ITO, New Delhi V. M/s. ONS Interactive Solutions Pvt. Ltd., New Delhi

ITA 4084/DEL/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6354 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 09-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 21-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R K SINDWANI
• Keywords: Business income
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO. 4084/DEL/2014 A.Y. : 2010-11 INCOME TAX OFFICER, WARD-13(4), NEW DELHI VS. M/S ONS INTERACTIVE SOLUTIONS PVT. LTD., G-4, NDSE-II, NEW DELHI (PAN: AAAC09093N) (APPELLANT) (RESPONDENT) AND C.O. NO. 81/DEL/2015 IN I.T.A. NO. 4084 /DEL/201 4 A.Y. : 2010-11 M/S ONS INTERACTIVE SOLUTIONS PVT. LTD., G-4, NDSE-II, NEW DELHI (PAN: AAAC09093N) VS. INCOME TAX OFFICER, WARD-13(4), NEW DELHI (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. RAJESH KUMAR, SR. DR ASSESSEE BY : SH. R.K.SINDWANI, CA ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THIS APPEAL AND ASSESSEE HAS FILED THE CROSS OBJECTION AGAINST THE IMPUGNED ORDER DATED 1 7.4.2014 PASSED BY THE LD. CIT(A)-XVI, DELHI RELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE GROUNDS RAISED IN THE REVENUES APPEAL READ AS UNDER:- 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S. 10A AMOUNTING TO RS. 95,88,414/- TO THE ASSESSEE BY IGNORING THE OBSERVATIONS OF THE AO IN ITS ASSESSMENT ORDER THAT THE STPI CER TIFICATE HAS BEEN OBTAINED FOR THE EXISTING BUSINESS AND NOT FOR NEW BUSINESS. THUS, THE CONDITIONS ENVISAGED IN SECTION 10A(2) OF THE INCOME TAX ACT HAS NOT BEEN FULFILLED BY THE AS SESSEE COMPANY. 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ABOVE DISALLOW ANCE BY IGNORING THE FACT THAT THE CLAIM OF DEDUCTION U/S.1 0A OF THE ACT HAS ALREADY BEEN DENIED TO THE ASSESSEE COMPANY IN THE ASSESSMENT ORDER FOR AY 2009-10 PASSED U/S. 143(3) OF THE ACT WHICH WAS CONFIRMED BY THE THEN LD. CIT(A). 1.2 THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUNDS OF APPEAL AND /OR DELETE OR AMEND ANY OF THE GROUND S OF APPEAL. 3. THE GROUNDS RAISED IN THE ASSESSEES CROSS OBJE CTION READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF AO IN DISALLOWING DEDUCTION U/S.10A AMOUNTING TO RS. 9588414/- IS ERRONEOUS. THUS THE ORDER OF LD. CIT (A) BE RESTORED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N THE LAW, THE LD. AO HAS ERRED IN DISALLOWING THE DEDUCTION U /S.10A, BY IGNORING THE FACT THAT THE CLAIM OF DEDUCTION U/ S. 10A OF THE ACT HAS EVEN BEEN ALLOWED BY THE ITAT FOR THE A Y 2009- 10 VIDE ITA NO. 2922/DEL/2013 DATED 23.12.2014 OF D ELHI BENCH E NEW DELHI. 3 4 THE BRIEF FACTS OF THE CASE ARE THAT THE ORIGINAL RETURN OF INCOME WAS FILED ON 26.9.2010 AT AN INCOME OF RS.7500/-. THE CASE WAS PROCESSED AND SUBSEQUENTLY SELECTED FOR SCRUTINY UN DER CASS. NOTICE U/S. 143(2) DATED 25.8.2011 WAS ISSUED AND SERVED U PON THE ASSESSEE. IN RESPONSE TO THE SAID NOTICE, THE AR O F THE ASSESSEE ATTENDED THE PROCEEDINGS AND FILED THE NECESSARY DE TAILS FROM TIME TO TIME. THE ASSESSEE IS A PRIVATE LIMITED COMPANY A ND IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND PROMOTION OF WEBSITES, OUTSOURCING AND SEARCHES OPERATIONS. THE ASSESSEE HAS DECLARED ONLY BUSINESS INCOME. AO OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S.10A OF THE I.T. ACT, 1961. THE ASSESEE WAS ASKED TO JUSTIFY I TS CLAIM FOR DEDUCTION U/S.10A AND IN RESPONSE TO THE SAME THE ASSESSEE FI LED ITS REPLY. AFTER CONSIDERING THE SAME, OBSERVED THAT THE CONDITION E NVISAGED IN SECTION 10A(2) HAS NOT BEEN FULFILLED BY THE ASSESSEE COMPA NY. HENCE, DEDUCTION WAS NOT ALLOWED TO THE ASSESSEE. THEREAF TER, THE AO VIDE ORDER DATED 12.3.2013 PASSED U/S. 143(3) OF THE I.T . ACT,1961 AND ASSESSED THE INCOME AT RS. 95,95,920. 5. AGAINST THE SAID ORDER OF THE LD. AO, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 17.4. 2014 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 6. AGGRIEVED WITH THE AFORESAID ORDER OF THE LD . CIT(A), REVENUE IS IN APPEAL AND ASSESSEE IS IN CROSS OBJECTION BEF ORE THE TRIBUNAL 7. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL AND S TATED THAT THE LD. CIT(A) HAS WRONGLY DELETED THE ADDITION. 8. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE RE LIED UPON THE ORDER OF THE LD. CIT(A). 4 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS OF THE REV ENUE AUTHORITIES. WE FIND THAT LD. CIT(A) HAS ELABORATELY DISCUSSED THE ISSUE IN DISPUTE VIDE PARA NO. 4.1 WHICH READS AS UNDER:- 4.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE A/R OF THE APPELLANT COMPANY, THE FACTS OF THE CASE AS WELL AS THE FINDINGS OF THE AO GROUND NOS. 1 & 5 OF APPEAL ARE GENERAL IN NATURE AND NOT PRESSED FOR BY THE APPELLANT. THEREFORE, NO ADJUDICATION IS CALLED FOR. GROUND NOS. 2 & 3 OF APPEAL ARE DIRECTED AGAINST DISALLOWANCE OF DEDUCTION CLAIMED U/S. 10A OF THE I .T. ACT. AO OBSERVED THAT THE ASSESSEE COMPANY HAS BEGUN ITS MANUFACTURING OR PRODUCTION AT NOIDA IN 2007, AND THE CERTIFICATE OF STPI WAS OBTAINED ON 23.9.2008. AO OBSERVED THAT THE ASSESSEE COMPANY HAS BEGUN PRODUCTION PRIOR TO THE DATE OF OBTAINING STPI CERTIFICATE. THE STPI ICATE IS NOT OBTAINED F OR NEW BUSINESS. AS SUCH AO HELD THAT THE CONDITION ENVISAGED IN SEE 10A(2) HAS NOT BEEN FULFILLED BY T HE ASSESSEE COMPANY. AO ALSO OBSERVED THAT ON SIMILAR GROUND, CLAIM OF DEDUCTION U/S 1OA HAS ALREADY BEEN DENIED TO THE ASSESSEE COMPANY IN THE ASSESSMENT ORDER FOR THE A Y 2009-10. THEREFORE, DEDUCTION U/S 1OA IS NOT ALLOWED BY THE AO. THE ABOVE ISSUE WAS DECIDED BY ME IN APPEAL NO. 318/11-12 FOR THE A Y 2009-10 IN THE ASSESSEE'S OWN CASE BY APPELLATE ORD ER DATED 27.02.2003 AS UNDER:- 6.2 FROM THE STPI LETTER OF APPROVAL DT. 23/09/2008 IT IS EVIDENT THAT THE UNIT OF THE 5 APPELLANT WAS APPROVED AS 100% EXPORT ORIENTED UNIT UNDER STP SCHEME W.E.F. 23/09/2008. THE GREEN CARD ISSUED TO THE UNIT APPROVING IT UNDER THE STP SCHEME AS A 100% EXPORT ORIENTED UNIT FOR COMPUTER SOFTWARE IS DT. 07/1 0/2008 AND VALID FOR 5 YEARS UPTO 06110/2013. UNDER SEC 10A(1) DEDUCTIONS IS ALLOWED FROM PROFITS AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM EXPORT OF COMPUTER SOFTWARE. THE REQUIREMENT ULS 1OA(2)(I)(B) IS THAT THE UNDERTAKING HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE COMPUTER SOFTWARE DURING THE PREVIOUS YEAR IN ANY SOFTWARE TECHNOLOGY PARK. FROM A READING OF THE TWO PROVISIONS TOGETHER' IT IS CLEAR THAT ONLY THE PROFITS DERIVED BY THE UNDERTAKING FROM STP UNIT IS ELIGIBLE FOR DEDUCTION U/S LOA. SINCE THE UNIT WAS APPROVED ON 23/09/2008, THEREFORE, ONLY THE PROFITS DERIVED FROM THE EXPORT OF COMPUTER SOFTWARE FROM AND AFTER THE DATE OF APPROVAL OF THE STP UNIT ON 23/09/2008 WILL BE ELIGIBLE FOR DEDUCTION ULS LOA. BECAUSE IN RESPECT OF THE PERIOD PRIOR TO THE DATE OF APPROVAL, DURING THE RELEVANT PREVIOUS YEAR, EVEN IF THE PROFITS ARE DERIVED FROM EXPORT OF COMPUTER SOFTWARE, THE SAME ARE NOT DERIVED FROM EXPORT OF COMPUTER SOFTWARE PRODUCED FROM STP UNIT AS REQUIRED ULS 1 OA(2)(I)(B). 6.3 CIRCULAR NO. 1/2005 DT. 06/0112005 OF CBDT, NEW DELHI RELATING TO CLARIFICATION REGARDING TAX 6 HOLIDAY UNDER SECTION LOB OF THE INCOME-TAX ACT TO 100% EXPORT ORIENTED UNDERTAKING SAYS: '4. THE MATTER HAS BEEN EXAMINED AND IT IS HEREBY 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 UNDER SECTION LOB 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. 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% EOD. MOREOVER, THE DEDUCTION TO SUCH UNITS IN ANY CASE WILL NOT BE AVAILABLE AFTER ASSESSMENT YEAR 2009-10.' ALTHOUGH THE ABOVE CIRCULAR IS IN THE CONTEXT OF SE E 1 OB, THE RATIO OF THE CIRCULAR EQUALLY APPLIES TO SE E LOA. IN THIS VIEW OF THE MATTER, I FIND SUPPORT FROM TH E DECISIONS OF HON 'BLE KARNATAKA HIGH COURT IN THE C ASE 7 OF CIT VS. EXPERT OUTSOURCE PVT. LTD. [2010] 20 TAXMANN.COM 481 (KAR.) IN WHICH THERE WAS ALSO CATEGORICAL FINDING THAT NO EXPORT OF COMPUTER SOFT WARE WAS MADE BEFORE THE DATE OF APPROVAL. 6.4 FROM THE ABOVE CIRCULAR ALSO IT IS CLEAR THAT O NLY THE PROFITS DERIVED FROM THE SOFTWARE EXPORT FROM A ND AFTER THE DATE OF APPROVAL ON 23/09/2008 SHALL BE EXEMPT ULS LOA. THE APPELLANT HAS FAILED TO PROVIDE DETAILS BEFORE THE A.O. TO PROVE THAT THE PROFITS D ERIVED ARE FROM SOFTWARE EXPORTS AFTER THE DATE OF APPROVA L. EVEN BEFORE ME IN THE APPELLATE PROCEEDINGS NO DETA ILS HAVE BEEN FURNISHED TO PROVE THAT THE PROFITS DERIV ED ARE NOT FROM EXPORT OF SOFTWARE BEFORE THE DATE OF APPROVAL BUT FROM EXPORT OF SOFTWARE AFTER THE DATE OF APPROVAL ON 23/0912008. IN VIEW OF THE ABOVE, AS TH E APPELLANT HAS FAILED TO PROVE THAT PROFITS DERIVED ARE FROM EXPORT OF SOFTWARE AFTER THE DATE OF APPROVAL AS STP UNIT, THEREFORE, THE A.O. IS JUSTIFIED IN DISAL LOWING THE DEDUCTION ULS LOA. THE APPEAL FAILS IN THIS GRO UND.' THE STPI APPROVAL WAS RECEIVED BY THE APPELLANT COMPANY ON 23.09.2008 IN THE MIDDLE OF THE PREVIOUS YEAR RELEVANT TO THE A Y 2009-10. IN THE AY 2009-10 IT WAS HELD THAT PROFITS DERIVED FROM THE EXPORT OF COMPUTER SOFTWARE FROM AND AFTER THE DATE OF APPROV AL OF THE STP UNIT ON 23/09/2008 WILL BE ELIGIBLE FOR DEDUCTION U/S LOA. IN THE A Y 2009-10 THE DISALLOWANCE OF DEDUCTION ULS LOA WAS CONFIRMED BECAUSE THE APPELLANT FAILED TO PROVIDE DETAILS BEF ORE THE AO TO PROVE THAT THE PROFITS DERIVED DURING THE A Y 8 2009-10 ARE FROM SOFTWARE EXPORTS AFTER THE DATE OF APPROVAL. SINCE STPI APPROVAL WAS RECEIVED IN THE PREVIOUS YEAR RELEVANT TO A Y 2009-10, THEREFORE, T HE PROFITS DERIVED FROM EXPORT OF COMPUTER SOFTWARE DURING THE PREVIOUS YEAR RELEVANT TO A Y 2010-11 WI LL BE ELIGIBLE FOR DEDUCTION U/S LOA PROVIDED OTHER CONDITIONS OF SEE LOA ARE FULFILLED BY THE APPELLAN T COMPANY. IN THE INSTANT AY 2010-11 THERE IS NO DISPUTE THAT THE OTHER CONDITIONS OF SEE LOA ARE FU LFILLED BY THE APPELLANT. IT IS ALSO SEEN THAT IN THE A Y 2 011- 12 THE AO HAS ALLOWED THE APPELLANT'S CLAIM OF DEDUCTION U/S 10A. IN VIEW OF THE ABOVE, THE AO IS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF DEDUCTION U/S 1OA. THE APPEAL IS ALLOWED IN THESE GROUNDS. 9.1 ON PERUSING THE ABOVE FINDING OF THE LD. CIT(A) , WE FIND THAT THE STPI APPROVAL WAS RECEIVED BY THE ASSESSEE COMPANY ON 23.09.2008 IN THE MIDDLE OF THE PREVIOUS YEAR RELEVANT TO THE A Y 2009-10. WE FURTHER NOTE THAT IN THE AY 2009-10 IT WAS HELD THA T PROFITS DERIVED FROM THE EXPORT OF COMPUTER SOFTWARE FROM AND AFTER THE DATE OF APPROVAL OF THE STP UNIT ON 23/09/2008 WILL BE ELIG IBLE FOR DEDUCTION U/S LOA. IN THE A Y 2009-10 THE DISALLOWANCE OF DED UCTION ULS LOA WAS CONFIRMED BECAUSE THE ASSESSEE FAILED TO PROVID E DETAILS BEFORE THE AO TO PROVE THAT THE PROFITS DERIVED DURING THE A Y 2009-10 ARE FROM SOFTWARE EXPORTS AFTER THE DATE OF APPROVAL. SINCE, STPI APPROVAL WAS RECEIVED IN THE PREVIOUS YEAR RELEVANT TO A Y 2009- 10, THEREFORE, THE PROFITS DERIVED FROM EXPORT OF COMPUTER SOFTWARE DU RING THE PREVIOUS YEAR RELEVANT TO AY 2010-11 WILL BE ELIGIBLE FOR DE DUCTION U/S LOA PROVIDED OTHER CONDITIONS OF SEC. LOA ARE FULFILLED BY THE ASSESSEE COMPANY. IN THE INSTANT AY 2010-11 THERE IS NO DISP UTE THAT THE OTHER CONDITIONS OF SEE LOA ARE FULFILLED BY THE ASSESSEE . WE FURTHER NOTE THAT 9 THAT IN THE A Y 2011-12 THE AO HAS ALLOWED THE ASSE SSEES CLAIM OF DEDUCTION U/S 10A. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE AO IS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF DEDUCTION U/S 1OA. HENCE, THE APPEAL WAS RIGHTLY A LLOWED BY THE LD. CIT(A), WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, THEREFORE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ISSUES IN DISPUTE AND ACCORDINGLY, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. 9.4 AS REGARDS THE ASSESSEES CROSS OBJECTION IS CO NCERNED, SINCE WE HAVE ALREADY DISMISSED THE REVENUES APPEAL, THE CR OSS OBJECTION HAS BECOME INFRUCTUOUS AND DISMISSED AS SUCH. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENU E AND CROSS OBJECTION FILED BY THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/03/2017. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICI AL MEMBER DATE 22/3/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES