M/s. Cklear Software Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 2512/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7420 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 24-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Competent authority; Benefit of exemption
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B : NEW DELHI BEFORE SHRI R.S. SYAL, AM & SHRI N.K. CHOUDHRY, JM ITA NO.2512/DEL/2014 ASSESSMENT YEAR : 2007-08 CKLEAR SOFTWARE PVT. LTD., IC/13, NEW ROHTAK ROAD, KAROL BAGH, NEW DELHI. PAN: AACCC5051A VS. ITO, WARD-3(2), NEW DELHI. ASSESSEE BY : SHRI RAJESH MALHOTRA, CA DEPTT. BY : SHRI ANIL KUMAR SHARMA, SR. DR DATE OF HEARING : 18.08.2016 DATE OF PRONOUNCEMENT : 18.08.2016 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 25.02.2014 UPHOLDING THE DE NIAL OF EXEMPTION U/S 10A IN RELATION TO THE ASSESSMENT YEA R 2007-08 ITA NO.2512/DEL/2014 2 2. SUCCINCTLY, THE FACTS OF THE CASE ARE THAT THE A SSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND SALES OF COMPUTER SOFTWARE. EXEMPTION U/S 10A AMOUNTING TO RS.9,30,2 05/- WAS CLAIMED ON THE BASIS OF AUDIT REPORT IN FORM NO.56F . THE AO OBSERVED THAT VARIOUS CONDITIONS PRESCRIBED FOR CLA IMING EXEMPTION U/S 10A WERE NOT SATISFIED AS THE INDUSTR IAL UNDERTAKING WAS OLD ONE AND ALSO IN OPERATION SINCE 23.10.2003. ON BEING CALLED UPON TO EXPLAIN AS TO WHY THE EXEMP TION BE NOT DENIED, THE ASSESSEE SUBMITTED THAT IT STARTED ITS BUSINESS OF MAINTENANCE OF SOFTWARE AND OBTAINED STPI REGISTRAT ION ON 6.7.2006. NEW ASSETS IN THE FORM OF COMPUTERS AND SOFTWARE WERE PURCHASED FOR THE TECHNICAL STAFF AND THE OLD COMPUTERS WERE USED FOR ADMINISTRATIVE STAFF. THE ASSESSEE CLAIME D THAT SINCE STPI IS A COMPETENT AUTHORITY FOR GRANTING CERTIFIC ATE OF 100% EOU AND SUCH CERTIFICATE WAS GRANTED TO THE ASSESSE E, THE BENEFIT OF EXEMPTION U/S 10A COULD NOT BE DENIED. NOT CONV INCED WITH THE ASSESSEES CONTENTIONS, THE AO HELD THAT CONDIT IONS AS ENVISAGED IN SUB-SECTION (1) OF SECTION 10A WERE NO T FULFILLED ITA NO.2512/DEL/2014 3 INASMUCH AS THE BUSINESS WAS ALREADY IN EXISTENCE S INCE THE A.Y. 2004-05. THAT IS HOW, THE BENEFIT OF SECTION 10A W AS NOT GRANTED. THE LD. CIT(A) ECHOED THE ASSESSMENT ORDE R ON THIS POINT. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS AN ADMITTED POSI TION THAT THE ASSESSEE SET UP A NEW UNDERTAKING ON 23.10.2003 AND STARTED ITS BUSINESS OF MAINTENANCE OF SOFTWARE. THE UNDERTAKI NG OBTAINED ITS STPI REGISTRATION ON 6.7.2006, A COPY OF WHICH IS AVAILABLE ON PAGES 24 TO 26 OF THE PAPER BOOK. THE COMPETENT AU THORITY, NAMELY, SOFTWARE TECHNOLOGY PARKS OF INDIA, ISSUED GREEN CARD TO THE ASSESSEE AS 100% EOU UNDER THE STP SCHEME. T HIS GREEN CARD WAS INITIALLY VALID FOR ONE YEAR UPTO 5.7.2007 AND, THEREAFTER, IT WAS RENEWED FROM TIME TO TIME. THE A SSESSEE WAS NOT SET UP IN THE AREA DESIGNATED AS STP COMPLEX. HOWEVER, ON THE BASIS OF INSTRUCTION NO.1 DATED 31.3.2006 ISSUE D BY THE CBDT PROVIDING THAT AN STP MAY BE A NEW UNIT BY ITSELF, THE ASSESSEE APPLIED FOR THE REGISTRATION, WHICH WAS DULY GRANTE D BY TREATING ITA NO.2512/DEL/2014 4 THE ASSESSEE AS 100% EOU. THOUGH THE ASSESSEE WAS SET UP ON 23.10.2003, IT DID NOT CLAIM ANY BENEFIT OF SECTION 10A FOR THE ASSESSMENT YEARS 2004-05 ONWARDS BECAUSE IT WAS NOT HAVING STP REGISTRATION. IT WAS ONLY PURSUANT TO THE CLARIFIC ATION ISSUED BY THE CBDT VIDE ITS INSTRUCTION NO.1 DATED 31.3.2006 THAT THE ASSESSEE APPLIED FOR REGISTRATION AND IT WAS GRANTE D APPROVAL AS 100% EOU UNDER THE STP SCHEME. WHEN THE ASSESSEE W AS SET UP ON 23.10.2003, THE BENEFIT OF EXEMPTION U/S 10A WAS OTHERWISE AVAILABLE TO THE QUALIFYING UNITS. SINCE THE ASSES SEE DID NOT GET REGISTRATION FROM THE DATE OF ITS SETTING UP, IT DI D NOT CLAIM THE BENEFIT OF EXEMPTION U/S 10A AND PAID TAX ON ITS RE GULAR INCOME. THE MERE FACT THAT THE ASSESSEE WAS GRANTED STPI RE GISTRATION ON 6.7.2006 WOULD NOT DISQUALIFY IT FOR BENEFIT OF SEC TION 10A FOR THE PERIOD COMMENCING FROM SUCH DATE IF OTHER REQUI SITE CONDITIONS STAND SATISFIED. THE CASE OF THE REVENUE IS THAT THE ASSESSEE SHOULD HAVE CLAIMED THE BENEFIT OF SECTION 10A FROM THE ASSESSMENT YEAR 2004-05 ITSELF AS IT WAS SET UP IN THE PREVIOUS YEAR RELEVANT TO THAT ASSESSMENT YEAR AND SINCE NO SUCH CLAIM WAS ITA NO.2512/DEL/2014 5 MADE, IT CANNOT BE CONSIDERED AS ELIGIBLE FOR THE B ENEFIT IN THE YEAR UNDER CONSIDERATION. WE ARE NOT CONVINCED WIT H THIS LOGIC. THERE CAN BE NO DENIAL OF THE FACT THAT THE ASSESSE E OTHERWISE FULFILLED ALL THE REQUISITE CONDITIONS FOR AVAILING BENEFIT U/S 10A FROM THE DATE IT WAS SET UP IN FINANCIAL YEAR 2003- 04. IT WAS ONLY DUE TO LACK OF STPI REGISTRATION THAT THE ASSE SSEE DID NOT GET THE BENEFIT OF SECTION 10A FOR THE INTERVENING PERI OD TERMINATING ON THE DATE IT WAS GRANTED CERTIFICATE OF STPI REGI STRATION AS 100% EOU ON THE BASIS OF INSTRUCTION NO.1 DATED 31. 3.2006. BY NOT CLAIMING EXEMPTION U/S 10A FOR THE EARLIER YEAR S, THE ASSESSEE SIMPLY LOST BENEFIT FOR THOSE YEARS. AS THE ASSESS EE WAS NOT ELIGIBLE FOR THE BENEFIT OF SECTION 10A FOR EARLIER YEARS FOR LACK OF REGISTRATION, IT CANNOT BE SAID THAT THE BENEFIT OF SECTION 10A, WHICH IS OTHERWISE RIGHTLY DUE TO THE ASSESSEE, SHO ULD ALSO BE DENIED ON GETTING THE REQUISITE REGISTRATION FOR TH E REMAINING PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH TH E ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE.. CO MPUTER ITA NO.2512/DEL/2014 6 SOFTWARE . THE HONBLE DELHI HIGH COURT IN PRAVEEN SONI VS. CIT (2011) 333 ITR 324 (DEL) HAS HELD THAT SPECIAL DEDUCTION U/S 80IB CANNOT BE DENIED FOR THE REMAINING YEARS I F IT WAS NOT CLAIMED FOR INITIAL YEARS SUBJECT TO THE FULFILLMEN T OF THE REQUISITE CONDITIONS. THE DELHI BENCH OF THE TRIBUNAL IN ITO VS. VIDYA TECH SOLUTIONS (P) LTD. (2010) 35 SOT 25 (DEL) , HAS ALLOWED THE BENEFIT OF SECTION 10A UNDER SIMILAR CIRCUMSTANCES AS ARE PREVAILING INSTANTLY. 4. THE AUTHORITIES BELOW HAVE ALSO CANVASSED A VI EW THAT SINCE THE ASSESSEE PURCHASED SOME OLD COMPUTERS, IT WAS A CASE OF RECONSTRUCTION OF BUSINESS. WE ARE NOT SATISFIED WI TH THIS PROPOSITION IN SO FAR AS THE FACTS OF THE INSTANT C ASE ARE CONCERNED. THE FACT THAT THE ASSESSEE USED SOME OLD COMPUTERS FOR ADMINISTRATIVE PURPOSES WOULD NOT MAKE THE ASSE SSEE INELIGIBLE FOR THE BENEFIT OF SECTION 10A, WHEN THE COMPUTERS AND SOFTWARE USED BY THE ASSESSEE IN THE INDUSTRIAL UND ERTAKING WERE NEW. WE HAVE SEEN THE BALANCE SHEETS OF THE ASSESSE E STARTING WITH ITS FIRST CLOSING ON 31.3.2014 AND THEREAFTER. IT IS OBSERVED ITA NO.2512/DEL/2014 7 THAT IN THE FIRST CLOSING ON 31.3.2014, THERE WERE NO FIXED ASSETS. THE ASSESSEE STARTED PURCHASING COMPUTERS AND SOFTW ARE ETC. FROM THE SECOND YEAR ONWARDS. THE ASSESSEE SIMPLY P URCHASED SOME SECOND HAND COMPUTERS FOR ADMINISTRATIVE PURPO SES. IT DOES NOT MAKE IT A CASE OF RECONSTRUCTED BUSINESS. 5. IN VIEW OF THE FOREGOING DISCUSSION, WE ARE SATI SFIED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DENI AL OF SECTION 10A BENEFIT TO THE ASSESSEE. THE IMPUGNED ORDER IS SET ASIDE TO THIS EXTENT. 6. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.08.2016. SD/- SD/- [N.K. CHOUDHRY] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, AUGUST, 2016. DK ITA NO.2512/DEL/2014 8 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.