ITO, Bangalore V. M/s Expert Outsource Pvt. Ltd., Bangalore

ITA 95/BANG/2011

• Counselvise Citation: 9521114 RSA 2011
• Duration Of Justice: 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 02-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUMAR AJEET JT
• Assessee Lawyers: H N KHINCHA
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.95/BANG/2011 ASSESSMENT YEAR : 2007-08 THE INCOME TAX OFFICER, WARD 11(1), BANGALORE. VS. M/S. EXPERT OUTSOURCE PVT. LTD., NO.20/2, 17 TH CROSS, BETWEEN 6 TH & 8 TH MAIN, MALLESWARAM, BANGALORE 560 055. PAN: AABCE 3312P APPELLANT RESPONDENT APPELLANT BY : SHRI KUMAR AJEET, JT. CIT(DR) RESPONDENT BY : SHRI H.N. KHINCHA, C.A. DATE OF HEARING : 20.10.2011 DATE OF PRONOUNCEMENT : 31.10.2011 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS APPEAL BY THE DEPARTMENT IS AGAINST THE ORDE R DATED 25.11.2010 OF THE CIT(APPEALS)-I, BANGALORE. 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS A PPEAL: ITA NO.95/BANG/11 PAGE 2 OF 4 1. THE ORDER OF THE LEARNED CIT(APPEALS), IN SO FA R AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADD ITION OF RS.73,36,414-00 MADE ON ACCOUNT OF DISALLOWANCE OF CLAIM OF THE ASSESSEE MADE U/S 10A OF THE I T ACT, 1961, WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES UNDER WHICH THE ADDITIO N WAS MADE BY THE ASSESSING OFFICER. 3. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASS ESSEE COMPANY IS ELIGIBLE TO CLAIM DEDUCTION U/S. 10A WIT HOUT APPRECIATING THAT THE ASSESSEE COMPANYS BUSINESS A CTIVITIES COMMENCED PRIOR TO OBTAINING OF APPROVAL FROM STPI AND, THEREFORE, THE CONDITION LAID DOWN IN SECTION 10A(2 )(I)(B) AND 10A(2)(I)(C) WERE NOT FULFILLED IN THE ASSESSEES C ASE. 4. THE LEARNED CIT(A) HAS NOT TAKEN INTO ACCOUNT TH E FACT THAT PLANT & MACHINERY PREVIOUSLY USED BY THE NON-S TP UNIT AGGREGATING TO RS.2,80,154/- HAVE BEEN TRANSFERRED TO THE STP UNIT WHICH IS MORE THAN 20% OF THE TOTAL PLANT AND MACHINERY OF STP UNIT, THEREBY NOT FULFILLING THE CONDITIONS LAI D DOWN IN SECTION 10A(2)(III) OF THE I.T. ACT. 5. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT(A) BE REVERSED IN SO FAR AS THE ABOVE MENTIONED ISSUE IS CONCERNED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR TO DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 3. FROM THE ABOVE GROUNDS IT WOULD BE CLEAR THAT TH E GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF CLAIM OF THE ASSESSEE MADE U/S. 10A OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED T O AS THE ACT IN SHORT]. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE GONE THROUGH THE MATERIAL ON RECORD. IN THE INSTAN T CASE, IT APPEARS THAT THE ASSESSING OFFICER MADE A DISALLOWANCE OF RS.73,36,1 44 CLAIMED BY THE ITA NO.95/BANG/11 PAGE 3 OF 4 ASSESSEE U/S. 10A OF THE ACT, THE SAID DISALLOWANCE WAS DELETED BY THE LD. CIT(APPEALS) BY FOLLOWING THE ORDER DATED 17.3.2010 OF THE ITAT IN ASSESSEES OWN CASE IN ITA NOS.896 & 897/BANG/09 FO R THE A.YS. 2005-06 & 2006-07 WHEREIN IT WAS HELD AS UNDER: 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE HON'BLE PUNJAB & HARYANA H IGH COURT, IN THE CASE OF MAHAVIR SPINNING MILLS LTD (SUPRA), HELD THAT DEDUCTION UNDER SECTION 10B WOULD BE AVAILABLE ON C ONVERSION OF EXISTING UNIT INTO AN EXPORT ORIENTED UNIT (EOU). T HE CONTENTIONS OF THE REVENUE AUTHORITIES THAT PROVISIONS OF SECTI ON 10B(2) WERE NOT FULFILLED ON CONVERSION OF EXISTING UNIT INTO E OU WERE NEGATIVE BY THE HIGH COURT. THE TRIBUNAL, IN THE CA SE OF M/S. FORESEE INFORMATION SYSTEMS (P) LTD. (SUPRA) HAD HE LD THE BENEFIT OF SECTION 10A WOULD BE AVAILABLE EVEN WHEN AN EXIS TING UNIT GETS CONVERTED INTO A STP UNIT. RELEVANT PORTION O F THE ORDER OF THE TRIBUNAL IS REPRODUCED BELOW : 6. WE HAVE HEARD BOTH THE SIDES. IT APPEARS THAT LEARNED CIT(A)HAS PASSED A VERY DETAILED ORDER IN THE ASSES SMENT YEAR 2002-03 AND RIGHTLY CAME TO THE CONCLUSION THAT THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER SECTION 10A OF THE IT A CT. FROM THE ASSESSMENT ORDER WE FIND THAT ACCORDING TO THE ASSE SSING OFFICER, IT IS NOT A NEW UNDERTAKING FOR THE PURPOSE OF EXEM PTION UNDER SECTION 10A OF THE IT ACT. FACTUALLY, IT IS ALSO CO RRECT THAT THE UNDERTAKING WAS ALREADY ENGAGED IN EXPORTING SOFTWA RE BEFORE IT BECAME A STP UNIT. THE STP WAS NOTIFIED IN MARCH, 1 993 BUT NOT IN SOFTWARE TECHNOLOGY PARK. IN THE YEAR 2001, A CO MPANY WAS FORMED BY CONVERSION OF THE FIRM AND IT STARTED PRO DUCTION IN STP UNIT AFTER GETTING APPROVAL. THEREAFTER ONLY THE UN DERTAKING CLAIMED EXEMPTION UNDER SECTION 10A OF THE IT ACT. THE CLAIM OF THE ASSESSEE IS SUPPORTED BY BOARD CIRCULAR NO.1/20 05, WHERE IT HAS BEEN CLEARLY HELD THAT UNDERTAKING SET UP IN DO MESTIC TARIFF AREA (DTA), WHICH IS SUBSEQUENTLY APPROVED AS 100% EXPORT ORIENTED, IS ENTITLED TO RELIEF UNDER SECTION 10B O F THE IT ACT PROVIDED THE UNDERTAKING SHALL GET RELIEF ONLY FOR THE REMAINING PERIOD OF TEN CONSECUTIVE YEARS BEGINNING WITH ASSE SSMENT YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE COMPUTE R SOFTWARE AS A DTA UNIT. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF MAHAVIR SPINNING MILLS LT D. (SUPRA) AND THE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBU NAL IN THE CASE ITA NO.95/BANG/11 PAGE 4 OF 4 OF M/S. FORESEE INFORMATION SYSTEMS (P) LTD. (SUPRA ), WE REJECT THE GROUNDS RAISED BY THE REVENUE. SINCE THE LD. CIT(A) HAS FOLLOWED THE AFORESAID REF ERRED TO ORDER DATED 17.3.2010 IN ASSESSEES OWN CASE FOR THE A.YS. 2005 -06 & 2006-07 IN ITA NO.986 & 897/BANG/09, SO, WE DO NOT SEE ANY INFIRMI TY IN THE IMPUGNED ORDER OF THE LD. CIT(A). 5. IN THE RESULT, THE APPEAL BY THE DEPARTMENT IS D ISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2011. SD/- SD/- ( SMT. P. MADHAVI DEVI ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 31 ST OCTOBER, 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.