M/s. Ionidea Enterprise Solutions private Ltd, Bangalore V. ACIT, Bangalore

ITA 133/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57430 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATHYA SAI
• Assessee Lawyers: A SHANKAR
• Section: 143(3); 10B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N BARATHVAJA SANKAR, VICE RESIDENT AND SMT. P MADHAVI DEVI, JUDICIAL MEMBER ITA NOS.133 & 134/BANG/2011 (ASST. YEAR - 2001-02 & 2006-07) M/S IONIDEA ENTERPRISES SOLUTIONS PVT. LTD., FLAT NO.38-40, EXPORT PROMOTION, INDUSTRIAL PARK, WHITEFIELD, BANGALORE-560 066. . APPELLANT VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-11(4), BANGALORE. . RESPONDENT APPELLANT BY : SHRI A SHANKAR RESPONDENT BY : SHRI SATHYA SAI DATE OF HEARING : 29-12-2011 DATE OF PRONOUNCEMENT : 06-01-2012 O R D E R PER P MADHAVI DEVI, JUDICIAL MEMBER : THESE APPEALS ARE FILED BY THE ASSESSEE. THE APPEAL S ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX ITA NO.133 & 134/B/11 2 (APPEALS) AT BANGALORE DATED 18.11.2010. THE APPE ALS ARISE OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME-T AX ACT, 1961. 2. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN DENYING THE CLAIM OF BENEFIT U/S 10A OF T HE INCOME-TAX ACT OF RS.1,65,904/- ON THE GROUND THAT THE ASSESSEE HA S NOT SATISFIED ALL THE STIPULATED CONDITIONS AS PER THE PROVISIONS OF SEC. 10A OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY WAS SET UP AT RAJAJINAGAR ON 1.8.1996 AND WAS ENGAGED IN TH E BUSINESS OF SOFTWARE DEVELOPMENT AND RELATED SERVICES. SUBSEQU ENTLY, IT HAS SET UP A UNIT AT WHITEFILED AND TRANSFERRED SOME OF THE PLANT AND MACHINERY FROM RAJAJINAGAR UNIT. THE WHITE FILED U NIT GOT THE STPI STATUS ON 8.6.1999. IT MADE THE CLAIM OF DEDUCTION U/S 10A FOR THE FIRST TIME IN THE ASST. YEAR 2001-02. THE CLAIM WA S DENIED TO THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS TRANSF ERRED ITS PLANT AND MACHINERY FROM RAJAJINAGAR UNIT TO WHITE FIELD UNIT AND, THEREFORE, IT IS NOT A NEW UNIT SET UP BY THE ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ORDER OF THE AO. THEREAFTER ASSES SEE PREFERRED AN ITA NO.133 & 134/B/11 3 APPEAL BEFORE THE ITAT. THE ITAT VIDE ORDERS DATED 27.2.1007 SET ASIDE THE CASE TO THE FILE OF THE AO FOR FRESH ADJU DICATION IN ACCORDANCE WITH LAW AFTER AFFORDING REASONABLE OPP ORTUNITY TO THE ASSESSEE TO DEMONSTRATE ITS CLAIM THAT THE RAJAJINA GAR UNIT CONTINUED TO OPERATE SUBSEQUENTLY WITH THE WHITEFILED UNIT AND A LSO THAT NO MACHINERY OF RAJAJINAGAR UNIT HAS BEEN TRANSFERRED TO WHITEFILED UNIT. DURING THE SECOND ROUND OF LITIGATION, THE ASSESSEE PRODUCED CERTAIN DETAILS BEFORE THE AO AND AFTER CONSIDERING THE SAM E, THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE HAS FAILED TO PROD UCE ANY SUBSTANTIAL EVIDENCE TO PROVE THAT THE RAJAJINAGAR UNIT CONTINU ED TO EXIST EVEN AFTER SHIFTING SOME OF THE MACHINERY TO WHITEFIELD UNIT AND ALSO THAT THE VALUE OF MACHINERY TRANSFERRED TO WHITEFIELD FR OM RAJAJINAGAR DID NOT EXCEED 20% OF THE VALUE OF THE WHITEFIELD MACHI NERY. IN VIEW OF THE SAME, HE DENIED THE BENEFIT OF DEDUCTION U/S 10 A OF THE INCOME- TAX ACT. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) RAISING VARIOUS GROUNDS THAT THE UNIT AT WHITEFIELD WAS THE NEW UNIT WHICH SATISFIED THE CONDITIONS U/S 10A OF THE ACT. WITHOUT PREJUDICE TO THE ABOVE CONTENTION, ANOTHER GROUND WAS ALSO RA ISED TO THE EFFECT THAT AS PER THE BOARD CIRCULAR, THE ASSESSEE IS ELI GIBLE FOR 10A ITA NO.133 & 134/B/11 4 DEDUCTION KEEPING IN MIND THE PERIOD FROM THE TIME THE BUSINESS COMMENCED IN DTA AND SUBSEQUENT CONVERSION TO STPI UNIT, THE ASSESSEE WAS ENTITLED TO RELIEF U/S 10A OF THE INCO ME-TAX ACT. THE CIT(A) HOWEVER CONFIRMED THE ORDER OF THE AO. THE ASSESSEE IS IN SECOND APPEAL BEFORE US NOW. 6. BEFORE US, THE ASSESSEE HAS RAISED VARIOUS GROU NDS TO THE EFFECT THAT - 1) THE PLANT AND MACHINERY TRANSFERRED TO THE NEW UNIT AT WHITEFIELD FROM THE OLD UNIT AT RAJAJINAGAR WAS BEL OW THE STIPULATED PERCENTAGE OF 20% AS PER THE PROVISIONS OF SEC. 10A OF THE ACT. 2) THAT THE ASSESSEE WAS ENTITLED TO THE BENEFIT O F DEDUCTION U/S 10A OF THE ACT ON THE BASIS OF THE CBDT CIRCULAR TO THE EFFECT THAT THE BUSINESS COMMENCED IN DTA AND SUBSEQUENT CONVERSION TO STP UNIT WAS ENTITLED TO DEDUCTION U/S 10A OF THE ACT. 7. WHILE REITERATING THE ASSESSEES SUBMISSIONS BE FORE THE AUTHORITIES BELOW, THE LEARNED COUNSEL FOR THE ASSE SSEE SHRI A SHANKAR SUBMITTED THAT THE ASSESSEE HAD TRANSFERRED SOME OF THE PLANT AND MACHINERY OF THE OLD UNIT AT RAJAJINAGAR TO WHITEFI ELD UNIT AND EVEN IF ITA NO.133 & 134/B/11 5 IT IS CONSIDERED THAT THE ENTIRE MACHINERY HAS BEEN TRANSFERRED FROM RAJAJINAGAR UNIT TO WHITEFIELD UNIT, IT MAKES UP OF ONLY 18.92% OF THE WHITFIELD UNIT, WHICH IS LESS THAN THE STIPULATED P ERCENTAGE OF 20%. TO DEMONSTRATE THE SAME HE DREW OUR ATTENTION TO THE PAPER BOOK THAT CONTAINING DETAILS OF MACHINERY AND THE WORKING OF THE SAID 18.82 %. 8. THE SECOND POINT RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT EVEN IF ENTIRE RAJAJINAGAR UNIT HAS BEEN SH IFTED TO WHITEFIELD UNIT, THEN AFTER ATTAINING THE STPI UNIT AS PER THE BOARD CIRCULAR NO.1 OF 2005 DATED 6.1.2005, THE ASSESSEE WAS ENTITLED T O THE DEDUCTION U/S 10A OF THE ACT. HE SUBMITTED THAT AS PER THE BOARD CIRCULAR, WHERE THE UNDERTAKING IS SET UP IN A DOMESTIC TARIFF AREA (DTA) WHICH IS SUBSEQUENTLY APPROVED AS 100% EXPORT ORIENTED UNIT, IT IS ENTITLED TO RELIEF U/S 10B OF THE INCOME-TAX ACT, PROVIDED, THE UNDERTAKING SHALL GET RELIEF ONLY FOR REMAINING PERIOD OF 10 CONSECU TIVE YEARS BEGINNING WITH THE ASSESSMENT YEAR IN WHICH THE UND ERTAKING BEGINS TO MANUFACTURE COMPUTER SOFTWARE AS THE DTA UNIT. 9. HE SUBMITTED THAT THIS BOARD CIRCULAR HAS BEEN CONSIDERED BY A BENCH OF THIS TRIBUNAL IN THE CASE OF ITO VS. F ORESEE INFO. SYSTEMS (P) LTD., IN ITA NO.3014, 1363 AND 1364/B/2 005 WHEREIN IT ITA NO.133 & 134/B/11 6 HAS BEEN HELD THAT THOUGH THE BENEFIT IS ONLY FOR 1 0B UNITS AS PER THE BOARD CIRCULAR, THE SAID CIRCULAR IS ALSO APPLICABL E FOR THE PURPOSE OF DEDUCTION U/S 10A. HE ALSO PLACED RELIANCE UPON TH E DECISION OF HONBLE KARNATAKA HIGH OF COURT IN THE CASE OF CIT VS. EXPERT OUTSOURCE (P) LTD., REPORTED IN 59 DTR 86, WHEREIN AFTER CONSIDERING THE SAID CIRCULAR IT HAS BEEN HELD THAT THE SAME IS APPLICABLE FOR 10A UNITS ALSO. THUS, ACCORDING TO HIM, THE ASSESSEE H AS SATISFIED THE CONDITIONS OF SEC. 10A AND ALSO AS PER THE BOARD CI RCULAR IS ENTITLED TO DEDUCTION U/S 10A OF THE ACT. 10. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE H AS TAKEN THE NEW PLEA BEFORE THE TRIBUNAL THAT THE ENTIRE UNIT OF R AJAJINAGAR HAS BEEN SHIFTED TO WHITEFIELD UNIT AND ALSO ABOUT THE BOARD CIRCULAR THAT THE ASSESSEE IS ENTITLED TO RELIEF U/S 10A OF THE ACT. HE SUBMITTED THAT THE ASSESSEE CANNOT TAKE TWO DIFFERENT STANDS IN EACH R OUNDS OF LITIGATION BEFORE THE TRIBUNAL. HE ALSO SUBMITTED THAT IF THE TRIBUNAL IS INCLINED TO ACCEPT THE SUBMISSIONS OF THE ASSESSEE, THEN THE CASE WOULD HAVE TO BE REMITTED BACK TO THE FILE OF THE AO FOR VERIFICA TION OF THE CONTENTIONS OF THE ASSESSEE. ITA NO.133 & 134/B/11 7 11. HAVING HEARD BOTH THE PARTIES AND HAVING CONSI DERED THE RIVAL CONTENTIONS, WE FIND THE CASE BEFORE US IS FOR CONS IDERATION AS TO WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT OR NOT? WE HAVE TO SEE WHETHER THE ASSESSEE HAS SATIS FIED THE CONDITIONS PRESCRIBED U/S 10A OF THE ACT TO GET THE SAID BENEF IT. ONE OF THE CONDITIONS LAID DOWN U/S 10A OF THE ACT IS THAT THE NEW UNIT SHOULD NOT HAVE BEEN FORMED BY RESTRUCTURING OF OLD UNIT A ND ALSO THAT IT SHOULD NOT HAVE TRANSFERRED MORE THAN 20% OF THE PL ANT AND MACHINERY FROM THE OLD UNIT TO THE NEW UNIT. 12. THE ASSESSEE HAS FILED STATEMENT OF ADDITION T O FIXED ASSETS AND PERCENTAGE THEREOF BEFORE US AND SUBMITTED THAT THE SE DETAILS WERE ALSO FILED BEFORE THE CIT(A) IN THE FORM OF PAPER BOOK A ND THE CIT(A) HAS NOT CONSIDERED THE SAME. WE FIND THAT THESE DETAIL S IN FACT WERE AVAILABLE AT THE PAGES MENTIONED IN THE WORKSHEET B UT THERE IS NO FINDING OF THE CIT(A) ON THESE DETAILS FILED BY THE ASSESSEE. WE ALSO FIND THAT THE ASSESSEE HAS TAKEN A SPECIFIC GROUND OF APPEAL BEFORE THE CIT(A) WITH REGARD TO THE APPLICABILITY OF THE BOAR D CIRCULAR WITH REGARD TO THE CLAIM OF DEDUCTION U/S 10A OF THE INC OME-TAX ACT IN RELATION TO A DTA UNIT SUBSEQUENTLY CONVERTED TO ST PI UNIT. WE FIND THAT THE CIT(A) HAS NOT CONSIDERED THIS CONTENTION OF THE ASSESSEE ITA NO.133 & 134/B/11 8 ALSO. THESE SUBMISSIONS MADE BY THE ASSESSEE THOUG H SOUND CONVINCING ENOUGH NEED TO BE VERIFIED BY THE AO. IN VIEW OF THE SAME, WE REMIT THE ISSUE OF DEDUCTION U/S 10A OF T HE INCOME-TAX ACT TO THE ASSESSING OFFICER WITH A DIRECTION TO VERIFY IF THE PLANT AND MACHINERY TRANSFERRED FROM THE RAJAJINAGAR UNIT TO THE WHITEFIELD UNIT IS LESS THAN 20% AS DEMONSTRATED BY THE ASSESSEE AN D ALSO TO VERIFY AS TO WHETHER THE ASSESSEE SATISFIES THE CONDITIONS UN DER THE CBDT CIRCULAR NO. 1 OF 2005. IT IS MADE CLEAR THAT IF T HE ASSESSEE IS ENTITLED TO THE DEDUCTION U/S 10A OF THE INCOME-TAX ACT ON T HE ABOVE GROUNDS, THE ASSESSEE SHALL BE ALLOWED DEDUCTION U/S 10A OF THE ACT. NEEDLESS TO MENTION THAT THE ASSESSEE SHALL BE GIVEN A FAIR OPPORTUNITY OF HEARING. 13. IN THE RESULT, THE APPEALS FILED BY THE ASSESS EE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 6TH JAN, 2012. SD/- SD/- (N BARATHVAJA SANKAR) (P MADHAVI DEVI) VICE PRESIDENT JUDICIAL MEMBER VMS. BANGALORE DATED : 06/01/2012 ITA NO.133 & 134/B/11 9 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE.