Income Tax Appellate Tribunal - Pune
Cat Labs P.Ltd, Pune vs Department Of Income Tax on 20 February, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member,
and Shri R.K. Panda, Accountant Member.
ITA.No.131/PN/2013
(Assessment Year 2009-10)
ITO, Ward-1(1), Pune .. Appellant
Vs.
Cat Labs Pvt. Ltd.,
54/1, Siddheshwar Nagar,
Tingre Nagar road,
Vishrantwadi, Pune-411015 .. Respondent
PAN No.AABCC6577C
Assessee by : Shri Sunil Ganoo
Revenue by : Shri P.L. Pathade
Date of Hearing : 20-02-2014
Date of Pronouncement : 26-02-2014
ORDER
PER R.K. PANDA, AM:
This appeal filed by the Revenue is directed against the order dated 16-08-2012 of the CIT(A)-I, Pune relating to Assessment Year 2009-10.
2. The grounds raised by the Revenue are as under :
"1. The order of the learned Commissioner of Income-tax (Appeals) is contrary to law and to the facts and circumstances of the case.
2. The learned Commissioner of Income-tax (Appeals) grossly erred in deleting the disallowance of Rs.1,20,73,454/- made in the assessment on account of denial of the assessee's claim of exemption u/s.l0B of the Income-tax Act, 1961 instead of confirming the said disallowance.
3. The learned Commissioner of Income-tax (Appeals) grossly erred in allowing exemption by erroneously considering that the registration granted by the Software Technology Park of India (STPI) is enough for fulfilment of the condition prescribed in Sec.10B for approval of an EOU unit u/s.14 of the Industries (Development & Regulation) Act, 1951.
4. The learned Commissioner of Income-tax (Appeals) grossly erred in failing to appreciate that in order to be eligible u/s.10B, an assessee has to be a 100% Export Oriented Unit as specified under Explanation 2(iv) appearing below section 10B of the Act, which defines a "hundred percent export oriented undertaking" as an undertaking so approved by the Board appointed in this behalf by the Central Government u/s.14 of 2 the Industries Development & Regulation Act, 1951. The assessee's 100% Export Oriented Unit was not such an approved undertaking.
5. The learned Commissioner of Income-tax (Appeals) grossly erred in failing to apply the ratio of the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Regency Creations Ltd., (27 Taxmann.com 322) which squarely applies to the present case.
6. For these and such other grounds as may be urged at the time of hearing, the order of the learned CIT (Appeals) may be vacated and that of the Assessing Officer be restored."
3. Facts of the case, in brief, are that the assessee is engaged in the business of manufacture, customisation and export of computer antivirus software. The assessee has been registered/approved as 100% export oriented undertaking by Software Technology Park of India. It filed its return of income on 22-09-2009 declaring total income of Rs.1,60,752/- after claiming exemption of Rs.1,20,73,453/- u/s. 10B of the I.T. Act. The assessee submitted Form 56G duly audited and certified by the Auditors along with return of income for claiming exemption u/s.10B of the I.T. Act. The Assessing Officer disallowed the claim of exemption u/s.10B on the ground that it is not approved by the Board appointed in this behalf by the Central Government u/s.14 of the Industries (Development and Regulation) Act, 1951. Further, the 100% EOU as per STPI is not at par with the 100% EOU approved by the Board appointed u/s.14 of the IDRA, 1951 by the Central Government. For this proposition, the Assessing Officer relied on the decision of the Hyderabad Bench of the Tribunal in the case of Infotech Enterprises Ltd. Vs. Jt. CIT reported in 85 ITD 325. The Assessing Officer accordingly rejected the claim of Rs.1,20,73,454/- claimed by the assessee u/s.10B of the I.T. Act.
33.1 In appeal the Ld.CIT(A) following his order for A.Y. 2008-09 allowed the claim of the assessee.
4. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us.
5. The Ld. Departmental Representative heavily relied on the order of the Assessing Officer
6. The Ld. Counsel for the assessee on the other hand submitted that under identical facts and circumstances the Ld.CIT(A) in assessee's own case for A.Y. 2008-09 has allowed the claim of deduction u/s.10B amounting to Rs.46,79,486/-. Although the tax effect is more than the monetary limits prescribed by the CBDT, the Revenue has not filed any appeal against the order of the CIT(A). Thus, the Revenue has accepted the order of the CIT(A) who has passed an elaborate order distinguishing the decision relied on by the Assessing Officer.
6.1 Relying on the decisions of the Hon'ble Supreme Court in the case of Union of India and Others Vs. Kaumudini Narayan Dalal & Another reported in 249 ITR 219 (SC) and the decision in the case of CIT Vs. Shivsagar Estate reported in 257 ITR 59 (SC) he submitted that when the Revenue did not file any appeal against the order of the CIT(A) in the preceding year the appeal filed for the subsequent year on the same issue is liable to be dismissed. He accordingly submitted that the grounds raised by the Revenue should be dismissed.
4
7. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the assessment order for A.Y. 2008-09 has also denied the claim of deduction u/s.10B on the ground that the assessee company is not a 100% EOU since it is not approved by the Board appointed in this behalf by the Central Government u/s.14 of the Industries (Development and Regulation) Act, 1951. Further, the 100% EOU as per STPI is not at par with the 100% EOU approved by the Board appointed u/s.14 of the IDRA, 1951 by the Central Government. Relying on the decision of the Hyderabad Bench of the Tribunal in the case of Infotech Enterprises Ltd. (Supra) the Assessing Officer disallowed the claim. We find on an appeal filed by the assessee, the Ld.CIT(A) allowed the claim of deduction u/s.10B of the by observing as under :
"3.3.1. I have carefully considered the facts of the case and the law as are apparent from the records. Ground No. 1 which is under consideration has been raised in an argumentative manner and therefore, what is being considered for adjudication are "Whether in the facts and circumstances of the case, the appellant company can be denied deduction u/s 10B only because the approval was taken from the body of STPI formed under the Ministry of Information Technology, formed by the Government for Control, monitoring and regulation of software exports and not from the Board appointed on behalf of the Central Government u/s 14 of the Industries (Development & Regulation) Act, 1951, despite the fact that in similar facts and circumstances this deduction has been allowed in earlier assessment years." From the perusal of the assessment order it is abundantly clear that the AO has mainly relied on the non-fulfillment of condition provided in the section, to obtain the approval from the Board appointed on behalf of the Central Government u/s 14 of the Industries (Development & Regulation) Act, 1951 which was found specifically available in Explanation 2 to sec. 10B which defines a 100% Export Oriented Unit (EOU), to which this provision applies. The AO found that the Explanation says that 100% export oriented undertaking means an undertaking which has been approved as a 100% export oriented undertaking by the Board appointed in this behalf by the Central Government in excise of power conferred by section 14 of the Industries (Development & Regulation) Act, 1951 (65 of 1951, and the rules made under that Act). As the appellant had taken the approval of 100% export oriented unit from the STPI, a technical body of Ministry of Information & Technology formed for the purpose of control, monitoring and regulation 5 of software exports, it was held by the AO that the status of EOU for the purpose of deduction u/s 10B cannot be recognized. The AO for the above has also placed reliance on the decision given by the ITAT, Hyderabad in the case of Infotech Enterprises Ltd. Vs. Jt.CIT (2003) 85 ITD 325 (Hyd). The appellant has contended in detail in their submission that the finding of the AO is hyper technical. The Ministry of Information Technology has specifically constituted STPI for granting 100% EOU approval to the units engaged in the manufacturing of softwares and its exports and therefore, this approval must be given recognition equivalent to the Board constituted under Industries Development & Regulation) Act. The appellant has placed reliance on different judgments, as can be seen from the submissions quoted above, which has approved the allowability of this deduction on the basis of STPI registration and it was also claimed that the above referred judgments have been given after taking into account the judgment of Infotech Enterprises Ltd. relied upon by the AO. The appellant has claimed that all the conditions prescribed in the section have been fulfilled. From the perusal of the assessment order also it is evident that the appellant has submitted submissions claiming that all the conditions are satisfied and the AO after examining the submissions made by the appellant has mainly held that the appellant is not eligible because it has not obtained the approval under the Industries (Development & Regulation) Act, 1951. A brief reference can also be seen in the assessment order, which can be considered to be saying that the AO was of the opinion that the appellant is not engaged in the manufacturing of software. However, the above inference of the AO seems to be lacking any conviction. She has only referred to the salary of directors to conclude that the appellant is not engaged in the business of manufacturing of software, despite the fact that in the submission made before her, which has been quoted in the assessment order, it is evident that the appellant had claimed before the AO that it holds an IPR for antivirus software, which are adopted and modified according to the requirements of the clients and the countries to whom the softwares are exported after putting them on compact disks. The appellant has also contended that the Supreme Court in the case of Oracles Software India Ltd., quoted supra had held that the process of transforming blank compact disks into software loaded disks amounts to manufacturing. The appellant had also contended before the AO that the definition available in the section in Explanation 2 of section 10B clearly says that a computer software means any computer programme recorded on any disk, tape, perforated media, or other information storage device or any customized electronic data or any product or service of similar nature will constitute software which are exported or transmitted from India to any place outside India by any means. The AO has not examined any of these claims of the appellant before saying in an ambiguous manner that the appellant is not engaged in the activity of software manufacturing on the basis of salary and note on activity. Therefore, it is clear from the perusal of the assessment order that the AO has failed to appreciate the materials placed before her in the light of the provisions contained u/s 10B and the interpretations given to the relevant issues in different judgments and has concluded without any basis that the appellant is not engaged in the business of manufacturing of software. In view of the above and the fact that the submissions of the appellant has remained uncontroverted, demonstrating that the appellant is engaged in the activity of manufacturing of softwares, it has to be held that the aforesaid finding of the AO is not correct. Therefore, it has to be considered in the facts of the case available on record that the appellant is engaged in the business of software manufacturing and export. Now coming to the main objection of the AO that the approval is not under sec. 14 of the Industries (D&R) Act, 1951, it is noted that there is no dispute to the fact that the approval for EOU available with the appellant is not from the Board constituted u/s 14 6 of the Industries (D&R) Act, 1951, but is from the STPI. However, the claim of the appellant that the STPI is a body constituted by the Govt. of India for the specific purpose of granting approval of EOU status to units engaged in the manufacturing and exports of softwares and therefore, the same is equivalent and serving the same purpose is required to be considered, is required to examined. For this purpose, the appellant has referred to a comparative table giving reference to the benefit of section 10B in Foreign Trade Policy of 2004-2009 vis-a-vis Export Import Policy, 2002-2007 and Export Import Policy 1992-1997, to bring the point to the fore that the Government has accepted the grant of benefit u/s 10B under the approval granted by STPI. The appellant has also claimed that the Assessing Officer has incorrectly followed the decision of the ITAT, Hyderabad given in the case of Infotech Enterprises Pvt. Ltd. Vs. JCIT (2003) 80 TTJ (Hyd) 589, which was delivered before the issuance of J Instruction No. 1 of the CBDT dated 31.3.2006 and the Minutes of the Industrial Ministerial Communication vide letter dated 23.3.2006 issued by the Ministry of Communication & Technology. For the above, the appellant relied on the Instruction No. 1 of 2006 of the CBDT and the decision of the ITAT, Delhi 'H' Bench given in the case of DCIT Vs. Valliant Communications Ltd. (ITA No. 2706/Del/2008/A.Y. 2005-06). The appellant has also placed reliance on the decision of ITAT Delhi 'F' Bench given in the case of Regency Creations Ltd. Vs. ACIT Cir.15(1), New Delhi, ITA No. 1588/Del/2010/A.Y. 2007-08); ITAT, Ahmedabad 'B' Bench given in the case of ITO Ward 4(1) Vs. E-Enfochip Ltd. (ITA No. 2311/Ahd/2008/A.Y. 2005-06); ITAT Delhi 'H' Bench decision given in the case of DCIT, Cir.16(1) Vs. Technovate E-Solutions Pvt. Ltd. (ITA No. 135/Del/2011/A.Y. 2003-04); CITVs. Excell Softech Ltd. (2008)219 CTR (P&H) 405. It can be seen that the finding of the Assessing Officer that sec.
10B required registration by the Board constituted u/s 14 of Industries (Development & Regulation) Act, 1951, is perfectly correct but the claim of the appellant that the above requirement should be construed to have been legally fulfilled as per the directions of the Ministry of Communication & Technology and the Instruction issued by the CBDT on a similar issue for registration u/s 10A, also looks correct. Instruction No. 1 of 2006 of the CBDT dated 31.3.2006, is in respect of sec. 10A but in this Instruction it has been accepted that confusion existed in respect of the authorities whose approval should be considered to be fulfilling the conditions prescribed in sec. 10A and in view of the same the Instruction directed the Assessing Officer as under:
"6. The matter has been examined in consultation with the Officers of the Department of Information Technology (earlier, Department of Electronics). In view of the ambiguity in the legal status of the approval by Director of STPs, the Inter-Ministerial Standing Committee will meet to consider the approvals by Directors of STPs issued in the past. Therefore, with a view to avoid infructuous demand raised in assessment and reassessment of assesses claiming deduction u/s 10A, it has been decided that the claim of the deduction u/s 10A of the Income tax Act, shall not be denied to STP units only on the ground that the approval/ registration to such unit has been granted by the Directors of Software Technology Parks. However, it has to be ensured that all other conditions specified in sec. 10A are fully satisfied before allowing any such claim."
The Tribunals have in the judgments relied upon by the appellant, after 2006 have come to the conclusion that the registration granted by STPI should be considered as enough for the fulfillment of this condition. The Tribunals have also considered the Minutes of the Industrial Ministerial Communication vide letter dated 23.3.2006 issued by Ministry of 7 Communication &Technology, as discussed in detail in the case of DCIT Vs. Vallient Communications Ltd. In Regency Creation Ltd. judgment given in ITA No. 1588/Del/2010/ A.Y. 2007-08, the Hon'ble ITAT also relied on a clarification obtained under RTI, which had stated that no approval / ratification of STPI approval is required from BOA formed by Ministry of Commerce u/s 14 of Industries (Development & Regulation) Act, 1951. For the above reason, the Tribunals have found that the decision of Infotech Enterprises Ltd., 85 ITD 325 (Hyd) will not be applicable after 2006. In view of the discussions made above, from which it is apparent that the overwhelming view of the Tribunals have been to treat the approval granted by the STPI to be enough for the fulfillment of condition prescribed in sec. 10B for approval of the EOU unit under sec. 14 of Industries (Development & Regulation) Act, 1951 and on this ground the benefit cannot be denied has to be accepted despite the fact that the sec. 10B specifically talks of only registration u/s.14 of Industries (Development & Regulation) Act, 1951. Since the Assessing Officer in this case has only raised this issue, the same has to be not allowed in view of the discussions made above. Ground No. 1 therefore, is allowed. The Tribunal in the above relied cases have also allowed the benefit on the 'principle of consistency', which is applicable in this case also. It was demonstrated by the AR that similar benefit u/s 10B was allowed by AO in earlier assessment years and no action to J withdraw the same has been taken. Thus on this basis also Ground No. 1 is required to be allowed."
7.1 We find although the tax effect was more than the prescribed monetary limit the Revenue has not filed any appeal against the order of the CIT(A) for the A.Y. 2008-09. We find the CIT(A) while allowing the appeal of the assessee for A.Y. 2009-10 has followed his earlier order under identical facts and circumstances. We find the Ld.CIT(A) in his order for A.Y. 2008-09 has distinguished the decision of the Hyderabad Bench of the Tribunal in the case of Infotech Enterprises Ltd. (Supra) and following various other decisions has allowed the claim of deduction u/s.10B. The Ld. Departmental Representative could not point out any mistake in the order of the Ld.CIT(A) nor could cite any other decision to controvert the finding given by the Ld.CIT(A). Since the order of the CIT(A) is based on various decisions including the CBDT Instruction No.1/2006, therefore, in absence of any contrary material brought to our notice, we find no infirmity in the order of the CIT(A). Accordingly, we 8 uphold the same. The grounds raised by the Revenue are accordingly dismissed.
8. In the result, the appeal filed by the Revenue is dismissed.
Pronounced in the Open Court on 26-02-2014.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV ) ( R.K. PANDA )
JUDICIAL MEMBER ACCOUNTANT MEMBER
satish
Pune, dated 26th February 2014
Copy of the order is forwarded to:
1. The Assessee
2. The Department
3. The CIT(A)-I, Pune
4. The CIT-I, Pune
5. The DR "A" Bench, Pune.
6. Guard File
By Order
// True Copy //
Senior Private Secretary,
Income Tax Appellate Tribunal, Pune