ITO, Nashik V. Shri Vilas Bhalchandra Wibhandik, Nashik

ITA 1338/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88814 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 28-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S L RATNAPARKHI
• Keywords: Opportunity of being heard
• Section: 143(3); 10AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1338/PN/2013 (ASSESSMENT YEAR : 2009-10) INCOME TAX OFFICER, WARD 1(4), NASHIK. . APPELLANT VS. SHRI VILAS BHALCHANDRA WIBHANDIK, ASC-55, SWAPNAGANDHA, ASHWIN NAGAR, NEAR SAMBHAJI STADIUM, CIDCO, NASHIK 422 009. PAN : AANPW8506A . RESPONDENT DEPARTMENT BY : SHRI RAJESH DAMOR ASSESSEE BY : SHRI S. L. RATNAPARKHI DATE OF HEARING : 23-12-2014 DATE OF PRONOUNCEMENT : 12-01-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGA INST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK DATED 15.04.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 08.12.2011 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2009-10. 2. BY WAY OF THE PRESENT APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 01. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LEARNED CIT(A) IS NOT JUSTIFIED IN DELETING ADDITIONS OF RS .18,27,127/-, RELATING TO PERIOD PRIOR TO THE DATE OF REGISTRATION WITH THE STPI. 02. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE ORDER PASSED BY THE LEARNED CIT(A) MAY BE SET-ASIDE. 3. BRIEFLY PUT, THE CONTROVERSY IN THE PRESENT APPE AL RELATES TO A CLAIM FOR DEDUCTION U/S 10A OF THE ACT AMOUNTING TO RS.18,27, 127/- MADE BY THE ASSESSEE IN HIS RETURN OF INCOME. THE ASSESSEE IS AN INDIVIDUAL, WHO IS ITA NO.1338/PN/2013 ENGAGED IN THE BUSINESS OF PROVIDING SERVICES IN TH E FIELD INFORMATION TECHNOLOGY AND SUCH BUSINESS IS CARRIED OUT UNDER T HE NAME AND STYLE SKSOFTSERV CONSULTANTS. THE UNIT OF THE ASSESSEE IS REGISTERED AS A 100% EXPORT ORIENTED UNIT (EOU) WITH SOFTWARE TECHN OLOGY PARKS OF INDIA (STPI) FOR COMPUTER SOFTWARE AND IT ENABLED SERVICE S. FOR THE ASSESSMENT YEAR 2009-10, ASSESSEE FILED A RETURN OF INCOME DEC LARING TOTAL INCOME OF RS.51,771/- WHICH, INTER-ALIA, INCLUDED THE CLAIM O F DEDUCTION U/S 10A OF THE ACT AMOUNTING TO RS.37,53,878/-. THE ASSESSING OFF ICER NOTED THAT ASSESSEE WAS GRANTED APPROVAL BY THE STPI ON 02.09.2008. TH EREFORE, ACCORDING TO HIM, THE SALE PROCEEDS EARNED BY THE ASSESSEE PRIOR TO THIS DATE WERE NOT ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT SINCE REG ISTRATION UNDER THE STPI WAS A CONDITION PRECEDENT FOR ALLOWANCE OF DEDUCTION U/ S 10A OF THE ACT. THEREFORE, HE RESTRICTED ASSESSEES CLAIM FOR DEDUC TION U/S 10A OF THE ACT TO RS.19,26,751/- AS AGAINST A CLAIM OF RS.37,58,878/- MADE IN THE RETURN OF INCOME. THE AFORESAID DISPUTE WAS CARRIED IN APPEA L BEFORE THE CIT(A). THE CIT(A) HAS DEALT WITH THE ISSUE IN THE FOLLOWING MA NNER :- 5.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. THE LIMITED ISSUE BEFORE ME IS WHETHER THE ENTIRE PROFITS FROM EXPORT S QUALIFY FOR DEDUCTION UNDER SECTION 10AA IN THE FIRST YEAR OR IS TO BE ALLOWED ON A PROPORTIONATE BASIS FROM THE DATE OF GRANTING OF APPROVAL BY THE DEVELOPMENT COMMISSIONER, STPI. THE AO HAS ALLOWED DEDUCTION U/S 10AA FROM 01/09/20 08 BY OBSERVING THAT THE ASSESSEE HAS GOT REGISTRATION WITH STPI BY PAYI NG REGISTRATION FEES ON 01/09/2008 AND ALSO NOTING THAT THE LICENSE ISSUED TO THE ASSESSEE BY THE CENTRAL EXCISE AND CUSTOMS AUTHORITY AS PER THE LET TER OF PERMISSION NO.STP/NSK-VIII(A)/(021)/2008/978 IS DATED 02/09/20 08. THE ID. AO, HOWEVER, DID NOT CAREFULLY EXAMINE THE CONTENTS OF THE ABOVE MENTIONED LETTER OF PERMISSION. IN THE POINT NO.11 OF THE SAID LETTE R, IT HAS BEEN MENTIONED THAT 'THIS LETTER OF PERMISSION/APPROVAL SHALL BE VALID FOR THE PERIOD OF 5 YEARS FROM THE DATE OF COMMENCEMENT OF PRODUCTION'. IT IS AN U NDISPUTED FACT THAT THE APPELLANT HAS STARTED THE PRODUCTION DURING THE PRE VIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL AND HAS EXPORTED COMPU TER SOFTWARE OF RS.46,95,750/- AS PER COLUMN 14 OF ANNEXURE A TO FO RM NO.56A DULY CERTIFIED BY THE CHARTERED ACCOUNTANT WHICH HAS BEEN FILED BY THE APPELLANT ON THE RECORD OF THE AO. IN VIEW OF THE ABOVE FACTS IT IS EVIDENT THAT AS PER THE LETTER OF PERMISSION THE ASSESSEE IS ENTITLED TO CLAIM DED UCTION U/S 10AA FOR THE PERIOD OF 5 YEARS FROM THE DATE OF COMMENCEMENT OF PRODUCTION. THEREFORE, THE AO IS NOT JUSTIFIED IN DISALLOWING PART OF THE CLAIM OF THE APPELLANT ON THE BASIS OF LETTER OF PERMISSION DATED 02/09/2008 BECA USE AS PER THE SAID LETTER THE APPELLANT IS ENTITLED TO CLAIM THE DEDUCTION FO R THE PERIOD OF 5 YEARS FROM THE YEAR IN WHICH THE PRODUCTION HAS BEEN COMMENCED . ITA NO.1338/PN/2013 5.3.1 IN MY CONSIDERED VIEWS, THE APPELLANT HAS BEG UN TO PROVIDE SERVICES FROM HIS UNIT DURING THE PREVIOUS YEAR REL EVANT TO THE ASSESSMENT YEAR, A FACT WHICH CANNOT BE DENIED. THE APPELLANT HAS ALSO SATISFIED ALL THE CONDITIONS FOR CLAIMING DEDUCTION UNDER SECTION 10A A OF THE ACT. THE SECTION NOWHERE PROVIDES THAT THE DEDUCTION UNDER SECTION 1 0AA FOR THE FIRST YEAR WILL BE AVAILABLE TO AN ENTREPRENEUR FROM AND AFTER THE DATE OF GETTING APPROVAL FROM THE DEVELOPMENT COMMISSIONER, STPI. THE SECTIO N PROVIDES THAT THE DEDUCTION FOR THE FIRST YEAR IS AVAILABLE IN THE AS SESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNIT BEGINS TO MANUFACTU RE OR PRODUCE ARTICLES OR THINGS OR PROVIDE SERVICES. SINCE THE APPELLANT HAS SET UP THE UNIT IN AN APPROVED SEZ AREA AND HAS BEEN ENGAGED IN THE BUSIN ESS OF PROVIDING SERVICES IN THE FIELD OF INFORMATION TECHNOLOGY ONL Y FOR EXPORTS AND HAS ALSO GOT THE NECESSARY APPROVAL FROM TH E DEVELOPMENT COMMISSIONER, STPI DURING THE YEAR, THE APPELLANT I S ENTITLED TO CLAIM THE ENTIRE EXPORT PROFITS FOR THE YEAR AS A DEDUCTION UNDER SECTION 10AA OF THE ACT IN COMPUTING THE INCOME FROM BUSINESS. 5.3.2 THE APPELLANT HAS CONTENDED THAT SINCE ALL TH E CONDITIONS SPECIFIED FOR CLAIMING DEDUCTION U/S 10A HAVE BEEN FULFILLED, HE IS ENTITLED TO FULL DEDUCTION U/S 10A AS CLAIMED IN THE RETURN OF INCOME. THE CONTENTION OF THE APPELLANT IS FOUND TO BE CORRECT. IN VIEW OF TH E ABOVE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE PART DISALLOWANCE OF THE CLAIM MADE U/S 10AA BY THE ASSESSING OFFICER IS UNJUSTIFIED AND IS DI RECTED TO ALLOW FULL CLAIM OF DEDUCTION OF RS.37,53,878/- AS AGAINST RS.19,26,751/- ALLOWED BY THE AO. THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE BALANCE AMOUNT OF RS.18,27,127/-. THIS GROUND OF APPEAL IS ALLOWED. 4. A PERUSAL OF THE AFORESAID OPERATIVE PART OF THE ORDER OF THE CIT(A) REVEALS THAT HE HAS CONSIDERED THE DISPUTE IN THE C ONTEXT OF SECTION 10AA OF THE ACT INSTEAD OF THE CLAIM MADE BY THE ASSESSEE M ADE IN THE RETURN OF INCOME, WHICH WAS U/S 10A OF THE ACT. IN-FACT, IN THE RETURN OF INCOME, CLAIM OF THE ASSESSEE WAS THAT HIS PROFITS AND GAINS DERIVED FROM EXPORT OF SOFTWARE WAS EXEMPT IN TERMS OF SECTION 10A OF THE ACT AS HI S UNIT WAS RECOGNIZED AS AN STPI UNIT. THE DISCUSSION BY THE CIT(A), ON THE OTHER HAND, REVEALS THAT HE HAS CONSIDERED THE DISPUTE IN THE CONTEXT OF SECTIO N 10AA OF THE ACT WHICH ESSENTIALLY DEALS WITH NEWLY ESTABLISHED UNITS IN S PECIAL ECONOMIC ZONES. THOUGH, IN THE CONCLUDING PARA 5.3.2, CIT(A) HAS RE FERRED TO SECTION 10A OF THE ACT, BUT THE ENTIRE DISCUSSION IN THE EARLIER PART OF THE ORDER IS IN THE CONTEXT OF SECTION 10AA OF THE ACT. IN-FACT, IN THE IMPUGNED ORDER, CIT(A) HAS REFERRED TO THE DEFINITION OF ENTREPRENEUR IN SECTION 2(J) OF THE SEZ ACT, 2005 WHICH IS RELEVANT IN THE CONTEXT OF A CLAIM U/S 10AA OF THE ACT AND NOT U/S 10A OF THE ACT. BE THAT AS IT MAY, WHEN THE AFORESAID POSITIO N WAS POINTED OUT TO THE LD. REPRESENTATIVE FOR THE ASSESSEE, HE FAIRLY CONCEDED THAT THE APPELLATE ITA NO.1338/PN/2013 PROCEEDINGS BEFORE THE CIT(A) WERE NOT IN CORRECT P ROSPECTIVE INASMUCH AS THE CLAIM OF THE ASSESSEE WAS U/S 10A OF THE ACT AN D NOT U/S 10AA OF THE ACT. 5. IN THIS BACKGROUND, IT WOULD BE IN THE FITNESS O F THINGS THAT THE MATTER IS RE-VISITED BY THE CIT(A) IN ITS CORRECT PROSPECTIVE . THEREFORE, WE SET-ASIDE THE IMPUGNED ORDER AND DIRECT THE CIT(A) TO CONSIDER TH E CLAIM OF THE ASSESSEE IN THE CONTEXT OF THE RETURN OF INCOME FILED WHICH WAS SUBJECT TO ASSESSMENT BY THE ASSESSING OFFICER WHEREIN THE DISPUTE PERTAINED ONLY TO ASSESSEES CLAIM FOR DEDUCTION U/S 10A OF THE ACT. WE MAY ALSO OBSE RVE THAT WE HAVE NOT CONSIDERED THE MERITS OF THE ISSUE, AND THEREFORE O UR DECISION TO REMAND THE MATTER BACK TO THE CIT(A) SHOULD NOT BE TAKEN AS AN Y REFLECTION ON THE MERITS OF THE ISSUE, WHICH SHALL BE DEALT WITH BY THE CIT( A) AS PER LAW. NEEDLESS TO SAY, THE CIT(A) SHALL ALLOW THE ASSESSEE A REASONAB LE OPPORTUNITY OF BEING HEARD BEFORE PASSING AN ORDER AFRESH IN ACCORDANCE WITH LAW. 6. IN THE RESULT, FOR STATISTICAL PURPOSES THE APPE AL OF THE REVENUE IS TREATED AS ALLOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JANUARY, 2015. SD/- SD/- (SUSHMA CHOWLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 12 TH JANUARY, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, NASHIK; 4) THE CIT-I, NASHIK; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE