THE ISSUE IN THE LIGHT OF THE ABOVE. 9. IN THE RESULT, REVENUE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JUNE, 2012. SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 22 ND JUNE, 2012 COPY FORWARDED TO: 1. THE INCOME TAX OFFICER, WARD-3(2),ROOM NO. 726, 7 TH FLOOR, I.T. TOWERS, AC GUARDS, HYDERABAD-500 004. 2. M/S. SUPREME NETSOFT PVT. LTD., 402, ADITYA TRAD E CENTRE, AMEERPET, HYDERABAD-500 038. 3. THE CIT(A)-IV, HYDERABAD. 4. THE CIT-III, HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD. TPRAO