Income Tax Appellate Tribunal - Ahmedabad
Prodigy Infosoft Pvt. Ltd.,, Ahmedabad vs Department Of Income Tax on 2 September, 2005
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IN THE INCOME TAX APPELLATE TRIBUNAL : 'C' BENCH : AHMEDABAD
(Before Hon'ble Shri T.K. Sharma, J.M. & Hon'ble Shri N.S. Saini, A.M.)
I.T.A. No. 2544/AHD./2005
Assessment Year : 2002-2003
Income Tax Officer, Ward-5(2), Ahmedabad -vs.- Prodigy Infosoft Pvt. Ltd., Ahmedabad
(P.A. No. AAACF 1781 A)
(Appellant) (Respondent)
Appellant by : Shri M.C. Pandit
Respondent by : Shri S.N. Soparkar and Smt. Urvashi Shodhan
ORDER
Per Shri T.K. Sharma, Judicial Member :- This appeal filed by the Revenue is against the
order dated 02.09.2005 of learned Commissioner of Income Tax (Appeals) -XI, Ahmedabad for the assessment year 2002-2003.
2. The facts in brief are that the assessee is a Company engaged in the business of export of Computer Software. In the assessment year under appeal, it earned income from the said business at Rs.11,75,166/-, which was claimed for exemption under section 10A of the Income Tax Act, 1961. The A.O. did not allow the exemption claimed by the assessee under section 10A of the Act on account of the following reasons :-
1) The appellant's original name for the previous year was Frostwaves P. Ltd., which was approved by Software Technology Parks - India whereas Tor the assessment year under consideration there is a change in the name which is under name and style of Prodigy Infosoft P. Ltd.
(2) The appellant company has not fulfilled the required conditions of import of Rs, 10 lacs and purchase of indigenous goods.
(3) There is no corresponding expenditure.
(4) The business of the appellant company is carried on from the premises in which two other business of the promoters are also carried on.
(5) For want of bills of electricity and telephone expenses.
(6) The municipal bill was not in the name of the appellant company.2
(7) The electricity expenses incurred in some of the months without having corresponding turnover.
(8) On the ground that there are no overseas calls, and therefore, export activity of the unit is not justifiable.
(9) The details of expenses do not justify export oriented status of the appellant (10) The academic qualification of the directors do not justify the claim of the appellant.
(11) The website for which module was developed by the appellant company could not be located, (12) The appellant company had limited capital comparing turnover.
(13) The dividends have been paid at Rs, 575/- per share to two directors only.
(14) Appellant's claim u/s.10A is not genuine and it is a device to divert unaccounted money, (15) By applying the provisions of section 80IA.
(16) By applying MCDOWELL decision in appellant's case.
(17) On the ground that details of substantiate software manufacture and export is not available.
3. On appeal before the Learned Commissioner of Income Tax(Appeals), it was contended that the assessee-company has earned foreign exchange through banking channel by way of exporting computer software. It was also submitted that exemption claimed by the assessee- company was also denied. In the previous assessment year when the name of assessee-company was Frostwaves P. Ltd., which is now changed as Prodigy Infosoft Pvt. Ltd. With regard to the change of name, necessary procedure with the Registrar of Companies was followed. It was also submitted that the A.O. denied the exemption based on several filmsy grounds, which is mentioned in the assessment order. Before the Learned Commissioner of Income Tax(Appeals), the assessee also filed the written submissions which is re-produced by the Learned Commissioner of Income Tax(Appeals) in the impugned order. The said written submission reads as under :-
3"The appellant company is registered with Software Technology Parks of India. (STPl) and approved as 100% Export Oriented Unit for Software The company claimed an exemption of Rs.11,75,166/-for income earned out of exports of softwares. The Id. A,O. rejected that claim of exemption of your appellant u/s.1QA of I. T. Act, stating that export transactions entered into by your appellant are not genuine and that the appellant company has tried to convert its taxable income.
As against the above, you' appellant submits trial it has complied with alt the conditions as stipulated u/s IDA and those also by STP1 including that of Private Custom Bonded Warehouse. The company started its operation in Asstt. Year 2001-02 and claimed exemption u/s,l0A of I. T. Act for that particular year. The claim was allowed by the same A, O, after verification of all the records and also he has gone to an extent saying that till the conditions were satisfied. The company availed orders for softwares exports the overseas clients. The softwares were manufactured by experienced and qualifies directors wrtn the help of supportive technical . The necessary papers / documents and forms were filed with STP! and after that softwares were delivered to the customers. The payments were collected through normal banking channel. All the relevant proof were submitted to the A. O. during the course of assessment proceedings so as to satisfy him about genuine activities of the company of exports of softwares. In this connection, your appellant would like to submit the lowing evidences / documents : -
(a) Application by Frostwaves Pvt Ltd. (The erstwhile company) dated 07-03-2000 with Software Technology Park, Gandhinagar, which is an autonomous society under Ministry of Information and Technology, Govt. of India (Pago 24 to 34).
(b) Approval by Software Technology Park - Govt of India dated 27-03-2003 (page 35 to 43).
(c) Approval by Registrar of Companies, Gujarat for change of name of the company from Frostwaves Pvt. Ltd. to Prodigy Infosoft Pvt. Ltd. Also permission accorded by STPI for change of name (page 44 to 45A).
(d) Asstt Order for A.V. 2001-02 allowing claim u/s.10A dated 2^-02-2004 (page 46-47).
(e) Copy of declaration of Software export through data communication link made by the company in. SOFTEX from to Software Technology Park of India along with purchase orders made by BIB customers, confirmation of the same, invoice raised to clients and Foreign Inward Remittance Certificates from Banks confirming receipt of money in the form foreign exchange (Page 4S to 63).
(f) Certificate of SOFTEX form by Software Technology Parks of India dated 26-07-
02001 (Page 48 to 63).
(g) Certificate from C. U, Shah College certifying the qualification of one of the Director, Shri Sanjay B. Shah (Page 64).
(h) Certificate from H K, College centre certifying qualification of one of the director, Smt. Uttaraben H. Shah (page 65).
4On the basis of aforesaid documents/evidence, it was contended that the software exports made by the assessee company is genuine and the transactions actually took place. There has been compliance of conditions levied by STPI as well as conditions for claiming exemption under section 10A of the Income Tax Act, 1961. The STPI was introduced by the Central Government to boost the export of computer software and to certify the exports on the perception that other government officers like A.O. may not understand the same technically. The change in the name is duly supported by certificate from ROC. The certificates authenticating the qualification of the Directors were also placed on record.
4. Before the Learned Commissioner of Income Tax(Appeals), it was also contended that the A.O. had not questioned the same nor found any adverse fact which might have gone against the genuine activities of the assessee-company. The claim has been rejected only on the basis of assumptions and inferential presumptions and with prejudicial mind. All the transactions of sales are duly recorded in the books of accounts as well as proved to be genuine by complying with all the laid down proceedings with various government authorities. It was also submitted that for the assessment year 2001-02, the assessment was framed under section 143(3)(i) of the Income Tax Act on 28.02.2003, wherein on going through the various details and other evidences furnished, it was held that the assessee has fulfilled the conditions for its claim made under section 10A of the Income Tax Act, 1961. After considering the aforesaid submissions, for the detailed reasons given in para 3.2, the Learned Commissioner of Income Tax(Appeals) allowed the deduction under section 10A. Para 3.2 is re-produced hereunder in its entirety :-
3.2. The submissions and the decisions relied upon by the A. R. of the appellant have been perused. The observations made by the assessing officer in assessment order have also been perused. The documentary evidences furnished by the appellant with regard to change of name, earning of foreign exchange, directors qualifications end other documents filed along with the A.R.'s submissions have also been perused. Having' examining the appellant's claim, it is seen that the appellant has followed the required procedure for getting the change of name from Frostwaves P. Ltd. to "Prodigy Infosoft Pvt. Ltd. Therefore, it can not be said that appellant in question is different from the company which had fifed the return of income for the previous assessment year. Even though there is change of name there are no changes in the constitution of the appellant company. Therefore, it can not be said that the appellant company did not have approve from Software Technology Park of India, It is further seen that the appellant is registered with Software Technology Park of India and it has fulfilled all the conditions stipulated by STPI. It is seen that the payments against the exports are received by the appellant .through banking channel. It is not the case that the appellant has not manufactured software products and not exported the same, ft is also seen that the 5 appellant has earned foreign exchange. Therefore, various reasons given by the assessing officer could not justify the denial of the exemption.
3.2.1. It is seen that similar exemption u/s, I0A has already been granted by the assessing officer in the appellant's own case for the A.Y. 2001-02 vide his order u/s-
.143(3) dated 28-02-2003. The only variation tor the assessment year under consideration is with regard to the change of the name which has lone in accordance to the procedure laid down by the Registrar of Companies. The A, O., however, not established the fact that the income from some sources have been brought to appellant's hands to make claim u/s.10A of I. T. Act Therefore, I am in agreement with, the contentions raised by the authorised representative. Having considered the facts of the case and following the decision relied upon by the A, R., referred to above. 1 am of the view that there is no justification for rejection of the appellant's claim u/s,10A of the Act, Therefore, the A.O. is directed to allow exemption u/s. 10A of the I.T. Act, 1961 as claimed by the appellant.
5. Aggrieved by the order of Learned Commissioner of Income Tax(Appeals), the Revenue is in appeal before us.
6. At the time of hearing before us, Shri M.C. Pandit, ld. Departmental Representative appeared and relying on the various reasons given by the A.O. in the assessment order contended that deduction claimed under section 10A was rightly denied by the A.O. The ld. D.R. also contended that the assessee-company could not satisfy the A.O. how computer software produced were transmitted to the customers and proved thereof. How the changes in the software were made also could not properly explain. In these circumstance, the claim of the assessee under section 10A was rightly denied and the ld. CIT(A) is not legally and factually correct in allowing the same.
7. On the other hand, on behalf of the assessee Shri S.N. Soparkar appeared and filed a paper book containing 343 pages. It was submitted that all these documents were produced before the lower authorities. The ld. counsel of the assessee drew our attention to the certification of Softex Form No. AC 000830 of M/s. Prodigy Infosoft Pvt. Ltd., Ahmedabad by Software Technology Parks of India, Gandhinagar, Gujarat vide letter dated 26.07.2001 addressed to the Joint Controller, ECD, RBI, Ahmedabad certifying the various documents including description sheet of software for export. The ld. counsel of the assessee submitted that in respect of each and every item of exports, such type of certificate is available in the paper book. Change of name of the assessee-company is duly approved by the Registrar of Companies. Exemption under section 6 10A in the immediately preceding assessment year i.e. assessment year 2001-02 was granted by the A.O. himself. The mere fact that there is change of name in this year is no ground to deny the exemption. In the impugned order, the Learned Commissioner of Income Tax(Appeals) after scrutinizing each and every documents directed the A.O. to allow the exemption under section 10A of the Income Tax Act, 1961. Therefore, the view taken by the Learned Commissioner of Income Tax(Appeals) be upheld.
8. We have given our careful consideration to the rival submissions made before us and have perused the orders of authorities below. It is pertinent to note that various objections raised by the A.O. in the assessment order for denying the exemption under section 10A were duly controverted before the Learned Commissioner of Income Tax(Appeals). The assessee-company is registered with Software Technology Parks of India (STPI) and approved as 100% Export Oriented Unit for Software. In this year, there was a change of name, which is also duly approved by ROC. Copy of declaration of software export through data communication link made by the company in SOFTEX from the Software Technology Park of India alongwith purchase orders made by the customers, confirmation of the same, invoice raised to clients and foreign inward remittance certificates from banks confirming receipt of money in the form of foreign exchange were furnished. Certificate regarding qualification of both the Directors was also furnished. The assessee-company has made genuine exports, earned foreign exchange, which is not doubted by any other authorities except the A.O. Keeping in view the totality of the facts and circumstances of the case, in our opinion, the Learned Commissioner of Income Tax(Appeals) has given cogent reason in directing the A.O. to allow the exemption under section 10A of the Income Tax Act, 1961. We, therefore, inclined to uphold the order of Learned Commissioner of Income Tax(Appeals).
9. In the result, the appeal of the Revenue is dismissed.
The Order pronounced in the Court on 13.11.2009
Sd/- Sd/-
(N.S. Saini) (T.K. Sharma)
Accountant Member Judicial Member
DATED : 13 / 11 / 2009
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Copy of the order is forwarded to :
1) The Assessee
(2) The Department
3) CIT(A) concerned; (4) CIT concerned, (5) D.R., ITAT, Ahmedabad.
True Copy By Order Deputy Registrar, ITAT, Ahmedabad Laha/Sr.P.S.