Dy.CIT, Circle-3(3), Hyderabad V. M/s Varsun e Technologies Private Limited, Hyderabad

ITA 688/HYD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69723 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 07-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Opportunity of being heard; Wrong claim; Assessment record; Revised return
• Section: 10B; 6; 10; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 688/HYD/2013 ASSESSMENT YEAR : 2009-10 DY. COMMISSIONER OF INCOME-TAX, APPELLANT CIRCLE 3(3), HYDERABAD. VS. M/S VARSUN E TECHNOLOGIES (P) LTD., RE SPONDENT HYDERABAD 500 081. (PAN AABCP4220B) APPELLANT BY : SMT. AMISHA S. GUPT RESPONDENT BY : SHRI V. RAGHAVENDRA RAO DATE OF HEARING : 13/08/2013 DATE OF PRONOUNCEMENT : 13/08/2013 ORDER PER CHANDRA POOJARI, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIREC TED AGAINST THE ORDER PASSED BY THE CIT(A)-9, HYDERABAD DATED 14/03 /2013, FOR ASSESSMENT YEARS 2009-10. 2. THE APPELLANT COMPANY ENGAGED IN THE BUSINESS OF COMPUTER SOFTWARE AND IT ENABLED SERVICES APART FROM MANUFAC TURE AND SALE OF ENGINEERING GOODS. THE ASSESSEE IS REGISTERED WI TH SOFTWARE TECHNOLOGIES PART OF INDIA (STP) W.E.F. 24.11.2005. IT FURNISHED RETURN OF INCOME FOR AY 2009-10 ON 30.09.2009. IT R EVISED RETURN OF INCOME ON 28.10.2009 DECLARING TOTAL INCOME OF R S. 43,52,856/- AFTER CLAIMING DEDUCTION OF RS. 38,60,3 71/- U/S 10 B 2 ITA NO. 688/HYD/13 M/S VARSUN E TECHNOLOGIES (P) LTD. OF THE ACT. THE AO EXAMINED THE ASSESSEES CLAIM OF DEDUCTION U/S 10 B OF THE ACT AND NOTICED THAT IT HAD NOT BEEN RECOGNI ZED 100% EXPORT ORIENTED UNDERTAKING (EOU) UNDER THE INDUSTR IES (DEVELOPMENT AND REGULATION) ACT, 1951. HE CONFRONT ED THE APPELLANT AND ASKED IT TO SHOW CAUSE AS TO WHY DEDU CTION U/S LOB SHOULD 'NOT BE DISALLOWED. THE APPELLANT COMPANY SU BMITTED THAT THEY MADE A WRONG CLAIM U/S LOB AND REQUESTED TO TR EAT THEIR CLAIM U/S LOB AS WITHDRAWN. THE ASSESSEE SUBMITTED THAT, ALTERNATIVELY, THEIR CLAIM OF DEDUCTION MAY BE CONS IDERED FOR ALLOWANCE U/S. LOA OF THE-TT, ACT. 3. AFTER GIVING SUFFICIENT OPPORTUNITY OF BEING HE ARD TO THE APPELLANT THE AO HELD THAT THE DEDUCTION CLAIMED U/ S 10B AT RS. 38,60,3711/- IS NOT ALLOWABLE TO THE APPELLANT BECA USE IT IS NOT APPROVED AS A HUNDRED PER CENT EXPORT ORIENTED UNDE RTAKING BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL G OVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY SECTION 14 OF T HE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 (65 OF 1951) , AND THE RULES MADE UNDER THAT ACT, IN TERMS OF CLAUSE (IV) OF EXPLANATION 2 TO SECTION 10B OF THE IT ACT. 1961. HE RELIED ON THE DECISION IN THE CASE OF INFOTECH ENTERPRISES LIMITED(85 ITD 325 ). HE ALSO RELIED ON CBDT INSTRUCTION NO. 2 (F.NO. 178/19/2008 -0TAT DATED 09.03.2009 AND CORRIGENDUM DT. 08.05.2009) WHICH CL ARIFIED AS UNDER:- 'THE MATTER REGARDING VALIDITY OF APPROVALS GIVEN B Y THE DEVELOPMENT COMMISSIONERS HAS BEEN EXAMINED IN THE BOARD IT HAS BEEN DECIDED THAT AN APPROVAL GRANTED BY THE DEVELOPMENT COMMISSIONER IN CASE OF AN 100 % EOU UNIT WILL BE CONSIDERED VALID ONCE SUCH APPROVAL IS RATI FIED BY THE BOARD OF APPROVAL FOR EOU SCHEME. 4. THE AO HAD DISALLOWED THE APPELLANT'S CLAIM OF DEDUCTION U/S 10B OF THE ACT FOR THE DETAILED REASONS GIVEN AND D ISCUSSED ON 3 ITA NO. 688/HYD/13 M/S VARSUN E TECHNOLOGIES (P) LTD. PAGES 2, 3 AND 4 OF THE RELEVANT ASSESSMENT ORDER. HE HAS ALSO REJECTED APPELLANT ALTERNATE CLAIM OF DEDUCTION U/S 10A BECAUSE THE APPELLANT HAS NOT FILED A REVISED RETURN TO CLA IM DEDUCTION U/S 10A OF THE ACT. HE RELIED ON THE DECISION OF HON'BL E SUPREME COURT IN THE CASE OF GOETZE (INDIA) LIMITED (284 IT R 323). 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 6. BEFORE THE CIT(A), THE LD. AR VEHEMENTLY ARGUED THAT THE AO HAS ERRED ON THE FACTS AND IN LAW IN DISALLOWING DE DUCTION U/S 10B OF THE ACT. HE STRONGLY CONTENDED THAT THE ASSESSIN G OFFICER HAS FURTHER ERRED IN NOT ALLOWING DEDUCTION U/S 10A OF THE ACT ONLY BECAUSE THE APPELLANT HAS NOT FURNISHED A REVISED R ETURN OF INCOME. 7. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) OBSERVED THAT IT IS NOT DISPUTED THAT IN THI S CASE, THE APPELLANT HAD NOT BEEN RECOGNIZED 100% EXPORT ORIEN TED UNDERTAKING (EOU) UNDER THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951. HE FURTHER OBSERVED THAT THE AO CONFRONTED THE APPELLANT AND ASKED IT TO SHOW CAUSE AS TO WHY DEDUCTION U/S 10B SHOULD NOT BE DISALLOWED. THE APP ELLANT COMPANY SUBMITTED THAT THEY MADE A WRONG CLAIM U/S LOB AND REQUESTED TO TREAT THEIR CLAIM U/S 10B AS WITHDRAWN AND THE ASSESSEE SUBMITTED THAT, ALTERNATIVELY, THEIR CLAIM OF DEDUCTION MAY BE CONSIDERED FOR ALLOWANCE U/S 10A IT ACT. 8. FURTHER, THE CIT(A) OBSERVED THAT ANY UNDERTAKIN G COVERED BY SUB-SO 2) OF SECTION 10 IS ENTITLED TO DEDUCTION UNDER SEC. 10A(1). UNDERTAKING IN FREE TRADE ZONES (FTZ) AND E LECTRONIC 4 ITA NO. 688/HYD/13 M/S VARSUN E TECHNOLOGIES (P) LTD. HARDWARE TECHNOLOGY PARKS (EHTP) ARE CONTINUED TO B E COVERED. HOWEVER, IN CASE OF A NEW ELIGIBLE UNDERTAKING COMM ENCING MANUFACTURE OR PRODUCTION AFTER I' APRIL, 2001, IT IS COVERED IF SET UP IN A SPECIAL TRADE ZONE (STZ) ALSO. IN CIT VS. ELECTRONIC CONTROLS & DISCHARGE SYSTEMS (P) LTD. (2011) 245 CT R (KER) 465, IT WAS HELD THAT EXEMPTION UNDER SEC. 10A IS AVAILA BLE ONLY ON ACTUAL EXPORTS AGAINST RECEIPT OF CONVERTIBLE FOREI GN EXCHANGE AND LOCAL SALES IN INDIAN RUPEE TO UNITS IN SEZ DO NOT QUALIFY FOR EXEMPTION UNDER SEC. 10A. SUCH PURCHASING UNITS IN SEZ WILL THEMSELVES BE ENTITLED TO EXEMPTION UNDER SEC. 10A ON EXPORTS AND THE LEGISLATURE SEEMS TO HAVE NOT INCORPORATED THE PROVISION OF SEZ ACT, 2005 IN SEC. 10A IN ORDER TO AVOID DUPL ICITY OF EXEMPTION. WHEN THE EXEMPTION IS ONLY ON ACTUAL PRO FITS DERIVED ON EXPORTS MADE AGAINST RECEIPT IN CONVERTIBLE FORE IGN EXCHANGE, THE TRIBUNAL HAS NO JUSTIFICATION TO EXTEND IT TO P ROFITS RECEIVED ON LOCAL SALES WITHIN INDIA AGAINST PAYMENT RECEIVED I N INDIAN RUPEES. 9. THE CIT(A) NOTED THAT SEC. 10B CONFERS TOTAL T AX EXEMPTION IN RESPECT OF ANY PROFITS AND GAINS DERIVED BY AN A SSESSEE FROM A HUNDRED PER CENT EXPORT ORIENTED UNDERTAKING. ADMIT TEDLY THE APPELLANT IS NOT A 100% EXPORT ORIENTED UNDERTAKING BECAUSE IT HAS NOT BEEN APPROVED AS SUCH BY THE BOARD APPOINTE D IN THIS BEHALF BY THE CENTRAL GOVT. IN EXERCISE OF THE POWE RS CONFERRED BY SEC. 14 OF THE INDUSTRIES (DEVELOPMENT AND REGULATI ON) ACT, 1951 (65 OF 1951), AND THE RULES MADE UNDER THE ACT. THE CIT(A) HELD THAT UNDER THE CIRCUMSTANCES THE AO HAS CORRECTLY D ISALLOWED DEDUCTION U/S 10B OF THE ACT. I CONFIRMED SUCH DISA LLOWANCES U/S 10B OF THE ACT. CORRESPONDING GROUNDS OF APPEAL ARE DISMISSED. 10. REGARDING APPELLANTS ALTERNATE CLAIMS OF DEDUCT ION OF U/S 10A OF THE ACT, THE CIT(A) DIRECTED THE ASSESSING OFFIC ER TO VERIFY 5 ITA NO. 688/HYD/13 M/S VARSUN E TECHNOLOGIES (P) LTD. FROM THE RETURN OF INCOME AND THE ASSESSMENT RECORD WHETHER APPELLANT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 1 0A OF THE ACT AND IF THE APPELLANT HAS FULFILLED ALL CRITERIA NE CESSARY FOR CLAIMING DEDUCTION U/S 10A OF THE ACT. IF THE AO IS SATISFIED ON THE BASIS OF THE RETURN OF INCOME AND THE ORIGINAL ASSESSMENT RECORD THAT THE APPELLANT IS TRULY ELIGIBLE FOR DED UCTION U/S 10A OF THE ACT THAN THE SAME MAY BE ALLOWED IN THE LIGHT O F THE DECISIONS, WHICH WERE MENTIONED AT PAGE 7 OF THE IM PUGNED ORDER. 11. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUN DS OF APPEAL: 1. THE CIT(A) ERRED BOTH IN LAW AND ON FACTS OF THE CASE. 2. THE CIT(A) HAVING UPHELD THE DISALLOWANCE OF EX EMPTION U/S 10B, OUGHT TO HAVE DENIED THE ALTERNATIVE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 10A, SINCE SUCH A CLAIM IS MADE BY FILING A REVISED RETURN OF INCOME. 3. THE CIT(A) OUGHT TO HAVE NOTICED THAT ALTERNATIV E CLAIM IF ANY, CAN BE CLAIMED BY FILING OF REVISED RETURN OF INCOME AND SHOULD HAVE APPRECIATED THE RATIO OF JUDGMENT GIVEN BY THE HONBLE SUPREME COURT IN THE CASE OF GOETZ (INDIA) LTD., 284 ITR 323. 12. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES , PERUSED THE RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE ARE OF THE OPINION THAT IF THE ASSESSEE I S ENTITLED FOR DEDUCTION U/S 10A, IN PARTICULAR, AND THE SAME HAS TO BE GRANTED TO THE ASSESSEE AFTER CONSIDERING THE CONDITIONS LA ID DOWN U/S 10A OF THE ACT, AS THE ASSESSEE CANNOT BE DEPRIVED OF EXEMPTION U/S 10A ON THE REASON THAT THE ASSESSEE HAS MADE CLAIM U/S 10B, IF ANY, AND NOT FILED REVISED RETURN OF INCOME FOR SU CH EXEMPTION. BEING SO, WE REMIT THE ENTIRE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE CLAIM OF TH E ASSESSEE U/S 6 ITA NO. 688/HYD/13 M/S VARSUN E TECHNOLOGIES (P) LTD. 10A OF THE ACT AND DECIDE THE ISSUE, DE-NOVO, IN AC CORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 13. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH AUGUST, 2013 SD/- SD/- (SAKTIJIT DEY) JUDICIAL MEMBER (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 13 TH AUGUST, 2013 KV COPY TO:- 1) DCIT, CIRCLE 3(3), 7 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2) M/S VARSUN E TECHNOLOGIES (P) LTD., PLOT NO. 13, PHASE II, KAVURI HILLS, MADHAPUR, HYDERABAD 500 081. 3) THE CIT (A)-9, HYDERABAD 4) THE CIT-III, HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.