ACIT, Circle-3(2), Hyderabad V. M/s. SP Software Pvt.Ltd, Hyderabad

ITA 1811/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66096 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-06-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 21-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G GYANA PRAKASH
• Assessee Lawyers: N VEN KATESHWARA RAO
• Keywords: Depreciation; Opportunity of being heard
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1811/HYD/2011 ASSESSMENT YEAR: 2008-09 ACIT, CIR-3(2) -V- M/S.SP SOFTWARE PVT. LTD., HYDERABAD. HY DERABAD. PAN:AACCS 8407N ( APPELLANT) (RESPONDENT) APPELLANT BY SRI G. G YANA PRAKASH RESPONDENT BY SHRI N. VEN KATESHWARA RAO DATE OF HEARING : 06-06-2012 DATE OF PRONOUNCEMENT : 03-08-2012. ORDER PER SAKTIJIT DEY, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30-6-2011 PASSED IN ITA NO.200/ACIT 3(1)/CIT( A)- IV/10-11 PERTAINING TO THE ASSESSMENT YEAR 2008-09. THERE IS A DELAY OF 38 DAYS IN FILING THIS APPEAL. THE REV ENUE HAS FILED AN AFFIDAVIT EXPLAINING THE REASONS FOR THE SAID DE LAY. WE HAVE GONE THROUGH THE SAID AFFIDAVIT AND FOUND THAT THERE IS A JUSTIFIABLE REASON FOR FILING THIS APPEAL LATE. AC CORDINGLY, WE CONDONE THE SAID DELAY AND ADMIT THE APPEAL FOR DIS POSAL. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS BEF ORE US:- ITA NO.1811/HYD/2011 SP SOFTWARE PVT. LTD., HYD. =============================== 2 I. THE ORDER OF THE CIT (A) IS ERRONEOUS IN LAW AND ON FACTS. II. THE CIT (A) OUGHT TO HAVE UPHELD THE DISALLOWANCE OF 10B, AS THE ASSESSEE FAILED TO PRODUCE RATIFICATION BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY SECTION 14 OF INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951. III. THE LD. CIT (A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE SUBSTANTIATING THE IMPROVEMENT PURPORTED TO HAVE BEEN MADE BY THE DIRECTORS TO THE SOFTWARE PRODUCT AND ACCORDINGLY UPHELD THE DISALLOWANCE OF EXCESS DEPRECIATION ON SOFTWARE DEVELOPED IN HOUSE. V. THE CIT (A) OUGHT TO ABOVE UPHELD THE DISALLOWANCE MADE ON THE DEPRECIATION IN RESPECT OF SOFTWARE PURCHASED MADE FROM OASIS INFOTECH LIMITED. VI. ANY OTHER GROUND(S) THAT MAY BE URGED AT THE TIME OF HEARING. 3. GROUND NOS. (I) AND (VI) ARE GENERAL IN NAT URE AND THEY DO NOT REQUIRE ANY ADJUDICATION. 4. GROUND NO. (II) AND (III) RELATE TO ALLOWANCE O F DEDUCTION CLAIMED U/S 10B BY THE CIT (A). FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN BUSINESS OF VALUE ADDED ITA NO.1811/HYD/2011 SP SOFTWARE PVT. LTD., HYD. =============================== 3 RESELLER OF THIRD PARTY SOFTWARE PRODUCTS AND NETWO RKING SYSTEM SOLUTIONS. THE ASSESSEE COMMENCED ITS OPERA TIONS IN 1995 AND FROM THE ASSESSMENT YEAR 2001-02 ONWARDS I T TRANSFORMED INTO INFORMATION TECHNOLOGY SERVICES C OMPANY OFFERING A WIDE RANGE OF SERVICES WHICH INCLUDES MU LTIMEDIA, E- COMMERCE, SOFTWARE DEVELOPMENT, TRAINING, MARKETING OF HARDWARE AND SOFTWARE. THE ASSESSEE BEING 100% EO U IS REGISTERED WITH SOFTWARE TECHNOLOGY PARK OF INDIA [STPI IN SHORT], HYDERABAD. FOR THE ASSESSMENT YEAR UNDER D ISPUTE, THE ASSESSEE CLAIMED EXEMPTION U/S 10B OF AN AMOUNT OF RS.2,90,39,676/-. THE AO REJECTED THE CLAIM OF EX EMPTION U/S 10B ON THE GROUND THAT THE ASSESSEE HAS TO GET ITS APPROVAL FROM THE BOARD APPOINTED ON THAT BEHALF BY CENTRAL GOVERNMENT IN EXERCISE OF POWERS CONFERRED U/S 14 O F INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 W HICH ACCORDING TO THE AO IS THE CONDITION PRECEDENT AS P ER EXPLANATION 2(IV) OF SECTION 10B. AGGRIEVED BY T HE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A). BEFORE THE CIT (A), IT WAS CONTENDED ON B EHALF OF THE ASSESSEE THAT IT IS REQUIREMENT FOR CLAIMING EXEMPT ION U/S 10B OF THE ACT, THE ASSESSEE HAS FIRST TO REGISTER WITH STPI. IN SUPPORT OF SUCH CONTENTION, THE ASSESSEE RELIED UPO N A DECISION OF ITAT, HYDERABAD BENCH IN THE CASE OF SM T. K. SUDHA RANI VS. ITO (ITA NO. 1750/HYD/20087 DATED 30 -10- 2009 WHEREIN IT WAS HELD THAT ONCE STPI APPROVES TH E UNIT AS 100% EOU, IT SHOULD BE ALLOWED EXEMPTION U/S 10B PR OVIDED IT COMPLIES OTHER CONDITIONS SPECIFIED IN THE SAID ORD ER. THE CIT (A) AFTER CONSIDERING THE CONTENTIONS RAISED BY THE ASSESSEE CAME TO A CONCLUSION THAT ONCE A UNIT IS CERTIFIED AS 100% EOU BY STPI THEN IT IS ELIGIBLE FOR DEDUCTION U/S 10B E VEN IF IT IS NOT APPROVED BY THE BOARD APPOINTED BY CENTRAL GOVERNME NT U/S ITA NO.1811/HYD/2011 SP SOFTWARE PVT. LTD., HYD. =============================== 4 14 OF INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 AS THE BOARD AND STPI IS ONE AND THE SAME. 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, THE ASSESSEE HAS N OT BEEN APPROVED AS 100% EOU AS PER EXPLANATION-2,CLAUSE (I V) OF SECTION 10B OF THE ACT. SECTIONS 10A AND 10B STAN D ON DIFFERENT FOOTING WHILE SECTION 10B SPEAKS OF APPRO VAL AS 100% EOU BY THE APPOINTED BOARD, NO SUCH REQUIREMENT IS THERE SO FAR AS 10A IS CONCERNED. IN A CASE OF SIMILAR NATU RE, THE ITAT, HYDERABAD BENCH IN ITA NO.577/HYD/10 IN CASE VNS MA CRO TECHNOLOGIES PVT. LTD., HYDERABAD WHILE HOLDING THA T THE ASSESSEE IS NOT ENTITLED TO AVAIL EXEMPTION U/S 10B , HOWEVER DIRECTED THE AO TO EXAMINE THE ISSUE OF ALLOWANCE O F DEDUCTION U/S 10A, IF THE ASSESSEE IS ENTITLED FOR SUCH DEDUC TION. THE ITAT HELD IN THE FOLLOWING MANNER:- 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIALS AVAILABLE ON RECORD. THE CONTENTION OF T HE ASSESSEES COUNSEL IS THAT THE ASSESSEE IS 100% EOU ENTITLED FOR EXEMPTION U/S 10A AND WRONGLY CLAIMED THE DEDUCTION U/S 10B AND IT WAS A TECHNICAL MISTAKE IN CLAIMING DEDUCTION U/S 10B. THE ASSESSEES COUNSEL FURTHER ARGUED THAT THE ASSESSEE HAS FULFILLED ALL THE REQU IREMENTS OF PROVISIONS OF SECTION 10A. HOWEVER, THIS CLAIM OF THE ASSESSEE NOT EXAMINED BY THE LOWER AUTHORITIES AND THEY STICK TO ONE CONTENTION THAT THE ASSESSEE CLAIM U/S 10B IS NOT ALLOWABLE. WE ARE AGREEING WITH THE DEPARTMENT THAT THD CONDITION FOR ALLOWANCE OF DEDUCTION U/S 10A AN D 10B ARE STOOD ON DIFFERENT FOOTING. HOWEVER, THE DEPA RTMENT CANNOT THRUST UPON THE ASSESSEE TO AVAIL DEDUCTION U/S 10B ONLY. IF THE ASSESSEE ENTITLED FOR DEDUCTION U/S 1 0A INSTEAD OF 10B, THAT CLAIM REQUIRED TO BE EXAMINED BY THE A SSESSING ITA NO.1811/HYD/2011 SP SOFTWARE PVT. LTD., HYD. =============================== 5 OFFICER IN ALL FAIRNESS. THE ISSUE OF ALLOWANCE OF DEDUCTION U/S 10A THOUGH ASSESSEE MADE A CLAIM BEFORE THE LOW ER AUTHORITIES HAS NOT EXAMINED BY THE ASSESSING OFFIC ER. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED 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 ASSESSING OFFICER WITH A DI RECTION TO DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER PROVI DING REASONABLE OPPORTUNITY TO THE ASSESSEE, AND ALSO TO GIVE A SPECIFIC FINDING WHETHER THE ASSESSEE IS ENTITLED T O DEDUCTION U/S 10A OF THE ACT OR NOT. THE ASSESSEE MAY FILE ANY EVIDENCE IN SUPPORT OF ITS CLAIM FOR DEDUCTION BEFORE THE ASSESSING OFFICER. WE MAKE IT CLEAR THAT OUR OBSERVATIONS HEREIN ABOVE SHALL NOT HAVE ANY BEARIN G ON THE DECISION OF THE ASSESSING OFFICER WITH REGARD TO TH E MERITS OF THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10A OF THE ACT. WE DIRECT ACCORDINGLY. FOLLOWING THE AFORESAID ORDER, WE RESTORE THE MATTE R TO THE FILE OF THE AO DIRECTING HIM TO EXAMINE AS TO WHETHER TH E ASSESSEE IS ENTITLED TO DEDUCTION U/S 10A OR NOT. IT IS OPE N TO THE ASSESSEE TO FILE EVIDENCE IN SUPPORT OF DEDUCTION U /S 10A. IF THE AO ULTIMATELY COMES TO A CONCLUSI9ON THAT THE A SSESSEE ENTITLED TO DEDUCTION U/S 10A, THEN SUCH DEDUCTION SHALL BE ALLOWED TO THE ASSESSEE. THE AO SHALL AFFORD A REA SONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE C OMPLETING THE PROCEEDINGS. 6. GROUND NOS. (IV) AND (V) RELATE TO THE CLAIM OF DEPRECIATION ON SOFTWARE DEVELOPED BY DIRECTORS AND SOFTWARE PURCHASED FROM OASIS INFOTECH LIMITED WHI CH ARE ALLOWED BY THE CIT (A). ITA NO.1811/HYD/2011 SP SOFTWARE PVT. LTD., HYD. =============================== 6 7. AT THE OUTSET, THE LEARNED AR FOR HE ASSESSEE S UBMITTED THAT THESE GROUNDS ARE SQUARELY COVERED BY THE ORDE R OF ITAT, HYDERABAD BENCH A, HYDERABAD PASSED IN ITA NOS. 534/HYD/2008, 151 TO 153/HYD/2009 FOR ASSESSMENT YE ARS 2001-02 TO 2003-04 AND FOR ASSESSMENT YEAR 2006-07. 8. THE LEARNED DR AGREES THAT THE ISSUES ARE COVERE D BY THE AFORESAID ORDER OF THE TRIBUNAL. 9. WE HAVE HEARD RIVAL CONTENTIONS. AFTER GOING TH ROUGH THE ORDERS PASSED BY THE ITAT, HYDERABAD BENCH IN A SSESSEES OWN CASE IN ITA NOS. 534/HYD/2008, 151 TO 153/HYD/ 2009 FOR ASSESSMENT YEARS 2001-02 TO 2003-04 AND ITA NO.777/HYD/2010 FOR ASSESSMENT YEAR 2006-07, WE ARE OF THE VIEW THAT THE GROUNDS RAISED BY THE REVENUE ARE SQ UARELY COVERED BY THE AFORESAID ORDERS OF THE ITAT IN FAVO UR OF THE ASSESSEE. WE THEREFORE FOLLOWING THE ORDERS OF THE ITAT REJECT THE GROUNDS RAISED BY THE REVENUE. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER WAS PRONOUNCED IN THE COURT ON 3-8--2012. SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER DATED THE 3 RD AUGUST, 2012 ITA NO.1811/HYD/2011 SP SOFTWARE PVT. LTD., HYD. =============================== 7 COPY FORWARDED TO: 1. M/S SP SOFTWARE PVT. LTD., SOFTWARE UNITS LAYOUT, INFOCITY, MADHAPUR, HYDERABAD. 2. ACIT, CIR-3(1), HYDERABAD. 3. THE CIT(A)-IV, HYDERABAD. 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD JMR* ITA NO.1811/HYD/2011 SP SOFTWARE PVT. LTD., HYD. =============================== 8 ITA NO.1811/HYD/2011 SP SOFTWARE PVT. LTD., HYD. =============================== 9 ITA NO.1811/HYD/2011 SP SOFTWARE PVT. LTD., HYD. =============================== 10 ITA NO.1811/HYD/2011 SP SOFTWARE PVT. LTD., HYD. =============================== 11 ITA NO.1811/HYD/2011 SP SOFTWARE PVT. LTD., HYD. =============================== 12 ITA NO.1811/HYD/2011 SP SOFTWARE PVT. LTD., HYD. =============================== 13