Income Tax Appellate Tribunal - Delhi
Nutech Information Systems P. Ltd., New ... vs Department Of Income Tax on 13 June, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : 'E' NEW DELHI
BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND
SHRI K.G. BANSAL, ACCOUNTANT MEMBER
I.T.A No. 4270/Del/11
Asstt. Year - 2008-09
Income Tax Officer Vs. M/s. Nutech Information
Systems P. Ltd.
Ward 13 (3), New Delhi.
J-7/107, Rajouri Garden,
New Delhi 110 027
(Appellant) (Respondent)
Appellant by: Shri R.S. Negi, Sr. DR
Respondent by: Shri Arun Kishore,CA
Date of hearing : 13-06-2012
Date of pronouncement : 29-6-2012
ORDER
PER K.G. BANSAL, AM:
The only ground taken by the revenue in this appeal is that Ld. CIT(A) erred in deleting the addition of ` 43,11,887/- made by the AO u/s 10B of the Income Tax Act, 1961, by ignoring the evidence clearly and elaborately brought out in the assessment order.
2. Briefly the facts are that the assessee - company had filed its return on 29.8.2008 declaring total income of ` 8,78,768/-. The return was processed u/s 143(1) and thereafter notice u/s 143(2) was issued on 2 ITA No. 4270/Del/11 Asstt. year 2008-09 7.8.2009. The assessee has been providing information technology services to foreign clients. Apart from business income from this source, it has earned dividend income in this year, which is not included in the total income u/s 10(34) and long-term capital gain, which is claimed to be not includible in the total income u/s 10(38). It has also earned interest income.
2.1 The assessee claimed the deduction of ` 43,11,887/- u/s 10B of the Act. In this connection, a certificate has been filed from software technology Park of India (STPI), which is valid upto 31.12.2007. The report in form No. 3CEB dated 5.9.2008 has also been filed. The AO examined the claim of the assessee. He has narrated 13 discrepancies in respect of the claim. Further, it has been found that the assessee has not been approved by the Board as 100% export - oriented undertaking, which is one of the essential conditions provided in clause (iv) of Explanation 2 to section 10B. In view, thereof, it has been held that the assessee is not entitled to the claim made by it u/s 10B read with section 10A of the Act.
3. The matter was agitated before the CIT(A) XVI, New Delhi. The assessee furnished replies to the discrepancies pointed out by the AO in the assessment order. These have been reproduced by the Ld. CIT(A) in a tabular form on page Nos. 3 to 6 of the impugned order. He also considered other submissions of the assessee in support of claim u/s 10B. Finally it has been held that there is no justification for not allowing the exemption u/s 10B. For ready reference, his finding are reproduced below :-
3ITA No. 4270/Del/11
Asstt. year 2008-09 "2.2 I have considered the facts of the case as discussed in the assessment order as well as the submissions of the appellant's AR. The conditions laid down in section 10B for a unit deriving profits from an undertaking engaged in export of computer software have been fulfilled by the appellant company as follows :-
a) It is a unit deriving profits from an undertaking engaged in export of computer software, as described under explanation 2(i) of the said section.
b) The appellant has been consecutively engaged in 100% export of computer software from the date of commencement of its production activities from 14th January, 2005 and has availed similar exemption in the past three years.
c) The deduction claimed is within the restricted period upto 1st April, 2012.
d) The production of computer software had started within the time period specified in the said section clause 10A(2)(i)(b) i.e. after 1st of April, 1994 as applicable to Software Technology Park. Registration Green Card copy was filed during the assessment and appellate stages.
e) The Income Tax Return was filed on 29th August, 2008 which is within the time stipulated u/s 139(1) of the Act.
f) The unit was not formed by splitting up or by reconstruction of any business already in existence.
g) It is not formed by the transfer of a new business plant previously used for any business.
h) There has been no local sale, copies of five invoices raised for export of IT services were produced before the AO as well as before me.
i) Audit Report inform no. 56F as per Rule 16D was obtained and filed with the AO.
The AO has not specified which of the conditions stipulated in the section has not been met by the appellant which has been enjoying this exemption since assessment year 2005-06, the assessments for A.Y.s 2005-06 & 2006-07 having been completed under scrutiny after accepting the returned income and the deduction claimed. No adjustments to the income were made in A.Y. 2007-08 either under section 143(1). As regards the alleged mismatch of sale and FIRCs, the appellant has filed copies of the FIRCs and their reconciliation with the export sales as per which payments against the invoices were received within the year (copies of FIRCs were filed before the 4 ITA No. 4270/Del/11 Asstt. year 2008-09 A.O. as well). Coming to the non-preparation or non-filing of softex forms, I agree with the appellant that this was a procedural issue between the STP Unit and STP office and does not impinge upon the allowance of exemption u/s 10B/10A, in case the conditions thereof are satisfied. The appellant submitted that other reports i.e. annual and monthly progress reports were duly filed with the STP Office which did not raise any objection or cancel its registration and in fact the delay in filing of Softex Forms has also subsequently been condoned. The green card of the appellant was not cancelled as alleged by the AO but only expired and was not renewed as the appellant did not have any further orders beyond August, 2007. Taking into account the totality of the facts of the case and the provisions of law in this regard, I am of the view that there was no justification for not allowing the exemption u/s 10B to the appellant. The disallowance made by the AO is therefore deleted. This ground of appeal is allowed."
4. Before us, Ld. Sr. DR drew our attention towards the findings of the AO and the Ld. CIT(A). It is submitted that the certificate of registration with the STPI was valid upto 31.12.2007 and not upto 31.3.2008, which is the last day of the relevant previous year. The assessee is also not approved by the Board as 100% export-oriented undertaking. Therefore, there is a patent error in the order of the Ld. CIT(A). 4.1 It is further submitted that the assessee had revised the claim from section 10B to section 10A. The Ld. CIT(A) has not furnished any finding on the revised claim. The assessee had also not filed a revised return before the AO for changing the claim of deduction from section 10B to 10A. Therefore, it is argued that the Ld. CIT(A) erred in granting deduction u/s 10B.
5. In reply, Ld. Counsel for the assessee submitted that there has been some confusion in the orders of the lower authorities as to whether the 5 ITA No. 4270/Del/11 Asstt. year 2008-09 claim of the assessee has been made u/s 10A or section 10B. The assessee had claimed deduction u/s 10B. However, this claim was revised before the AO and he was requested to grant the deduction u/s 10A. For this purpose, the assessee had also filed form No. 56F before the AO, which is applicable in respect of exemption u/s 10A. However, the AO did not grant the deduction for alleged discrepancies and claim under a wrong section. The discrepancies are frivolous in nature. Point wise reply was furnished before the Ld. CIT(A), which has also been reproduced in the impugned order. Thus, no discrepancy really exists. Ld. CIT(A) mentioned about section 10B / 10A in his finding in paragraph No. 2.2. However, he finally granted exemption u/s 10B, although it should have been granted u/s 10A.
5.1 It is argued that the delay in submission of Softex forms to STPI was condoned by it in letter dated 21.4.2011. There is no discrepancy in the amount mentioned in foreign inward remittance certificates (FIRC) and the turnover declared by the assessee as reconciliation in respect thereof has been furnished. It is further submitted that exemption u/s 10A and 10B are similar in nature except that approval of the Board is not required for claiming exemption u/s 10A. as held in the case of ITO vs. Vidya Tech Solutions (P) Ltd. (2010) 35 SOT 25 (Delhi). The claim of the assessee has been allowed by the revenue in earlier years in scrutiny assessments. It is also submitted that this is an incentive provision, which should be construed liberally.
6ITA No. 4270/Del/11
Asstt. year 2008-09
6. We have considered the facts of the case and submissions made before us. We find that the assessee had made claim u/s 10B, which was denied by the AO on the ground that approval of the Board has not been received. He also mentioned about certain discrepancies, which do not exist as per the order of the Ld. CIT(A). However, we find that the Ld. CIT(A) has also granted deduction u/s 10B, which is admittedly not admissible in the case of the assessee. Therefore, the matter is restored to the file of the Ld. CIT(A) for considering the matter afresh so as to decide whether the assessee is entitled to exemption u/s 10A and if yes, whether conditions precedent for grant of this exemption are satisfied in this case. He shall grant a due opportunity of being heard to the assessee in this matter and thereafter pass a speaking order in the matter.
7. In the result, the appeal is treated as allowed for statistical purpose.
sd/- sd/-
[I.C. SUDHIR] [K.G. BANSAL]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Veena
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY By Order,
Deputy Registrar, ITAT