M/s Green Leaf Business Solutions Private Limited, Hyderabad V. ITO, Ward - 16(2), Hyderabad

ITA 1369/HYD/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6046 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 01-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA.NO.1369/HYD/2014 ASSESSMENT YEAR 2010-2011 M/S. GREEN LEAF BUSINESS SOLUTIONS P. LTD., HYDERABAD 500 034. PAN AAECP9918P VS. THE INCOME TAX OFFICER, WARD-16(2), RANGE-16, HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. PVSS. PRASAD FOR REVENUE : MR. A. SITARAMA RAO DATE OF HEARING : 07.11.2016 DATE OF PRONOUNCEMENT : 11.11.2016 ORDER PER J. SUDHAKAR REDDY, A.M. THIS APPEAL BY THE ASSESSEE-COMPANY IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-V, HYDERABAD DATED 31. 12.2013. 2. AT THE OUTSET, THERE IS A DELAY OF 97 DAYS IN FILING OF THE APPEAL. THE ASSESSEE FILED A PETITION FOR CONDONA TION OF THE DELAY. HE ALSO FILED AN AFFIDAVIT IN SUPPORT OF THE SA ME. THE SUM AND SUBSTANCE OF THE SUBMISSION OF THE ASSESSEE IS THA T, BOTH THE DIRECTORS OF THE ASSESSEE-COMPANY HAD TRAVELLED ABROAD AND WERE NOT PRESENT IN INDIA DURING THAT PERIOD AND HENCE, THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FOR FILING THE APPE AL IN TIME. COPIES OF THE AIR TICKETS OF THE DIRECTORS EVIDENCING TRA VELLING OUT OF INDIA WERE FILED ALONG WITH OTHER EVIDENCES. 3. THE LD. D.R. THOUGH NOT LEAVING HIS GROUND SUBMITTE D THAT THE BENCH SHOULD TAKE A DECISION IN THIS MATTER. 2 ITA.NO.1369/HYD/2014 M/S. GREEN LEAF BUSINESS SOLUTIONS P. LTD., HYDERABAD. 4. WE ARE CONVINCED THAT THE ASSESSEE IS PREVENTED BY SUFFICIENT CAUSE FROM FILING THIS APPEAL WITHIN TIME. H ENCE, WE CONDONE THE DELAY IN FILING OF THE APPEAL AND ADMIT THE SAME. 5. THE GROUNDS TAKEN BY THE ASSESSEE ARE AS FOLLOWS : 1. THE LD. CIT(A) IS ERRONEOUS IN LAW AND ON THE FACT S OF THE CASE. 2. (A) THE LD. CIT(A) IS ERRONEOUS IN LAW IN CONFIRMIN G THE DENIAL OF RS.1,35,17,442 AS EXEMPTION UNDER SECTION .10B OF THE I.T. ACT, 1961 (B) THE LD CIT (A) OUGHT TO HAVE ALLOWED THE EXEMPT ION UNDER SECTION.10B OF RS.1,35,17,442 AS THE APPELLAN T COMPANY WAS LEGALLY AND FACTUALLY ENTITLED TO THE SAME. 3. (A) THE LD. CIT(A) IS ERRONEOUS IN LAW IN DENYING T HE EXEMPTION UNDER SECTION. 10B ON THE GROUND THAT THE APPROVAL LETTER FILED BY THE APPELLANT FROM ASST DEVELOPMENT COMMISSIONER OF VISAKHAPATNAM SEZ WAS NOT SUFFICIENT AND THAT THE APPROVAL OF THE BOARD V IDE INSTRUCTION NO 02/2009 DATED 9-3-2009 WAS COMPULSOR Y FOR ALLOWING EXEMPTION U/S 19B OF THE ACT (B) THE LD. CIT(A) OUGHT TO HAVE ALLOWED THE EXEMPT ION UNDER SECTION. 10B ON THE BASIS OF THE APPROVAL LET TER FILED BY THE APPELLANT FROM ASST DEVELOPMENT COMMISSIONER OF VISAKHAPATNAM SEZ. 4. THE LD. CIT(A) IGNORED TO CONSIDER THE AGREEMENT FO R SUB CONTRACT OF WORK AND HIRING OF COMPUTERS AND FURNIT URE ENTERED INTO BETWEEN THE ASSESSEE AND ITS SISTER CO MPANY. 5. THE LD. CIT(A) IGNORED THE FACT RAISED IN THE GROUN D THAT THE APPELLANT COMPANY APPOINTED NEW EMPLOYEES DURIN G THE YEAR FOR DEVELOPMENT AND EXPORT OF SOFTWARE. 6. THE LD. CIT(A) ERRED IN DISALLOWING THE TRAVEL EXPE NSES OF RS.27,14,871. 3 ITA.NO.1369/HYD/2014 M/S. GREEN LEAF BUSINESS SOLUTIONS P. LTD., HYDERABAD. 7. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF H EARING WITH THE PREVIOUS APPROVAL OF THE HONBLE TRIBUNAL. 6. AFTER HEARING THE RIVAL CONTENTIONS WE FIND THAT THE LD. CIT(A) IN HIS IMPUGNED ORDER HAS SIMPLY EXTRACTED THE ORDER OF THE ASSESSING OFFICER AT PAGES 2 TO 5 AND THEREAFTER AT PARA4.3 HELD AS FOLLOWS : 4.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F TILE APPELLANT AND THE ASSESSMENT ORDER. THE A.O HAS RIGHTLY OBSERVED THAT THE APPROVAL LETTER FILLED BY THE APPELLANT FROM ASSTT. DEVELOPMENT COMMISSIONER OF VISAKHAPATNAM SEZ WAS NOT SUFFICIENT AND THAT THE BOARD VIDE INSTRUCTION NO.02/2009 DATED 9-3-2009 HA S PRESCRIBED THE APPROVAL OF THE BOARD AS COMPULSORY FOR ALLOWING THE CLAIM UNDER SECTION 10B OF THE ACT. I FULLY AGREE WITH THE DETAILED REASONING OF THE A.O. AND HENCE, CONFIRM THE DISALLOWANCE UNDER SECTION 10B AMOUNTING TO RS.1,35,17,442. VARIOUS CONTENTIONS TAKEN UP BY THE ASSESSEE AND THE CA SE LAW CITED HAVE NOT BEEN CONSIDERED BY THE LD. CIT(A). 6.1. THE SUBMISSIONS OF THE ASSESSEE ARE EXTRACTED FOR READY REFERENCE : 11. APPROVAL OF THE DEVELOPMENT COMMISSIONER : THE LD AO/LD CIT(A) LEGALLY ERRED IN CONCLUDING THA T THE ASSESSEE IS NOT ENTITLED FOR THE BENEFIT OF SEC TION 10B ON THE GROUND THAT APPROVAL LETTER FILED FROM A SST. DEVELOPMENT COMMISSIONER OF VISHAKHAPATNAM SEZ WAS NOT SUFFICIENT AND THAT THE APPROVAL OF THE BOA RD WAS COMPULSORY FOR ALLOWING EXEMPTION UNDER THE ACT . 4 ITA.NO.1369/HYD/2014 M/S. GREEN LEAF BUSINESS SOLUTIONS P. LTD., HYDERABAD. 12. THE LD. AO/LD. CIT(A) HAVE PLACED RELIANCE ON BOARD INSTRUCTION NO.02/2009 DATED 09.03.2009. 13. HOWEVER, THE LD. AO/LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE SAID INSTRUCTION WAS AMENDED BY THE [F.NO.178/19/2008-ITA-I) DATED 08.05.2009.] 15. THE LD. AO/LD. CIT(A) OUGHT TO CONSIDERED THE F ACT THAT THE ASSESSEE COMPANY HAVE OBTAINED A LETTER FROM TH E OFFICE OF THE DEVELOPMENT COMMISSIONER DATED 28TH MAY, 2013 (PG. 67 OF PAPER BOOK) WHEREIN IT WAS CLEARLY STATED THAT THE BOARD OF APPROVALS, MINISTR Y OF COMMERCE, NEW DELHI RATIFIED THE LETTER OF PERMISSI ON CLOP) OF THE ASSESSEE FOR SETTING UP A 100% EOU. TH E LETTER ALSO STATES THAT THE SAME HAS BEEN ISSUED WI TH THE APPROVAL OF DEVELOPMENT COMMISSIONER. 16. FURTHER THE EPCES CIRCULAR NO.68 DATED 14.05.20 09 ISSUED BY EXPORT PROMOTION COUNCIL FOR EOUS & SEZS HAVE ALSO CLARIFIED THE POSITION ON EXEMPTION TO EO US UNDER SECTION.10B OF THE INCOME TAX ACT, 1961 (COPY ENCLOSED). 6.2. HE RELIED ON THE DECISIONS OF HONBLE GUJARAT H IGH COURT IN THE CASE OF PR. CIT VS. ECI TECHNOLOGIES P. LTD., TS-861- HC-2014 (GUJ.). 6.3. ON THE OTHER FINDING OF THE LD. ASSESSING OFFI CER, THE ASSESSEE SUBMITTED AS FOLLOWS : 20. IN OUR CASE, WE HAVE PROCURED SOFTWARE DEVELOP MENT WORK FROM A CLIENT NAMED SOUTH EASTERN DATA COOPERATIVE (SEDC), USA AND IN THE PROCESS OF EXECUTING THE CONTRACT WE HAVE SUBCONTRACTED THE PA RT OF THE DESIGNING AND PRELIMINARY TESTING OF THE ENT IRE PROJECT TO PROARCH IT SOLUTIONS (CONTRACTOR) UNDER A LOB WORK CONTRACT. THE JOB WORK AGREEMENT BETWEEN THE ASSESSEE COMPANY AND PROARCH IT SOLUTIONS PVT. LTD IS AT PAGE NO. 70 OF THE PAPER BOOK. 5 ITA.NO.1369/HYD/2014 M/S. GREEN LEAF BUSINESS SOLUTIONS P. LTD., HYDERABAD. 21. WE WOULD FURTHER LIKE TO SUBMIT THAT THE ENTIRE WORK OF THE PROJECT IS NOT OUTSOURCED AND THE ASSESSEE COMPANY ITSELF UNDERTAKES THE ACTUAL CODING, FINAL TESTING AND DELIVERY WORK INCLUDING THE POST DELIVE RY MODIFICATIONS, ERRORS ETC. IN ADDITION TO THE ABOVE THE ASSESSEE-COMPANY ALSO UNDERTAKES THE PRODUCTION AND DELIVERY OF THE SOFTWARE AND THE CONTRACTOR IN NO W AY RESPONSIBLE FOR THE SOFTWARE DEVELOPED. 26. IN OUR CASE THE ENTIRE SUPERVISORY CONTROL OR D IRECTION IS EXERCISED BY US AND ONLY THE DESIGN AND PRELIMINARY TESTING OF THE PROJECT IS SUBCONTRACTED TO PROARCH IT SOLUTIONS. 6.4. HE FURTHER RELIED ON THE FOLLOWING CASE LAWS : 1. GRIFFON LABORATORIES (P.) LTD., VS. CIT (1979) 119 ITR 145 (CAL.) 2. CIT VS. CONTINENTAL ENGINES LTD., (2011) 12 TAXMANN .COM 398 (DELHI). 3. JCIT VS. GEBBS INFOTECH LTD., ITA.NO.3370/MUM/2007 AND OTHER CASE LAWS. 6.5. ON TRAVELLING EXPENSES, IT WAS SUBMITTED THAT THE EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS. 6. AS THE LD.CIT(A) HAS NOT CONSIDERED EACH OF THESE CONTENTIONS AND CASE LAW RELIED UPON ON MERITS, WE SET ASIDE THE ISSUE TO THE FILE OF THE FIRST APPELLATE AUTHORITY WITH A SPECIFIC DIRECTION THAT EACH AND EVERY CONTENTION OF THE ASSESSEE AS WELL AS THE CASE LAW SHOULD BE CONSIDERED AND THE CASE ADJ UDICATED DENOVO, AFTER GIVING THE ASSESSEE ADEQUATE OPPORTUNIT Y OF BEING HEARD. . 6 ITA.NO.1369/HYD/2014 M/S. GREEN LEAF BUSINESS SOLUTIONS P. LTD., HYDERABAD. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11.11.2016. SD/- SD/- (SMT. P. MADHAVI DEVI) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 11 TH NOVEMBER, 2016. VBP/- COPY TO 1. M/S. GREEN LEAF BUSINESS SOLUTIONS P. LTD., (FORME RLY KNOWN AS PRO ARCH ELITE BUSINESS SOLUTIONS P. LTD.,) C/O. PRASAD & PRASAD, CHARTERED ACCOUNTANTS, FLAT NO.30 1, 3 RD FLOOR, M.J. TOWERS, ROAD NO.12, BANJARA HILLS, HYDERABAD 34. 2. THE INCOME TAX OFFICER, WARD-16(2), HYDERABAD. 3. CIT(A)-V, HYDERABAD. 4. CIT-IV, HYDERABAD. 6. D.R. ITAT A BENCH, HYDERABAD. 7. GUARD FILE.