ACIT, CHENNAI V. Shri Nagesh Chundur, CHENNAI

ITA 44/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64655 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-12-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 06-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R B NAIK
• Keywords: Question of law
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] I.T.A.NOS.43 & 44/MDS/2012 ASSESSMENT YEARS : 2005-06 AND 2008-09 THE ACIT CIRCLE XV CHENNAI VS SHRI NAGESH CHUNDUR 4A, SRINIVAS 30, MAHARAJA SURYA ROAD ALWARPET CHENNAI 600 018 [PAN ACUPC 6638E] (APPELLANT) (RESPONDENT) APPELLANT BY : MS.PUSHYA SITARAMAN, SR. COUNSEL FOR MS.VARDHINI KARTHIK RESPONDENT BY : SHRI R.B.NAIK, CIT/DR DATE OF HEARING : 11-12-2012 DATE OF PRONOUNCEMENT : 12-12-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THESE ARE THE APPEALS FILED BY THE RE VENUE AGAINST THE ORDERS OF THE CIT(A)-XII, CHENNAI, FOR ASSESSMENT Y EARS 2005-06 AND 2008-09, BOTH DATED 1.10.2011. 2. THE REVENUE HAS RAISED THE FOLLOWING COMMON GROUN DS OF APPEAL EXCEPT FOR THE CHANGE IN FIGURES: I.T.A.NO.43 & 44/12 :- 2 -: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTR ARY TO LAW AND FACTS OF THE CASE. 2.1. THE LD. CIT(A) ERRED IN DELETING THE DISALLOW ANCE OF EXEMPTION CLAIMED U/S 10A OF RS 34,89,448/-. 2.2 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT AS PER PROVISION OF SEC. 10A, BASED ON LOCATION OF ACTIVIT Y , DURING THE PREVIOUS YEAR RELEVANT TO ASST YEAR COMMENCING ON O R AFTER FIRST DAY OF APRIL 2001. IT SHOULD BE OPERATING IN ANY SE Z OR STPI WHEREAS ASSESSEE'S UNDETAKING STARTED ITS PRODUCTIO N DURING THE FY 1999-2000 BUT NOT REGISTERED WITH STPI BUT REGIS TERED ONLY ON 27.3.2002, ALSO NOT IN SEZ AND CONTINUING TO USE IT S OLD MACHINERIES. THE ASSESSEE DID NOT SATISFY THE CONDI TION LAID DOWN IN SEC 10A(2)(I)(B) AND 10A(2)(I)(C) OF THE AC T. 3.1 THE LD. CIT(A) OUGHT TO HAVE APPLIED THE RAT IO OF DECISION OF THE HYDERABAD BENCH OF ITAT IN THE CASE OF INFOT ECH ENTERPRISES LTD 85 ITD 325 WHERE THE FACTS OF THE C ASE ARE IDENTICAL AND SHOULD HAVE UPHELD THE ORDER OF THE A SSESSING OFFICER 3.2 THE LD. CIT(A) RELIED ON THE ORDERS OF THE HON'BLE ITAT IN THE ASSESSEE'S OWN CASE IN ITA NO. 83 & 729/ MDS/2011 DT. 01.06.2011 FOR THE ASST YEAR 2006-07 AND 2007-08 3.3 IT IS SUBMITTED THAT THE CIT(A) 'S ORDER REL IED UPON THE ITAT'S ORDER IN THE ASSESSEE'S OWN CASE FOR THE ASS T.YEARS 2006- 07 & 2007-08 HAS NOT BECOME FINAL AND APPEAL TO THE HIGH COURT HAVE BEEN PREFERRED BY THE DEPARTMENT. 4 FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3. THE DR SUBMITTED THAT THE SOLE ISSUE INVOLVED IN BOTH THE YEARS UNDER CONSIDERATION WAS THAT THE CIT(A) ERRED IN DE LETING THE DISALLOWANCE OF EXEMPTION CLAIMED U/S 10A OF ` 34,89,448/- IN ASSESSMENT YEAR 2005-06 AND ` 2,65,04,275/- IN ASSESSMENT YEAR 2008-09. HE SUBMITTED THAT THE CIT(A) HAS GRANTED THE RELIEF TO THE I.T.A.NO.43 & 44/12 :- 3 -: ASSESSEE BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2006-07 AND 2007-08 AGAINST WH ICH THE REVENUE IS IN APPEAL BEFORE THE HON'BLE MADRAS HIGH COURT. AS THE REVENUE HAS NOT ACCEPTED THE ORDER OF THE TRIBUNAL, THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER. 4. ON THE OTHER HAND, THE A.R OF THE ASSESSEE SUBMITT ED THAT THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL IN ASSESSMENT YEARS 2006-07 AND 2007-08 AND THEREFORE, THERE WAS NO ERROR IN THE ORDER OF THE CIT(A) IN ALLOWING THE CL AIM OF THE ASSESSEE FOR DEDUCTION U/S 10A. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RE CORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAS GOT APP ROVAL OF THE STPI(GOVERNMENT OF INDIA) AS A 100% EOU FOR COMPUTE R SOFTWARE ON 27.3.2002. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEES UNIT STARTED PRODUCTION DURING THE FINANCIAL YEAR 1999-2 000 BUT WAS NOT REGISTERED WITH STPI AT THAT TIME. IT GOT ITS REGIS TRATION ONLY ON 27.3.2002. THE ASSESSING OFFICER ALSO NOTED THAT T HE UNIT WAS NOT LOCATED IN ANY SPECIAL ECONOMIC ZONE AND IT CONTINU ED TO USE ITS OLD MACHINERY WHICH WAS EXISTENT FROM THE FINANCIAL YEA R 1999-2000. THEREFORE, THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUC TION U/S 10A AS IT I.T.A.NO.43 & 44/12 :- 4 -: HAS NOT FULFILLED THE CONDITIONS LAID DOWN IN SECTI ON 10A(2)(I)(B) AND SECTION 10A(2)(I)(C) OF THE ACT. ACCORDINGLY, HE D ISALLOWED DEDUCTION U/S 10A OF THE ACT TO THE ASSESSEE. 6. ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE ASS ESSEE ON THE GROUND THAT ON IDENTICAL FACTS AND CIRCUMSTANCES IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2006-07 AND 2007-08, THE TRIBUNAL IN I.T.A.NOS. 83 AND 729/MDS/2011, VIDE ITS ORDER DATE D 1.6.2011, HELD THAT THE ASSESSEES REGISTERED AS STPI UNITS ARE ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT EVEN SUCH ASSESSEES COMMENCED MA NUFACTURING ACTIVITY PRIOR TO THE DATE OF REGISTRATION WITH STP I. 7. WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE , VIDE ITS ORDER DATED 1.6.2011, IN THE SIMILAR FACTS AND CIRC UMSTANCES OF THE CASE, HAS HELD AS UNDER: 9. AFTER HAVING HEARD BOTH THE SIDES AND CONSIDE RING THE MATERIAL ON RECORD AS WELL AS PRECEDENTS RELIED UPON, WE FIN D THAT THE ISSUE RAISED IN THE APPEAL OF THE REVENUE IS NOT ONLY COV ERED IN FAVOUR OF THE ASSESSEE BY ITAT CHENNAI BENCH, BUT ALSO BY VAR IOUS DECISION OF OTHER BENCHES AND HONBLE HIGH COURTS INCLUDING HONBLE KARNATAKA HIGH COURTS DECISION IN ITA NO. 323 OF 2 010 DATED 01.03.2011 IN WHICH FACTS HAVE BEEN INCORPORATED I N PARA 2 AT PAGE 3 & 4 AND CONCLUSION HAS BEEN DRAWN I N PARA 4 AND 5 OF THE ORDER, WHICH ARE REPRODUCED AS UNDER: 2. THE ASSESSEE IS CARRYING ON THE BUSINESS AS A SOFTWARE CONSULTANT AND DEVELOPING SOFTWARE. IT IS A PRIVATE LIMITED COMPANY. IT WAS INCORPORATED ON 17.12.2003. IT ENTERED INTO AN AGREEMENT WITH ITS P ARENT COMPANY ON 20.10.2003 FOR PROVIDING SOFTWARE DEVELOPMENT SERVICES. THE FIRST INVOICE WAS RAISED BY I.T.A.NO.43 & 44/12 :- 5 -: THE ASSESSEE ON 29.12.2003. THE ASSESSEE SECURED TH E STPI REGISTRATION ON 04.08.2004. FOR THE ASSESSMENT YEAR 2005-06, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 10A OF THE ACT. HE HAD ENCLOSED FORM 56F ALONG WITH THE RETURN OF INCOME IN SUPPORT OF THE C LAIM OF DEDUCTION UNDER SECTION 10A. THEREAFTER, SCRUTINY ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED ON 28.09.2007. THE ASSESSING AUTHORITY DISALLOWED THE DEDUCTION CLAIMED UNDER SECTION 10A ON THE GROUND T HAT THE COMPANY WAS INCORPORATED AND STARTED BUSINESS ACTIVITY PRIOR TO OBTAINING APPROVAL OF STPI. HENCE , THE CONDITIONS LAID DOWN UNDER SECTION 10A(2)(I)(B) AND (C) OF THE ACT ARE NOT SATISFIED. THE ASSESSEE DID NOT CHOOSE THE AVAILABLE OPTION OF CONVERSION OF THE DT A UNIT INTO STP UNIT. THEREFORE, WHEN THE ASSESSEE HA S USED THE MACHINERY PREVIOUSLY USED, WHICH IS MORE T HAN 20% OF THE TOTAL PLANT AND MACHINERY, THE CONDITION LAID DOWN UNDER SECTION 10A(2)(III) OF THE ACT ARE NOT SATISFIED. AGGRIEVED BY THE SAID ORDER, THE ASSESSE E PREFERRED AN APPEAL. THE COMMISSIONER OF INCOME TAX (APPEALS) BY A WELL CONSIDERED ORDER BY PLACING REL IANCE ON THE CIRCULAR ISSUED UNDER SECTION 10B OF THE ACT AND ALSO THE SEVERAL JUDGMENTS DEALING WITH THE ABOVE ASPECTS, HELD THAT THE ASSESSEE IS ENTITLED TO THE DEDUCTION UNDER SECTION 10A TO THE EXISTING UNIT AN D CONSEQUENTLY, THE CONDITIONS LAID DOWN UNDER SECTIO N 10A(2)(I)(B) AND 10A(2)(II) & (III) ARE FULFILLED A ND DIRECTED THE ASSESSING AUTHORITY TO ALLOW ELIGIBLE DEDUCTIONS UNDER SECTION 10A. AGGRIEVED BY THE SAID ORDER, THE REVENUE PREFERRED AN APPEAL TO THE TRIBU NAL WHICH HAS UPHELD THE SAID ORDER. AGGRIEVED BY THE SAME, THE REVENUE IS IN APPEAL BEFORE US. 3. FROM THE AFORESAID FACTS, IT IS CLEAR THAT SECTI ON 10A PROVIDES FOR A DEDUCTION FROM THE TOTAL INCOME OF P ROFITS DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTICL ES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS. THE TAX HOLIDAY PERIO D COMMENCES WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE. SECTION 10(2) PRESCRIBES CERTAIN CONDITIONS ON THE FULFILLMENT OF WHICH THE BENEFIT OF 10A COULD BE AVAILED. I.T.A.NO.43 & 44/12 :- 6 -: 4. IN THE INSTANT CASE, THE ASSESSEE BEGAN OPERATIONS ON 17.12.2003 WHEREAS THE STPI WAS REGISTERED ON 04.08.2004. THE STP AUTHORITIES COULD ALSO PERMIT THE CONVERSION OF AN EXISTING UNIT INTO A STPI UNIT. THE PURPOSE OF THE STP SCHEME IS TO ENCOURAGE EXPORTS AND GAIN VALUABLE FOREIGN EXCHANG E FOR THE COUNTRY. THE STP SCHEME PROVIDES THE BENEFI T OF CONVERTING A DTA UNIT INTO A STPI UNIT AND THE SAME SHOULD ALSO HOLD GOOD FOR TAX PURPOSES. CBDT CIRCUL AR NO.1/2005 DATED 06.01.2005 GRANTS CERTAIN BENEFITS UNDER SECTION 10B. THOUGH THE CIRCULAR IS IN THE CO NTEXT OF SECTION 10B, THE RATIO OF THE CIRCULAR EQUALLY A PPLIES TO SECTION 10A ALSO. IN FACT, THE COMMISSIONER OF APPE ALS HAS REFERRED TO VARIOUS JUDGMENTS ON THE POINT AND HAS COME TO THE CONCLUSION THAT THE BENEFIT OF SECTION 10A WOULD ALSO BE AVAILABLE EVEN WHEN AN EXISTING UNIT GETS CONVERTED INTO A STPI UNIT. IN FACT, THE MATERIAL O N RECORD DISCLOSES THAT NO EXPORT OF COMPUTER SOFTWAR E WAS MADE BEFORE 04.08.2004. THE EXPORT COMMENCED ONLY AFTER 04.08.2004. THE INVOICES PRODUCED IN THE CASE CLEARLY ESTABLISH THE SAID FACT. IN THESE CIRCUMSTANCES, THE APPELLATE AUTHORITY AS WELL AS T HE TRIBUNAL WERE JUSTIFIED IN EXTENDING THE BENEFIT OF SECTION 10A TO THE UNIT IN QUESTION. 5. WE DO NOT SEE ANY ILLEGALITY COMMITTED BY THEM. THE SAID FINDING RECORDED BY THE APPELLATE AUTHORITY AS WELL AS THE TRIBUNAL IS ALSO BASED ON EVIDENCE AND IS IN ACCORDANCE WITH LAW. WE DO NOT SEE ANY SUBSTANTIAL QUESTION OF LAW THAT ARISES FOR CONSIDERATION IN TH IS APPEAL. ACCORDINGLY, THE APPEAL IS DISMISSED. 10. OTHER DECISIONS RELIED UPON BY THE LD. AR OF T HE ASSESSEE ARE ALSO FOUND TO BE SUPPORTIVE OF THE DEC ISION TAKEN BY THE LD. CIT(A) WHEN NO DISTINGUISHING FEAT URE IS POINTED OUT OR NOTICED AND OTHERWISE, THE ISSUE IS FOUND TO BE COVERED AGAINST THE REVENUE. IN THE ABSENCE OF ANY INFIRMITY OR FLAW IN THE ORDER OF THE LD. CIT(A) AND FOLLOWIN G THE RATIO OF DECISION AS PER PRECEDENTS RELIED UPON, WE UPHOLD T HE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE REV ENUE. 8. THE DR COULD NOT BRING ANY MATERIAL ON RECORD BEF ORE US TO SHOW THAT THE ORDER OF THE TRIBUNAL RELIED ON BY TH E CIT(A) IN GRANTING RELIEF TO THE ASSESSEE WAS VARIED IN APPEAL BY ANY HIGHER FORUM. THE I.T.A.NO.43 & 44/12 :- 7 -: DR ALSO COULD NOT POINT OUT ANY SPECIFIC ERROR IN T HE ORDER OF THE CIT(A). WE, THEREFORE, FIND NO GOOD AND JUSTIFIAB LE REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) WHICH IS CONFIRMED AND THE GROUNDS OF APPEAL OF THE REVENUE FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION ARE DISMISSED. 9. IN THE RESULT, BOTH THE APPEALS OF THE REVEN UE ARE DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 12 TH OF DECEMBER, 2012, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 12 TH DECEMBER, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR