ITO, Ward -17(2), Hyderabad, Hyderabad V. Elico Ltd., Hyderabad, Hyderabad

ITA 648/HYD/2015

• Counselvise Citation: 64822514 RSA 2015
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 13-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: S RAMA RAO
• Keywords: Opportunity of being heard; Reassessment proceedings
• Section: 143(3); 10B; 147; 148

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 648/HYD/2015 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, WARD 17(2), HYDERABAD VS. ELICO LTD., HYDERABAD. PAN AAACE 5140L (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B. KURMI NAIDU ASSESSEE BY : SHRI S. RAMA RAO DATE OF HEARING : 08-12-2015 DATE OF PRONOUNCEMENT : 18-12-2015 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF CIT(A) 5, HYDERABAD DATED 20/01/2015, FOR THE AY 2006-0 7 WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LD C!T(A) IS ERRONEOUS BOTH I N LAW AND ON FACTS AND IN LAW. 2. THE CIT(A) ERRED IN ALLOWING ALTERNATE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S. 10A DURING THE RE-ASSESSMENT PROCEE DINGS IGNORING THE FACT THAT THE ASSESSEE HAD NOT FILED ANY REVISED R ETURN FOR MAKING SUCH ALTERNATE CLAIM U/S. 10A INSTEAD OF 10B OF THE ACT AS ORIGINALLY CLAIMED. 3. THE C!T(A) HAS ERRED IN PLACING RELIANCE ON THE DECISION OF CLOUD SOFTECH INDIA PRIVATE LIMITED WHICH WAS BASED ON T HEIR OWN DECISION IN THE CASE OF INFOTECH ENTERPRISES LTD WHICH IS DELI VERED IN THE YEAR 2003, IGNORING THE DECISION IN THE CASE OF M/S. REGENCY CREATION LTD OF THE HON'BLE DELHI HIGH COURT ON THE SAME ISSUE DELIVER ED IN THE YEAR 2012. 4. THE CIT(A) ERRED IN NOT FOLLOWING THE SPIRIT OF THE DECISION OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF REGENCY CREATIO N LTD WHEREIN THERE WAS NO IMPLICATION THAT APPROVAL FOR PURPOSES OF AN ST P ALSO ENTITLED THE UNIT TO A BENEFIT U/S. 10B. 2. BRIEFLY THE FACTS OF THE CASE ARE, THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF ANALYTIC AL INSTRUMENTS AND 2 ITA NO. 648 /HYD/2015 ELICO LTD. PROVIDING BACK OFFICE HEALTH CARE SERVICES, FILED I TS RETURN OF INCOME ON 27/11/2006 ADMITTING LOSS OF RS. 1,23,53,233/- U NDER NORMAL PROVISIONS AND INCOME OF RS. 49,50,464/- U/S 115JB. IN THIS CASE, ASSESSMENT WAS ORIGINALLY COMPLETED U/S 143(3) ON 3 0/12/2008 DETERMINING TOTAL LOSS AT RS. 9,35,322/- AND BOOK P ROFIT AT RS. 65,71,766/-. WHILE COMPLETING THE ORIGINAL ASSESSME NT, AO ACCEPTED THE CLAIM OF DEDUCTION U/S 10B MADE BY THE ASSESSEE , BUT, RESTRICTED THE SAME AND MADE DISALLOWANCE TO THE EXTENT OF RS. 19,55,627/-. WHEN THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A), THE CIT(A) DIRECTED AO TO ALLOW DEDUCTION U/S 10B OF THE ACT. 2.1 THEREAFTER, THE AO REOPENED THE ASSESSMENT BY I SSUE OF NOTICE U/S 148 OF THE ACT AND IN THE REASSESSMENT PROCEEDI NGS, AO DISALLOWED THE ENTIRE CLAIM OF THE ASSESSEE FOR DED UCTION U/S 10B OF THE ACT STATING THAT ASSESSEE IS REGISTERED AS EOU WITH THE STPI, HYDERABAD WHILE AS PER EXPLANATION 2(IV) TO SECTION 10B, FOR CLAIMING DEDUCTION U/S 10B, THE ASSESSEE COMPANY NEED TO BE APPROVED AS A 100% EOU BY THE BOARD APPOINTED IN THIS BEHALF BY T HE CENTRAL GOVERNMENT U/S 14 OF INDUSTRIES (DEVELOPMENT & REGU LATION) ACT, 1951. HE ALSO RELIED ON THE DECISION IN THE CASE O F INFOTECH ENTERPRISES LTD. VS. CIT [2003] 85 ITR 325 (HYD.) 3. AGGRIEVED WITH THE ORDER OF AO, ASSESSEE PREFERR ED APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT IT HAS DISCLOSED ALL MATERIAL FACTS AND SUBMITTED ALL THE INFORMATION REQUIRED BEFORE THE ASSESSING OFFICER AT THE TIME OF REGULAR ASSESSMENT PROCEEDINGS WHEREIN THE ASSESSING OFFICER HAS ACCEP TED THE CLAIM OF DEDUCTION U/S 10B OF THE ASSESSEE AND HENCE THE INI TIATION OF PROCEEDINGS U/S 147 IS NOT VALID. FURTHER, THE ASSE SSEE RELIED ON THE DECISION OF THE HON'BLE ITAT, BENCH 'A', HYDERABAD IN ITA NO.1750/HYD/2008 IN THE CASE OF SMT. K. SUDHA RANI DATED 30.10.2009 WHEREIN IT IS HELD THAT THE APPROVAL OBT AINED FROM STPI AS 3 ITA NO. 648 /HYD/2015 ELICO LTD. 100% EOU ITSELF IS ENOUGH FOR GRANTING EXEMPTION U/ S 10B OF THE I.T. ACT. THE ASSESSEE FURTHER CONTENDED THAT ON APPEAL BEFORE THE CIT(A) IN RESPECT OF ORIGINAL ASSESSMENT PROCEEDINGS, THE CIT(A) ALSO GRANTED CLAIM FOR EXEMPTION U/S 10B OF THE ACT AND MODIFIED THE COMPUTATION OF EXEMPTION GRANTED BY THE ASSESSING O FFICER FOR WHICH THE ASSESSING OFFICER PASSED A CONSEQUENTIAL ORDER. 4.1 THE ASSESSEE SUBMITTED THAT THE ASSESSEE'S CLAI M OF DEDUCTION U/S 10A OF THE ACT INSTEAD OF SECTION 10B STATING T HAT IT HAS INADVERTENTLY CLAIMED DEDUCTION U/S 10B INSTEAD OF 10A SINCE THE MANNER OF DETERMINING SUCH A CLAIM IS SAME FOR BOTH THE SECTIONS, HAS BEEN REJECTED BY THE ASSESSING OFFICER FOR THE REAS ON THAT SECTION 10A AND SECTION 10B ARE TWO ENTIRELY DIFFERENT SECT IONS AND THE ASSESSEE HAS NOT MADE ANY CLAIM FOR DEDUCTION UNDER SECTION10A IN THE RETURN OF INCOME AND HAS ALSO NOT SUBMITTED AUD IT REPORT IN FORM 56F BUT INSTEAD SUBMITTED AUDIT REPORT IN FORM 56G FOR THE PURPOSE OF CLAIMING EXEMPTION U/S 10B, FOR WHICH THE ASSESSING OFFICER REJECTED THE CLAIM STATING THAT THE ASSESSEE COMPANY IS REGI STERED WITH STPI AND NOT WITH THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT U/S 14 OF INDUSTRIES (DEVELOPMENT & REGU LATION) ACT, 1951, AS SUCH NOT ELIGIBLE FOR DEDUCTION U/S 10B OF THE IT. ACT. 4.2 THE ASSESSEE OBJECTED FOR THE ABOVE CONTENTION OF THE ASSESSING OFFICER STATING THAT IF THE APPELLANT IS NOT ELIGIBLE FOR EXEMPTION U/S 10B, EXEMPTION U/S 10A CAN BE GRANTED AS THE ASSESSE HAD FILED ALL THE DETAILS NECESSARY FOR GRANTING EX EMPTION U/S 10A INCLUDING THE AUDIT REPORT IN FORM 56F WHICH HAS BE EN FILED DURING THE RE-ASSESSMENT PROCEEDINGS. IN THIS REGARD THE ASSES SEE RELIED ON THE DECISION OF THE HON'BLE ITAT IN THE CASE OF SMT. K. SUDHA RANI VS. ITO WHEREIN IT HAS BEEN HELD THAT THE APPELLANT IS ENTITLED EITHER FOR DEDUCTION U/S 10B OR U/S 10A OF THE I.T. ACT. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) ON THE ISSUE OF DEDUCTION U/S 10A FOR WHICH THE APP ELLANT IS ENTITLED 4 ITA NO. 648 /HYD/2015 ELICO LTD. FOR, AS AGAINST THE CLAIM MADE U/S 10B, WHICH WAS N OT CONSIDERED BY THE ASSESSING OFFICER ON THE GROUND THAT NO CORRECT CLAIM WAS MADE BY ASSESSEE BY SUBMITTING THE CORRECT FORM, IN THE ORIGINAL RETURN OF INCOME, OBSERVED THAT THERE IS NO DISPUTE THAT THE ASSESSEE COMPANY IS ELIGIBLE FOR DEDUCTION U/S 10A, AS IT IS AN EOU REGISTERED WITH STPI AND THE CLAIM WAS WRONGLY MADE U/S 10B, WHILE FURNI SHING FORM 56G. HE FURTHER OBSERVED THAT THE ASSESSEE CLAIMED DEDUC TION U/S 10A, WITH FURNISHING OF FORM 56F, BEFORE THE ASSESSING O FFICER IN THE REASSESSMENT PROCEEDINGS. HAVING SEEN THE CORRECT F ORM FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER WOULD HAVE EXAM INED THE ISSUE ON DETAILS WITH REFERENCE TO THE FACTS OF THE CASE AND THE LAW IN VOGUE. BUT THE ASSESSING OFFICE REFUSED TO CONSIDER THE CLAIM OF THE ASSESSEE ON THE GROUND THAT DEDUCTION U/S 10A AND 1 0B ARE NOT INTERCHANGEABLE AND NO CLAIM WAS MADE IN RETURN OF INCOME, IN THE PRESCRIBED FORM. IN VIEW OF THE ABOVE OBSERVATIONS, THE CIT(A) FOLLOWING THE DECISIONS OF THE ITAT, HYDERABAD I) I N CASE OF CLOUD SOFTECH INDIA PVT. LTD., VS. IT, ITA NO. 483/HYD/13 DATED 1309,13, II) VIVERA IT APPLICAION CONSULTING (P) LTD. VS. ITO, I TA NO. 129/HYD/2014, DT. 10/10/14 AND IN THE CASE OF INTR ACK INC. ITA NO. 1375 DATED 18/02/104, ALLOWED THE ASSESSEES CLAIM OF DEDUCTION U/S 10A BY HOLDING AS UNDER: 6.2 THE FACTS OF THE CASE UNDER REFERENCE ARE SIMI LAR TO THE ABOVE, WHERE THE APPELLANT MADE CLAIM U/S 10A AT THE STAG E OF REASSESSMENT AS AGAINST CLAIM MADE U/S 10B IN THE ORIGINAL RETURN OF INCOME. HAVING ACCEPTED THE FACT THE APPELLANT IS ELIGIBLE FOR DE DUCTION S 10A EXCEPT FOR THE REASON THAT CLAIM WAS MADE U/S 10B IN ORIGINAL RET.RRN OF INCOME, THE RESPONSIBILITY WAS CAST ON THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE AND DECIDING ON THE ISSUE, CONSIDERI NG ALL THE RELEVANT FACTS, WHERE THE ASSESSMENT WAS TAKEN UP FOR SCRU TINY. THIS VIEW IS ALSO SUPPORTED BY THE DECISION OF ITAT, MUMBAI IN THE C ASE OF EMERSON NETWORK POWER INDIA PVT. LTD. VS. ACIT (19 DTR 441 ). ON THESE LINES OF THE DISCUSSION, AND BASED ON THE DECISION OF ITAT, HYDERABAD IN THE ABOVE CASES CITED, I AM OF THE CONSIDERED OPINION THAT T HE ORDER OF ITAT IN THE CASE OF INFOTECH ENTERPRISES, WAS DISTINGUISHED BY HON'BLE ITAT LATER, AND FOR DETAILED FINDINGS GIVEN ON THE SUBJECT MATTER, THE ASSESSING OFFICER SHOULD EXAMINE THE CLAIM FOR THE DEDUCTION U/S 10A BY VERIFYING THE CLAIMS MADE AND ALLOW THE SAME ACCORDINGLY, BASED ON SUCH CLAIMS. ACCORDINGLY, IT IS REASONABLE TO HOLD THAT THIS GROUND OF' APPE AL TREATED AS ALLOWED, SUBJECT TO THE ABOVE VERIFICATION AND I ALLOWANCE OF DEDUCTION. 5 ITA NO. 648 /HYD/2015 ELICO LTD. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US. LD. DR RELIED ON THE ORDER OF AO. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE MATERIAL FACTS ON RECORD AS WELL AS THE ORDERS OF REVENUE AUTHORITIES. AS OBSERVED BY THE CIT(A) IN HIS ORDE R, THE ISSUE IN DISPUTE, IS SQUARELY COVERED BY THE DECISIONS OF I TAT, HYDERABAD BENCHES. 7.1 IN THE CASE OF CLOUD SOFTECH INDIA PVT. LTD. VS . ITO (SUPRA), THE ITAT HELD AS UNDER: 'THE COORDINATE BENCH OF HYDERABAD TRIBUNAL IN THE CASE OF INFOTECH ENTERPRISES LTD. VS. JCIT 85 ITO 325 HAD REJECTED THE ASSESSEE'S CLAIM FOR DEDUCTION UNDER SECTION 10A ON THE GROUND THAT THE UNIT WAS NOT SET UP IN THE YEAR RELEVANT TO ASSESSMENT YEAR 1994-95. THE TRIBUNAL ALSO REJECTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECT ION 10B ON THE GROUND THAT THE UNIT WAS NOT APPROVED BY BOARD APPOINTED BY THE GOVERNMENT FOR APPROVING 100% EOU. WE AGREE THAT THE UNDERTAKING WHICH HAS NOT BEEN APPROVED AS A 100% EOU, BY THE BOARD APPOINTED BY THE GOVERNMENT, AS REQUIRED UNDER SECTION 10B, THE ASSESSEE WILL NOT BE ENTITLED TO DEDUCTION UNDER SECTION 10B. BUT, THAT DOES NOT MEAN THAT WE HAVE TO CLOSE OUR EYES TOWARDS THE ALTERNATE CLAIM FOR DEDUCTION MADE BY THE ASSESSEE. AFTER-ALL, THE ASSESSEE IS CLAIMING DEDUCTION IN RESPECT OF P ROFITS FROM EXPORT OF SOFTWARE. DEDUCTION FOR EXPORT OF SOFTWARE IS AVAI LABLE' UNDER SECTION 10A, 10B AND 80HHE. IF THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER ONE SECTION, HIS CLAIM FOR DEDUCTION UNDER ANOTHER SEC TION OF THE ACT SHOULD BE CONSIDERED. RESPECTFULLY FOLLOWING THE DECISION OF THE DELHI HIGH COURT IN THEIR FINAL DECISION IN THE CASE OF CIT VS. VALIAN T COMMUNICATIONS IN ITA NO.2002 OF 2010 IN CIVIL MISC. APPLN. NO.12/2013 W E HOLD THAT THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 10A REQUI RES TO BE EXAMINED IN ACCORDANCE WITH LAW AND HENCE, WE REMIT THE ISSUE TO THE FILE OF ASSESSING OFFICER TO DECIDE DENOVO THE CLAIM OF THE ASSESSEE IN THE PRESENT CASE.' 7.2 IN THE CASE OF VIVERA I.T. APPLICATIONS CONSULT ING (P) LTD. VS. ITO (SUPRA), THE ITA HELD AS UNDER: CONSIDERING THE FACT THAT THERE IS NO DISPUTE THA T ASSESSEE IS A 100% EOU AND HAS EXPORTED SOFTWARE SERVICES TO OUTSIDE INDI A, ASSESSEE'S ALTERNATIVE CLAIM U/S REQUIRES TO BE CONSIDERED. SINCE THE EXE MPTION CLAIMED U/S 10A WAS NOT RAISED BEFORE AO AND THOUGH RAISED BEFORE THE CIT(A), BUT, WAS NOT ENTERTAINED BY HIM, WE CONSIDER IT APPROPRIATE TO REMIT THE ISSUE BACK TO THE FILE OF THE AD FOR EXAMINING THE SAME AFTER CONSIDERING ALL FACTS AND MATERIALS ON RECORD AND IN ACCORDANCE WITH THE STA TUTORY PROVISION. THE ASSESSEE MUST BE AFFORDED A REASONABLE OPPORTUNITY OF BEING HEARD IN THE MATTER.' 7.3 WHILE DEALING WITH THE SIMILAR ISSUE IN THE CAS E OF INTRACK INC (SUPRA), THE ITA HELD AS UNDER: 6 ITA NO. 648 /HYD/2015 ELICO LTD. 'OBVIOUSLY, ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTIO N UNDER SECTION 10B AND THEREFORE, MADE AN. ALTERNATE CLAIM FOR DEDUCTION UNDER SECTION 10A FOR WHICH IT WAS ELIGIBLE. ASSESSEE ALSO FILED RELEVAN T AUDITOR CERTIFICATE AND COMPLIED WITH THE PROVISIONS. A.O. SHOULD NOT HAVE DENIED THE CLAIM WHEN ASSESSEE IS OTHERWISE ELIGIBLE. THEREFORE, SINCE L EARNED CIT(A) CONSIDERED THE PRINCIPLES ON THE ISSUE IN MAKING AN ALTERNATE CLAIM, WE AFFIRM THE ORDER OF THE CIT(A). ASSESSING OFFICER IS DIRECTED TO ALLOW THE DEDUCTION UNDER SECTION 10A AFTER VERIFYING THE QUANTIFICATI ON OF THE AMOUNT AND COMPLIANCE WITH THE PROVISIONS OF LAW AND AFTER GI VING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS DIRE CTED BY THE CIT(A).' 7.4 AS THE ISSUE UNDER CONSIDERATION IS MATERIALLY IDENTICAL TO THAT OF THE CASES DECIDED BY THE COORDINATE BENCH OF THI S TRIBUNAL AS ABOVE, AND THE DECISION OF THE CIT(A) IS IN CONSONA NCE WITH THE DECISION OF THE TRIBUNAL, RESPECTFULLY FOLLOWING TH E DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL, WE UPHOLD THE OR DER OF THE CIT(A) AND DISMISS THE GROUNDS RAISED BY THE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 18 TH DECEMBER, 2015. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 18 TH DECEMBER, 2015 KV COPY TO:- 1) ITO, WARD 17(2), 6 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2) M/S ELICO LTD., B-90, APIE, SANAT NAGAR, HYDERA BAD 3 CIT(A)-5, HYDERABAD 4) CIT-5, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD. 7 ITA NO. 648 /HYD/2015 ELICO LTD. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER