The ITO, Ward-2(1)(4), Ahmedabad V. Mednautix Outsourcing Pvt. Ltd., Ahmedabad

ITA 617/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8577 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 14-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 18-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Difference of opinion; Competent authority; Change of opinion
• Section: 10B; 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD .., , BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER SL. NO(S) ITA / CO NOS. ASSESSME- NT YEAR(S) APPEAL(S) / CO(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 617/AHD/2015 2008-09 ITO WARD-2(1)(4) AHMEDABAD MEDNAUTIX OUTSOURCING PVT.LTD. 91, NEW YORK TOWER-A NR.THALTEJ CROSS ROAD SG HIGHWAY THALTEJ AHMEDABAD PAN:AACCD 5096 J 2. 618/AHD/2015 2009-10 -DO-REVENUE -DO-ASSESSEE 3. 619/AHD/2015 2010-11 -DO-REVENUE -DO-ASSESSEE 4. CO 65/AHD/2015 ( IN ITA 617/A/15 ) 2008-09 MEDNAUTIX OUTSOURCING PVT.LTD. ITO WARD-2(1)(4) AHMEDABAD 5. CO 66/AHD/2015 ( IN ITA 618/A/15 ) 2009-10 -DO-ASSESSEE -DO-REVENUE 6. CO 67/AHD/2015 ( IN ITA 619/A/15 ) 2010-11 -DO-ASSESSEE -DO-REVENUE ASSESSEE BY : SHRI T.P. HEMANI, (ADV.) REVENUE BY : SHRI PRASOON KABRA, SR.DR !'#$ / DATE OF HEARING 31/08/2017 %&'#$ / DATE OF PRONOUNCEMENT 05/09/2017 ITA NOS.617 TO 619/AHD/201 5 & CO NOS.65 TO 67/AHD/2015 ITO VS. MADNAUTIX OUTSOURCING P.LTD. ASST.YEARS 2008-09 TO 2010-11 - 2 - / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS HAVE BEEN FILED BY THE REVE NUE AGAINST THE COMMON ORDER OF THE COMMISSIONER OF INCOME TAX(APPE ALS)-2, AHMEDABAD [CIT(A) IN SHORT] DATED 31/12/2014 FOR THE ASSESSMENT YEARS (AYS) 2008-09, 2009-10 & 2010-11. THE ASSES SEE HAS ALSO FILED CROSS OBJECTIONS IN THE AFORESAID REVENUES APPEALS . 2. THE COMMON GROUNDS RAISED BY THE REVENUE FOR AL L THE THREE YEARS AGAINST THE IMPUGNED ORDER OF THE CIT(A) ARE BROAD LY SIMILAR. THE GROUND EXTRACTED FROM ITA NO.617/AHD/2015 AY 2008 -09 FOR READY REFERENCE READ AS UNDER:- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALL OWING THE ASSESSEES ALTERNATE CLAIM OF DEDUCTION U/S.10A WHI CH WAS NOT CLAIMED IN THE RETURN OF INCOME, IN PLACE OF ITS OR IGINAL CLAIM OF DEDUCTION U/S.10B. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS BY NOT CALLING FOR THE AOS COMMENTS TO THE REJOINDER FILED BY THE ASS ESSEE ON THE REMAND REPORT OF THE AO. 3. THE COMMON GROUNDS RAISED IN THE CROSS-OBJECTIO NS OF THE ASSESSEE READ AS UNDER (EXTRACTED FROM CO NO.65/AHD /2015 AY 2008- 09):- ITA NOS.617 TO 619/AHD/201 5 & CO NOS.65 TO 67/AHD/2015 ITO VS. MADNAUTIX OUTSOURCING P.LTD. ASST.YEARS 2008-09 TO 2010-11 - 3 - 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN UPHOLDING REOPENING U/S.147 OF THE ACT. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, REOPENING IS INVALID AND WITHOUT JURISDICTION. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FA CTS OF THE CASE IN NOT GRANTING CLAIM OF DEDUCTION U/S.10B OF THE A CT. LD.CIT(A) OUGHT TO HAVE HELD THAT THE ASSESSEE IS ALSO ELIGIB LE FOR CLAIM OF DEDUCTION U/S.10B OF THE ACT. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE LD.AO IN LEVYING INTEREST U/S.234A/B/C OF THE ACT. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON F ACTS OF THE CASE IN CONFIRMING ACTION OF LD. AO IN INITIATING PENAL TY PROCEEDINGS U/S.271(1)(C) OF THE ACT. 4. THE CONTROVERSY INVOLVED IN THE PRESENT APPEALS OF THE REVENUE REVOLVES AROUND ALLOWABILITY OF CLAIM OF DEDUCTION UNDER S.10A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'T HE ACT') WHICH WAS STATED TO BE NOT CLAIMED IN THE RETURN OF INCOME BY THE ASSESSEE. THE ASSESSEE IN ITS RETURN OF INCOME HAD CLAIMED DEDUC TION UNDER S.10B OF THE ACT. THE AO DENIED AFORESAID CLAIM OF DEDUCTI ON UNDER S.10B OF THE ACT. THE CIT(A) ALLOWED ALTERNATE CLAIM OF THE ASS ESSEE UNDER S.10A IN PLACE OF S.10B AT FIRST APPELLATE STAGE. THE REVEN UE HAS CHALLENGED THE AFORESAID ACTION OF CIT(A). THE ASSESSEE IN ITS CR OSS-OBJECTION HAS RAISED TWO-FOLD OBJECTION TO THE ORDER OF CIT(A). FIRSTLY, IT CHALLENGED ITA NOS.617 TO 619/AHD/201 5 & CO NOS.65 TO 67/AHD/2015 ITO VS. MADNAUTIX OUTSOURCING P.LTD. ASST.YEARS 2008-09 TO 2010-11 - 4 - ASSUMPTION OF JURISDICTION UNDER S.147 AND SECONDLY , ON MERITS, IT HAS CLAIMED ELIGIBILITY OF DEDUCTION UNDER S.10B AS CLA IMED. 5. BRIEFLY STATED, THE ASSESSEE-COMPANY IS STATED T O BE REGISTERED WITH STPI (SOFTWARE TECHNOLOGY PARKS OF INDIA), GANDHINA GAR AS 100% EOU (EXPORT ORIENTED UNDERTAKING) FOR CARRYING ON BUSIN ESS OF DEVELOPMENT AND EXPORT OF COMPUTER SOFTWARE AND IT ENABLED SERV ICES. ON THE STRENGTH OF AFORESAID REGISTRATION, THE ASSESSEE FI LED ITS RETURN OF INCOME FOR THE VARIOUS ASSESSMENT YEARS IN CAPTIONED APPEA LS WHEREIN DEDUCTIONS OF VARIED AMOUNTS HAVE BEEN CLAIMED UNDER S.10B OF THE ACT. THE ASSESSING OFFICER (AO) DENIED THE CLAIM OF DEDUCTIO N UNDER S.10B AGAINST THE PROFITS AND GAINS DERIVED BY 100% EOU F ROM EXPORT OF ARTICLES OR THINGS ON THE GROUND THAT CONDITIONS S PECIFIED UNDER S.10B OF THE ACT HAS NOT BEEN FULFILLED. IT IS THE CASE OF THE AO THAT CLAUSE(IV) OF EXPLANATION(2) OF SECTION 10B REQUIRES THAT UNDERTA KING OF THE ASSESSEE IS REQUIRED TO BE APPROVED AS 100% EOU BY THE BOARD AP POINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY SECTION 14 OF THE INDUSTRIES (DEVELOPMENT AND REGUL ATION) ACT, 1951 AND THE RULES MADE UNDER THAT ACT. THE AO NOTED THAT AN APPROVAL GRANTED IN THIS REGARD BY THE DEVELOPMENT COMMISSIONER WILL BE CONSIDERED VALID ONLY IF SUCH APPROVAL IS ULTIMATELY RATIFIED BY THE BOARD OF APPROVAL (BOA). THE AO OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE ITA NOS.617 TO 619/AHD/201 5 & CO NOS.65 TO 67/AHD/2015 ITO VS. MADNAUTIX OUTSOURCING P.LTD. ASST.YEARS 2008-09 TO 2010-11 - 5 - ANY DOCUMENTS TO SUPPORT THE APPROVAL OR RATIFICATI ON BY THE BOA FOR THE PURPOSES OF ELIGIBILITY OF DEDUCTION UNDER S.10B OF THE ACT. THE AO ACCORDINGLY DECLINED THE CLAIM OF DEDUCTION OF RS.3 4,94,279/- FOR THE AY 2008-09 UNDER S.10B OF THE ACT. SIMILAR CLAIM OF D EDUCTIONS OF DIFFERENT AMOUNTS WERE DECLINED IN RESPECT OF AYS 2009-10 & 2010-11 ALSO WHICH ARE SUBJECT MATTER OF PRESENT APPEALS. 6. IN THE FIRST APPEAL AGAINST THE ORDER OF THE AO, THE CIT(A) UPHELD THE ACTION OF THE AO TOWARDS DENIAL OF DEDUCTION CL AIMED UNDER S.10B OF THE ACT. HOWEVER, AS NOTED EARLIER, THE CIT(A) ALL OWED THE ALTERNATIVE CLAIM OF THE ASSESSEE UNDER S.10A OF THE ACT ON BEI NG SATISFIED THAT CONDITIONS PRESCRIBED THEREIN FOR ELIGIBILITY OF DE DUCTION STANDS SATISFIED. 7. AGGRIEVED BY THE ACTION OF THE CIT(A) IN ALLOWIN G THE ALTERNATIVE CLAIM OF THE ASSESSEE UNDER S.10A OF THE ACT, THE R EVENUE IS IN APPEAL BEFORE THE TRIBUNAL. LIKEWISE, THE ASSESSEE HAS AL SO CHALLENGED THE DENIAL OF ORIGINAL CLAIM OF DEDUCTION UNDER S.10B O F THE ACT AS PER ITS RETURN OF INCOME. 8. THE LD.DR FOR THE REVENUE MR.PRASOON KABRA AT TH E OUTSET SUBMITTED THAT THE CIT(A) MISDIRECTED ITSELF IN LAW IN ALLOWING ITA NOS.617 TO 619/AHD/201 5 & CO NOS.65 TO 67/AHD/2015 ITO VS. MADNAUTIX OUTSOURCING P.LTD. ASST.YEARS 2008-09 TO 2010-11 - 6 - ALTERNATIVE CLAIM OF DEDUCTION U/S.10A OF THE ACT W ITHOUT GIVING ANY OPPORTUNITY TO THE AO TO VERIFY THE TERMS AND CONDI TIONS SPECIFIED FOR ELIGIBILITY OF CLAIM UNDER S.10A OF THE ACT. THE L D.DR SUBMITTED THAT SECTIONS 10A & 10B HAS BEEN DELIBERATELY SEGREGATED BY THE STATUTE AND CONDITIONS FOR CLAIM OF DEDUCTIONS ARE REQUIRED TO BE SATISFIED INDEPENDENTLY WHICH HAS NOT BEEN DONE IN THE PRESEN T CASE. IT WAS THUS CONTENDED THAT THE ORDER OF THE CIT(A) IS VITIATE D. THE LD.DR RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT I N THE CASE OF FAST BOOKING (I) PVT.LTD. VS. DCIT 378 ITR 693 (DELHI) T O SUBMIT THAT RATIFICATION OF ACTION OF DEVELOPMENT COMMISSION BY BOARD OF APPROVAL IS NECESSARY TO AVAIL DEDUCTION S.10B OF THE ACT. 9. THE LD.AR FOR THE ASSESSEE MR.TUSHAR P.HEMANI, ON THE OTHER HAND, REFERRED TO THE PAPER-BOOK FILED AND INVITED OUR ATTENTION TO THE COPY OF APPROVAL/RATIFICATION OF ASSESSEES UNIT AS 100% EOU GRANTED VIDE LETTER DATED 14/03/2013 AND SUBMITTED THAT THE ASSESSEE APPLIED TO THE DESIGNATED AUTHORITY I.E. DEVELOPMENT COMMISSIO NER TO WHOM THE POWERS HAVE BEEN DELEGATED IN THIS BEHALF. IT WAS ALSO CONTENDED THAT SUBSEQUENT RATIFICATION OF THE APPROVAL IS THE INTE RNAL MATTER OF THE STPI AUTHORITIES AND THE CENTRAL GOVERNMENT. THE ASSES SEE HAS NO ROLE TO PLAY IN THE MATTER. THE LD.AR, HOWEVER, WITHOUT GO ING INTO THE CONTROVERSY SUBMITTED THAT THE ASSESSEE HAS ULTIMAT ELY OBTAINED THE APPROVAL AS CAN BE SEEN FROM THE COMMUNICATION FROM THE STPI VIDE ITA NOS.617 TO 619/AHD/201 5 & CO NOS.65 TO 67/AHD/2015 ITO VS. MADNAUTIX OUTSOURCING P.LTD. ASST.YEARS 2008-09 TO 2010-11 - 7 - DECISION LETTER DATED 14/03/2013. THE LD.AR ALSO RELIED UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF PR.CIT VS. ECI TECHNOLOGIES PVT.LTD. (TAX APPEAL NO. 203 OF 2015 ORDER DATED 22/04/2015) TO SUPPORT ELIGIBILITY OF ITS CLAIM OF DEDUCTION UNDER S.10B OF THE ACT. THE LD.AR SUBMITTED THAT ONCE THE BOARD H AS RATIFIED THE APPROVAL GRANTED BY THE COMPETENT AUTHORITY (DEVELO PMENT COMMISSIONER) OF STPI AS A MATTER OF FACT, THERE IS NO WARRANT FOR DENIAL OF DEDUCTION UNDER S.10B OF THE ACT AS CLAIMED. 10. THE LD.AR NEXT SUBMITTED THAT THE CLAIM OF DED UCTION UNDER S.10B OF THE ACT WAS EARLIER ALLOWED AFTER DUE DELIBERATI ON IN THE ORIGINAL ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE ACT D ATED 25/10/2010. IT WAS THUS CONTENDED THAT THE CASE RE-OPENED UNDER S. 147 OF THE ACT TO DENY THE CLAIM EARLIER ALLOWED ON A MERE CHANGE OF OPINION IS NOT SUSTAINABLE IN LAW. THE LD.AR ACCORDINGLY SUBMITTE D THAT APPEAL OF THE REVENUE IS REQUIRED TO BE DISMISSED AND CROSS OBJEC TIONS OF THE ASSESSEE FOR ELIGIBILITY OF CLAIMED UNDER S.10B OF THE ACT I S REQUIRED TO BE UPHELD. 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. WE OBSERVE AT THE OUTSET THAT A CLARIFICATION INSTRUCTION HAS BEEN ISSUED BY THE CBDT BEING INSTRUCTION NO.02/2009 DATED 09/03/2009 CORRE CTED BY (F.NO.178/19/2008 ITA - I, DATED 08/05/2009) TO B RING AN END TO ITA NOS.617 TO 619/AHD/201 5 & CO NOS.65 TO 67/AHD/2015 ITO VS. MADNAUTIX OUTSOURCING P.LTD. ASST.YEARS 2008-09 TO 2010-11 - 8 - ONGOING RAGING CONTROVERSY. BY VIRTUE OF THIS INS TRUCTION, IT STANDS CLARIFIED THAT THE POWERS VESTED WITH BOARD HAVE B EEN RECOGNIZED TO BE DELEGATED TO THE DEVELOPMENT COMMISSIONER CONCERNED FOR GRANTING APPROVALS TO 100% EOUS FOR THE PURPOSES OF S.10B OF THE ACT. IT IS THE CASE OF ASSESSEE THAT IN VIEW OF THE AFORESAID EXP RESS CBDT INSTRUCTION, THE APPROVAL OF DEVELOPMENT COMMISSIONER IS NOW SUF FICIENT FOR PURPOSE OF TAX HOLIDAY UNDER S.10B OF THE ACT. WE FIND FORCE IN THE CONTENTION ON BEHALF OF THE ASSESSEE THAT IT HAS NO CONTROL O VER THE INTERNAL MECHANISM AND PROCEDURE PRESCRIBED FOR RATIFICATION IN APPROPRIATE CASES BY THE BOARD OF APPROVAL. AS A COROLLARY, WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE THAT ANY DELAY IN RATIFICATION OF THE ACTION OF THE DEVELOPMENT COMMISSIONER AS PER PRESCRIBED PROCEDUR E BY THE BOARD APPOINTED UNDER S.14 OF INDUSTRIES (DEVELOPMENT AND REGULATION) ACT 1951, WILL NOT MAR THE CLAIM OF DEDUCTION BY THE AS SESSEE ALTOGETHER. ONCE, THE PERMISSION GRANTED BY THE OFFICE OF DEVEL OPMENT COMMISSIONER STANDS RATIFIED, THE RATIFICATION WOU LD RELATE BACK TO THE DATE OF PERMISSION. IT IS NOT THE CASE OF THE AO THAT OTHER TERMS AND CONDITIONS FOR AVAILING EXEMPTION UNDER S.10B OF TH E ACT HAS NOT BEEN COMPLIED WITH. IN THE INSTANT CASE, IT APPEARS FR OM THE COMMUNICATION LETTER DATED 14/03/2013 THAT LETTER OF PERMISSION D ATED 25/05/2007 ISSUED IN FAVOUR OF THE ASSESSEE FOR REGISTRATION AS 100% EOU UNDER STPI SCHEME WAS STATED TO BE RATIFIED IN THE FIRST MEET ING OF INTER-MINISTERIAL STANDING COMMITTEE (IMSC) ON 2-6-2008 CONSTITUTED B Y CENTRAL ITA NOS.617 TO 619/AHD/201 5 & CO NOS.65 TO 67/AHD/2015 ITO VS. MADNAUTIX OUTSOURCING P.LTD. ASST.YEARS 2008-09 TO 2010-11 - 9 - GOVERNMENT FOR SUCH PURPOSES. AS NOTED, THE RATIFI CATION SUBSEQUENTLY CARRIED OUT AND COMMUNICATED WILL OPERATE FROM THE DATE OF LETTER OF PERMISSION ISSUED BY THE DEVELOPMENT COMMISSIONER. THEREFORE, IN OUR CONSIDERED VIEW, THE ACTION OF THE AO AND CIT(A) IN DENYING THE CLAIM OF DEDUCTION UNDER S.10B OF THE ACT REQUIRES TO BE SET ASIDE AS UNSUSTAINABLE IN LAW. CONSEQUENTLY, THE CROSS OBJ ECTION FILED BY THE ASSESSEE REQUIRES TO BE VIEWED FAVORABLY ON MERITS. AS A COROLLARY, WE DO NOT CONSIDER IT EXPEDIENT TO DEAL WITH THE CORRE CTNESS OF ACTION OF CIT(A) IN ALLOWING THE ALTERNATE CLAIM OF ASSESSEE UNDER S.10A ON MERITS. 12. ALSO, IN VIEW OF THE MERITS IN THE CLAIM OF DED UCTION UNDER S.10B, WE DO NOT CONSIDER IT NECESSARY TO DEAL WITH THE C HALLENGE OF THE ASSESSEE ON ALLEGEDLY WRONG ASSUMPTION OF JURISDICTION BY I NVOKING THE SECTION 147 OF THE ACT. THUS, THE ASSESSEE, IN OUR CONSIDE RED OPINION, IS RIGHTLY ELIGIBLE FOR CLAIM OF DEDUCTION UNDER S.10B OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 13. THE FACTS BEING COMMON, ALL REVENUES APPEALS A ND CROSS- OBJECTIONS OF THE ASSESSEE REQUIRES TO BE TREATED S IMILARLY. ITA NOS.617 TO 619/AHD/201 5 & CO NOS.65 TO 67/AHD/2015 ITO VS. MADNAUTIX OUTSOURCING P.LTD. ASST.YEARS 2008-09 TO 2010-11 - 10 - 14. IN THE COMBINED RESULT, REVENUES APPEAL ARE DI SMISSED WHEREAS ASSESSEES CROSS-OBJECTIONS ARE ALLOWED IN TERMS OF OBSERVATIONS NOTED ABOVE. THIS ORDER PRONOUNCED IN OPEN COURT ON 05/ 09 /2017 (..) ( ) ( S.S. GODARA ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 05/ 09 /2017 -..!,.!../ T.C. NAIR, SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. ./0 / THE APPELLANT 2. 1/0 / THE RESPONDENT.11 3. 234$ 5$ / CONCERNED CIT 4. 5$ ( . ) / THE CIT(A)-2, AHMEDABAD 5. 67$!34 , ..34' , .2 / DR, ITAT, AHMEDABAD 6. 9' / GUARD FILE. / BY ORDER, 16$$ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 31.8.2017 (DICTATION-PAD 2 0- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 01.09.2017 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.6.9.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 6.9.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER