RR Donnelley India Outsource Private Limited, CHENNAI V. DCIT, CHENNAI

ITA 678/CHNY/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8629 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 02-08-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 06-04-2015
• Court: TRIBUNAL
• Department Lawyers: ARUN C BHARATH
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 10B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . ' # , $ #% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NO. 678/MDS/2015 / ASSESSMENT YEAR : 2010-11 RR DONNELLEY INDIA OUTSOURCE PVT. LTD., 43A, 1 ST MAIN ROAD, RAJA ANNAMALAI PURAM, CHENNAI 600 028. PAN AABCH1990A ( /APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX, CORPORATE CIRCLE-5(2), CHENNAI-34. RESPONDENT) / APPELLANT BY : SHRI VIKRAM VIJAYARAGHAVAN, ADVOCATE / RESPONDENT BY : SHRI ARUN C. BHARATH, CIT ! / DATE OF HEARING : 02.08.2016 '# ! / DATE OF PRONOUNCEMENT : 18.08.2016 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ASSESSMENT ORDER DATED 27.2.2015 PASSED U/S.143(3) R.W.SEC. - - ITA 678/15 2 144C(13) OF THE ACT CONSEQUENT TO THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL(DRP) DATED 29.12.2014 U/S.144C(5) OF THE ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS RE LATING TO TRANSFER PRICING : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LEARNED AO/ TPO AND THE HON ' BLE DRP ERRED IN MAKING AN ADJUSTMENT TO THE ARM ' S LENGTH PRICE ( , ALP') OF THE APPELLANT ' S INTERNATIONAL TRANSACTIONS WITH RELATED PARTIES AMOUNTING TO INR . 20 , 60 , 21 , 598/- . 3. THE LEARNED AOITPO AND THE HON ' BLE DRP HAVE ERRED, IN LAW AND IN FACTS, BY MODIFYING CERTAIN QUANTITATIVE AND QUALITATIVE FILTERS APPLIED BY THE APPELLANT (WITHO UT PROVIDING ANY COGENT REASONS ) AND APPLYING CERTAIN ADDIT I ONAL FILTERS , WHICH ARE ARBITRARY IN NATURE , FOR THE PURPOSES OF DETERMINING THE ALP . 4. THE LEARNED AOITPO AND THE HON ' BLE DRP HAVE ERRED , IN LAW AND IN FACTS , BY NOT PROVIDING TH E DETAILED SEARCH PROCESS (I.E. ACCEPT/REJECT MATRIX AND THE REASON O F REJECTIONS OF THE COMPANIES REJECTED QUALITATIVELY) OF THE FRESH SEARCH CONDUCTED , THUS RESORTED TO CHERRY PICKING OF THE COMPARABLES . 5. THE LEARNED AOITPO AND THE HON ' BLE DRP HAVE ERRED , IN LAW AND ON FACTS , BY SELECTING T HE FO L LOWING COMPANIES VIZ , (1) FORTUNE INFOTECH LIMITED (2) NITTANY OUTSOURCIN G SERVICES PR I VATE LIMITED AS FUNCTIONALLY COMPARABLE TO THE APPELLANT BASED ON THEIR OWN CONJECTURES AND SURMIS ES . 6. THE LEARNED AO/TPO AND THE HON ' BLE DRP HAVE ERRED , IN LAW AND ON FACTS , BY REJECTING R SYSTEMS LIMITED AS COMPARABLE TO THE APPELLANT ON THE GROUND THAT THE COMPANY FO L LOWS A DIFFE R ENT ACCOUNTING YEAR , WITHOUT APPRECIATING THE SUBMISS I ONS MADE BY THE APPELLANT THAT - - ITA 678/15 3 APPLICATION OF A DIFFERENT ACCOUNTING YEAR FILTER I S INAPPROPRIATE. 7. THE LEARNED AO/TPO AND THE HON ' BLE DRP HAVE ERRED , IN LAW AND ON FACTS , BY REJECTING CG - VAK SOFTWARE & EXPORTS L I MITED AS COMPARABLE TO THE APPELLANT ON THE GROUND THAT THE COMPANY ' S TURNOVER IS LESS THAN RS 1 CRORE , WITHOUT APPREC I ATING THE SUBMISS I ONS MADE BY THE APPELLANT THAT APP LI CATION OF A TURNOVER FILTE R IS INAPPROPRIATE . 8. THE LEARNED AO/TPO AND THE HON ' BLE DRP HAVE ERRED , IN LAW AND ON FACTS , BY NOT CONSIDER I NG TWO ADDITIONAL COMPARABLE COMPANIES NAMELY (1) MIGROGENETICS SYSTE MS LIMITED (2) DATAMATICS FINANCIAL SERVICES LIMITED F OR COMPUTATION OF ALP WITHOUT APPRECIATING THE SUBMISS IONS MADE BY THE APPE LL ANT THAT THE ABOVE COMPANIES ARE FUNCTIONALLY COMPARABLE TO THE APPELLANT AND SAT I SFY AL L THE FILTERS ADOPTED BY THE LEA R NED AO/TPO AND THE HON ' BLE DRP. 9. THE LEARNED AO/TPO AND THE HON ' BLE DRP , IN L AW AND I N FACTS , BY D I SREGARD I NG THE FINA N C I A L ANALYSIS UNDERTAKEN BY THE APPELLANT USING MULTIPLE YEAR DATA AND DETERMIN ING THE ALP USING STANDALONE FINANCIAL DATA PERTAINING TO F Y 2009- 10 , WHICH WAS NOT AVAILABLE TO THE APPELLANT AT THE TIM E OF COMPLYING WITH THE TRANSFER PR I CING DOCUMENTATION REQUIREMENTS . 10. THE L EARNED AO/TPO AND THE HON ' B L E DRP HAVE ERRED , IN LAW AND IN FACTS , IN TREATING CERTA I N EXPENSES AS OPERAT I NG I N NATURE FOR THE PURPOSES OF T R ANSFER PRIC I NG ANA L YSIS UNDE R TRANSACT I ONA L NET MARGIN METHOD , IN THE APPELLANT ' S CASE W I THOUT PROVIDING COGENT REASONS . 11 . THE LEARNED AO/TPO AND THE HON ' BLE DRP HAVE ERRED, I N LAW AND IN FACTS , BY NOT MAKING SUITABLE ADJUSTMENTS TO ACCOUNT FOR DIFFERENCES IN THE FUNCTIONAL AND RISK PROFILE OF THE APPE L LANT V I S-A-VIS THE COMPARABLES . - - ITA 678/15 4 HOWEVER, AT THE TIME OF HEARING, THE LD. AR PUT HIS ARGUMENTS RELATING TO SELECTION OF COMPARABLES BY THE TRANSFE R PRICING OFFICER(TPO). 3. THE FACTS OF THE CASE ARE THAT IN THE CASE OF TH E ASSESSEE REFERENCE WAS RECEIVED BY THE JCIT (TPO) II, CHENNA I FROM DCIT, COMPANY CIRCLE-V(4), CHENNAI (AO) FOR DETERMI NATION OF THE ARMS LENGTH PRICE(ALP) FOR THE INTERNATIONAL T RANSACTIONS UNDERTAKEN BY THE ASSESSEE DURING THE RELEVANT ASSE SSMENT YEAR 2010-11. THE TPO, VIDE ORDER DATED 3.1.2014, COMPUTED THE ALP MAKING AN UPWARD ADJUSTMENT OF 44.87 CRORES IN RESPECT TO ITES. PURSUANT TO THE COMPLETION OF THE TRANSFER PRICING PROCEEDINGS, THE AO INCORPORATED THE TRANSF ER PRICING ADJUSTMENT AND MADE CERTAIN OTHER ADJUSTMENTS IN TH E RETURNED INCOME IN THE DRAFT ASSESSMENT ORDER WHICH HE PASSE D U/S.143(3) R.W.S.144C OF THE ACT. AGGRIEVED BY THE AFORESAID ORDER, THE ASSESSEE HAS RAISED OBJECTIONS IN AN APP LICATION FILED IN FORM 35A BEFORE THE DRP, CHENNAI. 3.1 THE ASSESSEE IS A 100% SUBSIDIARY COMPANY OF DA TA ENTRY INTERNATIONAL PRIVATE LIMITED. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF INFORMATION TECHNOLOGY E NABLED - - ITA 678/15 5 SERVICES TO THE GROUP COMPANIES. WHILE MAKING THE TP ADJUSTMENT SO AS TO MAKE DETERMINE THE ALP, THE TPO CONSIDERED THE FOLLOWING COMPARABLES: I) COSMIC GLOBAL LIMITED II) INFORMED TECHNOLOGIES INDIA LIMITED III) FORTUNE INFOTECH LIMITED IV) JEEVAN SCIENTIFIC TECHNOLOGY LTD.(SEGMENTAL) V) E4E HEALTHCARE BUSINESS SERVICES LTD. 3.2 HOWEVER, WHEN THE ASSESSEE CARRIED THE MATTER B EFORE THE DRP, THE DRP CONSIDERED THE FOLLOWING COMPARABL ES: I) COSMIC GLOBAL LIMITED II) FORTUNE INFOTECH LIMITED III) JEEVAN SCIENTIFIC TECHNOLOGY LTD.(SEGMENTAL) IV) E4E HEALTHCARE BUSINESS SERVICES LTD.(FORMERLY KNOWN AS NITTANY OUTSOURCING SERVICES PRIVATE LIMITED) 4. NOW, THE ASSESSEE WANTS TO INCLUDE OR EXCLUDE TH E FOLLOWING COMPARABLES: I) R SYSTEMS INTERNATIONAL LTD., II) MICROGENETICS SYSTEMS LTD. ACCORDING TO THE LD. AR, R SYSTEMS INTERNATIONAL LT D.(RSIL) IS COMPARABLE TO THE ASSESSEES CASE. HE SUBMITTED TH AT TPO AS WELL AS DRP ACCEPTED THAT THIS COMPANY HAS FUNCTION AL COMPARABILITY TO THE ASSESSEES CASE. HOWEVER, IT WAS EXCLUDED BY THE TPO SOLELY ON THE REASON THAT ITS FINANCIAL YEAR IS DIFFERENT WITHOUT CONSIDERING THAT THE DATA FOR THE FINANCIAL YEAR ADOPTED - - ITA 678/15 6 BY THE ASSESSEE CAN BE EASILY COMPLIED FROM THE AUD ITED FINANCIAL STATEMENT OF THAT COMPANY. ACCORDING TO HIM, RSIL IS TO BE CONSIDERED AS COMPARABLE TO THE ASSESSEES CA SE. 5. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT RSI L WAS NOT CONSIDERED AS COMPARABLE BY THE TPO FOR THE REA SON THAT THE ENTITY HAS A DIFFERENT ACCOUNTING YEAR. IT HAS CL OSED THE BOOKS OF ACCOUNT BY 31.12.2009. ONE OF THE FILTERS ADOPTED BY THE TPO IS TO EXCLUDE COMPANIES HAVING DIFFERENT FINANCIAL YEA RS OTHER THAN 1 ST APRIL AND 31 ST MARCH. HE SUBMITTED THAT ADEQUATE NUMBER OF COMPARABLES ARE AVAILABLE, THE ELIMINATION OF A SIN GLE COMPARABLE FOR A VALID REASON CANNOT BE QUESTIONED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THERE IS NO DISP UTE THAT RSIL IS FUNCTIONAL COMPARABILITY TO THE ASSESSEES CASE. H OWEVER, THE ACCOUNTING YEAR ADOPTED BY THE RSIL IS DIFFERENT FR OM THE ASSESSEES ACCOUNTING YEAR. RSIL IS ADOPTED 1 ST JANUARY TO 31 ST DECEMBER AS ACCOUNTING YEAR AS AGAINST THE ACCOUNTI NG YEAR ADOPTED BY THE ASSESSEE AS 1 ST APRIL AND 31 ST MARCH. HOWEVER, DATA FOR THE FINANCIAL YEAR COULD BE COMPILED FROM THE AUDITED ACCOUNTS OF RSIL. HENCE, THE ASSESSEE IS DIRECTED TO FURNISH - - ITA 678/15 7 DATA FOR THE FINANCIAL YEAR 2009-10 (1 ST APRIL AND 31 ST MARCH) TO THE TPO, WHO AFTER DUE VERIFICATION SHALL CONSIDER THE SAME AS COMPARABLE TO THE ASSESSEES CASE SO AS TO DETERMIN E THE ALP. THIS VIEW OF OURS IS FORTIFIED BY THE DECISION OF T HE TRIBUNAL IN THE FOLLOWING CASES : (I) XCHANGING TECHNOLOGY SERVICES PVT. LTD. IN ITA NO.1222/DEL/2015 DATED 8.9.2015 (II) MERCER CONSULTING (INDIA) PVT. LTD. IN IA NO. 966/DEL/2014 DATED 6.6.2014 (III) AMERIPRISE INDIA PVT. LTD. V. ACIT IN ITA NO. 2010/DEL/2014 DATED 14.8.2015 (IV) M/S. MAERSK GLOBAL SERVICE CENTRES (INDIA) PVT . LTD. V. DCIT IN ITA NO.2594/MUM/2014 DATED 16.1.2015 (V) AEGIS LTD. V. ACT IN ITA NO.1213/MUM/2014 DATED 27.7.2015 ACCORDINGLY, THIS GROUND IS ALLOWED. 7. MICROGENETCIS SYSTEMS LTD. : THIS COMPANY WAS REJECTED ON ACCOUNT OF INSUFFICIENT FINANCIAL INF ORMATION AT THE TIME OF TP STUDY PREPARED BY THE ASSESSEE. ACCORDI NG TO THE LD. AR, NOW, THE DATA IS AVAILABLE IN PUBLIC DOMAIN AND IT MAY BE CONSIDERED. 8. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THI S DID NOT FORM PART OF THE ASSESSEES CHOICE OF COMPARABLES B EFORE THE TPO. THE SEARCH PROCESS INITIATED BY THE TPO ALSO DID NOT - - ITA 678/15 8 RESULT IN THESE TWO COMPARABLES AND THEREFORE, THEY WERE NOT CONSIDERED. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IT IS BROUGHT TO OUR NOTICE THAT THAT F INANCIALS FOR THE YEAR ENDED MARCH 2010 RELATING TO THIS COMPANY WAS UPLOADED IN THE MCA PORTAL ON 15 TH DECEMBER, 2011 AND THE ASSESSEE IS IN A POSITION TO PLACE NECESSARY FINANCIALS OF THIS COMPANY BEFORE THE TPO. ACCORDINGLY, THIS ISSUE IS REMITTED TO TH E FILE OF THE TPO FOR CONSIDERATION AND DECIDE THEREUPON IF IT IS FUN CTIONALLY COMPARABLE TO THE ASESSEES CASE AND TURNOVER OF TH AT COMPANY IS COMMENSURATED WITH THE ASSESSEE COMPANY. 10. CG-VAK SOFTWARE & EXPORTS LTD. : THIS COMPANY WAS NOT CONSIDERED AS COMPARABLE ON THE REASON THAT THE TUR NOVER IS LESS THAN ONE CRORE AND FAILED TO SATISFY THIS FILTER. 11. WE HAVE HEARD BOTH THE PARTIES. ADMITTEDLY THE TURNOVER OF CG-VAK SOFTWARE & EXPORTS LTD. IS AROUND ONE CRORE AS AGAINST THE TURNOVER OF THE ASSESSEE COMPANY IS 317 CRORES. ACCORDINGLY, IN OUR OPINION, TURNOVER OF VERY SMALL COMPANY CANNOT BE COMPARED WITH THE ASSESSEE COMPANYS TURN OVER. THIS GROUND IS REJECTED. - - ITA 678/15 9 12. DATAMATICS FINANCIAL SERVICES LIMITED : THIS COMPARABLE WAS REJECTED BY THE ASSESSEE, AS THIS WAS FUNCTIONA LLY DIFFERENT FROM THE ASSESSEE. BEFORE THE DRP, THE ASSESSEE H AS STATED THAT BOTH ARE IN BPO OPERATIONS AND SUBMITTED THAT IT IS TO BE CONSIDERED AS COMPARABLE AND PLACED RELIANCE ON THE ORDER OF TRIBUNAL, MUMBAI BENCH IN THE CASES OF TATA POWER S OLAR SYSTEMS LTD. V. DCIT [TS-14-ITAT-2014(MUM)-TP] AND SUMIT DIAMOND (INDIA) P LTD. V. ADDL. CIT, WHEREIN IT WAS HELD THAT A COMPANY WRONGLY INCLUDED IN TP STUDY CAN BE EXCLUDE D AT A LATER POINT OF TIME. IN A SIMILAR LINE, WHEN THE ASSESSE E HAS WRONGLY EXCLUDED A COMPARABLE COMPANY FROM THE TP STUDY AND FINDS THE SAME TO BE A COMPARABLE COMPANY, IT COULD BE IN CLUDED AT LATEST STAGE. HOWEVER, THE DRP HAS NOT CONSIDERED THE ARGUMENT OF THE ASSESSEE AND REJECTED THE SAME. IN OUR OPINION, IF DATAMATICS FINANCIAL SERVICES LIMITED I S FUNCTIONALLY COMPARABLE AND IF ITS TURNOVER IS COMMENSURATING WI TH THE ASSESSEE COMPANYS TURNOVER, IT IS TO BE CONSIDERED AS COMPARABLE TO DETERMINE THE ALP. ACCORDINGLY, THIS ISSUE IS REMITTED TO THE TPO FOR FRESH CONSIDERATION. - - ITA 678/15 10 13. COMPARABLES EXCLUDED FROM THE LIST OF COMPANY, FORTUNE INFOTECH LIMITED IS CONCERNED, THE LD. AR SUBMITTED THAT THE SAID COMPANY IS NOT CONSIDERED AS COMPARABLE FOR THE REA SON THAT THE ABOVE COMPANY IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEES CASE AND ANNUAL MAINTENANCE CHARGES ARE NOT CONSIDE RED AS OPERATING EXPENSES. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING UNIQUE INTANGIBLES TO THE GROUP COMPANIES. FORTUNE INFOTECH LIMITED HAD DEVELOPED AND OWNS ITS UNIQUE WEB BASED SOFTWARE BY WHICH IT PROVIDES NICHE SERVICES TO ITS CUSTOMERS. THE ISSUE WHETHER FORTUNE INFOTECH LIMITED IS TO BE TAKEN AS A COMPARABLE WITH ITES ENTITIES HAVING NO INTANGIBLES OF THEIR O WN WAS CONSIDERED IN DETAIL BY THE CO-ORDINATE BENCH OF TH IS TRIBUNAL IN THE CASE OF 24/7 CUSTOMER.COM(P.) LTD. IN ITA NO. 227/B ANG/2010 DATED 9.11.2012. AT PARA 15.3.4. OF THAT ORDER, TH E TRIBUNAL HELD THAT THIS COMPANY, FORTUNE INFOTECH LIMITED REQUIRE S TO BE EXCLUDED FROM THE LIST OF COMPARABLES AND THE SAME DECISION WAS TAKEN BY THE DELHI BENCH IN THE CASE OF EQUANT SOLUTIONS IND IA PVT. LTD. IN ITA NO.1202/DEL/2015 DATED 21.1.2016. IN VIEW OF TH IS, WE DIRECT - - ITA 678/15 11 THE TPO TO EXCLUDE FORTUNE INFOTECH LIMITED FROM TH E LIST OF COMPARABLE COMPANIES. 15. REGARDING E4E HEALTHCARE BUSINESS SERVICES LTD . , THE LD. AR, SUBMITTED THAT THE FINANCIAL STATEMENT SHOWS TH AT THE COMPANY HAS SOFTWARE DEVELOPMENT CENTRES AND THEREFORE, SHO ULD BE REJECTED AS COMPARABLES. HE PLACED RELIANCE ON THE ORDER OF THE TRIBUNAL IN THE CASE OF BECHTEL INDIA P. LTD. IN IT A NO.1478/DEL/2015 DATED 21.12.2015 TO SUPPORT HIS CA SE. 16. ON THE OTHER HAND, THE LD. DR RELIED ON THE O RDERS OF THE LOWER AUTHORITIES. 17. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL ON RECORD. THIS COMPANY WAS NOT FUNCTIONALLY COMPARABL E TO THE ASSESSES CASE AND THIS COMPANY IS IN HEALTH CARE O UTSOURCING SERVICES AND IN ADDITION, IT ALSO RENDERS SOFTWARE DEVELOPMENT SERVICES AND IT IS THE FACT THAT SEGMENTAL INFORMAT ION WAS NOT AVAILABLE. THE COMPANY WAS ALSO A 100% EOU, UNDER STPI GUIDELINES. HENCE, WE ARE INCLINED TO ACCEPT THE C ONTENTION OF THE LD. AR THAT THIS COMPANY SHOULD BE EXCLUDED FROM TH E COMPARABLES. RELIANCE PLACED ON BY THE LD. AR ALSO SUPPORTS OUR VIEW. ACCORDINGLY, WE DIRECT THE TPO TO EXCLUDE TH IS COMPANY FROM THE COMPARABLE COMPANIES. - - ITA 678/15 12 17.1 FURTHER, WE MAKE IT CLEAR THAT THE LD. AR HAS NOT ARGUED ANY OTHER GROUNDS RELATING TO TP ISSUES BEFORE US. ACCORDINGLY, ALL OTHER GROUNDS RAISED BY THE ASSESSEE IN THIS APPEAL WITH REFERENCE TO TP ISSUE ARE DISMISSED AS INFRUCTUOUS. 18. COMING TO OTHER GROUND NOT RELATING TO TP, THE CONTENTION OF THE LD. AR IS THAT AN ALTERNATE CLAIM OF THE ASSESS EE RELATING TO ALLOWABILITY OF DEDUCTION IS TO BE CONSIDERED U/S.1 0A INSTEAD OF SEC.10B OF THE ACT. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE TRIBUNAL IS CONSISTENTLY HOLDING TH AT IF THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S.10B OF THE ACT, T HEN THE ALTERNATE CLAIM OF THE ASSESSEE IS TO BE CONSIDERED. ACCORDI NGLY, WE REMIT THE ISSUE TO THE TPO TO VERIFY WHETHER THE ASSESSEE IS ENTITLED DEDUCTION U/S.10A OF THE ACT. THIS VIEW OF OURS IS FORTIFIED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. ANNAM SOF TWARE PVT. LTD. V. ACIT IN ITA NO.2929/MDS/2014 DATED 15.5.2015, W HEREIN IT WAS HELD AS UNDER : 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES AND THE CASE LAWS RELIED ON. THE ASSESSEE FILED FORM 56 F DATED 2.9.2011 FROM THE ACCOUNTANT, WHO CERTIFIED THATASS ESSEE IS CLAIMING DEDUCTION UNDER SECTION 10A OF THE ACT. TH E ASSESSEE FILED RETURN CLAIMING DEDUCTION UNDER SECT ION 10B IN THE RETURN OF INCOME. THE ASSESSING OFFICER DENIED DEDUCTION UNDER SECTION 10B STATING THAT ASSESSEE HAS NOT FUL FILLED THE CONDITIONS SPECIFIED THEREIN. IT WAS THE SUBMISSION OF THE - - ITA 678/15 13 ASSESSEE THAT CLAIM WAS MADE UNDER SECTION 10A AND ALL THE CONDITIONS STIPULATED UNDER SECTION 10A WERE COMPLI ED WITH. IT WAS THE SUBMISSION OF THE ASSESSEE THAT ITS UNIT WAS GRANTED APPROVAL FOR SETTING UP OF STPI UNIT BY THE DIRECTOR OF SOFTWARE TECHNOLOGY PARK OF INDIA WHICH IS A 100% E XPORT ORIENTED UNDERTAKING. IT WAS THE SUBMISSION OF ASSE SSEE THAT IN CASE DEDUCTION UNDER SECTION 10B IS NOT ALLOWABL E, DEDUCTION UNDER SECTION 10A SHOULD BE ALLOWED. 6. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. REGENCY CREATIONS PVT.LTD. (353 ITR 326) HELD THAT IN ORDER TO CLAIM EXEMPTION UNDER SECTION 10B, AN UNDERTAKIN G MUST HAVE BEEN APPROVED BY THE BOARD APPOINTED IN THIS B EHALF BY THE CENTRAL GOVERNMENT IN EXERCISE OF POWERS CONFER RED BY SECTION 14 OF THE INDUSTRIES (DEVELOPMENT & REGULAT ION) ACT, 1951 AND RULES MADE THEREUNDER. IN THIS CASE, ASSES SEE IS A UNIT RECOGNIZED BY THE STPI. IT WAS NOT PLACED ON R ECORD TO SUGGEST THAT UNIT WAS APPROVED BY THE BOARD APPOINT ED BY THE CENTRAL GOVERNMENT UNDER SECTION 14 OF INDUSTRI ES (DEVELOPMENT AND REGULATION) ACT, 1951, THEREFORE A SSESSEE IS NOT ELIGIBLE FOR 10B DEDUCTION. HOWEVER, IF THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 10B, THE C LAIM MADE BY THE ASSESSEE UNDER SECTION 10A OF THE ACT SHOULD BE CONSIDERED BY THE LOWER AUTHORITIES. 7. THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS.HEARTLAND KG INFORMATION (SUPRA) HELD AS UNDER:- HELD , DISMISSING THE APPEAL, (I) THAT THE TRANSFER WAS NO T THAT OF PLANT AND MACHINERY ALONE BUT OF SALE OF THE WHO LE BUSINESS UNIT OF THE TRANSFEROR COMPANY WHICH WAS PRIMARILY ONLY TO THE EXPORT OF ARTICLES OR THINGS. EVEN THOUGH THE A SSESSEE ORIGINALLY CLAIMED RELIEF UNDER SECTION 10B, IT WAS CAUTIOUS ENOUGH TO MAKE AN ALTERNATIVE PLEA UNDER SECTION 10 A IN VIEW OF THE FACT THAT THE ASSESSEE'S VENDOR HAD THE BENE FIT UNDER SECTION L0A. IT WAS NOT DENIED BY THE REVENUE THAT THE ASSESSEE HAD THE WHOLE BUSINESS TRANSFERRED TO ITS FAVOUR AN D THAT THE FACTUM OF TRANSFER WAS ALSO INTIMATED TO THE SOFTWA RE TECHNOLOGY PARK OF INDIA. THUS, AS A SOFTWARE TECHN OLOGY PARK, THE ASSESSEEWAS ENTITLED TO PLACE ITS CLAIM U NDER SECTION L0A. IN ANY EVENT, EVEN ASSUMING FOR A MOMENT, THE ASSESSEE HAD NOT REFERRED TO THE SECTION CORRECTLY, THE FACT REMAINED THAT IF THE CLAIM COULD BE FAVOURABLY CONSIDERED UN DER ANY OF THOSE SPECIAL DEDUCTION PROVISIONS AND ON THE CONDI TIONS - - ITA 678/15 14 SPECIFIED THEREIN BEING SATISFIED, THERE DID NOT EX IST ANY JUSTIFIABLE GROUND FOR THE REVENUE TO CONTEND THAT THE ASSESSEE SHALL NOT BE ENTITLED TO HAVE THE BENEFIT OF SECTIO N 10A. THE ASSESSEE WAS ENTITLED TO EXEMPTION UNDER SECTION 10 A. 8. RESPECTFULLY FOLLOWING THE SAID DECISION, WE SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND REMIT THE MATTER BA CK TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO CONSIDER T HE CLAIM OF THE ASSESSEE UNDER SECTION 10A AFTER EXAMINING THE ALLOWABILITY OF THE CLAIM AFRESH IN ACCORDANCE WITH LAW AND IN LIGHT OF THE ABOVE OBSERVATIONS ACCORDINGLY, THIS ISSUE IS REMITTED TO THE FILE OF THE TPO/AO TO CONSIDER THE ALLOWABILITY OF DEDUCTION U/S.10A OF T HE ACT. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON WEDNESDAY, THE 18 TH OF AUGUST, 2016 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 18 TH AUGUST, 2016. MPO* ;D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H3 /CIT(A) 4. H /CIT 5. FIJ K /DR 6. JLM /GF.