Income Tax Appellate Tribunal - Ahmedabad
The Acit.(Osd)Circle-5,, Ahmedabad vs M/S. Oxygen Healthcase Reaserch ... on 26 February, 2018
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ 'Mh' अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" D " BENCH, AHMEDABAD
सव ी एन.के. ब लैया, लेखा सद य एवं महावीर साद, या यक सद य के सम ।
BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER And
SHRI MAHAVIR PRASAD, JUDICIAL MEMBER
आयकर अपील सं./I.T.A. Nos. 1214 & 2907/AHD/2012
( नधा रण वष / Assessment Year : 2008-09 & 2009-10)
ACIT (OSD), बनाम/ M/s. Oxygen Healthcare
Circle -5, Vs. Research Pvt. Ltd.,
Ahmedabad. 15/A, Seema Society, Nr.
Memnagar Fire Station,
Naranpura, Ahmedabad.
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAACO 7229 C
(अपीलाथ' /Appellant) .. ( (यथ' / Respondent)
अपीलाथ' ओर से /Appellant by : Shri V. K. Singh, Sr.D.R.
(यथ' क* ओर से/Respondent by : Shri Sanjay Majmudar, A.R.
ु वाई क* तार.ख /
सन Date of Hearing 09/01/2018
घोषणा क* तार.ख /Date of Pronounce ment 26/02/2018
आदे श / O R D E R
PER MAHAVIR PRASAD, JUDICIAL MEMBER :
These are two appeals by the revenue against the separate order of the Commissioner of Income Tax (Appeals)-XI, Ahmedabad, vide Appeal Nos. CIT(A)-XI/344/ACIT.Cir-5/10-11 dated 09/03/2012 and CIT(A)-XI/355/Wd-5(2)/11-12 dated 12/10/2012 for Assessment Years (AYs) 2008-09 and 2009-10.
2. Since in both appeals parties are same and issues are common only amount and assessment years are different. Therefore, for the sake of ITA Nos.1214 & 2907/Ahd/2012 ACIT(OSD) vs. M/s. Oxygen Healthcare Research Pvt. Ltd.
Asst.Year -2008-09 & 2009-10 -2- convenience, we would like to dispose of both the appeals by way of a common order. Following grounds have taken by the department in both appeals:
2.1 In ITA No.1214/Ahd/2012 for AY 2008-09:
"Ld. CIT(A) has erred in law and on facts in directing the AO to allow the Assessee's claim of deduction of Rs.1,14,25,859/- u/s.10B of the I.T. Act."
2.2 In ITA No.2907/Ahd/2012 for AY 2009-10:
"Ld. CIT(A) has erred in law and on facts in deleing the disallowance of deduction u/s.10B of the Act of Rs.4,34,55,797/-."
3. The relevant facts as culled out from the materials on record are as under:-
The assessee company is carrying on the Business of Research & Development activities relating to drugs and healthcare services. From the computation of income filed alongwith audited financial statement and tax audit report, it is noticed that the company has income from business of Research & Development activities of Rs.1,14,25,859/- which has been claimed as exempt U/s.10A and the taxable income from business has been computed at Rs.NIL. To ascertain the veracity and genuineness of exemption claim, various details were called for by the ld. AO. From the analysis of various facts and information on record , facts considered and details furnished by the assessee during assessment proceedings, it transpired that assessee may not be eligible for exemption u/s.10B and hence, clarification regarding exemption u/s.10B called for on 22/11/2010 as to why claim for deduction u/s.10B should not be rejected. The same is reproduced below:
ITA Nos.1214 & 2907/Ahd/2012 ACIT(OSD) vs. M/s. Oxygen Healthcare Research Pvt. Ltd.
Asst.Year -2008-09 & 2009-10 -3- "You are requested to furnish the following information/explanation & documents:-
1) Explain why the claim of the assessee for deduction u/s. 10B should not be disallowed as the assessee has not made export of any article, thing or computer software during the period relevant to A. Y. 2008-09.
2) Furnish invoice-wise proof of exports, if any, made by the assessee.
3) Documentary evidences duly certified by the Customs authority to show that export, if any, has been made by the assessee.
4) Proof of foreign exchange, if any, having been realized by the assessee within the prescribed time period.
5) Till date, the assessee has not furnished Auditor's Report in Form No. 56G. Furnish the same, if any.
6) Proof of undertaking having been approved by the competent authority as 100% export oriented undertaking.
7) It is seen that in the statement of 'Computation of Income', the deduction has been claimed u/s. 10A, whereas as per letter dated 01.11.2010 submitted, it appears that the assessee has claimed u/s. 10B. Kindly explain the discrepancy".
3. The assessee vide reply dated 30.11.2010 with para wise which is as under:-
1. During the course of assessment proceedings, a question was asked why the claim of the assessee u/s. 10B should not be disallowed as the assessee has not made export of any article, thing or computer software during the period relevant to A.Y. 2008-09. In this connection, the assessee would like to submit the following for your perusal.
(a) The assesses company is basically engaged in providing Back Office services. Thus, the assesses company is providing information technology enabled services as back office operations for its parent and accordingly it is exporting services of research and development on contract chemistry, biology and combination chemistry through computer network.
(b) The CBDT has specifically notified the information technology enabled products or services including back office operations as part of the services for considering the items u/s.10b In customized electronic data or product or services of similar ITA Nos.1214 & 2907/Ahd/2012 ACIT(OSD) vs. M/s. Oxygen Healthcare Research Pvt. Ltd.
Asst.Year -2008-09 & 2009-10 -4- nature. Thus, for the purpose of considering the services provided by the assessee company, it is very much covered u/s.10B of the Act as per the notification of CBDT.
(c) Again, the assessee has received permission from the Development Commissioner, Kandla Special Economic Zone, Ministry of Commerce, Govt. of India. As per the said permission, the services provided by the assessee are very much covered u/s. 10B.
(d) Again the exports of the services are covered under the definition of Section 10B, and the assessee company is solely engaged in export of services for the financial year in question, the question of any disallowance u/s. 10B should not arise.
From the above, it is to be stated that the entire claim of the assessee is very much justified u/s. 10B of the I. T. Act, 1961."
4. The assessee's reply was considered but not acceptable because as per details available on record, it is clear that assessee has not export any item as per above referred explanation-2. It is clear from the explanation that any computer programme recorded on any disc, tape, perforated media or other information storage device; covered in software export. The assessee company is not involved/carried out any such type of export business which is covered in section 10B of the I.T. Act. It is also clear from the return that the assessee has claimed deduction in his return u/s.10A of the Act for the current year as well as in previous year also. But during the course of assessment proceedings for A.Y. 2008-09, the assessee company claimed deduction u/s.10B of the Act.
5. Ld. AO further stated, it is clear that the assessee company has not exported any software and assessee company has also not filed required ITA Nos.1214 & 2907/Ahd/2012 ACIT(OSD) vs. M/s. Oxygen Healthcare Research Pvt. Ltd.
Asst.Year -2008-09 & 2009-10 -5- reports timely as per provisions of Explanation-5 of Section 10B of the I.T. Act, which is reproduced as under:
"The deduction under sub-section (1) shall not be admissible for any assessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form27, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section".
5.2 Further, according to sub-section 8(iv) of section 10B of the I.T. Act the assessee company has not produce any approval taken by Appropriate Authority as per provision of this section, which reads as below ;
"hundred per cent export-oriented undertaking" means an undertaking which has been approved as a hundred per cent export-oriented undertaking by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 143e of the Industries (Development and Regulation) Act, 1951 (65 of 1951), and the rules made under that Act"
5.3 On basis of above reason, the claim of the assessee company for deduction u/s.10-B is not genuine and it is hereby rejected and the whole exercise seems to be a well laid device to divert unaccounted money under the guise of purported export earnings from sale of software and to defraud revenue by showing income as exempt u/s.10B of the I.T. Act."
6. Finally ld. AO made an addition of Rs.1,14,25,859/-.
7. Against the said addition, assessee preferred first statutory appeal before the ld. CIT(A) who allowed the appeal of the assessee.
8. Now appellant's appeal is before us.
ITA Nos.1214 & 2907/Ahd/2012 ACIT(OSD) vs. M/s. Oxygen Healthcare Research Pvt. Ltd.
Asst.Year -2008-09 & 2009-10 -6-
9. We have gone through the relevant record and impugned order. In this case, learned AO rejected the claim of the assessee that assessee company is not involved/carried out any such of export business which is covered u/s.10B of the I.T. Act. As per Section 10B special provision in respect of newly established 100% export oriented undertaking and deduction of such profit and gains as per derived export oriented undertaking from the export of articles and things or computer software for a period of 10 consecutive assessment year bringing with the assessment year relevant to the previous year in which under taking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee.
10. On the other hand, ld. CIT(A) gave relief to the assessee on the basis that assessee was having unit in SEZ and same was approved by the development Commissioner, Kandla Special Economic Zone as 100% export oriented unit and the same was ratified by the Board of approvals for EOU schemes and hold that the assessee's case is covered by the CBDT instruction bearing file no.178/19/2008-ITA-I dated 09/03/2009.
11. In our considered opinion, both the lower authorities have been failed to ascertain that what assessee is actually doing and just bury the lead. Assessee is claiming that he has been doing research and development in pharmaceutical in the export drug related services. Assessee claimed that they fall in the category of back office operation and in the audit report it is also mentioned that assessee is doing research ITA Nos.1214 & 2907/Ahd/2012 ACIT(OSD) vs. M/s. Oxygen Healthcare Research Pvt. Ltd.
Asst.Year -2008-09 & 2009-10 -7- and development work related to drugs and healthcare. But both authorities have not ascertained to the effect that what actually assessee is doing. Therefore, we set aside the orders of the CIT(A) in both appeals and remit this matted back to the file of the ld. AO to decide the nature of business of the company. AO will also ascertain that how assessee can get benefit under section 10B and accordingly, will decide the matter as per law.
12. In the result, both the appeals filed by the department is allowed for statistical purposes.
This Order pronounced in Open Court on 26/02/2018
Sd/- Sd/-
एन.के. ब लैया महावीर साद
(लेखा सद य) ( या यक सद य)
( N.K. BILLAIYA ) ( MAHAVIR PRASAD )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 26/02/2018
Priti Yadav, Sr.PS
आदे श क त"ल#प अ$े#षत/Copy of the Order forwarded to :
1. अपीलाथ' / The Appellant
2. (यथ' / The Respondent.
3. संबं6धत आयकर आयु8त / Concerned CIT
4. आयकर आयु8त(अपील) / The CIT(A)-XI, Ahmedabad.
5. 9वभागीय त न6ध, आयकर अपील.य अ6धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, स(या9पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad