Income-tax Officer, V. M/s. ESDS Software Solution Pvt. Ltd., Nashik

ITA 1931/PUN/2013

• Counselvise Citation: 193124514 RSA 2013
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 31-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Assessee Lawyers: NILESH KHANDELWAL
• Section: 143(3); 115JB; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.1931/PN/2013 (A.Y:2009-10) ITO, WARD 1(1), NASHIK APPELLANT VS. M/S. ESDS SOFTWARE SOLUTION PRIVATE LIMITED B-24/25, GANGAPUR MARG, NICE AREA, MIDC, SATPUR, NASHIK 422007 PAN: AABCE4981A RESPONDENT APPELLANT BY : SHRI P.S. NAIK RESPONDENT BY : SHRI NILESH KHANDELWAL DATE OF HEARING : 23.09.2014 DATE OF PRONOUNCEMENT : 23.09.2014 ORDER PER SHAILENDRA KUMAR YADAV : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK DATE D 23.08.2013 FOR A.Y. 2009-10 ON THE FOLLOWING GROUNDS. 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW THE LEARNED CIT(A)-I, NASHIK IS JUSTIFIED IN DE LETING THE DISALLOWANCE MADE U/S 10B AMOUNTING TO RS.49,36,884 /- HOLDING THAT THE AO WAS NOT JUSTIFIED IN RESTRICTI NG THE DEDUCTION U/S 10B TO 90%. 2. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LEARNE D CIT(A) BE VACATED AND THAT OF THE ASSESSING OFFICER ITO WARD 1(1), NASHIK, BE RESTORED. ITA NO.1931/PN/13 M/S. ESDS SOFTWARE SOLUTION PVT. LTD. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND AND ALTER ANY GROUND(S) OF APPEAL. 2. THE ASSESSEE A PRIVATE LIMITED COMPANY ENGAGED I N BUSINESS OF COMPUTER SOFTWARE AND ONLINE SERVICES. THE ASSES SEE FILED A RETURN OF INCOME DECLARING TOTAL INCOME AT RS.12,38 ,500/- ON 26.09.2009 AFTER CLAIMING DEDUCTION U/S 10B OF THE ACT AT 100% OF THE ELIGIBLE NET PROFIT OF RS.4,93,68,844/-. THE A SSESSING OFFICER HAS ASSESSED THE INCOME OF THE ASSESSEE U/S 143(3) OF THE ACT AT RS.61,75,390/- THEREBY ALLOWING DEDUCTION U/S 10B O F THE ACT ONLY TO THE EXTENT OF 90% OF THE ELIGIBLE NET PROFIT THU S ADDING BACK A SUM OF RS.49,36,884/-. 2.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE BY HOLDING THAT THE ASSESSIN G OFFICER WAS NOT JUSTIFIED IN RESTRICTING THE DEDUCTION U/S 10B TO 9 0% AND IN MAKING ADDITION IN QUESTION AND THE SAME WAS DELETE D. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUPPORT ED THE ORDER OF ASSESSING OFFICER AND SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE MADE U/S.10B OF THE AC T AMOUNTING TO RS.49,36,884/- HOLDING THAT THE ASSESSING OFFICER W AS NOT JUSTIFIED IN RESTRICTING THE DEDUCTION U/S 10B TO 90%. ACCOR DINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, THE LEARNED AUTHORIZE D REPRESENTATIVE HAS SUPPORTED THE ORDER OF CIT(A). 2.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFICER HAS ALLO WED DEDUCTION U/S 10B OF THE ACT @ 90% OF THE PROFIT OF THE BUSIN ESS OF THE ASSESSEE AS AGAINST ALLOWABLE DEDUCTION @ 100% OF T HE PROFIT ITA NO.1931/PN/13 M/S. ESDS SOFTWARE SOLUTION PVT. LTD. RESULTING INTO DISALLOWANCE OF RS.49,36,884/- STATI NG THAT THE SECOND PROVISO TO SECTION 10B OF THE ACT, WHICH REA DS AS UNDER:- 'PROVIDED [FURTHER] THAT FOR THE ASSESSMENT YEAR BE GINNING ON THE 1 ST DAY OF APRIL, 2003, THE DEDUCTION UNDER THIS SUB- SECTION SHALL BE NINETY PER CENT OF THE PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM THE EXPORT OF SUCH A RTICLES OR THINGS OR COMPUTER SOFTWARE'. 2.3 THE ASSESSING OFFICER DISALLOWED THE DEDUCTION CLAIMED TO THE EXTENT OF 10% ASSUMING THAT THE ABOVE PROVISION WAS APPLICABLE TO THE ASSESSMENT YEARS SUBSEQUENT TO THE ASSESSMENT Y EAR 2003-04 AND HENCE WAS APPLICABLE TO THE YEAR UNDER APPEAL I .E. A.Y. 2009- 10. THE STAND OF THE ASSESSEE HAS BEEN THAT VIDE H IS LETTER DATED 24.07.2013, WHICH READS AS UNDER:- 'THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND ENGA GED IN BUSINESS OF EXPORT OF COMPUTER SOFTWARE. THE ASSESS EE IS DUTY REGISTERED UNDER SOFTWARE TECHNOLOGY PARK OF INDIA AS 100% EXPORT ORIENTED UNIT HENCE ELIGIBLE TO CLAIM DEDUCT ION U/S 10B OF INCOME TAX ACT, 1961. ACCORDINGLY ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2009-10 AND CLAIMED 100% OF PROFIT AND GAIN OF UNDERTAKING. ACCORDINGLY AO REVI SED THE COMPUTATION AND ADDED EXCESS CLAIM OF DEDUCTION IN GROSS TOTAL INCOME OF THE APPELLANT. DUE TO THIS CALCULAT ION, DEDUCTION U/S 10B OF THE APPELLANT HAS BEEN REDUCED BY RS.49,36,884/- ( RS.4,93,68,844/- - RS.4,44,31,959/ -). FURTHER, HE HAS ALSO WRONGLY ADDED AMOUNT OF RS.49,36,884/- TO BOOK PROFIT CALCULATED U/S 115JB INSTEAD OF ADDING IT TO THE PROFIT CALCULATED AS PER GENERAL P ROVISION (OTHER THAN MAT) OF INCOME TAX ACT'. 2.4 ON PERUSAL OF THE PROVISO TO SECTION 10B OF THE ACT, WE FIND THAT THE SAID PROVISO RESTRICTING THE DEDUCTION U/S 10B OF THE ACT TO 90% WAS APPLICABLE ONLY FOR A.Y. 2003-04. FURTHER THE CBDT HAS ISSUED CIRCULAR NO.1 OF 2005 DATED 06.01.2005 WHICH READS AS UNDER:- 'SECTION 10-B OF THE INCOME TAX ACT PROVIDES FOR 10 0% DEDUCTION OF PROFITS DERIVED BY A HUNDRED PER CENT EXPORT ORIENTED UNDERTAKING, FROM EXPORT OF ARTICLES OR TH INGS OR ITA NO.1931/PN/13 M/S. ESDS SOFTWARE SOLUTION PVT. LTD. COMPUTER SOFTWARE MANUFACTURED OR PRODUCED BY IT. T HE DEDUCTION IS AVAILABLE FOR A PERIOD OF TEN CONSECUT IVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAK ING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COM PUTER SOFTWARE. HOWEVER, NO DEDUCTION UNDER SECTION 10-B IS AVAILABLE AFTER ASSESSMENT YEAR 2009-10'. 2.5 FROM THE ABOVE CIRCULAR WHICH WAS ISSUED ON 06. 01.2005, IT IS CLEAR THAT THE RESTRICTION OF DEDUCTION U/S 10B OF THE ACT WAS NOT APPLICABLE FOR THE ASSESSMENT YEARS SUBSEQUENT TO A .Y. 2003-04, AS THE CIRCULAR REFERS TO THE 100% DEDUCTION U/S 10 B OF THE ACT. THE PROVISO TO SECTION 10B OF THE ACT IS CLEARLY WO RDED. THUS, THE ASSESSING OFFICER HAS FURNISHED A REMAND REPORT DAT ED 24.01.2013 BEFORE THE CIT(A), WHICH IS AS UNDER:- 2. 'IN THIS CASE AN ORDER OF ASSESSMENT U/S 143(3) OF THE I.T. ACT WAS PASSED ON 30/12/2011, FOR A.Y. 2009-10, WIT H ASSESSED INCOME AT RS.61,75,390/-. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS CLAIMED DED UCTION @ 100%, UNDER SECTION 10B OF THE I.T. ACT AT RS.4,9 3,68,844/- HOWEVER DEDUCTION @ 90% WAS ALLOWED AND 10% AT RS.49,36,884/- WAS DISALLOWED AND ADDED TO THE TOTA L INCOME OF THE ASSESSEE COMPANY. 3. ON PERUSAL OF CBDT CIRCULAR NO.08/2002 DATED 27/08/2002 IT IS SEEN THAT 90% DEDUCTION UNDER SEC. 10B OF THE I.T. ACT WAS APPLICABLE FOR A.Y. 2003-04 AND IT APPEARS THAT FOR A.Y. 2009-10, 100% OF THE DEDUCTION IS ALL OWABLE. IN VIEW OF THE ABOVE, IT IS KINDLY REQUESTED THAT THE DECISION IN THE CASE MAY BE TAKEN ON MERITS'. 2.6 IN VIEW OF THE ABOVE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN RESTRICTING THE DEDUCTION U/S 10B OF THE ACT TO 90% AND IN MAKING ADDITION OF RS.49,36,884/- WHICH HAS BEEN DELETED B Y CIT(A) AS DISCUSSED ABOVE. THIS REASONED FACTUAL AND LEGAL F INDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED AS INDICATED ABOVE. ITA NO.1931/PN/13 M/S. ESDS SOFTWARE SOLUTION PVT. LTD. PRONOUNCED IN THE OPEN COURT ON THIS THE 23 RD DAY OF SEPTEMBER, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED THE 23 RD SEPTEMBER, 2014 GCVSR COPY TO:- 1) THE DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-I, NASHIK 4) THE CIT-I, NASHIK 5) THE DR, B BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, PUNE.