Income Tax Appellate Tribunal - Ahmedabad
The Ito, Ward-2(1)(4),, Ahmedabad vs Mednautix Outsourcing Pvt. Ltd.,, ... on 5 September, 2017
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'सी', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL " C " BENCH, AHMEDABAD सव ी एस.एस.गोदारा, या यक सद य एवं द प कुमार के डया, लेखा सद य के सम ।
BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER Sl. ITA / CO Nos. Assessme- Appeal(s) / CO(s) by No(s) nt Year(s) Appellant vs. Respondent Appellant Respondent
1. 617/Ahd/2015 2008-09 ITO Mednautix Ward-2(1)(4) Outsourcing Ahmedabad Pvt.Ltd.
91, New York Tower-A Nr.Thaltej Cross Road SG Highway Thaltej Ahmedabad PAN:AACCD 5096 J
2. 618/Ahd/2015 2009-10 -do-revenue -do-assessee
3. 619/Ahd/2015 2010-11 -do-revenue -do-assessee
4. CO 65/Ahd/2015 2008-09 Mednautix ITO (in ITA 617/A/15) Outsourcing Ward-2(1)(4) Pvt.Ltd. Ahmedabad
5. CO 66/Ahd/2015 2009-10 -do-assessee -do-revenue (in ITA 618/A/15)
6. CO 67/Ahd/2015 2010-11 -do-assessee -do-revenue (in ITA 619/A/15) Assessee by : Shri T.P. Hemani, (Adv.) Revenue by : Shri Prasoon Kabra, Sr.DR ु वाई क# तार ख / सन Date of Hearing 31/08/2017 घोषणा क# तार ख /Date of Pronounce ment 05/09/2017 ITA Nos.617 to 619/Ahd/2015 & CO Nos.65 to 67/Ahd/2015 ITO vs. Madnautix Outsourcing P.Ltd.
Asst.Years - 2008-09 to 2010-11 -2- आदे श / O R D E R PER PRADIP KUMAR KEDIA - AM:
The captioned appeals have been filed by the Revenue against the common order of the Commissioner of Income Tax(Appeals)-2, Ahmedabad [CIT(A) in short] dated 31/12/2014 for the Assessment Years (AYs) 2008-09, 2009-10 & 2010-11. The assessee has also filed Cross Objections in the aforesaid Revenue's appeals.
2. The common grounds raised by the Revenue for all the three years against the impugned order of the CIT(A) are broadly similar. The Ground extracted from ITA No.617/Ahd/2015 - AY 2008-09 for ready reference read as under:-
1. The Ld.CIT(A) has erred in law and on facts in allowing the assessee's alternate claim of deduction u/s.10A which was not claimed in the Return of Income, in place of its original claim of deduction u/s.10B.
2. The Ld.CIT(A) has erred in law and on facts by not calling for the AO's comments to the rejoinder filed by the assessee on the Remand Report of the AO.
3. The common grounds raised in the cross-objections of the assessee read as under (extracted from CO No.65/Ahd/2015 - AY 2008-
09):-
ITA Nos.617 to 619/Ahd/2015 & CO Nos.65 to 67/Ahd/2015 ITO vs. Madnautix Outsourcing P.Ltd.
Asst.Years - 2008-09 to 2010-11 -3-
1. The learned CIT(A) has erred in law and on facts of the case in upholding reopening u/s.147 of the Act. Under the facts and circumstances of the case, reopening is invalid and without jurisdiction.
2. The learned CIT(A) has erred in law and on facts of the case in not granting claim of deduction u/s.10B of the Act. Ld.CIT(A) ought to have held that the Assessee is also eligible for claim of deduction u/s.10B of the Act.
3. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld.AO in levying interest u/s.234A/B/C of the Act.
4. The learned CIT(A) has erred in law and on facts of the case in confirming action of ld. AO in initiating penalty proceedings u/s.271(1)(c) of the Act.
4. The controversy involved in the present appeals of the Revenue revolves around allowability of claim of deduction under s.10A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") which was stated to be not claimed in the return of income by the assessee. The assessee in its return of income had claimed deduction under s.10B of the Act. The AO denied aforesaid claim of deduction under s.10B of the Act. The CIT(A) allowed alternate claim of the Assessee under S.10A in place of s.10B at first appellate stage. The Revenue has challenged the aforesaid action of CIT(A). The Assessee in its cross-objection has raised two-fold objection to the order of CIT(A). Firstly, it challenged ITA Nos.617 to 619/Ahd/2015 & CO Nos.65 to 67/Ahd/2015 ITO vs. Madnautix Outsourcing P.Ltd.
Asst.Years - 2008-09 to 2010-11 -4- assumption of jurisdiction under s.147 and secondly, on merits, it has claimed eligibility of deduction under s.10B as claimed.
5. Briefly stated, the assessee-company is stated to be registered with STPI (Software Technology Parks of India), Gandhinagar as 100% EOU (Export Oriented Undertaking) for carrying on business of development and export of computer software and IT enabled services. On the strength of aforesaid registration, the assessee filed its return of income for the various assessment years in captioned appeals wherein deductions of varied amounts have been claimed under s.10B of the Act. The Assessing Officer (AO) denied the claim of deduction under s.10B against the profits and gains derived by 100% EOU from export of articles or things on the ground that conditions specified under s.10B of the Act has not been fulfilled. It is the case of the AO that clause(iv) of Explanation(2) of section 10B requires that undertaking of the assessee is required to be approved as 100% EOU by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 and the Rules made under that Act. The AO noted that an approval granted in this regard by the Development Commissioner will be considered valid only if such approval is ultimately ratified by the Board of Approval (BOA). The AO observed that the assessee failed to produce ITA Nos.617 to 619/Ahd/2015 & CO Nos.65 to 67/Ahd/2015 ITO vs. Madnautix Outsourcing P.Ltd.
Asst.Years - 2008-09 to 2010-11 -5- any documents to support the approval or ratification by the BOA for the purposes of eligibility of deduction under s.10B of the Act. The AO accordingly declined the claim of deduction of Rs.34,94,279/- for the AY 2008-09 under s.10B of the Act. Similar claim of deductions of different amounts were declined in respect of AYs 2009-10 & 2010-11 also which are subject matter of present appeals.
6. In the first appeal against the order of the AO, the CIT(A) upheld the action of the AO towards denial of deduction claimed under s.10B of the Act. However, as noted earlier, the CIT(A) allowed the alternative claim of the assessee under s.10A of the Act on being satisfied that conditions prescribed therein for eligibility of deduction stands satisfied.
7. Aggrieved by the action of the CIT(A) in allowing the alternative claim of the assessee under s.10A of the Act, the revenue is in appeal before the Tribunal. Likewise, the assessee has also challenged the denial of original claim of deduction under s.10B of the Act as per its return of income.
8. The Ld.DR for the revenue Mr.Prasoon Kabra at the outset submitted that the CIT(A) misdirected itself in law in allowing ITA Nos.617 to 619/Ahd/2015 & CO Nos.65 to 67/Ahd/2015 ITO vs. Madnautix Outsourcing P.Ltd.
Asst.Years - 2008-09 to 2010-11 -6- alternative claim of deduction u/s.10A of the Act without giving any opportunity to the AO to verify the terms and conditions specified for eligibility of claim under s.10A of the Act. The Ld.DR submitted that sections 10A & 10B has been deliberately segregated by the Statute and conditions for claim of deductions are required to be satisfied independently which has not been done in the present case. It was thus contended that the order of the CIT(A) is vitiated. The Ld.DR relied upon the decision of the Hon'ble Delhi High Court in the case of Fast Booking (I) Pvt.Ltd. vs. DCIT 378 ITR 693 (Delhi) to submit that ratification of action of Development Commission by Board of approval is necessary to avail deduction s.10B of the Act.
9. The Ld.AR for the assessee Mr.Tushar P.Hemani, on the other hand, referred to the paper-book filed and invited our attention to the copy of approval/ratification of assessee's unit as 100% EOU granted vide letter dated 14/03/2013 and submitted that the assessee applied to the designated authority i.e. Development Commissioner to whom the powers have been delegated in this behalf. It was also contended that subsequent ratification of the approval is the internal matter of the STPI authorities and the Central Government. The assessee has no role to play in the matter. The Ld.AR, however, without going into the controversy submitted that the assessee has ultimately obtained the approval as can be seen from the communication from the STPI vide ITA Nos.617 to 619/Ahd/2015 & CO Nos.65 to 67/Ahd/2015 ITO vs. Madnautix Outsourcing P.Ltd.
Asst.Years - 2008-09 to 2010-11 -7- decision letter dated 14/03/2013. The Ld.AR also relied upon the decision of the Hon'ble Gujarat High Court in the case of Pr.CIT vs. ECI Technologies Pvt.Ltd. (Tax Appeal No. 203 of 2015 order dated 22/04/2015) to support eligibility of its claim of deduction under s.10B of the Act. The Ld.AR submitted that once the Board has ratified the approval granted by the competent authority (Development Commissioner) of STPI as a matter of fact, there is no warrant for denial of deduction under s.10B of the Act as claimed.
10. The Ld.AR next submitted that the claim of deduction under s.10B of the Act was earlier allowed after due deliberation in the original assessment order passed under s.143(3) of the Act dated 25/10/2010. It was thus contended that the case re-opened under s.147 of the Act to deny the claim earlier allowed on a mere change of opinion is not sustainable in law. The Ld.AR accordingly submitted that appeal of the Revenue is required to be dismissed and Cross Objections of the assessee for eligibility of claimed under s.10B of the Act is required to be upheld.
11. We have carefully considered the rival submissions. We observe at the outset that a clarification instruction has been issued by the CBDT being instruction No.02/2009 dated 09/03/2009 corrected by (F.No.178/19/2008 - ITA - I, dated 08/05/2009) to bring an end to ITA Nos.617 to 619/Ahd/2015 & CO Nos.65 to 67/Ahd/2015 ITO vs. Madnautix Outsourcing P.Ltd.
Asst.Years - 2008-09 to 2010-11 -8- ongoing raging controversy. By virtue of this instruction, it stands clarified that the powers vested with Board have been recognized to be delegated to the Development Commissioner concerned for granting approvals to 100% EOUs for the purposes of s.10B of the Act. It is the case of Assessee that in view of the aforesaid express CBDT instruction, the approval of Development Commissioner is now sufficient for purpose of tax holiday under s.10B of the Act. We find force in the contention on behalf of the assessee that it has no control over the internal mechanism and procedure prescribed for ratification in appropriate cases by the Board of Approval. As a corollary, we find force in the argument of the assessee that any delay in ratification of the action of the Development Commissioner as per prescribed procedure by the Board appointed under s.14 of Industries (Development and Regulation) Act 1951, will not mar the claim of deduction by the assessee altogether. Once, the permission granted by the office of Development Commissioner stands ratified, the ratification would relate back to the date of permission. It is not the case of the AO that other terms and conditions for availing exemption under s.10B of the Act has not been complied with. In the instant case, it appears from the communication letter dated 14/03/2013 that letter of permission dated 25/05/2007 issued in favour of the assessee for registration as 100% EOU under STPI Scheme was stated to be ratified in the first meeting of Inter-Ministerial Standing Committee (IMSC) on 2-6-2008 constituted by Central ITA Nos.617 to 619/Ahd/2015 & CO Nos.65 to 67/Ahd/2015 ITO vs. Madnautix Outsourcing P.Ltd.
Asst.Years - 2008-09 to 2010-11 -9- Government for such purposes. As noted, the ratification subsequently carried out and communicated will operate from the date of letter of permission issued by the Development Commissioner. Therefore, in our considered view, the action of the AO and CIT(A) in denying the claim of deduction under s.10B of the Act requires to be set aside as unsustainable in law. Consequently, the Cross Objection filed by the assessee requires to be viewed favorably on merits. As a corollary, we do not consider it expedient to deal with the correctness of action of CIT(A) in allowing the alternate claim of assessee under s.10A on merits.
12. Also, in view of the merits in the claim of deduction under s.10B, we do not consider it necessary to deal with the challenge of the assessee on allegedly wrong assumption of jurisdiction by invoking the section 147 of the Act. Thus, the assessee, in our considered opinion, is rightly eligible for claim of deduction under s.10B of the Act in the facts and circumstances of the case.
13. The facts being common, all revenue's appeals and cross- objections of the assessee requires to be treated similarly.
ITA Nos.617 to 619/Ahd/2015 & CO Nos.65 to 67/Ahd/2015 ITO vs. Madnautix Outsourcing P.Ltd.
Asst.Years - 2008-09 to 2010-11
- 10 -
14. In the combined result, Revenue's appeal are dismissed whereas assessee's cross-objections are allowed in terms of observations noted above.
This Order pronounced in Open Court on 05/ 09 /2017
(एस.एस.गोदारा) ( द प कुमार के डया)
या यक सद य लेखा सद य
( S.S. GODARA ) ( PRADIP KUMAR KEDIA )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 05/ 09 /2017
ट .सी.नायर, व. न.स./T.C. NAIR, Sr. PS
आदे श क त ल प अ!े षत/Copy of the Order forwarded to :
1. अपीलाथ0 / The Appellant
2. 1यथ0 / The Respondent.11
3. संबं3धत आयकर आयु5त / Concerned CIT
4. आयकर आयु5त(अपील) / The CIT(A)-2, Ahmedabad
5. 6वभागीय त न3ध, आयकर अपील य अ3धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, स1या6पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation .. 31.8.2017 (dictation-pad 20- pages attached at the end of this appeal-file)
2. Date on which the typed draft is placed before the Dictating Member ...01.09.2017
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S.................
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......6.9.17
7. Date on which the file goes to the Bench Clerk.....................6.9.17
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................