M/s. APS Technologies, Pune V. Inocme-tax Officer,

ITA 321/PUN/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8556 (ITAT-PUNE)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 20-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Cost of acquisition
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 321 / P N/ 20 1 4 ASSESSMENT YEAR : 20 1 0 - 11 M/S. APS TECHNOLOGIES, FLAT NO. 801 , BLDG. NO. A/5, OXFORD VILLAGE, WANAWADI, PUNE - 411040 VS. INCOME TAX OFFICER, WARD - 2(2), PUNE (APPELLANT) (RESPONDENT) PAN NO. AAPFA9653A APPELLANT BY: SHRI BHARAT SHAH RESPONDENT BY: SHRI B.C. MALAKAR DATE OF HEARING : 0 3 - 12 - 2014 DATE OF PRONOUNCEMENT : 19 - 12 - 2014 ORDER PER R.S . PADVEKAR , JM : - THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) - II, PUNE DATED 25 - 10 - 2013 FOR THE A.Y. 20 1 0 - 11 . THE ASSESSEE HAS TAKEN FOLLOWING GROUND S IN THE APPEA L: 1. THE AUTHORITIES BELOW ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DENYING THE CLAIM OF THE ASSESSEE U/S. 10A UNDER THE BELIEF THAT PLANT AND MACHINERY USED BY STP UNIT IS SECOND HAND WHEN THE TAX INVOICE IS IN THE NAME OF STP UNIT ITSELF. JUST AND PROPER RELIEF BE GRANTED TO THE ASSESSEE IN THIS RESPECT. 2. THE AUTHORITIES BELOW ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DENYING THE CLAIM OF THE ASSESSEE U/S. 10A UNDER THE BELIEF THAT THE BUSINESS IS ALREADY IN EXISTENCE A ND THUS CONDITION IN SECTION 10A 2(II) HAS BEEN VIOLATED. JUST AND PROPER RELIEF BE GRANTED TO THE ASSESSEE IN THIS RESPECT. 2. THE FACTS WHICH REVEALED FROM THE RECORD ARE AS UNDER. THE ASSESSEE FIRM IS CARRYING OUT THE BUSINESS OF INFORMATION TECHN OLOGY SERVICES ERP CONSULTING. THE ASSESSEE FILED THE RETURN OF INCOME FOR 2 ITA NO. 321 /PN/2014, M/S. APS TECHNOLOGIES, PUNE THE A.Y. 2010 - 11 ON 31 - 08 - 2010 DECLARING TOTAL INCOME OF RS.13,53,140/ - . THE ASSESSMENT OF THE ASSESSEE HAS BEEN COMPLETED U/S. 143(3) OF THE INCOME - TAX ACT IN WHICH THE ASSESSI NG OFFICER HAS REJECTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 10A OF THE ACT TO THE EXTENT OF RS.1,02,52,181/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS NOTICED THAT THOUGH THE ASSESSEE FIRM HAD CLAIMED TO BE IN THE BUS INESS OF SOFTWARE DEVELOPMENT, HOWEVER, HA S NOT SHOWN ANY ASSET IN THE BALANCE SHEET FOR THE RELEVANT YEAR. AN EXPLANATION IN THIS REGARD WAS SOUGHT AND AFTER CONSIDERING THE SUBMISSION GIVEN BY THE ASSESSEE FIRM , T HE ASSESSING OFFICER EXAMINED THE ELIGIB ILITY OF THE ASSESSEES CLAIM OF DEDUCTION U/S. 10A OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT AS PER THE PROVISION OF CLAUSE (III) OF SUB - SEC. (2) OF SEC. 10A, AN STP IN WHICH MACHINERY OR PLANT PREVIOUSLY USED HAS BEEN TRANSFERRED OF VALUE EXCEEDIN G 25% OF THE TOTAL VALUE OF THE PLANT AND MACHINERY, SUCH STPS ARE NOT ELIGIBLE TO CLAIM DEDUCTION U/S. 10A. T HE ASSESSING OFFICER HAS FURTHER NOTED THAT THE TWO LAPTOPS, PRINTER ETC. WERE PURCHASED BY THE PARTNER OF THE ASSESSEE FIRM ON 03 - 04 - 2009 AND T HE STP REGISTRATION OF THE ASSESSEE FIRM WAS RECEIVED ON 07 - 09 - 2009 . T HE ASSESSING OFFICER INFERRED THAT UPTO 07 - 09 - 2009 THE OWNERSHIP OVER THE AFORESAID ITEMS CLEARLY REMAINED WITH THE PARTNER OF THE ASSESSEE FIRM. THE ASSESSING OFFICER FURTHER HELD THA T EVEN IF IT IS ASSUMED THAT THE PARTNER TRANSFERRED THE LAPTOPS AND PRINTER TO THE ASSESSEE FIRM, THE SAME COULD NOT BE TREATED AS NEW ASSET BUT A SECONDHAND USED ASSET THEREBY VIOLATING THE ESSENTIAL CONDITION FOR AVAILING DEDUCTION U/S. 10A AS LAID OUT IN CLAUSE (III) OF SECTION 10A(2). 2.1 THE ASSESSING OFFICER HAS FURTHER NOTED THAT AS PER CLAUSE (II) OF SEC. 10A(2), AN STP UNIT WHICH IS FORMED BY SPLITTING UP AND RE - CONSTRUCTION OF AN EXISTING BUSINESS IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S. 10A AND IN THE INSTANT CASE IT IS CLAIMED BY THE ASSESSEE FIRM THAT THE TWO LAPTOPS AND ONE PRINTER WERE PURCHASED BY THE PARTNER, SHRI 3 ITA NO. 321 /PN/2014, M/S. APS TECHNOLOGIES, PUNE ARVIND PATEL ON BEHALF OF THE ASSESSEE FIRM AND THE PAYMENTS MADE BY THE PARTNER AND NOT THE FIRM. THE ASSESSING OFFICER ALSO O BSERVED THAT THE SAID ITEMS WERE NOT SHOWN AS ASSETS IN THE FINANCIAL STATEMENTS OF THE FIRM FOR THE RELEVANT YEAR AND ALSO THE POSSIBILITY OF HAVING USED ANY NEW ASSETS BY TAKING THEM ON HIRE IS ALSO RULED OUT AS NO HIRE CHARGES HA VE BEEN CLAIMED BY THE A SSESSEE FIRM AS IS EVIDENT FROM THE FINANCIAL STATEMENT. THE ASSESSING OFFICER THUS INFERRED THAT THE BUSINESS OF THE ASSESSEE FIRM WAS ALREADY IN EXISTENCE WHEN THE AFORESAID ASSETS WERE USED AND WHEN THE STP WAS CREATED THE ASSETS OF THE OLD BUSINESS BEG AN TO BE USED IN THE NEW BUSINESS CLAIMED TO BE OF THE STP. THE ASSESSING OFFICER HAS EMPHASIZED ON THE FACT THAT THE BUSINESS OF SOFTWARE DEVELOPMENT COULD NOT BE CARRIED OUT WITHOUT THE REQUISITE ASSETS BEING LAPTOP / COMPUTER , PRINTER ETC. AND THE FACT TH AT THE SAID BUSINESS WAS ALREADY IN EXISTENCE AS RECEIPTS TO THE TUNE OF RS.14,69,466/ - RELATED TO THE PERIOD 01 - 04 - 2009 TO 24 - 07 - 2009 I.E. PRIO R TO THE REGISTRA TION OF STP. THE ASSESSING OFFICER FINALLY HELD THAT CONDITION OF SEC. 10A(2)(II) ALSO GETS VI OLATED AND HENCE , THE ASSESSEE - FIRM WAS HELD NOT TO BE ELIGIBLE TO CLAIM DEDUCTION U/S. 10A AND ACCORDINGLY THE CLAIM OF DEDUCTION AMOUNTING TO RS.1,02,52,181/ - WAS DISALLOWED. 3. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE LD. CIT(A) BUT DID NOT FIND FAVOUR. THE LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER O N THE ISSUE OF DEDUCTION U/S. 10A AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. THE REASONS GIVEN BY THE LD. CIT(A) ARE AS UNDER: 3.4. I HAVE CONSIDERED THE S UBMISSION MADE BY THE APPELLANT AND PERUSED MATERIAL ON RECORD. THE APPELLANT IS A FIRM ENGAGED IN THE BUSINESS OF INFORMATION & TECHNOLOGY SERVICES I.E. ERP CONSULTANCY. THE SOFTWARE DEVELOPMENT FEES WERE ACCOUNTED FOR AT RS.1,26,02,998/ - AND THE NET PROF IT DECLARED THEREON WAS OF RS.1,11,47,522/ - AND THE CLAIM U/S 10A WAS AT RS.1,02,52,181/ - . THE APPELLANT - FIRM HAD MADE A CLAIM OF DEDUCTION U/S 10A AND THE 4 ITA NO. 321 /PN/2014, M/S. APS TECHNOLOGIES, PUNE AUDIT REPORT IN FORM 56F WAS ALSO FILED BY THE APPELLANT. THE APPELLANT - FIRM HAS SUBMITTED THAT THE ASSESSMENT YEAR UNDER APPEAL IS THE FIRST YEAR OF OPERATION OF ITS STP UNIT. THE A.O. HOWEVER, HAS OBSERVED THAT DESPITE THE CLAIM MADE BY THE APPELLANT TO BE ENGAGED IN SOFTWARE DEVELOPMENT INCLUDING MAINTENANCE, SUPPORT, CUSTOMIZATION OF ERP SYSTEM, THE APPELLANT - FIRM HAD NOT SHOWN ANY ASSET IN THE BALANCE - SHEET. THE A.O. HELD THAT THE PROVISIONS OF SECTION 10A(2)(II) AND (III) HAVE NOT BEEN COMPLIED. THE A.O. ALSO FOUND THAT THE APPELLANT - FIRM HAD RECEIPTS TO THE TUNE OF RS.14,69,466/ - RELATING TO THE P ERIOD 1.4.2009 TO 24.7.2009, WHICH WERE CLEARLY PRIOR TO THE REGISTRATION OF THE STP. MOREOVER, THE REQUIRED ASSETS OF THE FIRM SUCH AS THE LAPTOPS AND THE PRINTER WERE PURCHASED BY THE PARTNER OF THE FIRM WHO SUBSEQUENTLY IS STATED TO HAVE TRANSFERRED THE SAID ASSETS TO THE FIRM. THE SAID ASSETS WERE CLAIMED TO HAVE BEEN PURCHASED BY THE PARTNER OF THE APPELLANT - FIRM ON 03.04.2009 HOWEVER, THE FIRM RECEIVED THE REGISTRATION ON 7.9.2009 AND HENCE THE SAID ASSETS REMAINED WITH THE PARTNER AND THE SUBSEQUE NT TRANSFER OF THE ASSETS CANNOT BE TREATED AS A NEW ASSET AS PER THE PROVISIONS OF SECTION 10A(2)(III). FURTHER, THE ABSENCE OF THE ASSETS IN THE FINANCIAL STATEMENTS AND THE SUBSEQUENT EXPLANATION OF THE APPELLANT IN THIS REGARD DO NOT APPEAR TO BE AN AC CEPTABLE EXPLANATION. ON AN ANALYSIS OF THE ENTIRE FACT AND CIRCUMSTANCES OF THE CASE, I TEND TO AGREE WITH THE CONTENTION OF THE ASSESSING OFFICER THAT THE BUSINESS OF SOFTWARE DEVELOPMENT WAS ALREADY IN EXISTENCE WHEREIN THE SAID ASSETS WORE BEING USED A ND WHICH IS STATED TO HAVE BEEN SUBSEQUENTLY TRANSFERRED. 3.5. SECTION 10A CONFERS TOTAL TAX LIABILITY IN RESPECT OF ANY PROFITS & GAINS DERIVED BY AN ASSESSEE FROM A NEW ESTABLISHED INDUSTRIAL UNDERTAKING, ESTABLISHED IN ANY FREE TRADE ZONE OR IN ANY ELE CTRONIC HARDWARE TECHNOLOGY PARK OR IN ANY SOFTWARE TECHNOLOGY PARK. AN INDUSTRIAL UNDERTAKING CAN ENJOY THE BENEFITS OF THE SECTION ONLY IF THE CONDITIONS AS PRESCRIBED IN THE SECTION ARE FULFILLED, WHICH ALSO INCLUDES CLAUSE (II) AND (III) OF SUB - SECTION (2) OF SECTION 10A. FIRSTLY, THAT IT IS NOT FORMED BY THE SPLITTING UP OR RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE AND SECONDLY, THAT IT IS NOT FORMED BY THE TRANSFER OF A NEW BUSINESS MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. THUS THE CONDITION IS THAT THE UNDERTAKING MUST NOT HAVE BEEN FORMED BY TRANSFER TO THE NEW BUSINESS OF MACHINERY OR 5 ITA NO. 321 /PN/2014, M/S. APS TECHNOLOGIES, PUNE PLAT PREVIOUSLY USED FOR ANY PURPOSE. THE ONUS LAY UPON THE APPELLANT TO ESTABLISH AND DEMONSTRATE THAT THE SAID MACHINERY OR PLANT IS NOT OR WAS NO T PREVIOUSLY USED FOR ANY PURPOSE BEFORE BEING INSTALLED OR BEING PUT TO USE BY THE NEW UNIT IN WHICH THE ELIGIBILITY IS CLAIMED AND DEDUCTION SOUGHT FOR. THE APPELLANT - FIRM HAS NOT BEEN ABLE TO BRING ANY SUCH MATERIAL ON RECORD TO SHOW THAT THE AFORESAID CONDITION AS STIPULATED UNDER CLAUSES (II) & (III) : OF SECTION 10A(2) HAVE BEEN FULFILLED. THE FACTS OF THE CASE LAW RELIED UPON BY THE APPELLANT - FIRM IN THE CASE OF CIT VS . EXPERT OUTSOURCE (P) LTD (2011) 59 DTR 86 (KAR), RELATED TO A CASE OF CONVERSIO N OF AN EXISTING UNIT INTO AN STPI UNIT; WHEREAS THE PRESENT CASE IS OF A NEW UNDERTAKING ALTOGETHER. FURTHER, IN THAT CASE RELIED UPON THERE WAS NO EXPORT OF COMPUTER SOFTWARE PRIOR TO THE REGISTRATION RATHER IT COMMENCED 'ONLY AFTER THE UNIT WAS REGISTER ED WHEREAS IN THE PRESENT CASE THE MATERIAL ON RECORD INDICATES THE COMMENCEMENT OF THE BUSINESS PRIOR TO ITS REGISTRATION ON 07.09.2009. THUS THE APPELLANT'S CLAIM THAT THE STP SCHEME IS AN INDEPENDENT CODE AND THE SAME DOES NOT RECOGNIZE THE CONDITIONS ENVISAGED BY SECTION 10A(2) IS ALSO NOT CORRECT AS THE SAID SCHEME PRESCRIBES THE CONDITIONS AND CRITERIA AND THE MANNER OF CARRYING OUT THE BUSINESS AND DOES NOT DEFINE THE MANNER IN WHICH THE TAX EXEMPTION WOULD BE GRANTED. THE LEGISLATURE HAS PRESCRIB ED SECTION 10A FOR THE PURPOSE WHICH DETAILS THE CONDITIONS WHICH ARE REQUIRED TO BE FULFILLED BEFORE THE CLAIM OF DEDUCTION IS MADE. IT IS A CARDINAL RULE OF INTERPRETATION THAT WHEN THE STATUTE PRESCRIBES THAT A PARTICULAR ACT IS TO BE DONE IN A PARTICUL AR MANNER, IT SHOULD BE DONE IN THE MANNER PRESCRIBED AND NOT IN ANY OTHER WAY. THUS THE CONTENTION RAISED BY THE APPELLANT IN THIS REGARD IS NOT TENABLE. THE APPELLANT HAS FAILED TO SUBSTANTIATE THE RELATION OF THE TWO ESSENTIAL CONDITIONS LAID OUT IN CLA USES (II) AND (III) OF SUB - SECTION (2) OF SECTION 10A AND HENCE THE ASSESSING OFFICER HAS RIGHTLY HELD THAT THE APPELLANT IS NOT ENTITLED TO CLAIM DEDUCTION U/S. 10A AND DISALLOWED THE CLAIM. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEAR D THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE LD. COUNSEL SUBMITS THAT THE ASSESSEE IS IN THE BUSINESS OF ERP CONSULTING. THE ASSESSEE ACCOUNTED THE SOFTWARE DEVELOPMENT FEES TO THE EXTENT OF RS.1,26,02,998/ - AND DECLARED THE NET PRO FIT ON THE 6 ITA NO. 321 /PN/2014, M/S. APS TECHNOLOGIES, PUNE SAME AT RS.1,11,47,522/ - . HE SUBMITS THAT THE INTERPRETATION MADE BY THE ASSESSING OFFICER OF SEC. 10A(2)(II ) & (III) OF THE INCOME - TAX ACT IS TOTALLY ERRONEOUS. HE SUBMITS THAT A.Y. 2010 - 11 WAS THE FIRST YEAR OF OPERATION AS STP UNIT. HE ARG UES THAT THE MAIN REASON OF THE ASSESSING OFFICER FOR REJECTING THE CLAIM OF THE ASSESSEE IS THAT THE ASSESSEE HAS NOT SHOWN ANY ASSET IN THE BALANCE SHEET. HE ARGUES THAT HE EXPLAINED TO THE ASSESSING OFFICER THAT THE ASSESSEE FIRM HAS PURCHASED TWO LAPT OPS AND A PRINTER FROM M/S. KNOWASYS TECHNOLOGIES P. LTD. AND THE EVIDENCE IN SUPPORT OF THE SAME WAS ALSO FURNISHED . THE PAYMENT WAS MADE BY THE PARTNER THROUGH HIS BANK ACCOUNT. THE ASSESSEE HAS USE D SAID LAPTOPS FOR ITS SOFTWARE DEVELOPMENT PROGRAMME OF ERP SYSTEM. 5. HE ARGUES THAT SINCE THE PARTNER HAD PAID THE PURCHASE COST OF LAPTOPS AND PRINTER FROM ITS OWN ACCOUNT FOR THE REASON THAT WHEN THOSE LAPTOPS WERE PURCHASED AT THAT TIME THE ASSESSEE HAS NO BANK ACCOUNT AND THE ASSESSEE FIRM WAS GETTI NG THE BUSINESS AND THERE WAS AN EXIGENCY TO PURCHASE THE LAPTOPS. LD. COUNSEL REFERRED TO PAPER BOOK AND SUBMITS THAT THE T AX I NVOICE OF PURCHASED OF THE LAPTOPS FROM M/S. KNOWASYS TECHNOLOGIES P. LTD. DATED 03 - 04 - 2009 IS ON THE NAME OF THE ASSESSEE FIRM INCLUDING THE PRINTER AND CARTRIDGES. HE REFERRED TO PAGE NO. 13 OF THE COMPILATION WHERE THE COPY OF THE T AX I NVOICE IS PLACED. HE SUBMITS THAT THE PAYMENT FOR PURCHASE OF LAPTOPS AND A PRINTER WERE MADE OUT BY THE PARTNER OF THE FIRM S HRI ARVIND V. PA T EL THROUGH HIS BANK ACCOUNT WITH HDFC BANK AS THE ASSESSEE DID NOT HAVE THE BANK ACCOUNT WHICH WAS ONLY OPEN ED ON 20 - 04 - 2009. HE REFERRED TO PAGE NO. 15 OF THE COMPILATION WHERE THE COPY OF THE HDFC BANK ACCOUNT IS PLACED. HE SUBMITS THAT THE ASSESSEE H AS NOT USED ANY SECONDHAND LAPTOPS WHICH WERE EARLIER USED IN SOME OTHER BUSINESS. HE ARGUES THAT OTHERWISE ALSO NO DISPUTE ABOUT THE FACT THAT THE ASSESSEES UNIT IS REGISTERED AS STP ON 07 - 09 - 2009 AND ON THE ERRONEOUS ASSUMPTION , THE ASSESSING OFFICER H ELD THAT FROM THE DATE OF PURCHASE OF THE TWO LAPTOPS 7 ITA NO. 321 /PN/2014, M/S. APS TECHNOLOGIES, PUNE AND A PRINTER ON 03 - 04 - 2009 TILL THE DATE OF REGISTRATION OF THE ASSESSEE FIRM AS STP ON 07 - 09 - 2009 , T HOSE LAPTOPS AND PRINTER WERE USED NOT IN THE BUSINESS OF THE ASSESSEE FIRM. HE ARGUES THAT DUE TO THE OVERSIGHT AS THE PAYME NT HAS GONE THROUGH THE PARTNERS BANK ACCOUNT , THE SAME WAS REMAINED TO BE TAKEN IN THE BALANCE SHEET OF THE ASSESSEE FIRM. HE SUBMITS THAT BOTH THE PARTNERS OF THE ASSESSEE FIRM HAVE NOT HAVING ANY INCOME OTHER THAN THE PROFITS AND REMUNERATION FROM THE ASSESSEE FIRM. HE PLEADED FOR ALLOWING THE DEDUCTION U/S. 10A OF THE ACT. PER CONTRA, THE LD .DR SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 6. IN THIS CASE IT IS NOT IN DISPUTE THAT THE ASSESSEE FIRM WAS REGISTERED AS STP O N 07 - 09 - 2009. IT IS ALSO NOT IN DISPUTE AT ALL THAT AS PER THE BALANCE SHEET OF THE ASSESSEE THERE ARE NO ASSETS AND IT IS PRECISE RESERVATION OF THE ASSESSING OFFICER THAT AFTER 07 - 09 - 2009 THE ASSESSEE HAS USED SECONDHAND LAPTOPS OF THE PARTNERS FOR DOIN G THE BUSINESS AND THERE IS VIOLATION OF THE CONDITIONS OF SEC.10A ( 2 ) (III) OF THE ACT. SEC. 10A IS A RESTRICTIVE CLAUSE WHICH PUT THE CONDITIONS FOR CLAIMING THE DEDUCTION U/S. 10 A OF THE ACT . THE RELEVANT PART OF SEC. 10A(2) READS AS UNDER: SEC.10A ( 2) THIS SECTION APPLIES TO ANY UNDERTAKING WHICH FULFILLS ALL THE FOLLOWING CONDITIONS, NAMELY: (I) IT HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMPUTER SOFTWARE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR (A) COM MENCING ON OR AFTER THE 1ST DAY OF APRIL, 1981, IN ANY FREE TRADE ZONE; OR (B) COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 1994, IN ANY ELECTRONIC HARDWARE TECHNOLOGY PARK, OR, AS THE CASE MAY BE, SOFTWARE TECHNOLOGY PARK; (C) COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2001 IN ANY SPECIAL ECONOMIC ZONE; (II) IT IS NOT FORMED BY THE SPLITTING UP, OR THE RECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE : 8 ITA NO. 321 /PN/2014, M/S. APS TECHNOLOGIES, PUNE PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RESPECT OF ANY UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE - ESTABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BUSINESS OF ANY SUCH UNDERTAKINGS AS IS REFERRED TO IN SEC TION 33B , IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN THAT SECTION; (III) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. 7. THE RE WAS IDENTICAL PROVISION IN SOME OF THE SECTION S PREVIOUSLY COMING UNDER CHAPTER VIA OF THE ACT , INCLUDING SEC. 80H, 80HH AND 80J ETC. SEC. 80H AND 80J ARE OMITTED IN THE INCOME - TAX ACT, 19 61. THE ANALOGOUS RESTRICTIVE CLAUSE WAS THERE IN SEC. 15C OF THE INCOME - TAX ACT, 1922 FOR CLAIMING THE DEDUCTIO N. IN THIS CONTEXT THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF BAJAJ TEMPO LIMITED VS. CIT 196 ITR 188 IS THE AUTHORITY ON THE PROPOSITION , E VEN THOUGH THE SAID DECISION IS RENDERED IN EXPLAINING THE SCOPE OF RESTRICTIVE CONDITION IN SEC. 15C OF THE 1922 ACT. IN THIS CASE THERE IS NO DISPUTE OF THE FACT THAT THE ASSESSEE FIRM WAS CONSTITUTED ON 01 - 04 - 2009 BUT THE STP REGISTRATION WAS GRANTED ON 04 - 08 - 2009 (BOTH AUTHORITIES BELOW MENTIONED DATE OF GRANT OF REGISTRATION AS 07 - 09 - 2009 BUT AS PER COPY OF PERMISSION LETTER PAGE NO. 12 OF THE COMPILATION, CORRECT DATE IS 04 - 08 - 2009) AND IN THE OPINION OF THE ASSESSING OFFICER THAT AMOUNTS TO VIOLATION OF CLAUSE (II) OF SUB - SEC. ( 2 ) OF SEC. 10A . W E FAIL TO UNDERSTAND HOW THE SAID CONDITION APPL IES T O THE ASSESSEES CASE ? MERELY BECAUSE THE STP REGISTRATION IS GRANTED SOMETIME AFTER ASSESSEE FIRM WAS FORMED AND STARTED ITS BUSINESS. FROM THE WORDING OF CLAUSE (II) OF SEC. 10 A (2) WITH NO STRETCH OF IMAGINATION IT CAN BE SAID THAT THE ASSESSEE FIRM IS FORMED BY THE SPLITTING OF O R RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE. NOTHING IS THERE ON RECORD TO SUGGEST THAT THE SAID ERP BUSINESS OF THE ASSESSEE FIRM WAS CARRIED ON BY OTHER ENTITY INCLUDING THE PARTNERS IN INDIVIDUAL CAPACITY AND SUBSEQ UENTLY THE BUSINESS OF THE SAID ENTITY WAS SP LITTED OR THERE WAS A RECONSTRUCTION . TO OUR 9 ITA NO. 321 /PN/2014, M/S. APS TECHNOLOGIES, PUNE UNDERSTANDING , APPLYING CLAUSE (II) TO SEC. 10A(2) OF THE ACT TO THE CASE OF THE ASSESSEE IS TOTALLY ERRONEOUS. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT CLAUSE (III) OF SEC. 10A(2) IS ALSO VIOLATED BY THE ASSESSEE AND ONLY REASON IS THAT THE ASSESSEE HAS NOT SHOWN ANY ASSET IN THE BALANCE SHEET I.E. LIKE LAPTO P S , PRINTER ETC. WHICH ARE REQUIRED FOR CARRYING ON BUSINESS OF THE ASSESSEE. 8. IN THE INSTANT CASE T HE ASSESSEE HAS PRODUCED THE EVIDENCE TO SHOW THAT TWO LAPTOPS AND A PRINTER WERE PURCHASED BY THE PARTNER OF THE ASSESSEE FIRM SHRI ARVIND V. PATEL ON BEHALF OF THE ASSESSEE FIRM AND PAYMENT WAS ALSO MADE BY THE SAID PARTNER FROM HIS BANK A/C . THE ASSESS EE HAS PRODUCED THE COPY OF THE HDFC BANK ACCOUNT OF THE ASSESSEE FIRM AND AS PER THE SAID STATEMENT IT IS SEEN THAT THE SAID BANK ACCOUNT WAS OPENED ON 20 - 04 - 2009 WHEREAS THE LAPTOPS AND PRINTER WERE PURCHASED BY THE ASSESSEE ON 03 - 04 - 2009. WE HAVE ASKED THE ASSESSEE TO FILE THE COPIES OF THE PARTNERS RETURN OF INCOME FOR A.Y. 2010 - 11 AND AS PER THE DIRECTIONS OF THE BENCH THE ASSESSEE HAS FILED THE COPIES WHICH ARE PLACED ON RECORD. ON PERUSAL OF THE COPIES OF THE PARTNER S RETURNS I T IS SEEN THAT EXC EPT THE SHARE OF PROFITS FROM THE ASSESSEE FIRM AND THE REMUNERATION , THERE IS NO INCOME WHICH CAN BE SAID TO HAVE EARNED BY USING TWO LAPTOPS . WE FAIL TO UNDERSTAND HOW THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE HAS USED THE SECONDHAND LAPTOPS WHIC H ARE IN THE NATURE OF PLANT AND MACHINERY. ON PERUSAL OF THE ASSESSMENT ORDER WE FIND THAT ALL THESE FACTS WERE PUT ON RECORD BY THE ASSESSEE IN HIS EXPLANATION DATED 13 - 12 - 2012. ADMITTEDLY THE LAPTOPS AND PRINTER ARE NEWLY PURCHASED MAY BE ON ACCOUNT O F PARTNER WHICH ARE USED FOR THE BUSINESS OF THE ASSESSEE FIRM. NOTHING IS THERE ON RECORD TO SUPPORT THE CASE OF THE ASSESSING OFFICER THAT THOSE LAPTOPS AND PRINTER WERE USED EARLIER FOR SOME OTHER BUSINESS BY THE PARTNER. IN OUR OPINION , THE CONCLUSIO N OF THE ASSESSING OFFICER IN RESPECT OF THE ALLEGED VIOLATION OF CLAUSE (III) TO SEC. 10A(2) IS ALSO ERRONEOUS. WE, 10 ITA NO. 321 /PN/2014, M/S. APS TECHNOLOGIES, PUNE THEREFORE, HOLD THAT THE ASSESSEE HAS NOT VIOLATED ANY OF THE CONDITIONS IN SEC. 10A(2) OF CLAUSE S (II) OR (III) OF THE INCOME - TAX ACT. A CCORDINGLY, THE GROUNDS TAKEN BY THE ASSESSEE ARE ALLOWED AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE U/S. 10A OF THE ACT. WE ALSO PUT ON RECORD THAT EXCEPT OTHER TWO REASONS THE ELIGIBILITY OR OTHER CONDITIONS ARE NOT DISPUTED BY THE REVENUE AUTHORITIES. 9. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 19 - 12 - 20 1 4 SD/ - SD/ - ( R . K . PAN DA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE , DATED : 19 TH DECEMBER, 20 1 4 RK/PS COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - II, PUNE 4 THE CIT - II, PUNE 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE