Ply Technology Solutions Private Ltd., CHENNAI V. DIT, CHENNAI

ITA 544/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8770 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 09-03-2016
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Assessee Lawyers: M KARUNAKARAN
• Keywords: Rule of consistency; Tax effect
• Section: 143(3); 142(1); 10B; 263

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I T.A. NO. 544/MDS/2016 / ASSESSMENT YEAR :2011 - 12 M/S. PLY TECHNOLOGY SOLUTIONS PRIVATE LIMITED, AA - 9, NEW NO. 83, 2 ND AVENUE, ANNA NAGAR, CHENNAI 600 040. [PAN: AA F C P1194C ] VS. THE ASSISTANT COMMISSIONE R OF INCOME TAX , COMPANY CIRCLE V (1) , CHENNAI . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI M. K ARUNAKARAN, ADVOCATE / RESPONDENT BY : SMT. PARMINDER , CIT / DATE OF HEARING : 1 0 . 0 5 .201 6 / DATE OF P RONOUNCEMENT : 27 . 0 7 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. PRINCIPAL COMMISSIONER OF INCOM E TAX , CHENNAI - 5, CHENNAI , DATED 22 . 0 2 .20 1 6 RELEVANT TO THE ASSESSMENT YEAR 20 11 - 12. THE ASSESSEE CHALLENGED THE ORDER PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] . I.T.A. NO . 544 /M/ 16 2 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF COMPUTER SOFTWAR E AND FILED ITS RETURN OF INCOME ADMITTING NIL INCOME ON 29.09.2011. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT DATED 03.08.2012 WAS SERVED ON THE ASSESSEE. NOTICE UNDER SECTION 142(1) OF THE ACT WAS ALSO ISSUED ON 06.11.2013. IN RESPONSE THERETO, THE ASSESSEE FILED VARIOUS INFORMATION CALLED FOR. AFTER VERIFICATION OF DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSM ENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT BY ACCEPTING THE RETURNED INCOME OF THE ASSESSEE. 3. ON VERIFICATION OF RECORDS, THE LD. PCIT HAS OBSERVED THAT THE ASSESSEE GOT THE INITIAL APPROVAL FROM STPL FOR SETTING UP OF 100% EOU ON 07.10.2010 AN D SIGNED THE AGREEMENT WITH STPL ONLY ON 18.11.2010. HE FURTHER NOTICED FROM THE INVOICE DETAILS THAT THE SOFTWARE SERVICE PROVIDED BY THE ASSESSEE TO ITS CLIENT IN USA WAS FROM APRIL 2010 TO NOVEMBER, 2010 AND ONLY A MEAGRE AMOUNT OF .4,64,440/ - OUT OF T HE TOTAL EXPORT PROCEEDS OF .53,19,900/ - HAS BEEN RECEIVED FROM THE SERVICE RENDERED BY THE ASSESSEE AFTER SIGNING THE AGREEMENT WITH THE STPL. THEREFORE, THE LD. PCIT WAS OF THE OPINION THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 1 0B OF THE ACT FOR SERVICE RENDERED BEFORE NOVEMBER, 2010. I.T.A. NO . 544 /M/ 16 3 4. FURTHER, FROM THE PROFIT AND LOSS ACCOUNT, THE LD. PCIT HAS OBSERVED THAT THE ASSESSEE HAD SHOWN ONLY MEAGRE AMOUNT FOR SALARY AND IT IS ALSO NOTICED THAT THE ASSESSEE PAID PROFESSIONAL CHARGE S TO M/S. RELUISEND TECHNOLOGY P. LTD. TO THE TUNE OF .6,04,950/ - . ON SCRUTINY OF THE DETAILS, HE FURTHER OBSERVED THAT THE ABOVE COMPANY WAS ONLY DOING TECHNICAL SERVICES TO ITS CLIENT IN USA AND THE ASSESSEE WAS ONLY DOING A BODY SHOPPING ACTIVITY [I.E., MANPOWER CONSULTANCY SERVICE TO ITS CLIENT IN USA]. THE ABOVE ACTIVITY IS NOT A MANUFACTURING ACTIVITY WITHIN THE MEANING OF SECTION 10B OF THE ACT . IT WAS FURTHER OBSERVED BY THE LD. PCIT THAT THE ASSESSEE HAS NOT RECEIVED THE APPROVAL FROM THE BOARD APPOINTED ON THIS BEHALF, BY THE CENTRAL GOVERNMENT, AS A RESULT OF WHICH, THE ASSESSEE S UNDERTAKING CANNOT BE DEFINED AS 100% EOU WHICH IS ELIGIBLE TO CLAIM EXEMPTION UNDER SECTION 10B OF THE ACT. 5. WITH THE ABOVE OBSERVATIONS, THE LD. PCIT WAS OF THE OPINION THAT THE ASSESSMENT ORDER PASSED BY THE ASSESS ING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, A NOTICE UNDER SECTION 263 OF THE ACT DATED 31.01.2016 WAS ISSUED TO THE ASSESSEE ASKING IT TO SHOW - CAUSE AS TO WHY THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2011 - 12 SHOULD NOT BE SET ASIDE AND REVISED UNDER SECTION 263 OF THE ACT. ACCORDINGLY, VIDE ITS REPLY DATED 27.01.2016, THE ASSESSEE HAS FILED A DETAILED WRITTEN SUBMISSION. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. PCIT I.T.A. NO . 544 /M/ 16 4 HAS HELD THAT THE DEDUCTION UNDER SECTION 1 0B OF THE ACT HAS BEEN WRONGLY ALLOWED TO THE ASSESSEE AND CONSEQUENTLY, THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO WITHDRAW THE DEDUCTION CLAIMED UNDER SECTION 10B OF THE ACT AND MODIFY THE ASSESSMENT ORDER. 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE MAIN ISSUE FOR ADJUDICATION IS WHETH ER THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 10B OF THE ACT FOR THE ASSESSMENT YEAR 2011 - 12 SINCE T HE ASSESSEE GOT THE APPROVAL FROM STPL FOR SETTING UP OF 100% EOU ON 07.10.2010 AND SIGNED THE AGREEMENT WITH STPL ON 18.11.2010. 8. ADMITT EDLY, VIDE REF. NO. STPIC/G/958/2010 - 11/571 DATED 07.10.2010 OF DIRECTOR OF THE STPI, CHENNAI HAS CONVEYED APPROVAL FOR SETTING UP OF 100% EOU UNDER THE SOFTWARE TECHNOLOGY PARK SCHEME OF GOVERNMENT OF INDIA AND ALSO CONVEYED THAT THE ASSESSEE W OULD BE ENT ITLED TO GET THE BENEFITS UNDER THE STP SCHEME ONLY AFTER ENTERING INTO THE LEGAL AGREEMENT WITH STPI - CHENNAI. ACCORDINGLY, THE ASSESSEE HAS SIGNED THE AGREEMENT WITH STPL ON 18.11.2010 AND THIS FACT WAS NOT DISPUTED. HOWEVER, T HE LD. PCIT HAS DISPUTED THA T THE ASSESSEE HAS NOT RECEIVED THE APPROVAL FROM THE BOARD APPOINTED ON THIS BEHALF BY THE CENTRAL GOVERNMENT IN VIEW OF I.T.A. NO . 544 /M/ 16 5 EXPLANATION 2 TO SECTION 10B OF THE ACT AND THEREFORE, THE ASSESSEE S UNDERTAKING CANNOT BE DEFINED AS 100% EOU TO CLAIM EXEMPTION UND ER SECTION 10B OF THE ACT. BY CONSIDERING VARIOUS DECISIONS OF THE BENCHES OF THE TRIBUNAL, THE PUNE BENCHES OF THE TRIBUNAL IN THE CASE OF ITO V. CAT LABS PVT. LTD. IN I.T.A. NO. 131/PN/2013 FOR THE ASSESSMENT YEAR 2009 - 10 DATED 26.02.2014 HAS OBSERVED AN D HELD AS UNDER: 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSING OFFICER IN THE ASSESSMENT ORDER FOR A.Y. 2008 - 09 HAS ALSO DENIED THE CLAIM OF DEDUCTION U/S.10B ON THE GROUND THAT THE ASSESSEE COMPANY IS NOT A 100% EOU SINCE IT IS NOT APPROVED BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTR AL GOVERNMENT U/S.14 OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951. FURTHER, THE 100% EOU AS PER STPI IS NOT AT PAR WITH THE 100% EOU APPROVED BY THE BOARD APPOINTED U/S.14 OF THE IDRA, 1951 BY THE CENTRAL GOVERNMENT. RELYING ON THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF INFOTECH ENTERPRISES LTD. (SUPRA) THE ASSESSING OFFICER DISALLOWED THE CLAIM. WE FIND ON AN APPEAL FILED BY THE ASSESSEE, THE LD.CIT(A) ALLOWED THE CLAIM OF DEDUCTION U/S.10B OF THE BY OBSERVING AS UNDER : '3.3.1. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE LAW AS ARE APPARENT FROM THE RECORDS. GROUND NO. 1 WHICH IS UNDER CONSIDERATION HAS BEEN RAISED IN AN ARGUMENTATIVE MANNER AND THEREFORE, WHAT IS BEING CONSIDERED FOR ADJUDICATION ARE 'WHE THER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT COMPANY CAN BE DENIED DEDUCTION U/S 10B ONLY BECAUSE THE APPROVAL WAS TAKEN FROM THE BODY OF STPI FORMED UNDER THE MINISTRY OF INFORMATION TECHNOLOGY, FORMED BY THE GOVERNMENT FOR CONTROL, MONI TORING AND REGULATION OF SOFTWARE EXPORTS AND NOT FROM THE BOARD APPOINTED ON BEHALF OF THE CENTRAL GOVERNMENT U/S 14 OF THE INDUSTRIES (DEVELOPMENT & REGULATION) ACT, 1951, DESPITE THE FACT THAT IN SIMILAR FACTS AND CIRCUMSTANCES THIS DEDUCTION HAS BEEN A LLOWED IN EARLIER I.T.A. NO . 544 /M/ 16 6 ASSESSMENT YEARS.' FROM THE PERUSAL OF THE ASSESSMENT ORDER IT IS ABUNDANTLY CLEAR THAT THE AO HAS MAINLY RELIED ON THE NON - FULFILLMENT OF CONDITION PROVIDED IN THE SECTION, TO OBTAIN THE APPROVAL FROM THE BOARD APPOINTED ON BEHALF OF THE CENTRAL GOVERNMENT U/S 14 OF THE INDUSTRIES (DEVELOPMENT & REGULATION) ACT, 1951 WHICH WAS FOUND SPECIFICALLY AVAILABLE IN EXPLANATION 2 TO SEC. 10B WHICH DEFINES A 100% EXPORT ORIENTED UNIT (EOU), TO WHICH THIS PROVISION APPLIES. THE AO FOUND THAT THE EX PLANATION SAYS THAT 100% EXPORT ORIENTED UNDERTAKING MEANS AN UNDERTAKING WHICH HAS BEEN APPROVED AS A 100% EXPORT ORIENTED UNDERTAKING BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT IN EXCISE OF POWER CONFERRED BY SECTION 14 OF THE INDUST RIES (DEVELOPMENT & REGULATION) ACT, 1951 (65 OF 1951, AND THE RULES MADE UNDER THAT ACT). AS THE APPELLANT HAD TAKEN THE APPROVAL OF 100% EXPORT ORIENTED UNIT FROM THE STPI, A TECHNICAL BODY OF MINISTRY OF INFORMATION & TECHNOLOGY FORMED FOR THE PURPOSE O F CONTROL, MONITORING AND REGULATION OF SOFTWARE EXPORTS, IT WAS HELD BY THE AO THAT THE STATUS OF EOU FOR THE PURPOSE OF DEDUCTION U/S 10B CANNOT BE RECOGNIZED. THE AO FOR THE ABOVE HAS ALSO PLACED RELIANCE ON THE DECISION GIVEN BY THE ITAT, HYDERABAD IN THE CASE OF INFOTECH ENTERPRISES LTD. VS. JT.CIT (2003) 85 ITD 325 (HYD). THE APPELLANT HAS CONTENDED IN DETAIL IN THEIR SUBMISSION THAT THE FINDING OF THE AO IS HYPER TECHNICAL. THE MINISTRY OF INFORMATION TECHNOLOGY HAS SPECIFICALLY CONSTITUTED STPI FO R GRANTING 100% EOU APPROVAL TO THE UNITS ENGAGED IN THE MANUFACTURING OF SOFTWARES AND ITS EXPORTS AND THEREFORE, THIS APPROVAL MUST BE GIVEN RECOGNITION EQUIVALENT TO THE BOARD CONSTITUTED UNDER INDUSTRIES DEVELOPMENT & REGULATION) ACT. THE APPELLANT HAS PLACED RELIANCE ON DIFFERENT JUDGMENTS, AS CAN BE SEEN FROM THE SUBMISSIONS QUOTED ABOVE, WHICH HAS APPROVED THE ALLOWABILITY OF THIS DEDUCTION ON THE BASIS OF STPI REGISTRATION AND IT WAS ALSO CLAIMED THAT THE ABOVE REFERRED JUDGMENTS HAVE BEEN GIVEN AFT ER TAKING INTO ACCOUNT THE JUDGMENT OF INFOTECH ENTERPRISES LTD. RELIED UPON BY THE AO. THE APPELLANT HAS CLAIMED THAT ALL THE CONDITIONS PRESCRIBED IN THE SECTION HAVE BEEN FULFILLED. FROM THE PERUSAL OF THE ASSESSMENT ORDER ALSO IT IS EVIDENT THAT THE AP PELLANT HAS SUBMITTED SUBMISSIONS CLAIMING THAT ALL THE CONDITIONS ARE SATISFIED AND THE AO AFTER EXAMINING THE SUBMISSIONS MADE BY THE APPELLANT HAS MAINLY HELD THAT THE APPELLANT IS NOT ELIGIBLE BECAUSE IT HAS NOT OBTAINED THE APPROVAL UNDER THE INDUSTRI ES (DEVELOPMENT & REGULATION) ACT, 1951. A BRIEF REFERENCE CAN ALSO BE SEEN IN THE I.T.A. NO . 544 /M/ 16 7 ASSESSMENT ORDER, WHICH CAN BE CONSIDERED TO BE SAYING THAT THE AO WAS OF THE OPINION THAT THE APPELLANT IS NOT ENGAGED IN THE MANUFACTURING OF SOFTWARE. HOWEVER, THE ABOVE INFERENCE OF THE AO SEEMS TO BE LACKING ANY CONVICTION. SHE HAS ONLY REFERRED TO THE SALARY OF DIRECTORS TO CONCLUDE THAT THE APPELLANT IS NOT ENGAGED IN THE BUSINESS OF MANUFACTURING OF SOFTWARE, DESPITE THE FACT THAT IN THE SUBMISSION MADE BEFORE HER, WH ICH HAS BEEN QUOTED IN THE ASSESSMENT ORDER, IT IS EVIDENT THAT THE APPELLANT HAD CLAIMED BEFORE THE AO THAT IT HOLDS AN IPR FOR ANTIVIRUS SOFTWARE, WHICH ARE ADOPTED AND MODIFIED ACCORDING TO THE REQUIREMENTS OF THE CLIENTS AND THE COUNTRIES TO WHOM THE S OFTWARES ARE EXPORTED AFTER PUTTING THEM ON COMPACT DISKS. THE APPELLANT HAS ALSO CONTENDED THAT THE SUPREME COURT IN THE CASE OF ORACLES SOFTWARE INDIA LTD., QUOTED SUPRA HAD HELD THAT THE PROCESS OF TRANSFORMING BLANK COMPACT DISKS INTO SOFTWARE LOADED D ISKS AMOUNTS TO MANUFACTURING. THE APPELLANT HAD ALSO CONTENDED BEFORE THE AO THAT THE DEFINITION AVAILABLE IN THE SECTION IN EXPLANATION 2 OF SECTION 10B CLEARLY SAYS THAT A COMPUTER SOFTWARE MEANS ANY COMPUTER PROGRAMME RECORDED ON ANY DISK, TAPE, PERFOR ATED MEDIA, OR OTHER INFORMATION STORAGE DEVICE OR ANY CUSTOMIZED ELECTRONIC DATA OR ANY PRODUCT OR SERVICE OF SIMILAR NATURE WILL CONSTITUTE SOFTWARE WHICH ARE EXPORTED OR TRANSMITTED FROM INDIA TO ANY PLACE OUTSIDE INDIA BY ANY MEANS. THE AO HAS NOT EXAM INED ANY OF THESE CLAIMS OF THE APPELLANT BEFORE SAYING IN AN AMBIGUOUS MANNER THAT THE APPELLANT IS NOT ENGAGED IN THE ACTIVITY OF SOFTWARE MANUFACTURING ON THE BASIS OF SALARY AND NOTE ON ACTIVITY. THEREFORE, IT IS CLEAR FROM THE PERUSAL OF THE ASSESSMEN T ORDER THAT THE AO HAS FAILED TO APPRECIATE THE MATERIALS PLACED BEFORE HER IN THE LIGHT OF THE PROVISIONS CONTAINED U/S 10B AND THE INTERPRETATIONS GIVEN TO THE RELEVANT ISSUES IN DIFFERENT JUDGMENTS AND HAS CONCLUDED WITHOUT ANY BASIS THAT THE APPELLANT IS NOT ENGAGED IN THE BUSINESS OF MANUFACTURING OF SOFTWARE. IN VIEW OF THE ABOVE AND THE FACT THAT THE SUBMISSIONS OF THE APPELLANT HAS REMAINED UNCONTROVERTED, DEMONSTRATING THAT THE APPELLANT IS ENGAGED IN THE ACTIVITY OF MANUFACTURING OF SOFTWARES, IT HAS TO BE HELD THAT THE AFORESAID FINDING OF THE AO IS NOT CORRECT. THEREFORE, IT HAS TO BE CONSIDERED IN THE FACTS OF THE CASE AVAILABLE ON RECORD THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF SOFTWARE MANUFACTURING AND EXPORT. NOW COMING TO THE MAIN OBJECTION OF THE AO THAT THE APPROVAL IS NOT UNDER SEC. 14 OF THE INDUSTRIES (D&R) ACT, 1951, IT IS NOTED THAT THERE IS NO DISPUTE TO THE FACT THAT THE APPROVAL FOR EOU AVAILABLE WITH THE APPELLANT IS NOT FROM THE BOARD CONSTITUTED U/S 14 OF THE INDUSTRIES (D&R) ACT, 1951, BUT IS FROM THE STPI. HOWEVER, THE CLAIM OF THE APPELLANT THAT THE STPI IS A BODY CONSTITUTED BY THE GOVT. OF INDIA FOR THE SPECIFIC PURPOSE OF GRANTING APPROVAL OF EOU STATUS TO UNITS ENGAGED IN THE MANUFACTURING I.T.A. NO . 544 /M/ 16 8 AND EXPORTS OF SOFTWARES AND THEREFORE, THE SAME IS EQUIVALENT AND SERVING THE SAME PURPOSE IS REQUIRED TO BE CONSIDERED, IS REQUIRED TO EXAMINED. FOR THIS PURPOSE, THE APPELLANT HAS REFERRED TO A COMPARATIVE TABLE GIVING REFERENCE TO THE BENEFIT OF SECTION 10B IN FOREIGN TRADE P OLICY OF 2004 - 2009 VIS - A - VIS EXPORT IMPORT POLICY, 2002 - 2007 AND EXPORT IMPORT POLICY 1992 - 1997, TO BRING THE POINT TO THE FORE THAT THE GOVERNMENT HAS ACCEPTED THE GRANT OF BENEFIT U/S 10B UNDER THE APPROVAL GRANTED BY STPI. THE APPELLANT HAS ALSO CLAIMED THAT THE ASSESSING OFFICER HAS INCORRECTLY FOLLOWED THE DECISION OF THE ITAT, HYDERABAD GIVEN IN THE CASE OF INFOTECH ENTERPRISES PVT. LTD. VS. JCIT (2003) 80 TTJ (HYD) 589, WHICH WAS DELIVERED BEFORE THE ISSUANCE OF INSTRUCTION NO. 1 OF THE CBDT DATED 31 .3.2006 AND THE MINUTES OF THE INDUSTRIAL MINISTERIAL COMMUNICATION VIDE LETTER DATED 23.3.2006 ISSUED BY THE MINISTRY OF COMMUNICATION & TECHNOLOGY. FOR THE ABOVE, THE APPELLANT RELIED ON THE INSTRUCTION NO. 1 OF 2006 OF THE CBDT AND THE DECISION OF THE I TAT, DELHI 'H' BENCH GIVEN IN THE CASE OF DCIT VS. VALLIANT COMMUNICATIONS LTD. (ITA NO. 2706/DEL/2008/ A.Y. 2005 - 06). THE APPELLANT HAS ALSO PLACED RELIANCE ON THE DECISION OF ITAT DELHI 'F' BENCH GIVEN IN THE CASE OF REGENCY CREATIONS LTD. VS. ACIT CIR.1 5(1), NEW DELHI, ITA NO. 1588/DEL/2010/A.Y. 2007 - 08); ITAT, AHMEDABAD 'B' BENCH GIVEN IN THE CASE OF ITO WARD 4(1) VS. E - ENFOCHIP LTD. (ITA NO. 2311/AHD/2008/A.Y. 2005 - 06); ITAT DELHI 'H' BENCH DECISION GIVEN IN THE CASE OF DCIT, CIR.16(1) VS. TECHNOVATE E - SOLUTIONS PVT. LTD. (ITA NO. 135/DEL/2011/A.Y. 2003 - 04); CIT VS. EXCELL SOFTECH LTD. (2008)219 CTR (P&H) 405. IT CAN BE SEEN THAT THE FINDING OF THE ASSESSING OFFICER THAT SEC. 10B REQUIRED REGISTRATION BY THE BOARD CONSTITUTED U/S 14 OF INDUSTRIES (DEVEL OPMENT & REGULATION) ACT, 1951, IS PERFECTLY CORRECT BUT THE CLAIM OF THE APPELLANT THAT THE ABOVE REQUIREMENT SHOULD BE CONSTRUED TO HAVE BEEN LEGALLY FULFILLED AS PER THE DIRECTIONS OF THE MINISTRY OF COMMUNICATION & TECHNOLOGY AND THE INSTRUCTION ISSUED BY THE CBDT ON A SIMILAR ISSUE FOR REGISTRATION U/S 10A, ALSO LOOKS CORRECT. INSTRUCTION NO. 1 OF 2006 OF THE CBDT DATED 31.3.2006, IS IN RESPECT OF SEC. 10A BUT IN THIS INSTRUCTION IT HAS BEEN ACCEPTED THAT CONFUSION EXISTED IN RESPECT OF THE AUTHORITIES WHOSE APPROVAL SHOULD BE CONSIDERED TO BE FULFILLING THE CONDITIONS PRESCRIBED IN SEC. 10A AND IN VIEW OF THE SAME THE INSTRUCTION DIRECTED THE ASSESSING OFFICER AS UNDER: '6. THE MATTER HAS BEEN EXAMINED IN CONSULTATION WITH THE OFFICERS OF THE DEPARTM ENT OF INFORMATION TECHNOLOGY (EARLIER, DEPARTMENT OF ELECTRONICS). IN VIEW OF THE AMBIGUITY IN THE LEGAL STATUS OF THE APPROVAL BY DIRECTOR OF STPS, THE INTER - MINISTERIAL STANDING COMMITTEE WILL MEET TO CONSIDER THE APPROVALS BY I.T.A. NO . 544 /M/ 16 9 DIRECTORS OF STPS ISSUED I N THE PAST. THEREFORE, WITH A VIEW TO AVOID INFRUCTUOUS DEMAND RAISED IN ASSESSMENT AND REASSESSMENT OF ASSESSES CLAIMING DEDUCTION U/S 10A, IT HAS BEEN DECIDED THAT THE CLAIM OF THE DEDUCTION U/S 10A OF THE INCOME TAX ACT, SHALL NOT BE DENIED TO STP UNITS ONLY ON THE GROUND THAT THE APPROVAL/ REGISTRATION TO SUCH UNIT HAS BEEN GRANTED BY THE DIRECTORS OF SOFTWARE TECHNOLOGY PARKS. HOWEVER, IT HAS TO BE ENSURED THAT ALL OTHER CONDITIONS SPECIFIED IN SEC. 10A ARE FULLY SATISFIED BEFORE ALLOWING ANY SUCH CLAI M.' THE TRIBUNALS HAVE IN THE JUDGMENTS RELIED UPON BY THE APPELLANT, AFTER 2006 HAVE COME TO THE CONCLUSION THAT THE REGISTRATION GRANTED BY STPI SHOULD BE CONSIDERED AS ENOUGH FOR THE FULFILLMENT OF THIS CONDITION. THE TRIBUNALS HAVE ALSO CONSIDERED TH E MINUTES OF THE INDUSTRIAL MINISTERIAL COMMUNICATION VIDE LETTER DATED 23.3.2006 ISSUED BY MINISTRY OF COMMUNICATION &TECHNOLOGY, AS DISCUSSED IN DETAIL IN THE CASE OF DCIT VS. VALLIENT COMMUNICATIONS LTD. IN REGENCY CREATION LTD. JUDGMENT GIVEN IN ITA NO . 1588/DEL/2010/ A.Y. 2007 - 08, THE HON'BLE ITAT ALSO RELIED ON A CLARIFICATION OBTAINED UNDER RTI, WHICH HAD STATED THAT NO APPROVAL / RATIFICATION OF STPI APPROVAL IS REQUIRED FROM BOA FORMED BY MINISTRY OF COMMERCE U/S 14 OF INDUSTRIES (DEVELOPMENT & REG ULATION) ACT, 1951. FOR THE ABOVE REASON, THE TRIBUNALS HAVE FOUND THAT THE DECISION OF INFOTECH ENTERPRISES LTD., 85 ITD 325 (HYD) WILL NOT BE APPLICABLE AFTER 2006. IN VIEW OF THE DISCUSSIONS MADE ABOVE, FROM WHICH IT IS APPARENT THAT THE OVERWHELMING VI EW OF THE TRIBUNALS HAVE BEEN TO TREAT THE APPROVAL GRANTED BY THE STPI TO BE ENOUGH FOR THE FULFILLMENT OF CONDITION PRESCRIBED IN SEC. 10B FOR APPROVAL OF THE EOU UNIT UNDER SEC. 14 OF INDUSTRIES (DEVELOPMENT & REGULATION) ACT, 1951 AND ON THIS GROUND TH E BENEFIT CANNOT BE DENIED HAS TO BE ACCEPTED DESPITE THE FACT THAT THE SEC. 10B SPECIFICALLY TALKS OF ONLY REGISTRATION U/S.14 OF INDUSTRIES (DEVELOPMENT & REGULATION) ACT, 1951. SINCE THE ASSESSING OFFICER IN THIS CASE HAS ONLY RAISED THIS ISSUE, THE SAM E HAS TO BE NOT ALLOWED IN VIEW OF THE DISCUSSIONS MADE ABOVE. GROUND NO. 1 THEREFORE, IS ALLOWED. THE TRIBUNAL IN THE ABOVE RELIED CASES HAVE ALSO ALLOWED THE BENEFIT ON THE 'PRINCIPLE OF CONSISTENCY', WHICH IS APPLICABLE IN THIS CASE ALSO. IT WAS DEMONST RATED BY THE AR THAT SIMILAR BENEFIT U/S 10B WAS ALLOWED BY AO IN EARLIER ASS ESSMENT YEARS AND NO ACTION TO WITHDRAW THE SAME HAS BEEN TAKEN. THUS ON THIS BASIS ALSO GROUND NO. 1 IS REQUIRED TO BE ALLOWED.' 7.1 WE FIND ALTHOUGH THE TAX EFFECT WAS MORE THAN THE PRESCRIBED MONETARY LIMIT THE REVENUE HAS NOT FILED ANY APPEAL AGAINST THE ORDER I.T.A. NO . 544 /M/ 16 10 OF THE CIT(A) FOR THE A.Y. 2008 - 09. WE FIND THE CIT(A) WHILE ALLOWING THE APPEAL OF THE ASSESSEE FOR A.Y. 2009 - 10 HAS FOLLOWED HIS EARLIER ORDER UNDER IDENTICAL FACTS AND CIRCUMSTANCES. WE FIND THE LD.CIT(A) IN HIS ORDER FOR A.Y. 2008 - 09 HAS DISTINGUISHED THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF INFOTECH ENTERPRISES LTD. (SUPRA) AND FOLLOWING VARIOUS OTHER DECISIONS HAS ALLOWED THE CLAIM OF DE DUCTION U/S.10B. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY MISTAKE IN THE ORDER OF THE LD.CIT(A) NOR COULD CITE ANY OTHER DECISION TO CONTROVERT THE FINDING GIVEN BY THE LD.CIT(A). SINCE THE ORDER OF THE CIT(A) IS BASED ON VARIOUS DECISIO NS INCLUDING THE CBDT INSTRUCTION NO.1/2006, THEREFORE, IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). ACCORDINGLY, WE UPHOLD THE SAME. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED . 9. IN VIEW OF THE ABOVE DECISION OF THE PUNE BENCHES OF THE TRIBUNAL, WHEREIN, IT IS APPARENT THAT THE OVERWHELMING VIEW OF VARIOUS BENCHES OF THE TRIBUNALS HAVE BEEN DISCUSSED AND ARRIVED AT A CONCLUSION TO TREAT THE APPROVAL GRANTED BY THE STPI TO B E ENOUGH FOR THE FULFILLMENT OF CONDITION PRESCRIBED IN SEC TION 10B OF THE ACT FOR APPROVAL OF THE EOU UNIT UNDER SEC TION 14 OF INDUSTRIES (DEVELOPMENT & REGULATION) ACT, 1951 . T HEREFORE, WE ARE OF THE OPINION THAT THE BENEFIT CANNOT BE DENIED TO THE ASSES SEE DESPITE THE FACT THAT THE SEC TION 10B OF THE ACT SPECIFICALLY TALKS OF ONLY REGISTRATION UNDER SECTION 14 OF INDUSTRIES (DEVELOPMENT & REGULATION) ACT, 1951. THUS, RESPECTFULLY FOLLOWING THE DECISION OF THE PUNE BENCHES OF THE TRIBUNAL IN THE CASE OF I TO V. CAT LABS PVT. LTD. (SUPRA), WE SET ASIDE THE ORDER PASSED BY THE LD. PCIT AND HOLD THAT THE ASSESSING OFFICER HAS RIGHTLY ALLOWED DEDUCTION UNDER SECTION 10B OF THE ACT. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. I.T.A. NO . 544 /M/ 16 11 10. T HE ALTERNATIVE PLEA RAISED BY THE ASSESSEE FOR ALLOWING THE CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT BECOME INFRUCTUOUS AND DOES NOT WARRANT ADJUDICATION BY US SINCE WE HOLD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 10B OF THE ACT . 11 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 27 TH JU LY , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 27 . 0 7 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.