The ITO, Ward-4(3), Ahmedabad V. Fusion Informatics Pvt.Ltd., Ahmedabad

ITA 366/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94891 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Competent authority
• Section: 143(3); 10B

Judgement Text

ITA NO . 366 /AHD/ 20 1 2 ASSESSMENT YEAR: 2 0 0 8 - 09 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHRI S.S. GODARA , JUDICIAL MEMBER ITA NO. 366 / AHD /201 2 ASSESSMENT YEAR: 200 8 - 09 INCOME TAX OFFICER, VS. M/S. FUSION INFOR MATICS PVT. LTD , WARD 4 ( 3 ), AHMEDABAD. 5 TH FLOOR, 501, NEW YORK PLAZA, PREMCHAND NAGAR ROAD, BODAKDEV, AHMEDABAD. [PAN A AACF 846 8 J ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DINESH SINGH, SR. D.R. RESPONDENT : SHRI ANKIT M. TALSANIA, A.R DATE OF HEARING : 27 .1 1 .2015 DATE OF PRONOUNCEMENT : 11. 1 2 .2015 O R D E R PER S.S. GODARA , J. M. THIS REVENUE S APPEAL FOR ASSESSMENT YEAR 2008 - 09, ARISE FROM ORDER OF THE C IT(A) - V III , AHMEDABAD DATED 30 . 11 .2011 PASSED IN CASE NO.CIT(A) - V III /ITO.WD.4(3)/671/10 - 11 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME T AX ACT, 1 961 ; IN SHORT THE ACT . 2. THE R EVENUE S SOLE SUB STANTIVE GROUND CHALLENGES THE LOWER APP ELLATE ORDER ALLOWING SECTION 10B DEDUCTI O N OF RS.34,87,738/ - ALLEGEDLY WITHOUT APPRECIATING THE FACT THAT THE A SSESSING AUTHORITY HAD ESTABLISHED IN ITS ORDER DATED 22.12.2010 THAT THE AS S ESSEE HAD RECONSTRUCTED ITS BUSINESS OF MANUFACTURING OF SOFTWARE ALREADY IN EXISTENCE SINCE FINANCIAL YEAR 2003 - 04; FORMED BY TRANSFER OF 39% OF PLANT & MACHINERY PREVIOUSLY USED ITA NO . 366 /AHD/ 20 1 2 ASSESSMENT YEAR: 2 0 0 8 - 09 PAGE 2 OF 6 FOR T HE PURPOSE OF NEW BUSINESS. THE CASE FILE REVEALS THAT THE C IT(A) HAS ACCEPTED ASSESS EE S ABOVE STATED DEDUCTION CLAIM BY STATING AS UNDER : - 2.4 I HAVE CONSIDERED THE ASSESSMENT ORDER, WRITTEN SUBMISSION; VARIOUS CASE LAWS AND CBDT CIRCULAR RELIED UPON BY THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT. THE APPELLANT HAS ORIGINALLY CLAIMED DEDUCTION OF RS.41,76,779/ - U/S 10B OF THE ACT THROUGH RETURN OF INCOME, WHEREAS, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT HAS REVISED ITS CLAIM AT RS.34,87738/ - THROUGH LETTER DATED 08/12/2010. THE ASSESSING OFFICER H AS REJECTED CLAIM BY INVOKING PROVISIONS OF S. 10B (2)(II) AND (III) OF THE ACT. IN THIS CONNECTION, THE AUTHORISED REPRESENTATIVE OF THE APPELLANT SUBMITTED THAT IT IS AN ADMITTED POSITION THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE UNDERTAKING OF THE APPELLANT HAS BEEN CONVERTED FROM DTU TO 100% EOU AND THEREFORE THE APPELLANT IS ELIGIBLE TO CLAIM DEDUCTION U/S 10B OF THE ACT. THE A.R. FURTHER ARGUED THAT THE CASE OF THE APPELLANT IS SQUARELY COVERED BY THE CBDT CIRCULAR NO. 1/2005, DATED 06/01/ 2005 AND VARIOUS DECISIONS AS QUOTED IN THE WRITTEN SUBMISSION. 2.5 I HAVE PERUSED THE CBDT CIRCULAR NO.1/2005, DATED 06/01/2005 WHICH HAS BEEN REPRODUCED ON PAGE NOS.8 - 10 IN WRITTEN SUBMISSION FILED BY THE APPELLANT. VIDE PARA 2, THE CONDITIONS ARE LAID DOWN TO CLAIM DEDUCTION U/S 1 0B OF THE ACT WHICH INCLUDED THE PROVISIONS OF S. 10B (2)(II) AND(III) INVOKED BY THE ASSESSING OFFICER IN THE PRESENT CASE. VIDE PARA 3, IT HAS BEEN MENTIONED THAT VARIOUS REPRESENTATIONS WERE RECEIVED BY IT FROM VARIOUS QUART ERS, THAT AN UNDERTAKING SET UP IN A DOMESTIC TARIFF AREA (DTA) WHICH IS SUBSEQUENTLY APPROVED AS A 100 PER CENT EXPORT - ORIENTED UNDERTAKING (EOU) BY THE COMPETENT AUTHORITY, WOULD BE ELIGIBLE FOR DEDUCTION UNDER S. 10B OF THE ACT. THE BOARD VIDE PARA 4 H AS CLARIFIED THAT AN UNDERTAKING SET UP IN DOMESTIC TARIFF AREA (DTA) AND DERIVING PROFIT FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE MANUFACTURED OR PRODUCED BY IT, WHICH IS SUBSEQUENTLY CONVERTED INTO A EOU, SHALL BE ELIGIBLE FOR DEDUCTION UND ER SECTION 10B OF THE IT ACT, ON GETTING APPROVAL AS 100% EXPORT ORIENTED UNDERTAKING. IN SUCH A CASE, THE DEDUCTION SHALL BE AVAILABLE ONLY FROM THE YEAR IN WHICH IT HAS GOT THE APPROVAL AS 100% EOU AND SHALL BE AVAILABLE ONLY FOR THE REMAINING PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS, BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMPUTER SOFTWARE, AS A DTA UNIT. 2.6 FURTHER, IN THE YEAR OF APPROVAL, THE DEDUCTION SHALL BE RESTRICTED TO THE PROFITS DERIVED FROM EXPORTS, FROM AND AFTER THE DATE OF APPROVAL OF THE DTA UNIT AS 100% EOU. MOREOVER, THE DEDUCTION TO SUCH UNITS IN ANY CASE WILL NOT BE AVAILABLE AFTER ASSESSMENT YEAR 2009 - 10. THEREFORE, I AGREE WI TH THE ARGUMENTS OF THE A.R. OF THE APPELLANT THAT THE VERY CIRCULAR IS SQUARELY APPLICABLE IN THE FACTS OF THE CASE OF THE APPELLANT AND THEREFORE THE APPELLANT IS ELIGIBLE TO CLAIM DEDUCTION U/S 10B OF THE ACT FROM THE YEAR UNDER APPEAL ITA NO . 366 /AHD/ 20 1 2 ASSESSMENT YEAR: 2 0 0 8 - 09 PAGE 3 OF 6 WHEREIN THE UNDER TAKING OF THE APPELLANT HAS BEEN CONVERTED FROM DTA TO 100% EOU. I FURTHER FIND THAT ILLUSTRATION NO.1 AS PROVIDED IN THE SAID CIRCULAR IS ALSO APPLICABLE IN THE PRESENT CASE BEFORE ME. I HAVE ALSO PERUSED THE VARIOUS DECISIONS CITED BY THE A.R. OF THE APP ELLANT IN THE WRITTEN SUBMISSION INCLUDING JURISDICTIONAL ORDERS OF HON'BLE ITAT IN THE CASE OF ANITA SYNTHETICS (P) LTD. AND E - INFOCHIPS (SUPRA), WHEREIN ALSO, FOLLOWING THE CBDT CIRCULAR NO.1/2005, DATED 06/01/2005 IT HAS BEEN HELD THAT THE UNDERTAKING OF THE ASSESSEE SHALL BE ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT FROM THE YEAR IN WHICH IT HAS BEEN CONVERTED FROM DTA TO 100% EOU. HENCE, I AM OF THE OPINION THAT THE UNDERTAKING OF THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT FOR THE YEAR UNDER APPEAL ON ITS CONVERSION FROM DTA TO 100% EOU. 2.7 THE OBJECTION OF ASSESSING OFFICER IS THAT THE UNDERTAKING OF THE ASSESSEE IS FORMED BY RECONSTRUCTION OR SPLITTING UP IS CONCERNED. THE CONDITION LAID DOWN U/S 10B(2)(II) OF THE ACT APPARENTLY IS O NLY TO PREVENT CLAIMS WHERE AN UNDERTAKING IS FORMED THROUGH A DIVISION, RECONSTRUCTION, AND THE LIKE, OF THE RESOURCES ALREADY IN EXISTENCE, WHILE IN THE PRESENT CASE THE OWNERSHIP, MANAGEMENT AND CONTROL OF THE ASSETS OF BUSINESS CONTINUED TO VEST IN THE SAME ASSESSEE, BOTH PRIOR TO AND SUBSEQUENT TO ITS BEING CONVERTED FROM DTA TO 100% EOU. FURTHER, THE CBDT HAS ALREADY CLARIFIED THE ISSUE THAT ON CONVERSION FROM DTA TO 100% EOU, THE UNDERTAKING SHALL BE ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT. FURTHER I FIND THAT EVEN AS PER THE SCHEME OF THE ACT, THE APPELLANT WOULD BE ELIGIBLE TO CLAIM DEDUCTION FOR REMAINING UNEXPIRED PERIOD FROM THE ASSESSMENT YEAR IN WHICH IT STARTED TO EXPORT SOFTWARE, WHICH ALSO ENSURES THAT NO UNDUE ADVANTAGE IS AVAILED BY THE EXISTING UNIT, WHICH WOULD OTHERWISE QUALIFY FOR EXEMPTION, THOUGH ONLY AT OR WITH REFERENCE TO A FUTURE DATE, AND NOT FROM THE FIRST DAY OF THEIR OPERATION. THEREFORE, I AM OF THE OPINION THAT CONDITIONS LAID DOWN U/S 10B(2)(II) ARE NOT VIOLATED BY THE AP PELLANT AND THE UNDERTAKING OF THE APPELLANT IS DULY ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT. 2.8 THE SECOND OBJECTION OF THE ASSESSING OFFICER WAS THAT THE APPELLANT HAS VIOLATED CONDITIONS LAID DOWN U/S 10B(2)(III) OF THE ACT IN FORMING OF THE UNDERTA KING BY THE TRANSFER OF OLD PLANT & MACHINERY TO NEW BUSINESS IN EXCESS OF 20% OF TOTAL PLANT & MACHINERY. IT IS TO BE SEEN THAT THERE IS NO TRANSFER OF ASSETS IN THE PRESENT CASE. IT IS ONLY CONVERSION FROM DTA TO 100% EOU AS WELL AS THE OWNERSHIP, MANAGE MENT AND CONTROL OF THE ASSETS OF BUSINESS, PREMISES OF THE UNDERTAKING HAS CONTINUED TO VEST IN THE SAME ASSESSEE PRIOR TO AND AFTER CONVERSION FROM DTA TO 100% EOU. IT IS ONLY EARNED FORWARD OF BLOCK OF ASSETS FROM EARLIER ASSESSMENT YEAR TO THE YEAR UND ER APPEAL AND THEREFORE THE ACTION OF ASSESSING OFFICER IN TREATING THE SAME AS TRANSFER OF OLD PLANT & MACHINERY TO NEW BUSINESS IS NOT JUSTIFIED. FURTHER AS I HELD ABOVE THAT CBDT CIRCULAR HAS ALREADY CLARIFIED THAT ON CONVERSION FROM DTA TO 100% EOU, TH E UNDERTAKING SHALL BE ELIGIBLE TO CLAIM DEDUCTION U/S 10B OF THE ACT SUPPORTS THAT UNDER THE CIRCUMSTANCES, IT CANNOT BE TREATED AS TRANSFER OF PLANT & MACHINERIES. FURTHER IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER THAT THE APPELLANT HAD ACQUIRED O LD PLANT & MACHINERIES IN PREVIOUS ASSESSMENT YEARS OR ITA NO . 366 /AHD/ 20 1 2 ASSESSMENT YEAR: 2 0 0 8 - 09 PAGE 4 OF 6 DURING THE YEAR UNDER APPEAL. THEREFORE, I AM OF THE OPINION THAT CONDITION AS LAID DOWN U/S 10B(2)(III) IS ALSO NOT VIOLATED BY THE APPELLANT AND AS HELD BY ME THE UNDERTAKING OF THE APPELLANT IS DULY ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT ARE HELD BY FOLLOWING AUTHORITIES: INCOME TAX OFFICER V. ANITA SYNTHETICS (P) LTD. 100 TTJ 277 (AMD) ITO VS. E - LNFOCHIPS LTD. 124 TTJ 176 (AHD.) CIT VS. MAHAVIR SPINNING MILLS LTD. [303 ITR 353 (P& H)] SRA SYSTEMS LTD. V. DEPUTY COMMISSIONER OF INCOME TAX. 2009 - (024) - DTR - 0633 TMAD HAVING REGARD TO THE CBDT CIRCULAR NO.1/2005, DATED 06/01/2005, ABOVE CITED JURISDICTIONAL ORDERS AND OTHER DECISIONS AS WELL AS THE FACTS OF THE CASE, I AM OF THE OPINION THAT THE CONDITIONS LAID DOWN U/S 10B(2)(II) /(III) ARE NOT VIOLATED AND THE UNDERTAKING OF THE APPELLANT IS ELIGIBLE TO CLAIM DEDUCTION U/S 10B OF THE ACT. 2.9 ONCE IT IS DECIDED THAT THE APPELLANT IS ELIGIBLE TO CLAIM DEDUCTION U/S 10B OF THE A CT, THE NEXT ISSUE COMES IS THE QUANTUM OF THE DEDUCTION. THE APPELLANT IN THE RETURN OF INCOME HAS CLAIMED DEDUCTION OF RS. 41, 76,779/ - , HOWEVER, THE SAME WAS REVISED AT RS.34,87,738/ - DURING THE COURSE OF ASSESSMENT PROCEEDINGS THROUGH FILING REVISED AUD IT REPORT IN FORM NO.56G. BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS, THE A.R. OF THE APPELLANT WAS ASKED TO FILE WORKING OF DEDUCTION OF RS.34,87,738/ - CLAIMED BY THE APPELLANT, WHICH WAS FILED ALONGWITH FORM NO.56G DURING THE COURSE OF A SSESSMENT PROCEEDINGS AS SUBMITTED BY THE APPELLANT VIDE ITS ; LETTER DATED 16/12/2010 TO AO. WITH THIS REGARD, THE A.R. OF THE APPELLANT FILED THE STATEMENT SHOWING DEDUCTION CLAIMED U/S 10B OF THE ACT IN REVISED FORM NO.56G ALONG WITH ADDITIONAL WRITTEN S UBMISSION DATED 31/10/2011. ON PERUSAL OF SUCH DETAILS, I FIND THAT THE APPELLANT HAS CLAIMED DEDUCTION OF RS.34,87, 738/ - U/S 10B FOR THE PERIOD FALLING AFTER THE DATE OF APPROVAL OF 100% EOU I.E. 10/07/2007 TO 31/03/2008 AND THAT ALSO ON PROPORTIONATE BAS IS OF EXPORT TURNOVER TO TOTAL TURNOVER FOR THIS PERIOD, WHICH IS AS PER THE SCHEME OF THE ACT AND CBDT CIRCULAR (SUPRA). THEREFORE, I AM OF THE OPINION THAT THE APPELLANT HAS RIGHTLY CLAIMED DEDUCTION TO THE EXTENT OF RS.34,87,738/ - U/S 10B OF THE ACT AND THEREFORE, THE SAME IS ALLOWED. HOWEVER, BALANCE AMOUNT OF DEDUCTION OF RS. 6,89,041/ - (RS.41,76,779/ - MINUS RS.34,87,738/ - ) CLAIMED U/S 10B OF THE ACT IN THE RETURN OF INCOME IS NOT AVAILABLE TO THE APPELLANT AND ITA NO . 366 /AHD/ 20 1 2 ASSESSMENT YEAR: 2 0 0 8 - 09 PAGE 5 OF 6 THEREFORE, DISALLOWANCE TO THAT EXTENT MAD E BY THE ASSESSING OFFICER IS CONFIRMED. THEREFORE, THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED. 3. HEA R D BOTH THE PARTIES. RELEVANT RECORDS PERUSED. WE HAVE ALREADY NARRATED FACTUAL BACKDROP OF THE CASE IN PRECEDING PARA GRAPHS . THE SAME IS NOT REPEAT ED FOR THE SAKE OF BREVITY. IT HAS COME ON RECORD THAT THE ASS ESSEE HA S CONVERTED ITS UNDERTAKING TO THAT FROM DT A TO 100% EXPORT ORIENTED U NDERTAKING . T HIS CRUCIAL FACT HAS GONE UN - REBUTTED. T HERE IS FURTHER NO DISPUTE THAT THE BOARD CIRCULAR N O.1/2005 DATED 0 6. 0 1.2005 ALREADY TREATS SUCH AN UNDERTAKING TO BE ELIGIBLE FOR SECTION 10B DEDUCTION ON GETTING APPROVAL AS 100% EXPORT ORIENTED UNDERTAKING . A CO - ORDINATE BE NCH OF THE TRIBUNAL IN ITA NO. 2875/A HD/2004 DECIDED ON 29.01.2010 IN THE CASE OF ITO VS . ABEY CHEMICALS P VT . L TD . REJECTS AN IDENTICAL CONDITION RAISED AT REVENUE S BEHEST. THIS VIEW STANDS CONFIRMED IN REVENUE S T AX A PPEAL N O.1601 OF 2010 DISMISSED ON 18.10.2011. W E DRAW SUPPORT FROM ALL OF T HE ABOVE STATED FACTS AND CASE LAW AS WELL AS THE B O ARD S CIRCULAR TO CONCLUDE THAT THE CIT(A) HAS RIGHTLY HELD ASSE SSEE S SECTION 10B DED UCTION CLAIM OF RS.34,87,738/ - ALLOWABLE AS PER LAW. THE SO LE SUBSTANTIVE GROUND RAISED IN THIS APPEAL FAILS. 4. IN THE RESULT, T HIS REVENUE S APPEAL IS DISMISSED. P RO NOUNCED IN THE OPEN COURT ON THIS 11 TH D AY OF DECEMBER, 2015. SD/ - SD/ - PRAMOD KUMAR S.S. GODARA ( ACCOUNTANT MEMBER) ( JUDICIAL MEMBER) AHMEDABAD , THE 11 TH DAY OF DECEMBER , 201 5 PBN/* ITA NO . 366 /AHD/ 20 1 2 ASSESSMENT YEAR: 2 0 0 8 - 09 PAGE 6 OF 6 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD