Pramati Tecnologies P. Ltd, Hyderabad V. DCIT, Circle 16(3), Hyderabad

ITA 704/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61962 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 07-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MAYA MAHESWARI
• Assessee Lawyers: C SUBRAMANYAM
• Keywords: Capital asset; Services rendered outside India; Permanent establishment
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.704/HYD/2010 : ASSESSMENT YEAR 2004- 05 M/S. PRAMATI TECHNOLOGIES PVT. LTD., HYDERABAD ( PAN - AACCP 1967 C ) (APPELLANT) V/S ASSTT. COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), HYDERABAD (RESPONDENT) ITA NO.762/HYD/2010 : ASSESSMENT YEAR 2004- 05 ITA NO.763/HYD/2010 : ASSESSMENT YEAR 2005- 06 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 16(3), HYDERABAD (APPELLANT) V/S M/S. PRAMATI TECHNOLOGIES PVT. LTD., HYDERABAD ( PAN - AACCP 1967 C ) (RESPONDENT) ASSESSEE BY : SHRI C.SUBRAMANYAM DEPARTMENT BY : SMT. MAYA MAHESWARI DATE OF HEARING 10.7.2012 DATE OF PRONOUNCEMENT 19.7.2012 O R D E R PER D.KARUNAKARA RAO, ACCOUNTANT MEMBER: THERE ARE THREE APPEALS IN THIS BUNCH TWO BY THE DEPARTMENT AND ONE BY THE ASSESSEE. THERE ARE CROSS -APPEALS FOR THE ASSESSMENT YEAR 2004-05, WHICH ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) V, HYDERABAD DATED 15.3.2010. THE THIRD APPEAL IS BY THE DEPARTMENT FOR THE ASSES SMENT YEAR 2005-06, WHICH IS DIRECTED AGAINST THE ORDER OF THE COMMISSI ONER OF INCOME- TAX(APPEALS) V, HYDERABAD DATED 15.3.2010. SINCE C OMMON ISSUES ARE INVOLVED, THESE APPEALS ARE BEING DISPOSED OFF BY T HIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.704, 762 & 763/HYD/2010 M/S. PRAMATI TECHNOLOGIES PVT. LTD., HYDERABAD 2 REVENUES APPEALS : ITA NOS. 762 & 763/HYD/2010 2. THE FIRST COMMON EFFECTIVE GRIEVANCE OF THE REV ENUE IN THESE APPEALS RELATES TO DISALLOWANCE OUT OF TRAVELING AN D CONVEYANCE EXPENDITURE. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSI NG OFFICER ON VERIFICATION OF BILLS AND VOUCHERS FOR EXPENDITURE UNDER THE HEAD TRAVELLING AND CONVEYANCE, OBSERVED THAT MAJORITY OF THE BILLS ARE IN THE NAMES OF THE INDIVIDUALS. SINCE, SUCH EXPENDITURE W HICH IS NOT PROPERLY BILLED IN THE HANDS OF THE COMPANY CANNOT BE ALLOWE D AS PER THE PROVISIONS OF S.37(1) OF THE ACT, ASSESSEE WAS ASKE D FURNISH ITS OBJECTION IF ANY, AGAINST THE DISALLOWANCE PROPOSED IN THAT B EHALF. ASSESSEE IN RESPONSE SUBMITTED THAT THE BILLS THAT ARE SUBMITTE D ARE ISSUED BY THE TRAVEL AGENTS FOR THE PURCHASE OF TICKETS TAKEN IN THE NAMES OF THE EMPLOYEES WHO ARE TRAVELLING ON BEHALF OF THE COMPA NY, AND THE EVIDENCE IN SUPPORT OF THIS EXPENDITURE BEING INCURRED ON BE HALF OF THE ASSESSEE COMPANY IS THE CLAIMS OF THE EMPLOYEES SUBMITTED SU BSEQUENTLY TO THE COMPANY. NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED 25% OF THE EXPENDITURE CLAIMED BY THE ASSESSEE, WHICH WORKED OUT TO RS.12,28,516 FOR THE ASSESSMENT YEAR 2004-05 AND RS.3,85,150 FOR THE ASSESSMENT YEAR 200 5-06. 4. ON APPEAL, THE CIT(A) OBSERVING THAT THE EXPEN DITURE INCURRED ON TRAVELLING IS PROPERLY VOUCHED AND VERI FIABLE, DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER FOR BOTH TH E YEARS. 5. AGGRIEVED BY THE ORDERS OF THE CIT(A) ON THIS I SSUE, REVENUE IS IN APPEAL BEFORE US. ITA NO.704, 762 & 763/HYD/2010 M/S. PRAMATI TECHNOLOGIES PVT. LTD., HYDERABAD 3 6. LEARNED DEPARTMENTAL REPRESENTATIVE, STRONGLY S UPPORTING THE ORDERS OF THE ASSESSING OFFICER SUBMITTED THAT THE REASONS GIVEN BY THE ASSESSING OFFICER FOR MAKING THE IMPUGNED ADDIT IONS ARE SOUND AND VALID, AND THE DISALLOWANCES MADE BY HIM FOR THE YE ARS UNDER APPEAL ARE REASONABLE, AND AS SUCH THE CIT(A) OUGHT TO HAVE SU STAINED THE SAME. HE ACCORDINGLY SUBMITTED THAT THE RELIEFS GRANTED B Y THE CIT(A) ARE NOT JUSTIFIED AND HENCE, DISALLOWANCES MADE BY THE ASSE SSING OFFICER SHOULD BE RESTORED. 7. LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER H AND, STRONGLY SUPPORTED THE ORDERS OF THE CIT(A) AND SUBMITTED TH AT THE EXPENDITURE UNDER THE HEAD TRAVELLING AND CONVEYANCE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE, AND T HOUGH THE BILLS AND VOUCHERS ARE IN THE NAME OF THE INDIVIDUALS AS OBSE RVED BY THE ASSESSING OFFICER, THE CLAIMS MADE BY THE EMPLOYEES ON THE CO MPANY FOR THESE EXPENSES CONSTITUTE VALID EVIDENCE TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE FOR DEDUCTION IN RESPECT OF THESE EXPENSES . 8. WE HEARD THE PARTIES AND PERUSED THE MATERIAL A VAILABLE ON RECORD. EVEN THOUGH THE ASSESSEE HAS EXPLAINED BEF ORE THE CIT(A) THAT THE EXPENSES ARE MEANT FOR THE PURPOSE OF BUSINESS AND ARE PROPERLY VOUCHED AND THE SAME HAVE BEEN PROPERLY SPENT, ACCO UNTED AND PAID BY THE COMPANY, THE REASONS ELABORATING THE DEFICIENCI ES IN THE VOUCHERS AND BILLS PRODUCED BY THE ASSESSEE, POINTED OUT BY THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDERS CANNOT BE TOTALLY I GNORED. AT THE SAME TIME, WE FIND THAT THE DISALLOWANCE WORKED OUT APPL YING A STRAIGHT RATE 25% IS EXCESSIVE AND UNREASONABLE. CONSIDERING TOT ALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT A TOKEN DISALLOWANCE OF RS.1.5 LAKHS AS AGAINST DISALLOWANCE OF RS.12,28 ,516 MADE BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2004-05 A ND OF RS.50,000 AS AGAINST RS.3,85,150 MADE BY THE ASSESSING OFFICER F OR THE ASSESSMENT ITA NO.704, 762 & 763/HYD/2010 M/S. PRAMATI TECHNOLOGIES PVT. LTD., HYDERABAD 4 YEAR 2005-06, WOULD MEET THE ENDS OF JUSTICE. WE A CCORDINGLY SET ASIDE THE IMPUGNED ORDERS OF THE CIT(A) ON THIS ISSUE, AN D RESTORE THE DISALLOWANCES MADE BY THE ASSESSING OFFICER ONLY TO THE EXTENT OF RS.1.5 LAKHS FOR THE ASSESSMENT YEAR 2004-05 AND RS.50,000 FOR THE ASSESSMENT YEAR 2005-06. CONSEQUENTLY, REVENUES GROUNDS ON TH IS ISSUE ARE PARTLY ALLOWED. 9. THE NEXT COMMON ISSUE INVOLVED IN THE APPEALS O F THE REVENUE RELATES TO DISALLOWANCE OUT OF EXPENSES MAD E BY THE ASSESSING OFFICER, ON THE GROUND OF THE SAME BEING IN THE NAT URE OF PAYMENTS MADE TOWARDS PROFESSIONAL SERVICES RENDERED OUTSIDE INDI A, FROM WHICH NO TAX WAS DEDUCTED. GROUNDS RAISED ON BY THE REVENUE ON THIS ISSUE IN THE APPEAL FOR ASSESSMENT YEAR 2004-05 READS AS FOLLOWS - 3. LD. CIT(A) ERRED IN ALLOWING EXPENSES OF RS.29 ,43,130, WHICH ARE IN THE NATURE OF PAYMENTS MADE TOWARDS PROFESSIONAL SERVICES RENDERED OUTSIDE INDIA FROM W HICH NO TAX WAS DEDUCTED AT SOURCE. 4. LD. CIT(A) OUGHT TO HAVE APPLIED THE PROVISIONS OF SECTION 5(2)(A) AS TO THE SALES PROMOTION PAYMENTS ARE DEEM ED TO HAVE BEEN MADE IN INDIA. 5. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FAC T THAT THE ASSESSEE REMITTED THE SALES PROMOTION EXPENSES THRO UGH DDS PURCHASED FROM THE INDIAN BANKS OR MADE PROVISI ON FOR SUCH EXPENSES IN THE BOOKS OF ACCOUNT MAINTAINED IN INDIA. HENCE, BY VIRTUE OF PROVISIONS OF SECTION 5(2)(A) S UCH PAYM ENTS ARE LIABLE TO TAX IN INDIA AND THE ASSESSEE IS UNDER STATUTORY OBLIGATION TO DEDUCT TAX AT SOURCE U/S. 195 OF I.T. ACT. RELIANCE IS PLACED ON THE DECISION OF APEX COURT IN THE CASE OF STANDARD TRIUMPH MOTOR COMPANY LIMIT ED VS. CIT REPORTED IN 201 ITR 391. BUT FOR THE AMOUNT MENTIONED IN GROUND NO.3 ABOVE, THE GROUNDS RAISED IN THE APPEAL FOR ASSESSMENT YEAR 2005-06 ARE IDENT ICAL, AND THE AMOUNT MENTIONED IN GROUND NO.3 FOR THAT YEAR IS RS.8,92,6 14. 10. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE, REITERATING THE SUBMISSIONS MADE BEFORE THE LOWER A UTHORITIES, SUBMITTED ITA NO.704, 762 & 763/HYD/2010 M/S. PRAMATI TECHNOLOGIES PVT. LTD., HYDERABAD 5 THAT THE ISSUE INVOLVED IN THE ABOVE GROUNDS OF APP EAL IS COVERED BY THE DECISION OF THE TRIBUNAL DATED 20.11.2009 IN ASSESS EES OWN CASE OF THE ASSESSMENT YEAR 2003-04 IN ITA NO.1170/HYD/2007, CO PY OF WHICH IS FURNISHED AT PAGE 129 OF THE PAPER-BOOK. 11. LEARNED DEPARTMENTAL REPRESENTATIVE, PER CONTR A, STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SU BMITTED THAT THE CIT(A) IS NOT JUSTIFIED IN GRANTING RELIEF TO THE A SSESSEE. 12. WE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. WE FIND THAT THE CIT(A) IN THE IMPUGNED ORDERS HAS FOLLOWED THE ORDER OF THE FIRST APPELLATE AUTHORITY FOR THE ASSESSMENT YEAR 2003- 04, WHILE DELETING THE IMPUGNED ADDITIONS MADE BY T HE ASSESSING OFFICER. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSE E, COORDINATE BENCH OF THIS TRIBUNAL VIDE ITS ORDER DATED 20.11.2009 FO R THAT YEAR HAS UPHELD THE ACTION OF THE CIT(A) IN DELETING THE CORRESPOND ING ADDITION MADE BY THE ASSESSING OFFICER FOR THAT YEAR, AND DISMISSED THE APPEAL OF THE REVENUE. THE REASONING GIVEN BY THE TRIBUNAL IN SU PPORT OF ITS CONCLUSION FOR THAT YEAR IN PARA 4 OF ITS ORDER DATED 20.11.20 09 READS AS FOLLOWS- 4. THE CIT(A) AFTER VERIFYING THE BOOKS OF ACCOU NT FOUND THAT THE PAYM ENTS WERE MADE BY THE ASSESSEE THROUGH ITS BRANCH OFFICE SITUATED IN THE USA TO THE FOREIGN AGENTS. T HE PAYM ENTS WERE MADE DIRECTLY BY THE BRANCH OFFICE SITUATED OU TSIDE INDIA. IT IS NOT THE CASE OF THE REVENUE THAT THE PAYM ENTS WERE MADE FORM ANY OFFICE SITUATED IN INDIA. IT IS ALSO NOT ON RE CORD THAT THE FOREIGN AGENTS HAVE ANY PERMANENT ESTABLISHMENT IN INDIA. IN THIS FACTUAL SITUATION, THE PAYMENTS MADE BY THE BRANCH OFFICE OR THE ASSESSEE SITUATED OUTSIDE INDIA TO AGENTS OUTSIDE T HE COUNTRY MAY NOT FALL WITHIN THE PROVISIONS OF SEC.195(1). THERE FORE, THE ASSESSEE M AY NOT BE REQUIRED TO DEDUCT TAX UNDER SEC.195(1). THEREFORE, IN OUR OPINION, THE DISALLOWANCE MADE BY THE AO WAS NOT JUSTIFIED. THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. . WE ARE IN AGREEMENT WITH THE ABOVE REASONING GIVEN BY THE COORDINATE BENCH OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2003- 04. IN PRINCIPLE, SO LONG AS THE RECEIPTS/EXPENDITURE OF THE BRANCH OFFI CES ABROAD ARE CLUBBED ITA NO.704, 762 & 763/HYD/2010 M/S. PRAMATI TECHNOLOGIES PVT. LTD., HYDERABAD 6 IN THE ACCOUNTS OF THE ASSESSEES HEAD OFFICE, THE PAYMENTS MADE TO THE BRANCH OFFICES MERELY CONSTITUTE PAYMENT BY ONE HAN D TO THE OTHER OF THE SAME PERSON. HENCE, FACTS AND CIRCUMSTANCES OF TH E CASE FOR THE YEARS UNDER APPEAL BEING IDENTICAL WITH THOSE CONSIDERED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 2003-04, RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL, WE UPHOLD THE ORDER OF THE CIT(A) FOR THE YEARS UNDER APPEAL, AND CONSEQUENTLY, GROUNDS OF THE REVENUE ON THIS IS SUE ARE DISMISSED. 13. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ASSESSEES APPEAL : ITA NOS. 704/HYD/2010 14. IN THIS APPEAL OF THE ASSESSEE FOR THE ASSES SMENT YEAR 2004- 05, THE ONLY EFF4ECTIVE GROUNDS RAISED ARE AS UNDER - 1.1 THE ORDERS PASSED BY THE ASSESSING OFFICER U/S . 143(3) OF THE I.T. ACT AND UPHELD BY THE LEARNED CIT(A) IN S O FAR AS TREATMENT OF SUBSIDY AS REVENUE IN NATURE IS ERRONE OUS BOTH ON FACTS AS WELL AS IN LAW. 1.2 THE LEARNED CIT(A) ERRED IN VIEWING THAT DUTY E XEMPTION VALID UNDER EOU SCHEME OF STPI FOR THE PURCHASES MA DE BY THE ASSESSEE COMPANY ON SPECIFIED AND QUALIFIED ITE MS IS REVENUE IN NATURE, THEREFORE, THE SAME IS LIABLE FO R TAX. 1.3. FOR THESE AND OTHER REASONS THAT ARE TO BE URG ED AT THE TIME OF HEARING OF THE CASE, THE APPELLANT PRAYS THAT TH E ORDERS PASSED BY THE ASSESSING OFFICER AND SUSTAINED BY TH E LEARNED CIT(A) TO THE EXTENT UNDER CONTEXT IN THE PRESENT A PPEAL, IS CONTRARY TO THE FACTS OF THE CASE AND PROVISIONS OF LAW, THEREFORE, THE SAME NEEDS TO BE DELETED IN THE INTE REST OF JUSTICE. 15. THE ISSUE INVOLVED IN THE ABOVE GROUND RELATES TO THE NATURE OF SUBSIDY RECEIVED BY THE ASSESSEE, WHICH HAS BEEN TREATED AS OF REVENUE NATURE, AS AGAINST THE ASSESSEES CLAIM FOR TREATING IT AS OF CAPITAL NATURE. ITA NO.704, 762 & 763/HYD/2010 M/S. PRAMATI TECHNOLOGIES PVT. LTD., HYDERABAD 7 16. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE COMPANY IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF COMPUTER SOFTWARE PRODUCTS. FROM THE NOTES IN THE ACCOUNTS ATTACHED TO THE R ETURN OF INCOME, IT WAS NOTED THAT THE ASSESSEE MENTIONED THE FOLLOWING THE COMPANY HAS AVAILED CUSTOMS/CENTRAL EXCISE DUT Y BENEFIT OF RS.45,55,109/- (PREVIOUS YEAR : RS.44,46,521/-) AS OF MARCH, 31, 2004 IN RESPECT OF CAPITAL GOODS PURCHASED UNDER 10 0% EXPORT ORIENTED UNIT SCHEME OF SOFTWARE TECHNOLOGY PARKS O F INDIA, WITH STIPULATION OF EXPORT OBLIGATION TO BE FULFILLED BY THE COMPANY OVER A PERIOD OF FOUR YEARS FROM THE DATE OF IMPORT OF THE RESPECTIVE CAPITAL GOODS WHICH HAS BEEN FULFILLED PROPORTIONAT ELY FOR THE YEAR UNDER CONSIDERATION. FROM THE ABOVE NOTE, IT IS CLEAR THAT THE ASSESSEE AVAILED BENEFIT OF RS.45,55,109/- ON ACCOUNT OF CUSTOMS AND EXCISE DUT Y EXEMPTION ON THE PURCHASE OF IMPORTED AND BUSINESS CAPITAL GOODS AS PER THE SOFTWARE TECHNOLOGY PARKS OF INDIA SCHEME(STPI). THE ASSESS ING OFFICER INVOKED THE PROVISIONS OF 28(III) AND 28(III)(C) OF THE I.T . ACT BY STATING THAT THE WAIVER OF CUSTOMS AND EXCISE DUTY WAS ANOTHER FORM OF CASH ASSISTANCE GIVEN TO THE ASSESSEE AND THUS TAXABLE. THE ASSESS ING OFFICER FURTHER HELD THE VIEW THAT THE ABOVE ASSISTANCE WAS GIVEN T O THE ASSESSEE AS PART OF THE SOFTWARE EXPORTS SCHEME OF THE DEPARTMENT OF ELECTRONICS, GOVERNMENT OF INDIA. TAKING NOTE OF THE FACT THAT THE INITIAL AGREEMENT DATED 14.4.1997 WAS SUBSEQUENTLY RENEWED ON 26.12.2 0903 WITH EFFECT FROM 28.4.2002, THE ASSESSING OFFICER OBSERVED THAT THE PROCESS IS ON GOING AND SINCE THE ASSESSEE IS MEETING THE EXPORT OBLIGATION, THE RENEWAL OF CUSTOMS DUTY BENEFIT GIVEN IS FURTHER EX TENDED. HE FURTHER NOTED THAT THE ASSESSEE VIDE HIS LETTER DATED 22.12 .2006 HAS ATTACHED THE LIST OF CAPITAL GOODS THAT WERE IMPORTED FROM THE F INANCIAL YEAR 1999-2000 TILL 2003-04. THE TOTAL OF THE CUSTOMS DUTY WAIVED ON THESE GOODS IMPORTED FROM 1999-200 IS RS.45,55,109. THE GOODS IMPORTED FOR THE YEARS 1999-2000, 2000-01 AND 2001-02 FALLS UNDER TH E AMBIT OF THE INITIAL AGREEMENT ENTERED IN 1997 WHEREIN ALL THE E XPORT OBLIGATIONS TILL APRIL 2002 WERE FULFILLED. A CERTIFICATE TO THIS EXTENT WAS GIVEN BY THE ITA NO.704, 762 & 763/HYD/2010 M/S. PRAMATI TECHNOLOGIES PVT. LTD., HYDERABAD 8 ASSESSEE VIDE ITS LETTER DATED 26.12.2006. FOR THE SUBSEQUENT YEAR, I.E. 2002-03, SINCE THE AGREEMENT IS VALID UPTO APRIL 20 07, THE ASSESSEE HAS STATED THAT THE EXPORT OBLIGATION WAS NOT FULFILLED AS ON DATE. BUT FOR THOSE YEARS, IN WHICH THE EXPORT OBLIGATION IS FULF ILLED THE DUTY BENEFIT RECEIVED CANNOT BE TREATED AS CONTINGENT LIABILITY. THE ASSESSING OFFICER NOTED THAT THIS FACT IS FURTHER CORROBORATED BY THE EXPORT EARNINGS AND OTHER DOCUMENTS SUBMITTED BY THE ASSESSEE TO THE DI RECTOR OF STPI. THE SUPPLEMENTARY AGREEMENT ENTERED INTO BY THE ASSESSE E ON 26.12.2003 WITH STPI ALSO SPEAKS OF COMPLIANCE OF THE ASSESSEE WITH THE EXPORT OBLIGATIONS. THE ASSESSING OFFICER ALSO HAS REFERR ED TO THE DECISIONS OF THE APEX COURT IN THE CASE OF SAWHNEY STEEL AND PRESS W ORKS LTD. (228 ITR 253); CIT V/S. BAZPUR COOPERATIVE SUGAR FACTORY LTD . (172 ITR 321) AND OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S. ITALIA(JD) (141 ITR 948), AND ULTIMATELY CONCLUDED AS FOLLOWS- WHEN THE EXPORT OBLIGATION IS FULFILLED BY THE ASS ESSEE, THE ARS VIEW POINT THAT EXPORT OBLIGATION IS NOT COMPLETELY FULFILLED TILL DATE IS NOT AN ACCEPTABLE ARGUMENT. THE RENEWAL OF THE EARLIER AGREEMENT STATING THE COM PLIANCE OF EXPORT OBLIGATION BY THE ASSESSEE WILL IMMEDIATELY CONVERT THE CUSTOMS DUTY BENEFIT GIVEN FOR IMPORT OF CAPITAL GOODS FROM THE YEAR 1999-2000 TO 2001-02 INTO A TRADING RECEIPT. EVEN IF THE ARGUMENT OF THE ASSESSEE THAT THE ENTIRE EXPORT OBLIGATION IS NOT FULFILLED IS AC CEPTED THAT PERTAINS ONLY TO ONLY THE EXPORT OBLIGATION PENDING TILL APRIL, 2007 AS PER THE SUPPLEMENTARY AGREEMENT ENTERED ON 26-12 -2003 WITH EFFECT FROM 28.1.2002. THE CUSTOMS DUTY FOREGONE ON IMPORTS PERTAINING TO THIS PERIOD I.E. FROM F.Y. 2002-023 T O 2003-04 IS ONLY RS.2,88,365/- (RS.179777 + RS108588). TO THE EXTENT OF THIS AMOUNT, THE VERSION OF THE ASSESSEE THAT HE BENEFIT RECEIVED CAN ONLY BE TREATED AS CONTINGENT LIABILITY PENDING FOR FULFILLMENT OF EXPORT OBLIGATION IS ACCEPTED. THE BALANCE AMOUNT O F RS.42,66,744/0 IS ADDED AS TRADING RECEIPT. 17. AGGRIEVED BY THE ADDITION MADE BY THE ASSESSI NG OFFICER TREATING THE SUBSIDY RECEIVED BY THE ASSESSEE AS OF TRADING NATURE, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), CONFIR MED THE VIEW TAKEN BY THE ASSESSING OFFICER ON THIS ISSUE, AFTER REFERRIN G TO THE DECISIOSN OF THE APEX COURT IN THE CASE OF JEEVANLAL (1989)LIMITED V ./S. CIT (142 ITR ITA NO.704, 762 & 763/HYD/2010 M/S. PRAMATI TECHNOLOGIES PVT. LTD., HYDERABAD 9 448); OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S. SAHNEY STEEL & PRESS WORKS LTD. (SUPRA) AMONG OTHERS. 18. AGGRIEVED BY THE ORDER OF THE CIT(A), ASSESSEE PREFERRED THE PRESENT APPEAL BEFORE US. 19. THE LEARNED COUNSEL FOR THE ASSESSEE, REITERAT ING THE CONTENTIONS URGED BEFORE THE LOWER AUTHORITIES, SUB MITTED THAT THE SUBSIDY RECEIVED BY THE ASSESSEE IN THE PRESENT CAS E IS BY WAY OF WAIVER OF DUTY ATTRIBUTABLE TO THE CAPITAL GOODS IMPORTED, WHICH IS OF CAPITAL NATURE. HE ALSO SUBMITTED IN THE ALTERNATIVE THAT IF AT ALL THE SUBSIDY HAS TO BE TAXED, THE AMOUNT TO BE TAXED SHOULD BE RESTR ICTED ONLY TO RS.1,08,588 OUT OF THE TOTAL AMOUNT OF RS.45,55,109 , WHICH IS THE TOTAL AMOUNT OF SUBSIDY ADDED, AS THIS IS THE AMOUNT RELA TABLE TO THE IMPORT OF CAPITAL GOODS NAMELY HP COMPUTER SERVER, ETC. 20. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND, STRONGLY SUPPORTED THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES, 21. WE HEARD THE BY PARTIES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE STPI SCHEME, COPY OF WHICH IS FILED IN THE PAPER-BOOK BEFORE US. IN OUR CONSIDERED VIEW, THE ISSUE WHETHER THE SUBSIDY RECEIVED BY THE ASSESSEE IN THE FORM OF DUTY WAIVER ON THE IMPO RT OF CAPITAL GOODS, CASTING EXPORT OBLIGATIONS ON THE ASSESSEE, HAS TO BE RE-EXAMINED IN THE LIGHT OF THE STPI SCHEME AS A WHOLE, A COPY OF WHIC H IS NOW FILED BEFORE US. THE ASSESSING OFFICER NEEDS TO CONDUCT PURPOSE TEST OF THE SAID SUBSIDY ON THE ONE HAND, IN THE LIGHT OF THE CITED JUDGMENTS, AND THE DETAILS OF ACTUAL CAPITAL ASSET, IN RESPECT OF WHIC H THE ASSESSEE ENJOYED THE WAIVER OF THE DUTY ON THE OTHER, BEFORE ARRIVIN G AT PROPER AND LEGALLY SUSTAINABLE DECISION IN THE MATTER. THE ASSESSING OFFICER SHOULD ALSO ITA NO.704, 762 & 763/HYD/2010 M/S. PRAMATI TECHNOLOGIES PVT. LTD., HYDERABAD 10 EXAMINE THE APPLICABILITY OF THE PROVISIONS OF S.43 (1) OF THE ACT WITH ITS RELEVANT EXPLANATIONS BEFORE REACHING ANY CONCLUSIO NS ON THE ISSUE BY PASSING A SPEAKING ORDER. WITH THESE OBSERVATIONS, WE SET ASIDE THE IMPUGNED ORDERS OF THE CIT(A), AND RESTORE THE MATT ER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION OF THE EN TIRE ISSUE IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 22. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. 23. TO SUM UP, WHILE BOTH THE APPEALS OF THE REVEN UE BEING ITA NO.762-763/HYD/2010 ARE DISMISSED, ASSESSEES APPEA L ITA NO.704/HYD/2010 IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE COURT ON 19.07.2012 SD/- SD/- (ASHA VIJAYARAGHAVAN) (D.KARUNAKARA RAO) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 19 TH JULY, 2012 COPY FORWARDED TO: 1. 2. M/S. PRAMATI TECHNOLOGIES PVT. LTD., 301 WHITE HOUS E, BEGUMPET, HYDERABAD DY. COMMISSIONER OF INCOME-TAX, CIRCLE 16(3), HYDER ABAD 3 . COMMISSIONER OF INCOME - TAX(APPEALS) - V HYDERABAD 4 . COMMISSIONER OF INCOME - TAX IV , HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.