Knowledge Quest Infotech Pvt. Ltd., Pune V. Assistant Commissioner of Income-tax,

ITA 204/PUN/2014

• Counselvise Citation: 20424514 RSA 2014
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 31-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D S KOTHARI
• Keywords: Opportunity of being heard
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.204/PN/2014 (ASSESSMENT YEAR : 2010-11) KNOWLEDGE QUEST INFOTECH PVT. LTD., FLAT NO. G-704, S.NO.183, CAPRICO, WAKAD ROAD, WAKAD, PUNE 411 057. PAN : AADCK4247R . APPELLANT VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 11(1), PUNE. . RESPONDENT ASSESSEE BY : MR. KISHOR PHADKE DEPARTMENT BY : MR. D. S. KOTHARI DATE OF HEARING : 07-01-2015 DATE OF PRONOUNCEMENT : 30-01-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AG AINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, PUNE DA TED 31.10.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 06.02.2013 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2010-11. 2. IN THIS APPEAL, ASSESSEE HAS RAISED THE FOLLOWIN G GROUNDS OF APPEAL :- 1 THE LEARNED CIT(A)-I, PUNE ERRED IN LAW AND ON F ACTS IN CONFIRMING ACIT- CIRCLE 1(1) DECISION OF DISALLOWIN G CLAIM OF DEDUCTION U/S 10- B OF THE ITA, 1961, AMOUNTING TO RS.35,90,293/-; ON THE ANALOGY THAT STP UNDERTAKING OF THE APPELLANT IS NOT AN ELIGIBLE UND ERTAKING AS PER EXPLANATION- 2(IV) OF SECTION 10B OF THE ITA, 1961. 2. ALTERNATIVELY AND WITHOUT PREJUDICE TO GROUND NO .1; THE LEARNED CIT(A)-I, PUNE ERRED IN LAW AND ON FACTS IN NOT APP RECIATING THAT THE APPELLANTS STP UNDERTAKING IS ELIGIBLE FOR DEDUCTI ON U/S 10A OF THE ITA, 1961. ITA NO.204/PN/2014 3. THE APPELLANT BEFORE US IS A COMPANY INCORPORATE D UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS, INTER-ALIA, ENGA GED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND TRAINING. IN ITS RETURN O F INCOME FILED FOR ASSESSMENT YEAR 2010-11, IT CLAIMED DEDUCTION OF RS .35,90,293/- IN TERMS OF SECTION 10B OF THE ACT. THE SAID CLAIM OF THE ASSE SSEE WAS REJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT THE UNIT OF TH E ASSESSEE WAS REGISTERED WITH THE DIRECTORATE OF SOFTWARE TECHNOLOGY PARK OF INDIA (STPI) WHEREAS IN TERMS OF EXPLANATION 2(IV) TO SECTION 10B OF THE AC T, ASSESSEES 100% EXPORT ORIENTED UNIT (EOU) WAS TO BE APPROVED BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT U/S 14 OF THE INDUSTRIAL DEVELOPMENT AND REGULATION ACT, 1951. 4. THE AFORESAID ASPECT OF THE MATTER IS AGITATED B Y THE ASSESSEE BEFORE US BY WAY OF GROUND OF APPEAL NO.1. HOWEVER, THE L D. REPRESENTATIVE FOR THE ASSESSEE WAS QUITE FAIR IN POINTING OUT THAT THE AF ORESAID STAND OF THE REVENUE IS IN CONFORMITY WITH THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. REGENCY CREATIONS LTD., 353 ITR 326 (DEL HI). THE PUNE BENCH OF THE TRIBUNAL HAS ALSO CONSIDERED A SIMILAR SITUATIO N IN THE CASE OF CLARION TECHNOLOGIES PVT. LTD. VS. DCIT VIDE ITA NO.2554/PN /2012 & OTHERS DATED 30.10.2014 AND BY FOLLOWING THE JUDGEMENT OF THE HO NBLE DELHI HIGH COURT IN THE CASE OF REGENCY CREATIONS LTD. (SUPRA), THE ACT ION OF THE INCOME-TAX AUTHORITIES IN DENYING THE CLAIM FOR DEDUCTION U/S 10B OF THE ACT HAS BEEN AFFIRMED. AS A CONSEQUENCE, ON THIS ASPECT OF THE CONTROVERSY ASSESSEE FAILS AND ACCORDINGLY GROUND OF APPEAL NO.1 IS DISMISSED. 5. THE SECOND GROUND OF APPEAL RAISED BY THE ASSESS EE IS PUTTING-FORTH AN ALTERNATE CLAIM FOR DEDUCTION U/A 10A OF THE ACT . ITA NO.204/PN/2014 6. ONCE THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10B OF THE ACT WAS REJECTED BY THE ASSESSING OFFICER, IN APPELLATE PRO CEEDINGS BEFORE THE CIT(A) ASSESSEE RAISED AN ALTERNATE PLEA THAT IT BE ALLOWE D DEDUCTION U/S 10A OF THE ACT IN PLACE OF SECTION 10B OF THE ACT AS ASSESSEE S UNIT IS APPROVED BY THE DIRECTOR, STPI. THE CIT(A) HAS NOT ENTERTAINED THE ALTERNATE CLAIM OF THE ASSESSEE PRIMARILY ON THE GROUND THAT THE CLAIM FOR DEDUCTION U/S 10A OF THE ACT WAS NOT MADE IN THE RETURN OF INCOME. AGAINST SUCH A DECISION OF THE CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT THE ALTERNATE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 1 0A OF THE ACT HAS BEEN UNJUSTLY DENIED BY THE CIT(A). THE LD. REPRESENTAT IVE POINTED OUT THAT ASSESSEE FULFILLS ALL THE CONDITIONS LAID DOWN IN S ECTION 10A OF THE ACT AND THEREFORE SUCH A CLAIM OUGHT TO HAVE BEEN CONSIDERE D BY THE CIT(A) ON ITS MERITS. IT WAS ALSO POINTED OUT THAT WHEN ASSESSEE RAISED AN ALTERNATE CLAIM FOR DEDUCTION U/S 10A OF THE ACT BEFORE THE CIT(A), ASSESSEE FURNISHED AUDIT REPORT PRESCRIBED IN FORM NO.56F OF THE ACT IN ORDE R TO CLAIM THE DEDUCTION. THE LD. REPRESENTATIVE POINTED OUT THAT ASSESSEE CO ULD HAVE RAISED THE ALTERNATE CLAIM ONLY AFTER IT BECAME CLEAR AFTER PA SSING OF THE ASSESSMENT ORDER THAT THE CLAIM OF DEDUCTION U/S 10B OF THE AC T MADE IN THE RETURN OF INCOME STOOD REJECTED. 8. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE HAS POINTED OUT THAT IT IS NOT A CASE WHERE THE DEDUCTION U/S 1 0A OF THE ACT WAS CLAIMED IN THE RETURN OF INCOME BUT THE AUDIT REPORT IN FORM N O.56F WAS NOT ENCLOSED WITH THE RETURN OF INCOME AND THEREFORE IT HAS BEEN RIGHTLY NOT ENTERTAINED BY THE CIT(A). ITA NO.204/PN/2014 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN OUR CONSIDERED OPINION, THE APPROACH OF THE LOWER AUTHORITIES IN D EALING WITH ASSESSEES ALTERNATE CLAIM FOR DEDUCTION U/S 10A OF THE ACT IS NOT JUSTIFIED. QUITE CLEARLY, WHEN ASSESSEE FILED ITS RETURN OF INCOME, IT CLAIME D DEDUCTION US 10B OF THE ACT. ONCE IN THE ASSESSMENT ORDER, SUCH A CLAIM WA S DENIED, THE ONLY OCCASION FOR THE ASSESSEE TO PUT-FORTH AN ALTERNATE CLAIM U/S 10A OF THE ACT WAS BEFORE THE CIT(A). THE CIT(A) HAS OBSERVED THA T THE CLAIM NOT HAVING BEEN MADE IN THE RETURN OF INCOME COULD NOT BE ENTE RTAINED AT A LATER STAGE. THE AFORESAID APPROACH OF THE CIT(A), IN OUR VIEW, IS NOT JUSTIFIED HAVING REGARD TO THE PECULIAR FACTS AND CIRCUMSTANCES OF T HE PRESENT CASE. IN ITS APPEAL BEFORE THE CIT(A), ASSESSEE STAKED THE CLAIM FOR DEDUCTION U/S 10A OF THE ACT ALONG WITH THE FILING OF THE PRESCRIBED AUD IT REPORT IN FORM NO.56F. UNDER IDENTICAL CIRCUMSTANCES, THE HONBLE DELHI HI GH COURT IN THE CASE OF CIT VS. VALIANT COMMUNICATION LTD. IN ITA NOS.440 441 /2012 DATED 04.01.2013 CONSIDERED ASSESSEES ALTERNATE CLAIM FOR DEDUCTION U/S 10A OF THE ACT AND DIRECTED THE INCOME-TAX AUTHORITIES TO EXAMINE THE SAME. IN THE CASE OF CLARION TECHNOLOGIES PVT. LTD. (SUPRA), A SIMILAR S ITUATION HAS BEEN DEALT WITH BY THE TRIBUNAL AND THE FOLLOWING DISCUSSION IS REL EVANT :- 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. IN THE PRESENT CASE, IN THE PAST YEARS ASSESSEE HAS BEEN A LLOWED THE CLAIM OF DEDUCTION U/S 10B OF THE ACT. IN THE RETURN OF INC OME FILED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2010-11 ALSO ASSESSEE CLAIMED DEDUCTION U/S 10B OF THE ACT IN RELATION TO THE PROFITS DERIVED F ROM ITS STPI UNIT. THIS CLAIM OF DEDUCTION CAME TO BE DENIED ON THE GROUND THAT THE APPROVAL FROM DIRECTOR, STPI WAS INSUFFICIENT AND THAT THE ASSESSEE WAS REQ UIRED TO TAKE APPROVAL FROM THE BOARD APPOINTED FOR THIS PURPOSE BY THE CE NTRAL GOVERNMENT, FOLLOWING THE JUDGEMENT OF THE HONBLE DELHI HIGH C OURT IN THE CASE OF REGENCY CREATIONS LTD. (SUPRA). IN THE AFORESAID S ITUATION, AT THE TIME OF FILING OF RETURN OF INCOME FOR THE INSTANT ASSESSMENT YEAR , ASSESSEE COULD NOT HAVE ENVISAGED THE DENIAL OF ITS CLAIM OF DEDUCTION U/S 10B OF THE ACT, WHICH WAS BEING ALLOWED IN THE PAST. THE AFORESAID CIRCUMSTAN CE CLEARLY ESTABLISHES THE BONAFIDES OF THE REASONS PREVAILING WITH THE ASSESS EE FOR NOT HAVING MADE A CLAIM FOR DEDUCTION U/S 10A OF THE ACT IN THE RETUR N OF INCOME. HAVING REGARD TO THE PECULIAR FACTS AND CIRCUMSTANCES OF THE INST ANT CASE, IN OUR VIEW, THE STAND OF THE REVENUE THAT ASSESSEE CANNOT BE ALLOWE D THE BENEFITS OF SECTION 10A OF THE ACT MERELY BECAUSE THE PRESCRIBED AUDIT REPORT IN FORM NO.56F WAS NOT FILED IN THE RETURN OF INCOME, IS QUITE ERR ONEOUS. PERTINENTLY, AFTER DENIAL OF DEDUCTION U/S 10B OF THE ACT IN THE ASSES SMENT ORDER, THE EARLIEST ITA NO.204/PN/2014 OPPORTUNITY FOR THE ASSESSEE TO STAKE CLAIM FOR DED UCTION U/S 10A OF THE ACT WAS BEFORE THE CIT(A); AND, THE ASSESSEE MADE THE C LAIM BEFORE THE CIT(A) ALONG WITH THE PRESCRIBED AUDIT REPORT IN FORM NO.5 6F. THE HONBLE DELHI HIGH COURT IN THE CASE OF VALIANT COMMUNICATIONS (S UPRA) IN SIMILAR CIRCUMSTANCES HELD THAT THE CLAIM OF THE ASSESSEE F OR DEDUCTION U/S 10A OF THE ACT IS REQUIRED TO BE EXAMINED IN ACCORDANCE WITH L AW. PERTINENTLY, EVEN IN THAT CASE ASSESSEE HAD CLAIMED DEDUCTION U/S 10B OF THE ACT IN THE RETURN OF INCOME, WHICH WAS NOT ALLOWED ULTIMATELY IN THE ABS ENCE OF THE UNIT BEING APPROVED BY THE BOARD APPOINTED BY THE CENTRAL GOVE RNMENT, WHEREAS THE UNIT WAS ONLY REGISTERED WITH THE STPI. THE HONBL E DELHI HIGH COURT DIRECTED THE LOWER AUTHORITIES TO CONSIDER THE CLAIM OF DEDU CTION U/S 10A OF THE ACT IN ACCORDANCE WITH LAW. IN THE PRESENT CASE ALSO, WE FIND NO REASON TO DENY THE ASSESSEE AN OPPORTUNITY TO PUT-FORTH ITS CLAIM FOR DEDUCTION U/S 10A OF THE ACT WITH REGARD THE PROFITS OF ITS STPI UNIT, SUBJECT O F-COURSE TO THE FULFILLMENT OF THE PRESCRIBED CONDITIONS. 17. SECTION 10A OF THE ACT PROVIDES A DEDUCTION OF SUCH PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM EXPORT OF ARTI CLES OR THINGS OR COMPUTER SOFTWARE MANUFACTURED OR PRODUCED BY IT. THE ASSES SEE CLAIMED THAT IT HAS UNDERTAKEN EXPORT OF COMPUTER SOFTWARE MANUFACTURED BY IT AND ITS UNIT IS REGISTERED WITH DIRECTOR, STPI. THE APPROVAL GRANT ED BY DIRECTOR, STPI HAS BEEN HELD TO BE A SUFFICIENT COMPLIANCE WITH REQUIR EMENTS OF SECTION 10A(2)(I)(B) OF THE ACT EVEN AS PER THE CBDT VIDE I NSTRUCTION NO.1 OF 2006 DATED 31.03.2006. THEREFORE, PRIMA-FACIE THE 100% EOU OF THE ASSESSEE, BEING REGISTERED WITH STPI, IS ELIGIBLE TO STAKE CL AIM FOR DEDUCTION U/S 10A OF THE ACT, PROVIDED THE OTHER CONDITIONS LAID DOWN IN SECTION 10A OF THE ACT ARE SATISFIED. THEREFORE, IN CONFORMITY WITH THE JUDGE MENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF VALIANT COMMUNICATIONS (S UPRA), WE DEEM IT FIT AND PROPER TO REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U /S 10A OF THE ACT AS PER LAW. THE ASSESSING OFFICER SHALL CONSIDER THE FORM NO.56 F FURNISHED BY THE ASSESSEE BEFORE THE CIT(A) AND SUCH OTHER MATERIAL AND SUBMISSIONS THAT THE ASSESSEE MAY PUT-FORTH IN ORDER TO JUSTIFY ITS CLAI M OF DEDUCTION U/S 10A OF THE ACT. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL ALLOW A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE A DJUDICATING ON THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10A OF THE ACT IN AC CORDANCE WITH LAW. THUS, ON THE ALTERNATE PLEA ASSESSEE SUCCEEDS. 10. FOLLOWING THE AFORESAID PRECEDENT, IN THE PRESE NT CASE ALSO WE FIND NO JUSTIFICATION FOR THE CIT(A) TO HAVE DENIED THE ASS ESSEE TO PUT-FORTH HIS CLAIM FOR DEDUCTION U/S 10A OF THE ACT WITH REGARD TO THE PROFITS OF STPI UNIT SUBJECT OF-COURSE TO THE FULFILLMENT OF THE PRESCRIBED COND ITIONS. THEREFORE, IN CONFORMITY WITH THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF VALIANT COMMUNICATION LTD. (SUPRA), WE DEEM IT FIT AND PROPER TO REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FO R VERIFYING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10A OF THE ACT AS PER LA W. THE ASSESSING OFFICER SHALL CONSIDER THE AUDIT REPORT IN FORM NO.56F FURN ISHED BY THE ASSESSEE ITA NO.204/PN/2014 BEFORE THE CIT(A) AND SUCH OTHER MATERIAL AND SUBMI SSIONS WHICH THE ASSESSEE MAY PUT-FORTH IN ORDER TO JUSTIFY ITS CLAI M FOR DEDUCTION U/S 10A OF THE ACT. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD AND ONLY THER EAFTER HE SHALL PASS AN ORDER AFRESH ON THIS ASPECT AS PER LAW. THUS, ON T HIS ASPECT ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON 30 TH JANUARY, 2015. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 30 TH JANUARY, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, PUNE; 4) THE CIT-I, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE