Income Tax Appellate Tribunal - Ahmedabad
E-Infochips Limited,, Ahmedabad vs Department Of Income Tax on 28 March, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL AT
AHMEDABAD
AHMEDABAD "B"BENCH
Before Shri G.D. Agarwal, Vice-President (AZ) and
Shri Mahavir Singh, Judicial Member
ITA No.2311/ Ahd/2008
[Asstt.Year: 2005-06]
Incom e Tax Officer, -vs- E-Infochip Ltd.
W ard-4(1), R.No.105, 11/A-B, Cargo Motors, Off.
1 s t Floor, Navjivan Trust C.G. Road, Elisbridge, Ahm edabad
Building, Navjivan P.O. P AN No. AACCS1310E
Ahm edabad
(Appellant) (Respondent)
Revenue by : Shri Alok Johri, CIT-DR
Assessee by: Shri S.N.Soparkar, SR-AR &
Shri Bandish Soparkar
ORDER
PER Mahavir Singh, Judicial Member:-
This appeal by Revenue is arising out of the order of Commissioner of Income-tax (Appeals)-VIII, Ahmedabad in appeal No. CIT(A)- VIII/ITO/4(1)/147/07-08 dated 28-03-2008. The assessment was framed by ITO, Ward-4(1), Ahmedabad u/s.143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') vide his order dated 19-12-2008 for assessment year 2005-06.
2. The first issue in this appeal of Revenue is against the order of CIT(A) exempted an amount of Rs.8,40,35,068/- u/s.10B of the Act. For this, Revenue has raised the following ground No.1:-
"1. The Ld. CIT(A) has erred in law and on the facts in holding that the assessee is entitled for exemption u/s.10B of Rs.8,40,35,068/- in respect of the Ahmedabad undertaking."ITA No.2311/Ahd/2008 A.Y. 2005-06
ITO Wd-4(1) A'bd v. E-Infochip Ltd. Page 2
3. At the outset Ld. SR-Counsel for the assessee, Shri S.N.Soparkar stated that this issue is covered in favour of assessee and against the Revenue by the decision of this Tribunal in assessee's own case in ITA No.4005/Ahd/2003 dated 30-05-2008 for assessment year 2001-02, wherein exactly on similar facts, the Tribunal has decided the issue vide para-7.5 as under:-
"7.5 We have heard the rival contention and gone through the facts of the case. On the aspects of violation of STPI norms and establishment of new undertaking, we do not find any infirmity in the findings of ld. CIT(A). In respect of finding of the AO regarding conversion of unit in to STPI unit, we may have a look at the following circular issued by the CBDT.
"Subject: Tax holiday under section 10B of the Income-tax Act to 100% Export Oriented Undertaking-Certain clarification-Reg.
Circular No.1 of 2005, dt. 6th Jan., 2005 Section 10B of the Income-tax Act provides for 100% deduction of profits derived by a hundred per cent export oriented undertaking, from export of articles or things or computer software manufactured or produced by it. The deduction is available for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software. However, no deduction under section 10B is available after assessment year 2009-10.
2. The deduction under section 10B is available to an undertaking which fulfills all the following conditions:-
i) it manufactures or produces any article or thing or computer software ;
ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence except in the circumstances specified under section 33B of the IT Act ;
iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.ITA No.2311/Ahd/2008 A.Y. 2005-06
ITO Wd-4(1) A'bd v. E-Infochip Ltd. Page 3
3. Representations have been received from various quarters as to whether an undertaking set up in Domestic Tariff Area, which is subsequently approved as 100% EOU by the Board appointed by the Central Government in exercise of powers conferred under Section 14 of the Industries (Development and Regulation) Act, 1951, is eligible for deduction under section 10B of the Income-tax Act.
4. The matter has been examined and it is hereby clarified that an undertaking set up in Domestic Tariff Area (DTA) and deriving profit from export of articles or things or computer software manufactured or produced by it, which is subsequently converted into a EOU, shall be eligible for deduction under section 10B of the IT Act, on getting approval as 100% export oriented undertaking.
In such a case, the deduction shall be available only from the year in which it has got the approval as 100% and shall be available only for the remaining period of ten consecutive assessment years, beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as DTA unit. Further, in the year of approval, the deduction shall be restricted to the profits derived from exports, from and after the date of approval of the DTA unit as 100% EOU. Moreover, the deduction to such units in any case will not be available after assessment year 2009-01.
4. To clarify the above position, certain illustrations are given as under:-
i) undertaking 'A' is set up in Domestic Tariff Area and starts manufacture or production of computer software in financial year 1999-00 relevant to assessment year 2000-01. It gets approval as 100% EOU on 10th September, 2004 in the financial year 2004-05 relevant to assessment year 2005-06. Accordingly, it shall be eligible for deduction under section 10B from assessment year 2005-06 i.e., the year in which it fulfills the basic condition of being a 100% EOU.
Further, the deduction shall be available only for the remaining period of EOU. Further, the deduction shall be available only for the remaining period of ten years i.e., from assessment year 2005-06 to assessment year 2009-10. This deduction under section 10B for assessment year 2005-06 shall be restricted to the ITA No.2311/Ahd/2008 A.Y. 2005-06 ITO Wd-4(1) A'bd v. E-Infochip Ltd. Page 4 profits derived from exports, from and after the date of approval of the DTA unit as 1005 EOU.
ii) Undertaking 'B' set up in Domestic Tariff Area, begins to manufacture or produce computer software in financial year 1996-97 relevant to assessment year 1997-98. It gets approval as 100% EOU in financial year 2007-08 relevant to assessment year 2008-09. No deduction under section 10B shall be admissible to undertaking 'B' as the period of 10 years expires in financial year 2005-06 relevant to assessment year 2006-07, prior to its approval as 100% EOU.
iii) Undertaking 'C' is set up in Domestic Tariff Area in the financial year 2000-01 relevant to assessment year 2001-02 and engaged in the business of providing computer related services, other than those notified by the Board for the purposes of Section 10B. In financial year 2002-03, it acquires more than 20% of old plant & machinery and starts manufacturing computer software. It also gets approval as 100% EOU in financial year 2002-03. Undertaking 'C' shall not be eligible for deduction under section 10B, as there has been transfer of old plant & machinery.
iv) Undertaking 'D' is set up and starts producing computer software in financial year 2003-04 relevant to assessment year 2004-05. It gets approval as 100% EOU in financial year 2006-07 relevant to assessment year 2007-08. However, the deduction shall not be available after assessment year 2009-10.
v) Undertaking 'E' is set up and starts producing computer software prior to 31st March, 1994. It gets approval as 100% EOU in financial year 2004-05 relevant to assessment year 2005-06. Undertaking 'E' shall not be eligible for deduction under section 10B as the period of deduction of 10 years expires prior to assessment year 2005-06.
[F.No.149/194/2004-TPL]"
"7.6 As is apparent from the para-4 of the aforesaid Circular and the Illustrations given thereafter, CBDT itself has permitted an undertaking set up in Domestic Tariff Are (DTA) and deriving profit from export of articles or things or computer software manufactured or produced by it and which is subsequently converted into a EOU, deduction under section 10B of the IT Act ITA No.2311/Ahd/2008 A.Y. 2005-06 ITO Wd-4(1) A'bd v. E-Infochip Ltd. Page 5 on getting approval as 100% export oriented undertaking. The deduction is available from the year in which it gets the approval as 100% EOU and is available only for the remaining period of ten consecutive assessment years, beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as a DTA unit. In the light of this Circular and the findings of ld. CIT(A), with which we agree, there is no ground for denial of claim for deduction u/s.10B of the Act, the taxpayer having registered as 100% EOU in the period relevant to AY 1996-97. As regards violation of norms of STPI, we are of the view that unless violation of conditions of approval, impinge on conditions for grant of deduction under the relevant provisions of the Act, there is no ground for denial of deduction. In this case the status of taxpayer as 100% EOU and under STPI scheme continues. For the default already penalty has been imposed by the concerned authorities.
7.7 As regards domestic sale, second proviso to the extent Sec. 10B(1) itself permits that the profits and gains derived from such domestic sales of articles or things or computer software as do not exceed twenty-five per cent of total sales shall be deemed to be the profits and gains derived from the export of articles or things or computer software.
7.8 Regarding permission of Central Excise Authorities referred o in grounds of appeal, to a query by the Bench, Ld. DR could not explain as to how in the absence of such permission, taxpayer could undertake exports and earn valuable foreign exchange for the country. As already stated, the unit has been granted the status of 100% EOU on 31.8.1995. The fact of exports has already been taken cognizance by the Commissioner, Central Excise & Customs even while passing order dated 28.6.2001 levying penalty for various defaults [c.f. page 420-424 of paper book]. To say at this stage that permission of Excise Authorities has not been obtained before exports, is quite contrary to facts on record. In any case no basis has been adduced before us for such a plea.
7.9 In view of the foregoing, we do not find any infirmity in the findings of Ld. CIT(A) and consequently uphold his order and reject the grounds raised by the Revenue."ITA No.2311/Ahd/2008 A.Y. 2005-06
ITO Wd-4(1) A'bd v. E-Infochip Ltd. Page 6 From the above, it is seen that the issue is exactly covered by the Tribunal's decision (supra), respectfully following the same, we dismiss this issue of the Revenue's appeal.
4. The next issue in this appeal of Revenue is against the order of CIT(A) in allowing exemption u/s 10B of the Act for Pune Undertaking. For this, the Revenue has raised the following ground No.2:-
"The Ld. CIT(A) has erred in law and on the facts in holding that the assessee is entitled for exemption u/s.10B of Rs.11,927/- for the Pune undertaking."
5. After hearing the rival contentions, we find that the CIT(A) has examined the issue in para-3.3 of his appellate order and allowed the claim of assessee as under:-
"3.3 I have considered the submissions of the A.R carefully. I agree with the contention of the A.R. that the only requirement of section 10B is that the unit should be registered with the Prescribed Authority, which in the appellant's case is STPI. The starting of new unit at Pune has not been disputed by the A.O. As regards the objection of the A.O. that the appellant has not produced the letter of acceptance it has been contended by the A.R that the Legal agreement executed by the appellant accepting all the terms of STPI approval letter is itself the letter of acceptance. The appellant has submitted copy of Certificate issued by Excise / Customs Authorities. As regards the permission of Excise Authorities, the appellant had applied to Excise & Customs on 01-02-2005 but the licence was granted on 04-03-2005 which dates back to the date of application and the STPI which is the "Approving"
authority has not taken any adverse view of the same. Further on similar issue of certificate of Excise Authorities, the issue has been decided in favour of the appellant in A.Y. 2001-02. As regards the filing of softex declaration after the export the appellant has replied that it is not the requirement that exports have to be made only after acceptance of Softex by STPI and that the filing of Softex form is to be done only after the exports have taken place. This is found to be correct as per the guidelines of RBI. As regards the observation of the A.O that the Export Realisation of Pune Undertaking has been deposited in Ahmedabad Unit's Bank A/c, the A.R has replied that in the Foreign Inward Remittance Certificate issued by Axis Bank for Pune Unit, though the same was issued by Head Office of Axis Bank, the Account No. of Pune Unit has been mentioned. The A.R has furnished copies of letter dated ITA No.2311/Ahd/2008 A.Y. 2005-06 ITO Wd-4(1) A'bd v. E-Infochip Ltd. Page 7 17-12-2007 and certificate of Pune Unit Banker's viz Axis Bank dated 05-01-2008 which clarifies the issue. In view of the above facts and the clarifications and submissions of the A.R., I find the contention of the A.R. to be tenable and I hold that disallowance made by the A.O is not justified, hence I direct the A.O to allow exemption u/s.10B to Pune unit. This ground is allowed."
6. In view of the above findings of CIT(A), we find that the unit of assessee is registered with STPI and letter of acceptance is issued by the concerned authorities regarding legal agreement executed by it. We find from the copy of certificate issued by Custom Authorities regarding permission and licence was granted on 04-03-2005, which dates that to the date of application and STPI be approving Authority has not taken any adverse view. As regards to export realization by this Unit, which is deposited in Ahmedabad Units Bank account, the foreign inward remittance certificated issued by Axis Bank Pune unit clearly mentioned that the same was issued by Head office of Axis Bank and it was deposited in account of Pune unit. In view of these facts, we are of the view that the CIT(A) has correctly allowed the claim of the assessee on facts and we confirm the same. This issue of Revenue's appeal is dismissed.
7. In the result, Revenue's appeal is dismissed.
Order pronounced on this day of 24th Sept,2010 Sd/- Sd/-
(G.D.Agarwal) (Mahavir Singh)
(Vice President) (Judicial Member)
Ahmedabad,
Dated : 24/09/2010
*Dkp
Copy of the Order forwarded to:-
1. The Assessee.
2. The Revenue.
3. The CIT(Appeals)-VIII, Ahmedabad
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
/True copy/
Deputy/Asstt.Registrar
ITAT, Ahmedabad