DCIT, New Delhi V. M/s. Infogain India Pvt. Ltd., New Delhi

ITA 2339/DEL/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69577 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 08-10-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 17-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: SALIL KAPOOR VIKAS J AIN
• Section: 10B

Judgement Text

ITA NO. 2339/DEL/2010 ASSTT.YEAR: 2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `C NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.2339/DEL/2010 ASSESSMENT YEAR : 2005-06 DY.COMMISSIONER OF INCOME TAX, VS M/S INFOGAI N INDIA PVT. LTD., CIRCLE 11(1), 125, JANGPURA EXTENSION, NEW DELHI. NEW DELHI-110014 (PAN: AAACI8748Q) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SATPAL SINGH, SR. DR RESPONDENT BY : S/SHRI SALIL KAPOOR, VIKAS J AIN O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX(A)-VIII, NEW DELHI DATED 12.03.2010 IN APPEAL NO. 181/09-10 FOR AY 2005-06. 2. GROUNDS NO. 1 & 4 OF THE REVENUE ARE GENERAL IN NATURE WHICH NEED NO ADJUDICATION. REMAINING GROUNDS READ AS UNDER:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADD ITION ON ACCOUNT OF DEDUCTION U/S 10B AMOUNTING TO RS.5,88,28,278/-. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O N ACCOUNT OF ITA NO. 2339/DEL/2010 ASSTT.YEAR: 2005-06 2 TDS OF RS.57,594/-. GROUND NO.2 3. APROPOS GROUND NO.2, LD. DR SUBMITTED THAT THE A SSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY WAS INCORPORATED FROM 14.5.1991 AND CLAIMING DEDUCTION U/S 80HHE AND 10B OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) AND IN VIEW OF SUB-SECTION (5) OF SE CTION 80HHE OF THE ACT, NO DEDUCTION UNDER ANY OTHER PROVISIONS OF THE ACT CAN BE ALLOWED ONCE DEDUCTION IS CLAIMED U/S 80HHE OF THE ACT. THE DR FURTHER CONTENDED THAT THE ASSESSEE HAD COMMENCED BUSINESS FROM AY 1992-93 AND HENCE THERE WAS NO REASON FOR CLAIM OF DEDUCTION U/S 10B OF THE ACT FOR THE YEAR UNDER CONSIDERATION I.E. 2005-06 BECAUSE THE PERIOD OF 10 YEARS WAS OVER BY AY 2001-02. THE DR ALSO CONTENDED THAT THE ASSESSEE C LAIMED DEDUCTION U/S 10B OF THE ACT BEING A 100% EOU COMPUTER SOFTWARE C OMPANY IN STP TO THE EXTENT OF RS.5,88,28,278 BUT IT WAS ALSO OBSERV ED THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80HHE OF THE ACT IN EARLIER Y EARS. THE DR POINTED OUT THAT THE ASSESSEE HAD NO COGENT REASON TO SWITC H OVER TO DEDUCTION FROM SECTION 80HHE OF THE ACT TO SECTION 10B OF THE ACT. THE DR VEHEMENTLY CONTENDED THAT THE ACT OF SWITCH OVER OF THE ASSESS EE FROM DEDUCTION U/S 80HHE OF THE ACT TO SECTION 10B OF THE ACT WAS NOT AN INCIDENTAL OR NORMAL ACT BUT THE SAME HAS BEEN DONE WITH A SPECIFIC MOTI VE TO CLAIM EXCESS ITA NO. 2339/DEL/2010 ASSTT.YEAR: 2005-06 3 DEDUCTION TO AVOID PAYMENT OF TAX. PLACING RELIANC E ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MCDOWELL & CO. LTD. VS COMMERCIAL TAX OFFICER, 154 ITR 148(SC) , THE DR SUBMITTED THAT COLORABLE DEVICES CANNOT BE A PART OF TAX PLANNING AND IT IS WRONG TO ENCOURAGE OR ENTERTAIN THE BELIEF THAT IT IS HONORA BLE TO AVOID THE PAYMENT OF TAX BY RESORTING TO DUBIOUS METHODS. 4. ON ABOVE CONTENTION OF THE REVENUE, LD. COUNSEL OF THE ASSESSEE HAS DRAWN OUR ATTENTION TOWARDS PAGE NO.11, 12, 13 & 17 OF THE IMPUGNED ORDER AND SUBMITTED THAT ADMITTEDLY THE COMPANY WAS INCOR PORATED IN THE YEAR 1991 AND THE FIRST ASSESSMENT YEAR WAS 1992-93 BUT THIS FACT IS NOT RELEVANT FOR DETERMINATION OF CLAIM OF THE ASSESSEE U/S 10B OF THE ACT. THE COUNSEL POINTED OUT THAT AS PER DECISION OF JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF COMMISSIONER OF INCOME TAX VS LEGATO SY STEMS INDIA PVT. LTD. 203 CTR 101 , THE QUESTION OF PREREQUISITE STIPULATED FOR THE P URPOSE OF GETTING BENEFIT U/S 10A OF THE ACT IS A MATTER TO B E DETERMINED BY THE ASSESSING OFFICER AND ALSO THE ENTITLEMENT OF THE A SSESSEE TO SEEK DEDUCTION U/S 80HHE HAVING BEEN LEFT TO BE DETERMINED BY THE ASSESSING OFFICER SUBJECT TO THE ASSESSEES SATISFYING THE PREREQUISI TE STIPULATED FOR THE GRANT OF SUCH BENEFIT UNDER THE SAID PROVISION. IN THIS CAS E, THE HONBLE HIGH COURT HAS HELD THAT A NEW UNIT IS ENTITLED FOR EXEMPTION U/S 10A OF THE ACT IF ITA NO. 2339/DEL/2010 ASSTT.YEAR: 2005-06 4 NECESSARY PRECONDITIONS MENTIONED IN SECTION 10A OF THE ACT WERE SATISFIED. THEIR LORDSHIPS ALSO HELD THAT ALTERNATIVELY THE AS SESSEE COULD ALSO CLAIM DEDUCTION U/S 80HHE OF THE ACT IF AN OPPORTUNITY WA S PROVIDED TO MEET THE CONDITIONS. 5. THE COUNSEL OF THE ASSESSEE ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF C.I.T. VS EXCEL SOFTEC LIMITED 219 CTR 405 (P&H) WHEREIN THEIR LORDSHIPS HAVE HELD AS UNDER:- THE INITIAL YEAR IS THE YEAR IN WHICH THE ELIGIBLE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMPUTER SOFTWARE. IT IS NOT DISPUTED THAT THE ASSESSEE UNIT FULFILLS ALL TH E CONDITIONS, AS MENTIONED IN SUB SECTION (2). IN THE PRESENT CASE, THE ASSESSEE HAD STARTED THE DEVELOPMENT OF COMPUTER SOFTWARE IN THE ASSESSMENT YEAR 1998-99 AND WAS REGISTERED WITH THE SOFTWARE TECHNOLOGY PARK WITH EFFECT FROM 24.3.2000, THEREFORE, THE 10 YEARS PERIOD HAS TO BE RECKONED F ROM THE ASSESSMENT YEAR 1998-99. THE ASSESSEE HAS CLAIMED EXEMPTION FOR THE FIRST TIME IN THE ASSESSM ENT YEAR 2001-02, WHICH IS WELL WITHIN 10 YEARS. THEREFORE, THE UNIT OF THE ASSESSEE CANNOT BE DENIE D THE SAID EXEMPTION ON THE GROUND THAT IT IS NOT THE NEWLY ESTABLISHED UNDERTAKING IN THE ASSESSMENT YEA R IN QUESTION. IN OUR VIEW, THE WORDS 'NEWLY ESTABLIS HED UNDERTAKING' ARE ONLY TO IDENTIFY THE INITIAL YEAR OF THE PERIOD OF 10 YEARS FOR WHICH THE ASSESSEE IS ELIGIB LE FOR CLAIM OF EXEMPTION UNDER SECTION 10B OF THE ACT . SECTION 10B (1) OF THE ACT DOES NOT USE THE WORDS 'NEWLY ESTABLISHED UNDERTAKING'. ONLY IN THE HEADIN G, THE WORDS 'NEWLY ESTABLISHED HUNDRED PER CENT EXPORT-ORIENTED UNDERTAKINGS' HAVE BEEN MENTIONED. ITA NO. 2339/DEL/2010 ASSTT.YEAR: 2005-06 5 IT IS WELL SETTLED LAW THAT HEADINGS OR TITLES PREF IXED TO SECTIONS OR GROUP OF SECTIONS CAN BE REFERRED TO IN CONSTRUING AN ACT OF THE LEGISLATION, ONLY WHEN THE ENACTING WORDS ARE AMBIGUOUS, BUT WHEN THE LANGUAGE OF THE SECTION IS CLEAR, THEN THE HEADING CANNOT BE USED TO GIVE A DIFFERENT EFFECT TO CLEAR WORDS IN THE SECTION. IN OUR VIEW, THERE IS NO AMBIGUITY IN SECTION 10B OF THE ACT, WHICH PROVIDES EXEMPTION TO CERTAIN NEWLY ESTABLISHED HUNDRED PER CENT EXPORT- ORIENTED UNDERTAKINGS, ON FULFILLING CERTAIN CONDIT IONS, FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS. T HE INITIAL YEAR IS THE YEAR IN WHICH THE ELIGIBLE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMPUTER SOFTWARE. SECTION 10 B OF THE ACT DOES NOT PROVIDE ANY RESTRICTION THAT IN EACH OF THE YEAR OF CLAIM, THE EXPORT-ORIENTED UNDERTAKI NG SHOULD BE NEWLY ESTABLISHED. INDEED, RELEVANCE OF 'NEWLY ESTABLISHED UNDERTAKING' IS ONLY TO IDENTIFY THE INITIAL YEAR OF THE PERIOD OF TEN YEARS FOR WHICH T HE ASSESSEE IS ELIGIBLE FOR CLAIM OF EXEMPTION UNDER SECTION 10B OF THE ACT. SINCE IN THE PRESENT CASE, UNDISPUTEDLY, THE INITIAL YEAR IS THE ASSESSMENT YE AR 1998-99, THEREFORE, THE ASSESSEE WAS RIGHTLY HELD T O BE FULLY ELIGIBLE FOR EXEMPTION UNDER SECTION 10B OF T HE ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E . 2001-02, AS IT WAS THE FOURTH YEAR, OUT OF TEN YEAR S BEGINNING WITH THE INITIAL ASSESSMENT YEAR, IN WHIC H IT BEGAN TO DEVELOP AND EXPORT THE COMPUTER SOFTWARE. 6. THE LD. COUNSEL SUPPORTED THE IMPUGNED ORDER AND SUBMITTED THAT THE COMMISSIONER OF INCOME TAX(A) RIGHTLY ALLOWED AND D IRECTED THE ASSESSING OFFICER THAT THE ASSESSEE SHALL BE ENTITLED FOR EXE MPTION U/S 10A OF THE ACT FOR THE YEAR UNDER CONSIDERATION BECAUSE THE ASSESS EE WAS ENTITLED TO EXEMPTION IN THE YEAR IN WHICH AMENDMENT INTRODUCED BY INCOME TAX (2 ND ITA NO. 2339/DEL/2010 ASSTT.YEAR: 2005-06 6 AMENDMENT) ACT, 1998 W.E.F. 1.4.1999 BECAME EFFECTI VE OPERATIVE AND THE ASSESSEE WILL BE ENTITLED FOR EXEMPTION FOR THE EXT ENDED PERIOD BECAUSE THE PERIOD OF FIVE YEARS HAD NOT EXHAUSTED UPTO AY 1999 -2000. ON CAREFUL CONSIDERATION OF ABOVE RIVAL CONTENTIONS OF BOTH TH E PARTIES, FOR THE SAKE OF CLARITY IN OUR FINDINGS, WE FIND IT APPROPRIATE TO REPRODUCED THE RELEVANT OBSERVATIONS AND FINDINGS OF THE COMMISSIONER OF IN COME TAX(A) IN THE IMPUGNED ORDER WHICH READ AS UNDER:- 3.1 BEFORE COMING TO THE GROUNDS OF APPEAL, IT WOULD BE APPROPRIATE TO DECIDE THE ISSUE OF ADDITIO NAL EVIDENCE SOUGHT TO BE FILED BY THE APPELLANT COMPAN Y IN THE COURSE OF APPELLATE PROCEEDINGS. ACCORDING TO THE APPELLANT COMPANY, THE CONTENTION OF THE ID. ASSESS ING OFFICER THAT THE UNDERTAKING OF THE APPELLANT WAS N OT REGISTERED WITH THE BOARD SPECIFIED IN SECTION 10B OF THE ACT IS NOT CORRECT IN AS MUCH AS THE UNDERTAKING WA S DULY APPROVED BY THE SECRETARIAT FOR INDUSTRIAL APPROVAL S(EOU SECTION), DEPARTMENT OF INDUSTRIAL POLICY PROMOTION , MINISTRY OF INDUSTRY. IN SUPPORT OF THIS CLAIM, THE APPELLANT HAS FILED THE COPY OF THE APPROVAL GRANTED BY THE SECRETARIAT FOR INDUSTRIAL APPROVALS (EOU SECTION) ALONG WITH OTHER CONNECTED CORRESPONDENCE AND PRESS NOTES ETC. IT WAS SUBMITTED BY THE APPELLANT THAT IN ALL THE E ARLIER ASSTT. YEARS THE CLAIM OF THE APPELLANT WAS ACCEPTE D BY THE ASSESSING OFFICER AFTER PROPER VERIFICATION OF ALL THE NECESSARY DOCUMENTS AND THEREFORE, IT WAS UNDER BON A FIDE BELIEF THAT SINCE THE NECESSARY CERTIFICATES ETC. H AVE ALREADY BEEN EXAMINED BY THE AO IN THE INITIAL YEAR S OF CLAIM, THERE WAS NO NECESSITY TO FILE THE SAME AGAI N. HOWEVER, THE AUDITORS' CERTIFICATE IN FORM 560 WAS DULY FILED. IT IS, THEREFORE, ARGUED THAT IF THE ASSESSI NG OFFICER HAD ANY DOUBTS ABOUT THE APPROVALS ETC., HE COULD H AVE ASKED THE APPELLANT TO FILE THE SAME. HOWEVER, ACCO RDING TO THE APPELLANT, THE ASSESSING OFFICER WAS NOT JUS TIFIED TO ITA NO. 2339/DEL/2010 ASSTT.YEAR: 2005-06 7 DENY ITS LEGITIMATE CLAIM IN SUCH ARBITRARY MANNER. IT IS, THEREFORE, ARGUED THAT THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE COPY OF APPROVA LS ETC. GRANTED BY THE SECRETARIAT FOR INDUSTRIAL APPROVALS (EOU SECTION) IN AS MUCH AS THE ASSESSING OFFICER DID NO T GIVE ANY OPPORTUNITY TO IT TO FILE SUCH DOCUMENTS BEFORE HIM. 3.2 I HAVE GIVEN A CAREFUL THOUGHT TO THE SUBMI SSIONS MADE ON BEHALF OF THE APPELLANT AND HAVE GONE THROU GH THE REPORT OF THE ASSESSING OFFICER SUBMITTED VIDE HER LETTER DATED 22.02.2010. ON CONSIDERATION, I FIND THAT THE RE IS NO EVIDENCE TO SUGGEST THAT THE ASSESSING OFFICER AT A NY TIME DURING THE ENTIRE ASSESSMENT PROCEEDINGS, EVEN REMO TELY, EXPRESSED HIS INTENTION THAT HE WANTED TO TAKE A DI FFERENT VIEW FROM THE EARLIER YEARS W.R.T. THE ASSESSEE'S E LIGIBILITY FOR THE PURPOSES OF DEDUCTION U/S 10B OF THE ACT ON THE GROUND THAT IT WAS NOT REGISTERED WITH THE CONCERNE D AUTHORITY, WHICH IS THE SECRETARIAT FOR INDUSTRIAL APPROVALS (EOU SECTION) IN THE PRESENT CASE. THEREFORE, I DO NOT FIND ANY MERIT IN THE ASSESSING OFFICER'S CLAIM THAT DUE OPPORTUNITY WAS GRANTED TO THE APPELLANT FOR FILING THE DOCUMENTS IN QUESTION AT THE TIME OF ASSESSMENT AND ACCORDINGLY, THE REQUEST OF APPELLANT IS BEING ACCE PTED. 3.3 HAVING DECIDED THE ISSUE OF ADDITIONAL EVIDE NCE, NOW I PROCEED TO TAKE UP THE ISSUE OF ELIGIBILITY OF AP PELLANT FOR DEDUCTION U/S 10B OF THE ACT. AS STATED EARLIER, TH E LD. ASSESSING OFFICER HAS REJECTED THE CLAIM OF THE APP ELLANT ON THE GROUNDS THAT- A. THE APPELLANT COMPANY COMMENCED ITS BUSINESS DURING THE PREVIOUS YEAR RELEVANT TO A. Y. 1992-93 AND THEREFORE, THE PERIOD OF 10 YEARS PRESCRIBED U/S 10 B OF THE ACT WAS OVER BY AY 2001-02. HENCE, THE APPELLANT WA S NOT ENTITLED FOR THE DEDUCTION IN THE YEAR UNDER CONSID ERATION, AS THE SAME FELL BEYOND THE PRESCRIBED PERIOD OF 10 YEARS. B. THE APPELLANT IS NOT A NEWLY ESTABLISHED UNDERTAKING AND THEREFORE, WAS NOT ELIGIBLE FOR DED UCTION U/S 10B OF THE ACT. ITA NO. 2339/DEL/2010 ASSTT.YEAR: 2005-06 8 C. THE PROVISIONS OF SECTION 80 HHE(5) OF THE ACT PRECLUDE THE ASSESSEE FROM CLAIMING DEDUCTION IN RE SPECT OF PROFITS FROM EXPORTS OF COMPUTER SOFTWARE UNDER ANY OTHER SECTION FOR ANY OTHER ASSESSMENT YEAR. D. THE APPELLANT CO. IS NOT REGISTERED WITH THE BO ARD APPOINTED BY CENTRAL GOVT. IN EXERCISE OF POWERS CONFERRED U/S 14 OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT,1951. 3.3.1 HOWEVER, AS DISCUSSED EARLIER, THE LD. COUNSE L APPEARING ON BEHALF OF THE APPELLANT CO. HAS ONE BY ONE REBUTTED ALL THE GROUNDS TAKEN BY THE LD. ASSESSING OFFICER FOR REJECTING ASSESSEE'S CLAIM WITH NECESSARY SUPPO RTING DOCUMENTS. ON A CAREFUL CONSIDERATION OF THE ARGUMENTS OF THE LD. COUNSEL AND ON A PERUSAL OF THE DOCUMENTS PLACE D BEFORE ME, I FIND THAT THE ASSESSING OFFICER WAS NO T JUSTIFIED IN REJECTING THE ASSESSEE'S CLAIM U/S 10B OF THE AC T. ON A CLOSE READING OF THE ASSESSMENT ORDER, I FIND THAT THE ASSESSING OFFICER HAS NOT ASSIGNED ANY REASONS FOR TAKING A VIEW WHICH WAS APPOSED TO THE VIEW TAKEN BY HIS PREDECESSORS IN EARLIER YEARS IN IDENTICAL FACT SIT UATIONS. I AM FULLY AWARE OF THE FACT THAT STRICTLY SPEAKING, RULE OF RES JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS A ND EVERY ASSESSMENT YEAR IS A SEPARATE UNIT AND WHAT I S DECIDED IN ONE YEAR MAY NOT BE NECESSARILY FOLLOWED IN THE FOLLOWING YEARS. HOWEVER, WHEN THE ASSESSING OFFICE R HIMSELF HAS TAKEN A VIEW AFTER EXAMINATION OF RELEV ANT FACTS IN A PARTICULAR YEAR AND THAT DECISION OF THE AO HAS NOT BEEN BROUGHT INTO QUESTION BY ANY OF HIS SUPERVISORY/REVIEWING AUTHORITY, IT IS EXPECTED THA T IN NORMAL COURSE THAT DECISION OF THE PREDECESSOR MUST BE RESPECTED AND FOLLOWED OTHERWISE WE WILL BE CREATIN G A CHAOTIC SITUATION WHICH MAY SHAKEN THE TAXPAYERS' F AITH IN THE SYSTEM. WHILE WRITING THIS, I AM GUIDED AND SUP PORTED , APART FROM OTHERS, BY THE LAND MARK JUDGMENT OF THE APEX COURT THE CASE OF RADHASOAMI SATSANG VS CIT 193ITR3 21. ITA NO. 2339/DEL/2010 ASSTT.YEAR: 2005-06 9 3.3.2 ON MERITS ALSO, I DO NOT FIND ANY JUSTIFICATI ON ON THE PART OF THE AO IN HOLDING THAT THE APPELLANT CO. WAS NOT ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT BECAU SE IT HAD COMMENCED ITS BUSINESS DURING THE PREVIOUS YEAR REL EVANT TO THE AY 1992-93 AND PERIOD OF 10 YEARS WAS OVER B Y AY 2001-02. I THINK THAT THE AO HAS TOTALLY MISCONSTRU ED AND MISINTERPRETED THE PROVISIONS OF SECTION 10B OF THE ACT. THE CORRECT POSITION OF LAW HAS BEEN ELABORATELY EXPLAI NED BY THE CBDT IN ITS CIRCULAR NO. 1/2005 DATED 06.01.2005,ACCORDING TO WHICH, THE PERIOD OF 10 YEA RS HAD TO BE RECKONED FROM THE YEAR IN WHICH AN ASSESSEE G OT THE APPROVAL AS 100% EXPORT ORIENTED UNDERTAKING. AS P ER THE DOCUMENTS PLACED BEFORE ME THE APPELLANT CO. WA S REGISTERED WITH COMPETENT BOARD VIZ DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION, SECRETARIAT FOR IN DUSTRIAL APPROVA1S(EOU SECTION) VIDE LETTER NO.STP : PER:4(1997)/EOP/65/96 DATED 27.01.1997 AND THEREFOR E WAS ELIGIBLE FOR DEDUCTION U/S 10B FOR THE YEAR UND ER CONSIDERATION. ACCORDINGLY, I HOLD THAT THE AO WAS COMPLETELY IN ERROR IN HOLDING THAT SINCE THE ASSES SEE STARTED ITS BUSINESS IN FY 1991-92, THE PRESCRIBED PERIOD OF 10 YEARS FOR THE PURPOSES OF SECTION 10B HAD COME T O AN END BY ASSTT. YEAR 2001-02, AS THE YEAR OF COMMENCE MENT OF BUSINESS HAS NOTHING TO DO WITH THE ISSUE AT HAN D. 3.3.3 SIMILARLY, THERE IS NO JUSTIFICATION IN HOLDI NG THAT THE ASSESSEE COMPANY WAS ESTABLISHED ON 14.05. 1991 AND STARTED ITS COMMERCIAL ACTIVITIES FROM FY 1991- 92 AND THEREFORE, WAS NOT A NEWLY ESTABLISHED UNDERTAKING. HERE AGAIN, I FIND THE ASSESSING OFFICER HAS FAILED TO C ORRECTLY APPRECIATE THE REAL IMPORT OF 'NEWLY ESTABLISHED IN DUSTRIAL UNDERTAKING' W.R.T. THE PROVISIONS OF SECTION 10B O F THE ACT. THE SAID SECTION ENVISAGES SETTING UP OF EXPORT ORI ENTED UNDERTAKING WHICH IS ALTOGETHER DIFFERENT AND DISTI NCT FROM SETTING UP OF NORMAL COMMERCIAL ACTIVITIES. AS SUBM ITTED BY THE LD. COUNSEL FOR THE APPELLANT, 100% EXPORT ORIE NTED UNDERTAKING WAS ESTABLISHED BY THE ASSESSEE COMPANY IN FY 1997-98 FOR EXPORTING OF COMPUTER SOFTWARE, WHIC H HAS NOT BEEN CONTROVERTED BY THE AO. RATHER, THE AO HIM SELF ITA NO. 2339/DEL/2010 ASSTT.YEAR: 2005-06 10 HAS MENTIONED THIS FACT IN PARAS 4.1 AND 4.2 OF HIS ORDER. THEREFORE, ON THIS GROUND ALSO THE ACTION OF THE AO IS NOT SUSTAINABLE. 7. FURTHER, THE CIT(A) HAS CONCLUDED ITS FINDINGS A ND OBSERVATIONS BY DIRECTING THE ASSESSING OFFICER TO GRANT EXEMPTION U/S 10B OF THE ACT TO THE ASSESSEE WITH FOLLOWING OPERATIVE PARA OF THE IMPUG NED ORDER:- IN THE CASE OF THE ASSESSEE, NEITHER THE PERIOD OF FIVE YEARS NOR THE BLOCK PERIOD OF EIGHT YEARS EXPI RED WHEN THE AMENDMENT REPLACING THE WORD 'TEN' FOR 'FIVE' W AS INTRODUCED BY IT ( SECOND AMENDMENT) ACT, 1998 W.E .F. 1- 4-1999. SINCE THE ASSESSEE WAS ENTITLED TO EXEMPTIO N IN THE YEAR IN WHICH AMENDMENT BECAME EFFECTIVE & OPERATIV E, THE ASSESSEE WILL BE ENTITLED TO THE EXTENDED PERIO D OF EXEMPTION BECAUSE THE PERIOD OF FIVE YEARS HAD NOT EXHAUSTED UP TO ASSESSMENT YEAR 1999-2000. SINCE TH E RIGHT OF THE ASSESSEE WAS CONTINUING IN THE YEAR OF AMENDMENT AND WAS NOT LOST ON THE DATE WHEN THE AMENDMENT CAME INTO EXISTENCE, THE VIEW TAKEN BY TH E LD.CIT(A) CANNOT BE UPHELD. SO FAR AS THE OBJECTIONS OF THE LD.CIT(A) REGARDING CONDUCT OF THE ASSESSEE FIRM IN NOT CLAIMING THE EX EMPTION IN EARLIER YEAR IS CONCERNED, THE APPROACH OF THE LD.CIT(A) RAISING THIS OBJECTION, CANNOT BE LEGALLY JUSTIFIED BECAUSE IF THE ASSESSEE IS ENTITLED TO ANY BENEFIT UNDER ANY STATUTORY PROVISION THEN THE PAST CONDUCT CANNOT BE RELEVANT PARTICULARLY WHEN REFERENCE TO SUCH CONDUC T IS NOT MADE IN THE ACT. THE ELIGIBILITY OF THE ASSESSEE HA S TO BE SEEN IN THE YEAR IN WHICH THE CLAIM IS PREFERRED AN D IF IN EARLIER YEARS THE ASSESSEE WAIVED HIS RIGHT THEN HE CANNOT BE STOPPED IN CLAIMING THE BENEFIT IN THE SUBSEQUEN T YEARS. THE LD.CIT(A) HAS ALSO OBSERVED THAT THE ASSESSEE DID NOT FILE DECLARATION EXERCISING OPTION PRIOR TO THE DUE DATE FOR FILING OF RETURN BUT FILED IT ALONG WITH T HE RETURN ITA NO. 2339/DEL/2010 ASSTT.YEAR: 2005-06 11 AND, THEREFORE, THE ASSESSEE IS DISQUALIFIED FROM C LAIMING EXEMPTION ON THIS GROUND ALSO. WE DO NOT FIND ANY F ORCE IN SUCH OBJECTION BECAUSE THIS OBJECTION IS MERELY OF SUPER TECHNICAL NATURE. IN VIEW OF THE ABOVE, WE ARE LIAB LE TO CONCUR WITH THE FINDING OF LD.CIT(A) AND SET ASIDE THE SAME. CONSEQUENTLY, WE ALLOW THE GROUND OF APPEAL T AKEN BY THE ASSESSEE AND DIRECT THAT THE ASSESSEE SHALL BE ENTITLED TO CLAIM EXEMPTION U/S 10B IN THE ASSESSME NT YEAR UNDER CONSIDERATION. 8. ON CAREFUL CONSIDERATION OF RIVAL CONTENTIONS AN D CAREFUL PERUSAL OF RECORD AND CITATIONS SUBMITTED BEFORE US, WE OBSERV E THAT THE REVENUE HAS NOT DISPUTED THIS POINT THAT THE ASSESSEE GOT APPROVAL AS 100% EOU AS PER APPROVAL DATED 27.01.1997. WE FURTHER OBSERVE THAT IN THE IMPUGNED ORDER, THE COMMISSIONER OF INCOME TAX(A) HAS HELD THAT THE ASSESSING OFFICER WAS COMPLETELY IN ERROR IN HOLDING THAT SINCE THE ASSES SEE STARTED ITS BUSINESS IN AY 1992-93, THEN THE PRESCRIBED PERIOD OF 10 YEARS FOR THE PURPOSE OF EXEMPTION U/S 10B OF THE ACT HAD COME TO AN END BY AY 2001-02. WE ALSO OBSERVE THAT THE SAID SECTION 10B ENVISAGES SETTING UP OF EXPORT ORIENTED UNDERTAKING WHICH IS ALTOGETHER DIFFERENT AND DISTI NCT FROM SETTING UP OF A NORMAL COMMERCIAL ACTIVITY UNIT. THE ASSESSING OFF ICER HAS NOT CONTROVERTED THE FACT THAT THE ASSESSEE COMPANY EST ABLISHED 100% EOU IN FY 1997-98 FOR EXPORTING OF COMPUTER SOFTWARE AND T HIS FACT HAS FOUND PLACE IN THE ASSESSMENT ORDER PARA 4.1 AND 4.2. IN VIEW OF ABOVE AND IN THE LIGHT OF DECISIONS OF HONBLE HIGH COURT OF DELHI IN THE CAS E OF LEGATO SYSTEMS ITA NO. 2339/DEL/2010 ASSTT.YEAR: 2005-06 12 INDIA PVT. LTD. AND DECISIONS OF HONBLE PUNJAB & H ARYANA HIGH COURT IN THE CASE OF EXCEL SOFTECH LTD. (SUPRA), WE ARE OF T HE FIRM OPINION THAT THE COMMISSIONER OF INCOME TAX(A) RIGHTLY GRANTED RELIE F TO THE ASSESSEE BY DIRECTING THE ASSESSING OFFICER TO GRANT EXEMPTION U/S 10B OF THE ACT FOR THE ASSESSEE. WE ARE UNABLE TO FIND ANY PERVERSITY, AM BIGUITY, PERVERSITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE FINDINGS O F THE COMMISSIONER OF INCOME TAX(A). PER CONTRA, WE CLEARLY OBSERVE THAT THE ASSESSING OFFICER IGNORED THIS FACT THAT THE ASSESSEES 100% EOU WAS ESTABLISHED IN AY 1997- 98 RELATED TO AY 1998-99. THE ASSESSING OFFICER DE NIED EXEMPTION ON SURMISES AND CONJECTURES BY TAKING HYPER TECHNICAL APPROACH. SINCE THE ASSESSEE WAS ENTITLED TO EXEMPTION U/S 10B OF THE A CT, THEN THE PERIOD CANNOT BE SAID TO BE EXHAUSTED IN THE YEAR UNDER CO NSIDERATION, HENCE WE UPHOLD THE FINDINGS OF THE COMMISSIONER OF INCOME T AX(A) IN THE IMPUGNED ORDER. ACCORDINGLY, GROUND NO.2 OF THE REVENUE IS D ISMISSED. GROUND NO.3 9. APROPOS GROUND NO.3, LD. DR SUBMITTED THAT THE A SSESSING OFFICER RIGHTLY OBSERVED THAT THE PROFESSIONAL RECEIPTS AS PER TDS CERTIFICATES WERE TO THE EXTENT OF RS.8,59,730/- IN THE ACCOUNTS BUT IT HAS BEEN TAKEN AT RS.8,02,136. THEREFORE, IN THE ABSENCE OF ANY EVID ENCE TO SUBSTANTIATE THE CLAIM, THE SUM OF RS.57,594 WAS RIGHTLY ADDED TO TH E TOTAL INCOME AS ITA NO. 2339/DEL/2010 ASSTT.YEAR: 2005-06 13 SUPPRESSION OF RECEIPT. THE LD. DR SUBMITTED THAT THE COMMISSIONER OF INCOME TAX(A) HAS CONSIDERED CERTAIN EVIDENCE WHILE GRANTING RELIEF TO THE ASSESSEE IN THIS REGARD WHICH HAS NOT BEEN CONFRONT ED TO THE ASSESSING OFFICER. 10. ON THESE SUBMISSIONS OF THE REVENUE, THE LD. CO UNSEL OF THE ASSESSEE REPLIED THAT THE ASSESSEE VERY WELL EXPLAINED THE D IFFERENCE POINTED OUT BY THE ASSESSING OFFICER. THE COUNSEL FURTHER SUBMITT ED THAT THE DIFFERENCE IN QUESTION WAS ATTRIBUTABLE TO SERVICE TAX AND THE AS SESSEE COULD NOT SUBMIT RELEVANT EXPLANATION AND EVIDENCE BEFORE THE ASSESS ING OFFICER. THEREFORE, THE SAME WAS RIGHTLY CONSIDERED BY THE COMMISSIONER OF INCOME TAX(A) DURING THE FIRST APPELLATE PROCEEDINGS. THE COUNSE L SUPPORTED THE IMPUGNED ORDER AND SUBMITTED THAT GROUND NO. 3 OF THE REVENU E IS ALSO NOT SUSTAINABLE. 11. AFTER CAREFUL CONSIDERATION OF ABOVE RIVAL SUBM ISSIONS AND PERUSAL OF PARA 5 AND 5.1 OF THE IMPUGNED ORDER, WE CLEARLY OB SERVE THAT THE ASSESSEE COMPANY FILED SOME PROOF EXPLAINING THE DIFFERENCE IN QUESTION WHICH COULD NOT BE CONFRONTED TO THE ASSESSING OFFICER, NEITHER DURING THE ASSESSMENT PROCEEDINGS NOR DURING THE APPELLATE PROCEEDINGS. THE ISSUE IS RELATED TO THE RECONCILEMENT OF THE DIFFERENCE, THEREFORE, WE FIND IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR FRE SH ADJUDICATION. THE ASSESSING OFFICER IS DIRECTED THAT THE ISSUE SHALL BE DECIDED DE NOVO BY ITA NO. 2339/DEL/2010 ASSTT.YEAR: 2005-06 14 AFFORDING DUE OPPORTUNITY OF HEARING TO THE ASSESSE E AND WITHOUT BEING PREJUDICED WITH THE EARLIER ASSESSMENT AND FIRST AP PELLATE ORDER. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.11.2013. SD/- SD/- (G.D. AGRAWAL) (CHANDRAMOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 29TH NOVEMBER 2013 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR