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ITA 1675/HYD/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6438 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 03-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: K A SAI PRASAD
• Section: 143(3); 115JB; 10B

Judgement Text

ITA NO 1675 OF 2014 PENNYWISE SOLUTIONS P LTD HYDER ABAD PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI J. SUDHAKAR REDEDY, ACCOUNTANT MEMBER AND SMT. P.MADHAVI DEVI, JUDICIAL MEMBER ITA NO.1675/HYD/2014 (ASSESSMENT YEAR: 2011-12) DY. COMMISSIONER OF INCOME TAX, CIRCLE 16(2) HYDERABAD VS. M/S. PENNYWISE SOLUTIONS PRIVATE LIMITED HYDERABAD PAN: AAECP 0333 L (APPELLANT) (RESPONDENT) FOR REVENUE SHRI M. SITARAM, DR FOR ASSESSEE : SHRI K.A. SAI PRASAD DATE OF HEARING : 16.06.2016 DATE OF PRONO UNCEMENT : 17 .06.2016 O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS REVENUES APPEAL FOR THE A.Y 2011-12. IN TH IS APPEAL, THE REVENUE IS AGGRIEVED BY THE ORDER OF TH E CIT (A) IN DIRECTING THE AO TO ALLOW THE EXEMPTION U/S 10B OF THE ACT, EVEN THOUGH THE ASSESSEE HAS NOT RECEIVED THE RATIFICATI ON BY THE BOARD OF APPROVAL AS PER SECTION 14 OF THE INDUSTRI ES DEVELOPMENT AND REGULATION ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, WHICH IS ENGAGED IN THE BUSINESS OF INFORMATION TEC HNOLOGY AND I.T. ENABLED SERVICED, FILED ITS E-RETURN OF INCOME FOR A.Y 2011-12 ON 28.09.2011 ADMITTING TOTAL INCOME AT RS.75,71,17 0 UNDER THE NORMAL PROVISIONS AND BOOK PROFIT U/S 115JB AT RS.1 ,67,63,185. ITA NO 1675 OF 2014 PENNYWISE SOLUTIONS P LTD HYDER ABAD PAGE 2 OF 6 DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE I.T. ACT, THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED EXPORT TU RNOVER AT RS.3.71 CRORES AND WORKED OUT DEDUCTION U/S 10B AT RS.94,74,578 AND THE SAME WAS CLAIMED. HE OBSERVED THAT AS PER THE PROVISIONS OF SECTION 10B OF THE ACT, THE DEDUC TIN FOR AN 100% EOU HAS TO BE APPROVED BY THE BOARD APPOINTED ON BEHALF OF THE CENTRAL GOVT. HE OBSERVED THAT IN THE CASE O F THE ASSESSEE, THE APPROVAL WAS GIVEN BY THE DEVELOPMENT COMMISSIO NER, VISAKHAPATNAM WHICH SHOULD BE FURTHER RATIFIED BY T HE BOARD OF APPROVAL AS PER SECTION 14 OF THE INDUSTRIES DEVELO PMENT AND THE REGULATION ACT. THE ASSESSEE WAS THEREFORE, AS KED TO FURNISH THE COPY OF THE APPROVAL ISSUED BY THE BOARD OF DIR ECTORS. IN RESPONSE THERETO, THE ASSESSEE VIDE LETTER DATED 25 .10.2013 SUBMITTED THAT TO THE EXTENT OF CLAIM OF EXEMPTION, FEATURES OF SECTION 10A AND 10B AFTER THE FINANCE ACT, 2002 ARE ONE AND THE SAME ARE TO BE RATIFIED BY STPI IN THE CASE OF CLAI M OF EXEMPTION U/S 10B OF THE ACT. IT WAS ALSO SUBMITTED THAT THE STPI RENEWED THE EXEMPTION OF 100% EOU EXEMPTION FOR THE PERIOD OF 5 YEARS EFFECTING FROM 10.10.11 TO 9.11.2016 AND THAT ALL T HE TERMS AND CONDITIONS MENTIONED FOR PERMISSION REMAIN UNCHANGE D AND SUBJECT TO PREVAILING TRADE POLICY. IT WAS ALSO SUB MITTED THAT THE LETTER OF RATIFICATION FROM STPI WAS NOT RECEIVED F OR THE RELEVANT A.Y, THOUGH THE ASSESSEE HAS COMPLIED WITH ALL THE CONDITIONS. DURING THE COURSE OF HEARING ALSO, THE CONTENTIONS WERE REITERATED. THE AO THEREAFTER PROCEEDED TO FOLLOW T HE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. REGENCY CREATIONS LTD (2012) TO DISALLOW THE CLAIM OF DEDUC TION OF RS.94,74,578. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A), WHO ALLOWED THE SAME BY FOLLOWING THE DECISION OF THE ITA NO 1675 OF 2014 PENNYWISE SOLUTIONS P LTD HYDER ABAD PAGE 3 OF 6 COORDINATE BENCH OF THIS TRIBUNAL IN VARIOUS OTHER CASES. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 3. THE LEARNED DR HAS PLACED RELIANCE UPON THE CBDT INSTRUCTIONS NO.2 OF 2009 DATED 9.3.2009 WHEREIN IT WAS CLARIFIED THAT SECTION 10B OF THE ACT PROVIDES FOR EXEMPTION OF INCOME, IN CASE OF 100% EOUS SUBJECT TO FULFILMENT OF PRESCRIB ED CONDITIONS I.E. RATIFICATION OF THE APPROVAL GRANTED BY THE DE VELOPMENT COMMISSIONER BY THE BOARD OF APPROVALS. IT WAS STAT ED THAT AN APPROVAL GRANTED BY THE DEVELOPMENT COMMISSIONER IN THE CASE OF 100% EOU WILL BE CONSIDERED VALID ONCE SUCH AN A PPROVAL IS RATIFIED BY THE BOARD OF APPROVAL FOR THE EOU SCHEM E. HE ALSO PLACED RELIANCE UPON THE DECISION OF THE HON'BLE DE LHI HIGH COURT IN THE CASE OF CIT VS. REGENCY CREATIONS LTD (2013) (353 ITR 0326). 4. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, SUPPORTED THE ORDERS OF THE CIT (A) AND ALSO PLACED ON RECORD A COPY OF LETTER DATED 25.08.2011 ISSUED BY THE SOFTW ARE TECHNOLOGY PARKS OF INDIA-II TO THE ASSESSEE IN RES PONSE TO ITS LETTER DATED 2.8.2011 REGARDING THE I.T. DEPARTMENT DENYING EXEMPTION TO STP UNIT, THE INCOME TAX BENEFIT U/S 1 0B OF THE ACT. IT IS STATED THEREIN THAT THE APPLICATIONS FOR ESTABLISHING STP UNIT WILL BE CONSIDERED BY THE INTER-MINISTERIAL ST ANDING COMMITT (IMSC) UNDER THE CHAIRMANSHIP AS SECRETARY, DEPARTMENT OF ELECTRONICS AND FURTHER THAT THE WORD DEVELOPMENT COMMISSIONER WHEREVER IT OCCURS SHALL BE SUBSTITUTED BY THE WORD CHIEF EXECUTIVE OF THE STP SOCIETY AND THAT THE LETTERS BOA' WHEREVER OCCURS SHALL BE SUB STITUTED BY ITA NO 1675 OF 2014 PENNYWISE SOLUTIONS P LTD HYDER ABAD PAGE 4 OF 6 THE LETTERS (IMSC). IT WAS FURTHER STATED THAT THE IMSC HAS DELEGATED THE POWERS TO THE DIRECTORS OF STP TO CON SIDER AND APPROVE THE APPLICATIONS FOR SETTING UP OF STP UNIT S UNDER THE STP SCHEME VIDE ORDER F.NO.10(58)92/IP DATED 21.5.1 997 AND THEREFORE, THE DIRECTORS OF STPS ARE EMPOWERED TO G RANT APPROVAL FOR SETTING UP OF STP UNIT UNDER THE STP SCHEME AND THE STP SCHEME POLICY, TERMS & CONDITIONS ARE APPLICABLE TO THE STP UNITS REGISTERED UNDER THE STP SCHEME. FURTHER, VID E LETTER DATED 27.02.2012, THE DIRECTOR OF STPI HAS ADDRESSED A LE TTER TO THE AO OF THE ASSESSEE STATING THAT THE TAX BENEFIT SHALL NOT BE DENIED TO STP UNIT, ONLY ON THE GROUND THAT THE APPROVAL TO U NIT HAS BEEN GRANTED BY THE DIRECTORS OF STPI AND FURTHER THAT V IDE LETTER NO.1(1)06/IPH DATED 7.9.2006, A CLARIFICATION IS IS SUED BY THE DEPARTMENT OF INFORMATION TECHNOLOGY, GOVT. OF INDI A THAT NO FURTHER RATIFICATION OF APPROVALS ISSUED BY THE DIR ECTORS OF THE STPI UNIT IS REQUIRED FROM THE INTER-MINISTERIAL ST ANDING COMMITTEE (IMSC). THUS, ACCORDING TO THE LEARNED CO UNSEL FOR THE ASSESSEE, THE BOARD OF APPROVAL HAVE BEEN SUBST ITUTED BY IMSC AND IT HAS BEEN CLARIFIED THAT THE RATIFICATIO N IS NOT REQUIRED FROM IMS AND HENCE THE ASSESSEE CANNOT BE DENIED THE DEDUCTIONS U/S 10B OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO FILED BEFORE US THE COPIES OF A N UMBER OF JUDGMENTS OF THE HON'BLE HIGH COURT OF ANDHRA PRADE SH AND ALSO THE HON'BLE GUJARAT HIGH COURT AND DECISIONS OF THE VARIOUS BENCHES OF THIS TRIBUNAL HOLDING THAT THE ASSESSEE SHALL NOT BE DENIED THE EXEMPTION U/S 10B OF THE ACT ONLY FOR TH E REASON THAT THE BOARD OF APPROVAL HAS NOT RATIFIED, THE APPROVA L GRANTED BY THE DIRECTOR OF STPI. HE HAS ALSO FILED A CHART TO DEMONSTRATE THAT THE ASSESSEE GOT THE APPROVAL AS A 100% EOU VI DE LETTER ITA NO 1675 OF 2014 PENNYWISE SOLUTIONS P LTD HYDER ABAD PAGE 5 OF 6 DATED 29.06.2006 WHICH WAS FURTHER RENEWED VIDE LET TER DATED 25.10.11 AND THAT THE ASSESSEE HAD CLAIMED THE DEDU CTION U/S 10B FROM A.Y 2007-08 ONWARDS AND THE CLAIM WAS ALLO WED TO THE ASSESSEE U/S 143(3) OF THE ACT FOR A.YS 2007-08 & 2 008-09. IT WAS SUBMITTED THAT THE AO HAD DISALLOWED THE CLAIM FOR THE FIRST TIME IN A.Y 2009-10, BUT THE CIT (A) HAD GRANTED RE LIEF WHICH WAS ACCEPTED BY THE REVENUE. SIMILAR WAS THE SITUATION FOR A.YS 2010-11 AS WELL AND IT IS ONLY IN A.Y 2011-12 THAT THE REVENUE IS IN APPEAL. ACCORDING TO HIM, REVENUE SHOULD ADOPT A UNIFORM APPROACH. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE LEARNED DR IS RELYING UPON THE CBDT INSTRUCTIONS REQUIRING THE APPROVAL TO BE RATIFIED BY THE BOARD OF APPROVAL, WHILE THE LEARNED COUNSEL FOR THE ASSESSE E IS RELYING UPON THE LETTERS OF CLARIFICATIONS ISSUED BY THE DI RECTOR OF STPI. WE FIND THAT THIS TRIBUNAL IN THE CASE OF ACIT VS. SMT. K. SUDHA RANI IN ITA NO.412/HYD/2010 VIDE ORDER DATED 17.09. 2010 HAS HELD THAT ONCE THE STPI HAS APPROVED A UNIT AS 100% EO UNDERTAKING, IT SHOULD BE ALLOWED DEDUCTION U/S 10B SUBJECT TO THE OTHER CONDITIONS AS SPECIFIED IN THAT SECTION. THE TRIBUNAL ALSO FOLLOWED THE DECISION OF THE HON'BLE SUPREME C OURT IN THE CASE OF BAJAJ TEMPO LTD VS. CIT (196 ITR 88) TO HOL D THAT SECTION 10B BEING A SPECIAL INCENTIVE PROVISION SHOULD BE C ONSIDERED LIBERALLY. THIS DECISION OF THE TRIBUNAL IN THE CAS E OF SMT. SUDHA RANI HAS BEEN CONFIRMED BY THE HON'BLE HIGH COURT O F ANDHRA PRADESH VIDE ORDER NO.87 OF 2013, DATED 25.06.2013 AND THE CIT (A) HAS FOLLOWED THE SAID DECISION TO GRANT RELIEF TO THE ASSESSEE. SINCE THE TRIBUNAL AND THE HON'BLE HIGH COURT HAVE TAKEN ITA NO 1675 OF 2014 PENNYWISE SOLUTIONS P LTD HYDER ABAD PAGE 6 OF 6 COGNISANCE OF THE RELEVANT PROVISION OF LAW AS WELL AS THE CBDT INSTRUCTIONS AND ALSO LETTERS OF THE STPI (CITED SU PRA), WE ARE OF THE OPINION THAT THE SAID DECISION IS BIDING ON US. FURTHER, WE ALSO FIND THE A.Y 2007-08 IS THE FIRST YEAR OF CLAI M OF EXEMPTION U/S 10B AND THE AO WAS REQUIRED TO VERIFY THE ASSES SEES ELIGIBILITY IN THE SAID YEAR. THE AO ALLOWED THE EX EMPTION U/S 10B DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) FO R BOTH A.YS 2007-08 AND 2008-09 AND REVENUE HAS ALSO ACCEPTED T HE CIT (A) FINDING FOR 2009-10 AND 2010-11. THUS, EVEN AS PER THE PRINCIPLE OF UNIFORMITY AND CONSISTENCY, THE AO CANNOT TAKE A DIFFERENT STAND IN THE 6 TH YEAR OF THE CLAIM. IN VIEW OF THE SAME, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE C IT (A). 6. IN THE RESULT, REVENUES APPEAL IS ACCORDINGLY D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE, 2016. S D/ - S D/ - ( J. SUDHAKAR REDDY ) ( P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 17 TH JUNE, 2016. VNODAN/SPS COPY TO: 1. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 16(2) ROO M NO.611, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH. HYDERABAD 2. M/S. PENNYWISE SOLUTIONS P LTD , PLOT NO.6-3-655/4 CIVIL SUPPLIES BHAVAN LANE, SOMAJIGUDA HYDERABAD 3. CIT(A) - V HYDERABAD 4. CIT IV HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER