M/s. VSR Infotech , Visakhapatnam V. The ITO , Visakhapatnam

ITA 374/VIZ/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8742 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 25-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEBAKUMAR SONOWAL
• Keywords: Bonafide belief; Condonation of delay
• Section: 143(3); 10B; 148; 263; 10

Judgement Text

ITA NO.373 & 374/VIZAG/2016 M/S. VSR INFOTECH, VISAKHAPATNAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . .. . . . . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.373& 374/VIZAG/2016 ( / ASSESSMENT YEAR: 2008-09 & 2010-11) M/S. VSR INFOTECH VISAKHAPATNAM ITO, WARD - 3(2) VISAKHAPATNAM [PAN NO. AAFFV8176P ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI DEBA KUMAR SONOWAL, DR / DATE OF HEARING : 21.02.2018 / DATE OF PRONOUNCEMENT : 2 8. 02.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED A GAINST ORDER OF THE COMMISSIONER OF INCOME TAX-1 (CIT), VISAKHAPATN AM VIDE F.NO.CIT- 1/VSP/263/11/2014-15 DATED 30.3.2016 FOR THE ASSESS MENT YEARS 2008- 09 & 2010-11. SINCE THE FACTS ARE IDENTICAL AND THE ISSUE INVOLVED IS ITA NO.373 & 374/VIZAG/2016 M/S. VSR INFOTECH, VISAKHAPATNAM 2 COMMON IN THESE APPEALS, THEY ARE CLUBBED, HEARD TO GETHER, DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE FILED APPEALS WITH A DELAY OF 453 D AYS. IN THIS CASE, THE ORDER OF THE CIT(A) WAS SERVED ON THE ASSESSEE ON 31.3.2015, THE APPEAL OUGHT TO HAVE BEEN FILED ON 29.5.2015 AGAINS T WHICH, THE ASSESSEE HAS FILED APPEAL ON 22.8.2016 FOR THE A.Y 2008-09. THE ASSESSEE FILED AN AFFIDAVIT EXPLAINING REASONS FOR DELAY. IN HIS PETITION FOR CONDONATION OF DELAY, THE ASSESSEE SUBMITTED THAT H E WAS IN MUMBAI FROM JULY, 2014 AND HAD RECEIVED THE ORDER OF THE C IT U/S 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE AC T') THROUGH HIS AUDITOR ON 31.3.2015 AND AFTER SIGNING HE HAD SENT THE APPEAL PAPERS TO THE ACCOUNTANT OF THE FIRM. THE ACCOUNTANT OF THE FIRM HAD FORGOTTEN TO HAND OVER THE DOCUMENTS TO THE CHARTERED ACCOUNTANT AND MEANWHILE HE LEFT THE JOB OF THE ASSESSEE FIRM WITHOUT HANDIN G OVER THE APPEAL PAPERS TO THE INCUMBENT ACCOUNTANT. THE MANAGING PARTNER WAS UNDER THE BONAFIDE BELIEF THAT APPEAL WAS FILED IN TIME. MEANWHILE, THE MANAGING PARTNER STATED TO HAVE LEFT TO SINGAPORE A ND THEREAFTER HE WAS BUSY IN TRAVELLING IN SEARCH OF NEW ASSIGNMENTS. S UBSEQUENTLY, HE GOT THE NEW ASSIGNMENT BASED AT USA AND HE HAD TO TRAVE L TO USA ON 29.4.2016 TO GET ACQUAINTED WITH THE REQUIREMENT OF NEW CLIENTS AND HE RETURNED TO INDIA IN THE FIRST WEEK OF JULY, 2016 A ND BY SURPRISE, HE HAD ITA NO.373 & 374/VIZAG/2016 M/S. VSR INFOTECH, VISAKHAPATNAM 3 RECEIVED THE ORDER PASSED BY THE A.O. GIVING EFFECT TO THE REVISION ORDER U/S 263 OF THE ACT ON 19.7.2016, THEN ONLY HE CAME TO KNOW THAT THE ASSESSEE HAS NOT PREFERRED THE APPEAL AGAINST ORDER U/S 263 OF THE ACT. AFTER COMING TO KNOW THAT THE APPEAL WAS NOT FILED, THE ASSESSEE FILED THE APPEAL WITH A REQUEST TO CONDONATION OF DELAY. THE ASSESSEE HAS ENCLOSED A COPY OF THE PASSPORT EVIDENCING THE TRAV ELLING DATES OUT OF COUNTRY. THE LD. A.R. ARGUED THAT THERE IS A REASO NABLE AND SUFFICIENT CAUSE FOR NOT FILING OF APPEAL AND THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT THE APPEAL WAS FILED. THERE WAS NO WIL LFUL DEFAULT FROM THE ASSESSEE IN FILING THE APPEAL. THE LD. A.R. FURTHE R ARGUED THAT THERE WAS MERIT IN THE ASSESSEES CASE AND MERELY BECAUSE OF THE BONAFIDE DEFAULT CONDONATION OF DELAY SHOULD NOT BE REJECTED. THE L D. A.R. FURTHER ARGUED THAT NON CONDONATION OF DELAY WOULD CAUSE FI NANCIAL INJURY TO THE ASSESSEE AND ACCORDINGLY REQUESTED FOR CONDONATION OF DELAY AND ADMIT THE APPEAL OF THE ASSESSEE. 3. ON THE OTHER HAND, THE LD. D.R. ARGUED THAT THER E WAS A DELAY OF 453 DAYS IN THIS CASE, WHICH IS A LONG DELAY WHICH REQUIRED TO BE EXPLAINED. THE ASSESSEE HAS NOT EXPLAINED THE DELA Y SATISFACTORILY; HENCE, OPPOSED THE CONDONATION OF DELAY. 4. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE EVIDENCE PLACED BEFO RE US. IN THIS CASE, ITA NO.373 & 374/VIZAG/2016 M/S. VSR INFOTECH, VISAKHAPATNAM 4 THE FACT THAT THE ASSESSEE WAS NOT RESIDING IN VISA KHAPATNAM AND RESIDING AT MUMBAI WAS NOT DISPUTED BY THE REVENUE. SIMILARLY, THE LD. A.R. EXPLAINED THAT THE ASSESSEE WAS UNDER THE BONA FIDE BELIEF THAT THE APPEAL WAS FILED SINCE THE PAPERS WERE SENT TO THE ACCOUNTANT AFTER DULY SIGNED BY THE MANAGING PARTNER AND DUE TO FREQUENT TRAVEL TO ABROAD AND OVERSTAYAL, THE ASSESSEE COULD NOT FOLLOW UP WI TH THE AUTHORIZED REPRESENTATIVE WITH REGARD TO THE STATUS OF FILING OF APPEAL. THE LD. A.R. ALSO ARGUED THAT THERE IS SUBSTANTIAL MERIT IN THE CASE OF THE ASSESSEE AND NON CONDONATION OF DELAY WOULD CAUSE FINANCIAL INJURY AND INJUSTICE TO THE ASSESSEE. THEREFORE, IN THE INTEREST OF JUS TICE, WE ARE OF THE VIEW THAT THE DELAY REQUIRED TO BE CONDONED IN THE ASSES SEES CASE, ACCORDINGLY, THE DELAY IS CONDONED AND THE APPEAL I S ADMITTED. 5. IN THIS CASE, THE ASSESSMENT WAS COMPLETED U/S 1 43(3) OF THE ACT ORIGINALLY ON 30.8.2010 ACCEPTING THE INCOME RETURN ED. THE ASSESSEE FILED RETURN OF INCOME ADMITTING TOTAL INCOME OF ` 2,50,220/- ON 29.8.2008. SUBSEQUENTLY, THE ASSESSMENT WAS REOPEN ED U/S 148 OF THE ACT ON 29.2.2012 FOR VERIFICATION OF THE ASSESSEES ELIGIBILITY REGARDING THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 10B OF TH E ACT. THE ASSESSEE HAD CLAIMED EXEMPTION OF ` 53,07,039/- U/S 10B OF THE ACT FOR THE A.Y.2008-09. FOR THE A.Y2010-11 THE ASSESSEE HAS CL AIMED THE ITA NO.373 & 374/VIZAG/2016 M/S. VSR INFOTECH, VISAKHAPATNAM 5 EXEMPTION OF ` 88,80,362/- U/S 10B AND THE ASSESSMENT WAS COMPLET ED UNDER SECTION143(3) OF THE ACT DATED 17/12/2012. 6. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF COM PUTER SOFTWARE AND REGISTERED WITH THE SOFTWARE TECHNOLOGY PARK OF INDIA (STPI), DUVVADA, VISAKHAPATNAM. THE A.O. HAS CALLED FOR TH E EXPLANATION OF THE ASSESSEE AS TO WHY THE EXEMPTION CLAIMED BY THE ASS ESSEE U/S 10B OF THE ACT SHOULD NOT BE DISALLOWED AND REQUESTED THE ASSESSEE TO PRODUCE INFORMATION WITH REGARD TO THE SATISFACTION OF THE CONDITIONS LAID DOWN FOR GRANTING DEDUCTION U/S 10B OF THE ACT AS WELL A S THE APPROVAL FROM THE BOARD FOR ALLOWING THE EXEMPTION U/S 10B. THE ASSESSEE HAD REPLIED TO THE A.O., AND THE SAME IS EXTRACTED AS U NDER: ON VERIFICATION OF PROFIT AND LOSS ACCOUNT AND COM PUTATION IT IS NOTICED THAT THE ASSESSEE HAS CLAIMED EXEMPTION U/S 10B OF RS. 53,07,039,ACCORDING TO THE PROVISIONS OF SECTION LO B, FOR CLAIMING EXEMPTION UNDER THIS SECTION THE ASSESSEE SHOULD OB TAIN STATUTORY APPROVAL FROM BOARD OF APPROVAL' APPOINTED BY GOVER NMENT OF INDIA. IN THIS CASE NO PROOF FOR APPROVAL OBTAINED FROM 'BOAR D OF APPROVAL' PLACED ON RECORD. FURTHER, THE DEDUCTION U/S 10B IS AVAILA BLE TO UNDERTAKING WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING OR COMPUTER SOFTWARE. BUT, THE ASSESSEE IS PROVIDING CERTAIN CO NSULTING SERVICES TO THE 'CHEMTURA' COMPANY RELATING TO EAS MARKETING, SALES AND SERVICES. FURTHER, THE CONSULTING AGREEMENT WITH 'CHEMTURA' W AS EXPIRED ON 1-3-2007 AND NO AGREEMENT FOR THE F.Y.2007-08 RELEV ANT TO A.Y.2008- 09. THE ASSESSEE IS ALSO REQUIRED TO ENTER A LEGAL AGREEMENT WITH THE DIRECTOR, STPI, HYDERABAD IN THE PRESCRIBED FORM AP ENDIX-14F. IN THE ABSENCE OF THE ABOVE APPROVALS AND AGREEMENTS THE A SSESSEE FIRM IS NOT ENTITLED FOR EXEMPTION U/S LOB. THEREFORE, THE ASSE SSEE IS ASKED TO PRODUCE THE INFORMATION AND ALSO CALLED UPON AS TO WHY THE EXEMPTION CLAIMED U/S 10B SHOULD NOT BE WITHDRAWN. IN RESPONS E THERETO THE ASSESSEE FURNISHED A DETAILED REPLY AS UNDER: 'A) APPROVAL FROM BOARD: IT WAS MENTIONED IN YOUR L ETTER THAT THE ASSESSEE SHOULD OBTAIN STATUTORY APPROVAL FROM THE BOARD APPOINTED BY ITA NO.373 & 374/VIZAG/2016 M/S. VSR INFOTECH, VISAKHAPATNAM 6 GOVERNMENT OF INDIA. YOU HAVE ALSO MENTIONED THE CAS E OF MIS INFOTECH ENTERPRISES LTD VS CIT. BUT HOWEVER THE INCOME TAX APPELLATE TRIBUNAL, HYDERABAD, IN THE CASE SECUNDERABAD SOFTWARE VS. CI T, HAS HELD THAT, HAVING BEEN REGISTERED WITH STPI, IS ENTITLED FOR D EDUCTION UNDER SECTION 10B OF THE INCOME TAX ACT. IT HAS SPECIFICALLY MENTI ONED THAT STPI REGISTRATION IS SUFFICIENT TO CLAIM DEDUCTION UNDER SECTION 108 OF THE IT ACT. WE HEREWITH ENCLOSED THE COPY OF THE SAID CASE FOR YOUR REFERENCE. WE ALSO HEREWITH ENCLOSED ANOTHER TRIBUN AL CASE SMT, K.SUDHA RANI VS. DEPARTMENT OF INCOME TAX (ITA NO. 4 12\HYD\2012). B) COMPUTER SOFTWARE: IT WAS MENTIONED IN YOUR LETT ER THAT DEDUCTION U/S. LOB IS AVAILABLE ONLY TO AN UNDERTAKING WHICH FULFI LS 'MANUFACTURE, OR PRODUCES ANY ARTICLE OR THING OR COMPUTER SOFTWARE. WE INVITE YOUR KIND ATTENTION TO THE NOTIFICATION ISSUED BY CENTRAL BOA RD OF DIRECT TAXES VIDE NOTIFICATION NO. 11521 DATED 26-9-2000. AS PER THE SAID NOTIFICATION, THE FOLLOWING INFORMATION TECHNOLOGY ENABLED PRODUCTS O R SERVICES ARE COVERED UNDER SECTION LOB. (I) BACK-OFFICE OPERATIONS; (II) CALL CENTRES; (III) CONTENT DEVELOPMENT OR ANIMATION; .JIV) DATA PROCES SING; (V) ENGINEERING AND DESIGN; (VI) GEOGRAPHIC INFORMATION SYSTEM SERVICES; (VII) HUMAN RESOURCE SERVICES; (VIII) INSURANCE CLAIM PROCESSING; (IX) LEGAL DATABASES; (X) MEDICAL TRANSCRIPTION; (XI) PAYROLL; (XII) REMOTE MAINTENANCE; (XIII) REVENUE ACCOUNTING; (XIV) SUPPORT CENTRES (XV) WEBSITE SERVICES- OUR SERVICES TO THE COMPANY CHEMTURA WOULD SQUARELY COVER UNDER COMPUTER SOFTWARE AS PER THE ABOVE CIRCULAR. C) IT WAS ALSO MENTIONED THAT THE AGREEMENT WITH CH EMTURA WAS EXPIRED ON 1S T MARCH, 2007. WE HEREWITH ENCLOSED THE RENEWED AGRE EMENT WITH CHEMTURA. D) WE ALSO HEREWITH ENCLOSED THE LEGAL AGREEMENT WI TH THE DIRECTOR STPI, IN THE PRESCRIBED FORM OF APPENDIX- 14F. HENCE, WE REQUEST YOUR GOODSELVES TO DROP THE RE-OP ENING OF ASSESSMENT UNDER SECTION 148 OF THE INCOME TAX ACT. ' THE ASSESSEE HAS ENTERED INTO LEGAL AGREEMENT WITH THE DIRECTOR, ITA NO.373 & 374/VIZAG/2016 M/S. VSR INFOTECH, VISAKHAPATNAM 7 STPI, HYDERABAD ON 7-7-2006 IN THE PRESCRIBED FROM 1 4-IF WITHIN ONE MONTH FROM THE DATE OF LETTER OF APPROVAL (LOP) DAT ED 29-06-2006 AND FURNISHED COPY OF THE SAME. THE ASSESSEE ALSO FURNI SHED THE REVIVAL AND EXTENSION OF CONSULTING AGREEMENT WITH 'CHEMTURA' F ROM 1-3-2007 TO 31-3-2006. THE ASSESSEE FURNISHED COPY OF THE NOTIF ICATION NO. 11521 DATED 26-9-2000 ISSUED BY THE CBDT AND AS PER WHICH ALL THE INFORMATION TECHNOLOGY ENABLED SERVICES ARE COVERED UNDER CLAUSE (B) OF EXPLANATION 2 OF THE SECTION 10B WERE COVERED. THE ASSESSEE SUBMITTED THAT THE SERVICES RENDERED TO 'CHEMTURA' INVOLVES (A) SUPPORT AND CONFIGURING SAP BUSINESS PROCESSS, (B) LEAD BUSINESS BLUE PRINT/GAP ANALYSIS SESSIONS (C) PROVIDE WEEKLY PROJECTS UPDATES OR AS REQUIRED (D) DEVELOPMENT OF SOLUTIONS TO ISSUE (E) TRAINING OF USERS FUNCTIONALITY, AS REQUIRED (F) DEMONSTRATION OF SAP PROCESSES (G) OTHER SAP RELATED SERVICES AS REQUIRED (H) INVESTIGATION OF SAP BEST PRACTICES (I) DATA MIGRATION AS REQUIRED. HE EXPLAINED THAT SOME OF THE ABOVE SERVICES COVER UNDER DATA PROCESSING AND SOME OF THE SERVICES COVER UNDER REM OTE MAINTENANCE OF CBDT NOTIFICATION NO. 11521 DATED 26-9-2000. A LETTER WAS ADDRESSED TO THE DIRECTOR, SOFTWARE TE CHNOLOGY PARKS OF INDIA, VSEZ, DUVVADA, VISAKHAPATNAM TO PRO VIDE COPY OF APPROVAL OR RATIFICATION OF LOP BY 'BOARD OF APPROV AL' ON 16-11-2012. THE SOFTWARE TECHNOLOGY PARKS OF INDIA VIDE ITS LET TER DATED 5-122012 FURNISHED A COPY OF LETTER NO.1(1)/06-IPHW DATED 7- 9-2006 BY THE ADDITIONAL DIRECTOR, DEPARTMENT OF IT TO THE DIRECT OR, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, CBDT, NORTH BLOCK, NEW DELHI STATING THAT NO FURTHER RATIFICATION OF APPROVALS I SSUED BY THE DIRECTORS OF SOFTWARE TECHNOLOGY PARKS OF INDIA IS REQUIRED F ROM THE INTER MINISTERIAL STANDING COMMITTEE(IMSC). IT IS CLARIFI ED THAT TAX BENEFITS SHALL NOT BE DENIED BY INCOMETAX DEPARTMENT TO STP UNITS ONLY ON THE GROUND THAT THE APPROVAL TO UNITS HAVE BEEN GRANTED BY THE DIRECTORS OF SOFTWARE TECHNOLOGY PARKS OF INDIA. 7. AFTER VERIFICATION OF THE INFORMATION FURNISHED BY THE ASSESSEE AND AFTER CONSIDERING THE CLARIFICATION RECEIVED FROM T HE DIRECTOR, THE A.O. ACCEPTED THE CLAIM OF THE ASSESSEE AND COMPLETED TH E REASSESSMENT ALLOWING THE EXEMPTION CLAIMED U/S 10B OF THE ACT. ITA NO.373 & 374/VIZAG/2016 M/S. VSR INFOTECH, VISAKHAPATNAM 8 8. IN THE ASSESSMENT YEAR 2010-11, THE ASSESSMENT W AS COMPLETED U/S 143(3) OF THE ACT ALLOWING THE EXEMPTION U/S 10 B OF THE ACT. THE A.O. COMPLETED THE ASSESSMENT IN THE ASSESSMENT YEA R 2010-11 ALSO AFTER VERIFICATION OF THE ELIGIBILITY OF THE ASSESS EE WITH REGARD TO THE ENGAGEMENT OF ASSESSEE IN THE COMPUTER SOFTWARE SER VICES AND ALSO WITH REGARD TO THE REQUIREMENT OF APPROVAL FROM THE BOARD APPOINTED BY THE GOVERNMENT OF INDIA. SUBSEQUENTLY, THE LD. CIT HAS TAKEN UP THE CASES FOR REVISION FOR BOTH THE ASSESSMENT YEARS AN D HELD THAT THE ASSESSMENTS MADE BY THE A.O. WERE ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE DUE TO THE FOLLOWING REASON S: THE ASSESSEE IS ENGAGED ONLY IN CONSULTANCY WORK WH ICH WILL NOT COME WITH IN THE PURVIEW OF SECTION 10B OF THE AC T. THE A.O. HAS NOT FOLLOWED THE RATIO OF THE DELHI HIGH COURT IN THE C ASE OF M/S. REGENCY CREATIONS LIMITED AS MENTIONED ABOVE. 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE LD. CIT HAS TAKEN UP THE CASE FOR REVISION U/S 263 OF T HE ACT SINCE THE ASSESSEE IS NOT IN THE ACTIVITY OF MANUFACTURING TH E COMPUTER SOFTWARE AND THE ASSESSEE DID NOT OBTAIN THE APPROVAL FROM T HE BOARD TO BE CONSTITUTED BY CENTRAL GOVERNMENT WHICH ISSUES NOTI FICATION. HOWEVER, ITA NO.373 & 374/VIZAG/2016 M/S. VSR INFOTECH, VISAKHAPATNAM 9 ON VERIFICATION OF THE ASSESSMENT ORDER, IT IS OBSE RVED THAT THE ASSESSING OFFICER HAS EXAMINED THE ISSUE WHETHER THE ASSESSEE IS CARRYING ON CONSULTANCY WORK OR ENGAGED IN THE MANUFACTURING OF COMPUTER SOFTWARE. IN THE REPLY SUBMITTED BY THE ASSESSEE B EFORE THE A.O. WHICH WAS REPRODUCED ABOVE, THE ASSESSEE SUBMITTED THAT T HE IT IS ENGAGED IN THE DATA PROCESSING AND REMOTE MAINTENANCE WHICH IS INFORMATION TECHNOLOGY ENABLED PRODUCTS OR SERVICES COVERED U/S 10B OF THE ACT AS PER THE NOTIFICATION ISSUED BY THE VIDE CBDT VIDE N OTIFICATION NO.11521 DATED 26.9.2000. SINCE THE ISSUE HAS BEEN CONSIDER ED BY THE ASSESSING OFFICER AND TAKEN A CONSCIOUS DECISION THAT THE ASS ESSEE IS ENGAGED IN THE COMPUTER SOFTWARE AFTER CONDUCTING NECESSARY EN QUIRY AND ANALYZING THE INFORMATION FILED BY THE ASSESSEE, THE LD. CIT IS NOT PERMITTED TO REVISIT THE SAME ISSUE WHICH WAS ALREADY EXAMINED B Y THE ASSESSING OFFICER AND ALLOWED THE DEDUCTION. SIMILARLY, THE ISSUE WITH REGARD TO THE APPROVAL FROM THE BOARD CONSTITUTED BY CENTRAL GOVE RNMENT WAS ALSO EXAMINED BY THE ASSESSING OFFICER. THE A.O. HAS CO NDUCTED ENQUIRIES WITH THE DIRECTOR, SOFTWARE TECHNOLOGY PARKS OF IND IA, VSEZ, DUVVADA, VISAKHAPATNAM WHO HAS CLARIFIED VIDE LETTER DATED 5 .12.2012 THAT ONCE THE DIRECTOR, STPI APPROVES THE UNIT, NO FURTHER RA TIFICATION OF APPROVAL FROM THE INTER-MINISTERIAL STANDING COMMITTEE IS RE QUIRED AND THE INCOME TAX BENEFITS SHOULD NOT BE DENIED ON THE GROUND THA T THE APPROVAL OF ITA NO.373 & 374/VIZAG/2016 M/S. VSR INFOTECH, VISAKHAPATNAM 10 UNITS HAVE BEEN GRANTED BY THE DIRECTOR OF STPI. H ENCE, IT IS EVIDENT FROM THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 147/143(3) OF THE ACT THAT THE A.O. HAS EXAMINED THE ISSUE OF REQUIRE MENT OF APPROVAL FROM THE BOARD ALSO. 10. HONBLE ITAT, HYDERABAD A BENCH IN ITA N O.412/HYD/2010 DATED 17.9.2010 IN THE CASE OF K. SUDHARANI HAS EXA MINED THE ISSUE WITH REGARD TO THE REQUIREMENT OF APPROVAL BY THE B OARD APPOINTED BY THE CENTRAL GOVERNMENT IN EXERCISE OF POWERS U/S 14 OF THE INDUSTRIES (DEVELOPMENT & REGULARISATION ACT, 1951) AND THE RU LES MADE THEREUNDER, WHICH PRESCRIBED UNDER THE INCOME TAX A CT FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 10B OF THE ACT AND GAVE A RULING THAT THE APPROVAL OF 100% EOU BY THE BOARD AND STPI IS ONE A ND THE SAME AND THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10B OF T HE ACT. FOR READY REFERENCE, WE EXTRACT RELEVANT PARA NO.3 OF THE CIT ED ORDER WHICH READS AS UNDER: 3. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OP INION THAT SIMILAR ISSUE CAME FOR CONSIDERATION BEFORE THIS TRIBUNAL I N ASSESSEES OWN CASE IN ITA NO.1750/HYD/2008 VIDE ORDER DATED 30.10.2009 WH EREIN IT WAS HELD AS FOLLOWS: 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIALS AVAILABLE ON RECORD. ONE OF THE CONDITION S PRESCRIBED BY THE STATUTE FOR CLAIMING EXEMPTION U/S 10B OF TH E ACT IS THAT THE UNIT BEGINS TO MANUFACTURE OR PRODUCE COMPUTER SOFTWARE/IT ENABLED SERVICES IN ANY SOFTWARE TECHNO LOGY PARK (STP). AS PER EXPLANATION 2 (VII) TO SECTION 1OA, S TP OR STPI (SOFTWARE TECHNOLOGY PART OF INDIA) MEANS ANY PARK SET UP IN ITA NO.373 & 374/VIZAG/2016 M/S. VSR INFOTECH, VISAKHAPATNAM 11 ACCORDANCE WITH THE SOFTWARE TECHNOLOGY PARK SCHEME NOTIFIED BY THE GOVERNMENT IN THE MINISTRY OF COMMERCE AND I NDUSTRY. THE DEDUCTION U/S 10B AS CLAIMED HAS BEEN DENIED IN THE CASE UNDER CONSIDERATION BY THE DEPARTMENT ONLY ON THE G ROUND THAT SOFTWARE TECHNOLOGY PARK SCHEME AS NOTIFIED STIPULA TES THAT THE ENTITY STP MUST BE APPROVED BY THE BOARD AND MERE A PPROVAL BY THE INTER MINISTERIAL STANDING COMMITTEE (IMSC) IS NOT ENOUGH. AS PER GAZETTE NOTIFICATION GSR NO.526(E) P UBLISHED IN PART II SEC. III OF THE GAZETTE OF INDIA EXTRA O RDINARY, DATED 13TH AUGUST, 1991, THE IMSC WAS INVESTED WITH THE FUNCT ION OF APPROVAL OF SETTING UP OF 100% EOUS FOR THE UNITS U NDER THE STP SCHEME. IT MAY BE NOTED THAT STP WHILE REGISTER ING A UNIT EXECUTES AN AGREEMENT BETWEEN SUCH UNIT AND PRESIDE NT OF INDIA (REFERRED TO AS THE GOVT.) AND ACCORDINGLY GR ANTS THE STATUS OF 100% EXPORT ORIENTED UNIT AS DEFINED IN M INISTRY OF COMMERCE, NOTIFICATION NO.33 (RE) 92-97 DATED 22' M ARCH 1994 ON SOFTWARE TECHNOLOGY PARKS. HENCE, IT IS NOT RELEVANT AS TO HOW THE SOFTWARE TECHNOLOGY PARKS. HENCE, IT IS NOT RELEVANT AS TO HOW THE STATUTORY OBLIGATION OR AUTHORITY IS DELEGATED TO STP SINCE IT IS AN INTERNAL MATTER OF THE GOVT. THE REFORE, ONCE STP APPROVES THE UNIT AS A 100% EXPORT ORIENTED UND ERTAKING, IT SHOULD BE ALLOWED DEDUCTION U/S LOB PROVIDED IT COMPLIES WITH OTHER CONDITIONS AS SPECIFIED IN THAT SECTION. S.10B IS A SPECIAL INCENTIVE PROVISION INTRODUCED BY THE LEGIS LATURE IN ORDER TO PROMOTE EXPORTS OF COMPUTER SOFTWARE/IT EN ABLED SERVICES AND THEREFORE THE SAME OUGHT TO BE CONSTRU ED LIBERALLY. THE SUPREME COURT IN THE CASE OF BAJAJ T EMPO LTD. VS. CIT (196 ITR 188) HAD HELD AS UNDER: A PROVISION IN TAXING STATUTE GRANTING INCENTIVES F OR PROMOTING GROWTH AND DEVELOPMENT SHOULD BE CONSTRUED LIBERALLY, THE RESTRICTION ON IT TOO HAS TO BE CONSTRUED SO AS TO ADVANCE OBJECTIVE OF THE PROVISION AND NOT TO FRUSTRATE IT'. THERE IS NO DISPUTE THAT THE ASSESSEE IN THE INSTAN T CASE HAS OBTAINED APPROVAL FROM STP HYDERABAD AS 100% EOU. T HE FIRST APPELLATE AUTHORITY HELD THAT THE ASSESSEE AS NOT E LIGIBLE FOR RELIEF U/S LOB ONLY ON THE GROUND THAT THE 100% EOU UNDER STP SCHEME CANNOT BE EQUATED WITH THE 100% EOU APPROVED BY THE BOARD. SINCE IN OUR CONSIDERED OPINION THE APPROVAL OF 100% EOU BY THE BOARD AND STP IS ONE AND THE SAME, ASSES SEE IS ELIGIBLE FOR EXEMPTION U/S 10B OF THE ACT. WE ACCOR DINGLY, SET ASIDE THE IMPUGNED ORDER OF THE CIT(A), AND DIRECT THE ASSESSING OFFICER TO ALLOW THE ASSESSEE'S CLAIM FOR EXEMPTION U/S 10B OF THE ACT, ALLOWING THE GROUNDS OF THE ASSESSE E IN THIS BEHALF. ITA NO.373 & 374/VIZAG/2016 M/S. VSR INFOTECH, VISAKHAPATNAM 12 11. THE REVENUE WENT ON APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT AGAINST THE ORDER OF THE HONBLE ITAT IN THE CASE CITED (SUPRA) AND THE HONBLE JURISDICTIONAL HIGH COURT D ISMISSED THE APPEAL OF THE REVENUE. THEREFORE, ISSUE IS PUT AT REST BY TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF K. SUDHARANI IN ITTA NO.8 7 OF 2013 DATED 25.6.2013 WITH REGARD TO THE REQUIREMENT OF BOARD A PPROVAL. SIMILAR VIEWS ARE TAKEN BY THE HONBLE ITAT B BENCH IN FO LLOWING CASES: (I) ITA NOS.836, 815, 816, 817/HYD/2016 & 916/HYD/2017 IN THE CASE OF DCIT, CIRCLE-8(1), HYDERABAD VS. M/S. VALUE LABS, HYDERABAD DATED 15.12.2017. (II) ITA NO.1501/HYD/2011 IN THE CASE OF ITO WARD-3(1), HYDERABAD VS. M/S. SECUNDERABAD SOFTWARE SERVICES, SECUNDERABAD DATED 10.4.2012. 12. THEREFORE, IT IS EVIDENT FROM THE ORDER OF THE A.O. THAT THE A.O. HAS TAKEN ONE OF THE POSSIBLE VIEWS. THEREFORE, ON CE THE A.O. HAS TAKEN ONE OF THE POSSIBLE VIEWS AFTER CONDUCTING THE ENQU IRIES, THE LD. CIT IS NOT PERMITTED TO TAKE UP THE CASE FOR REVISION U/S 263 BECAUSE THE LD. CIT HAS ANOTHER INDEPENDENT VIEW. THIS VIEW IS SUP PORTED BY THE HONBLE SUPREME COURT DECISION IN THE CASE OF CIT V S. MAX INDIA LIMITED 166 TAXMAN.COM 0188 AND SIMILAR VIEW WAS EXPRESSED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT GUJARAT II VS. QUA LITY STEEL SUPPLY COMPLEX 84 TAXMANN.COM 234 (SC). HONBLE APEX COURT HELD THAT ITA NO.373 & 374/VIZAG/2016 M/S. VSR INFOTECH, VISAKHAPATNAM 13 WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE OF THE VIEWS WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREF ORE, WE HOLD THAT THERE IS NO CASE FOR ASSUMING JURISDICTION BY THE LD. CIT U/S 263 OF THE ACT, ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT A ND ALLOW THE APPEAL OF THE ASSESSEE. 13. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E ARE ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 28 TH FEB18. SD/- SD/- ( . ) ( . .. . . . . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 28.02.2018 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT M/S. VSR INFOTECH, D.NO.9-42-9/3 1, FLAT NO.504, MAHALAKSHMI TOWERS, BALAJI NAGAR, SIRIPURAM, VISAKHAPATNAM 2. / THE RESPONDENT THE ITO, WARD-3(2), VISAKHAPATN AM 3. + / THE CIT-1, VISAKHAPATNAM 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM ITA NO.373 & 374/VIZAG/2016 M/S. VSR INFOTECH, VISAKHAPATNAM 14 SL. NO. DESCRIPTION DATE INITIALS 1. DATE OF DICTATION BY THE AUTHOR 22.02.2018 SR.P S 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 23.02.2 018 SR.PS 3. DRAFT PLACED BEFORE THE SECOND MEMBER SR. PS 4. DRAFT APPROVED BY THE SECOND MEMBER SR. PS 5. DATE OF APPROVED ORDER COMES TO THE SR. PS SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER SR. PS 7. DATE OF FILE SENT TO THE BENCH CLERK SR. PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK HD. C LK 9. DATE OF DISPATCH OF ORDER SR. PS