Income Tax Appellate Tribunal - Delhi
Yogendra Chandra Kurele, , New Delhi vs Department Of Income Tax on 15 November, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'I' DELHI
BEFORE SMT. DIVA SINGH & AND SHRI K.G. BANSAL
ITA Nos. 3752 & 3753(Del)/2010
Assessment years: 2003-04 & 2004-05
Asstt. Commissioner of Income Shri Yogendra Chandra Kurele,
Tax, Circle 23, New Delhi. Vs. 701, Mercantile House,
15, K.G Marg, New Delhi.
PAN: ABAPK7210M
(Appellant) (Respondent)
Appellant by : Shri H.L. Dihana, CIT, DR
Respondent by : Shri Akarsh Garg, Advocate
Date of Hearing : 15.11.2011
Date of Pronouncement : 30.11.2011
ORDER
PER BENCH In both the appeals, the revenue has raised similar grounds to the effect that on the facts and in the circumstances of the case, the ld. CIT(Appeals) erred in deleting the disallowance made by the AO of the claim made u/s 10A of the Income-tax Act, 1961 ('the Act' for short). The claim amounted to Rs. 9,57,50,188/- in assessment year 2003-04 and Rs. 1,12,19,869/- in assessment year 2004-05.
2. It is the common case of both the parties that the ld.
CIT(Appeals) allowed the claim by following the decision of the Tribunal in the case of the assessee for assessment year 2002-03 in ITA No. 2819(Del)/2009 dated 16.10.2009. However, since the 2 ITA Nos. 3752 & 3753(Del)/2010 revenue has carried the matter further, the ld. CIT, DR relies on the order of the AO.
3. We have considered the facts of the case and submissions made before us. The decision of the Tribunal (supra) reads as under:-
"26. Dissatisfied with the action of the Assessing Officer, assessee carried the matter in appeal before the learned CIT(Appeals). It was contended by the assessee that he has duly set up an export division under the name & Style of Bulbul Kurely Exports. The export Division was duly approved by the Software Technology Park of India (STPI), NOIDA under the Ministry of Information and Broadcasting, Government of India which is an approved authority for this purpose. The assessee contended that he has filed copy of registration certificate with the Assessing Officer. The assessee further contended that exports were supported by relevant bills and other documents as are required to be kept maintained in relation to the foreign trade. Assessing officer has not raised any doubt about those agreements and bills. It was also contended that STPI is a technical authority consisting of highly technical persons has never charged the assessee with any violation of not exporting software development and exported by the assessee. With regard to the apprehension of Assessing Officer that M/s. LAM Research would have not entered into an agreement with an entity like assessee for development of software because of difference in the strature of the two entities, it was contended by the assessee that Assessing Officer has collected the information from the web site only which merely give the broad profile of the organizations. In order to p[rove the address of the LAM Research, the assessee had produced courier acknowledgment exhibiting sending of documents. The assessee has also produced copy of the FIRC from Punjab National Bank, export bill and bank certificate which indicate that money has been received from the account of LAM Research itself. It was emphasized by the assessee that remittance in foreign exchange were undisputedly attributed to LAM Research Corporation only and the Assessing Officer also not doubted such receipt. With regard to the report of IT Inspector about the visit of assessee's premises, it was contended that Assessing Officer has miserably failed to take cognizance geography of the premises. The premises is a three & half storied building built on a plot of 196.97 sq.yds. having covered area of more than 3,000 sq.fis. It was consisting of one big hall at the ground floor, six cabins for senior staff and one cabin for housing work station, seven work stations at first floor. Similarly, four cabins for senior staff and ample provisions for more than twenty work stations at second floor. At third floor, one hall, guest room, kitchen and servant room. Similarly, with regard to the statement of Shri Amod Srivastava, it was pointed out that some dispute on payment was there with Shri Amod Srivastava and, therefore, he has given a statement against the assessee. Shri Srivastava has categorically denied about the receipt of any payment and carrying out any activity for the assessee but 2 3 ITA Nos. 3752 & 3753(Del)/2010 the assessee has produced certificate from the bank indicating clearance of a cheques for a consideration of Rs. 4,50,0001- in favour of Shri Srivastava. Shri Srivastava has termed himself as a lay man who does not know anything about the software business but he was a franchise holder of ET & T an Central Government Undertaking under the firm name M/s IFCOMNetworking, 112/116A Benajhabar Road, -Kanpur. The Assessee has submitted cheque numbers and details of clearance. With regard to the defects pointed out about user of internet, it was contended by the assessee that Assessing Officer failed to appreciate the very activity. 168 hours of ISDN were utilized by the assessee for uploading the software to the purchaser otherwise for development of software he has used 13200 hours of the net working.
27. Learned First Appellate Authority has re-appreciated the controversy in details and allowed the exemption to the assessee. His detailed finding is worth to note:
"4.6 I have carefully considered the submissions of the Authorized Representative, remand report and rejoinder thereto. The A.O. had in his assessment order doubted the export of software to M/s LAM research. The Appellant has produced evidence in the form of banker's certificate for foreign remittance, copies of bills and other correspondence wit LAM research to prove that remittances came from the bank account of LAM research itself. The AO has also observed that LAM research is a fortune 500 company and hence there can be no doubt that there can be any falsity in the certificate issued by the bankers evidencing flow of funds from bank account of LAM research. Couriers sent to LAM research have also not been disputed by the AO in his remand report. Hence as regards the buyer is concerned no question can be raised against the same. The export of software also stands proven by the Softex returns filed by the appellant regularly in compliance to the STP I guidelines. Even on an enquiry by the AO from STP I, vide its letter dated 12.05.2005, the Joint Director of STP I has replied to the AO. The relevant contents of the reply are reproduced hereunder:
"SoftwareTechnologyParksOfIndia MinistryofCommunicationandInformation Technology,DepartmentofInformation Technology GovernmentofIndia,GangaSoftwareTechnology Complex Sector 29, Noida-201303 (UP) Travellingexpenses.91-120-245041/,2450412-/4, 2450400-03 Fax 91-120-245404-05 Website:-
www.stpn.sofi.netlwww.stpionline.com.3
Sub: Setting up 100% export Oriented Unit under STP Scheme for the Development/manufacture of computer software-Reg.
This refers to your letter no. YCIACITIKNPI04-05I1O dated 31.03.05 received in this office on 26.4.05 regarding the above subject matter. As per our records the following are the facts:
1.M/s Bulbul Kurele Exports is registered under STP Scheme vide approval no. PCMGIPSEI051025-STPNI6475 dtd. 30th Ja.2002 for the development of computer software from the location 113/127 Swaroop Nagar, Kanpur (UP).
2.The unit has exported the computer software Rs.5.78 crores in the financial year 2001-02. Regarding clarification in respect of buyer M/s.
LAM Research Corporation as per the records the address is 4650, Cushing Parkway, Fremont CA 94538-6470, Dallas-Texas, USA. M/s. Lam Research Corpn. Has also communicated on 22.10.2001 to M/s. Bulbul Kurele Exports to start development of their software at the earliest in the result party has initiated the development process. The copy of communication has filed by the party on 17th January 2002 along with application for STP I registration. So..... duration of project is more than 3 months.
3.In case of Export of Software through data communication link The declaration of Export is in Softex form as per RBI guideline. The procedure of attestation of softex by STPI is based on declaration by the party in the softex forms, purchase order/agreement with the client back- up form submitted by the party and proof of Data-cum service provider. As per declaration on the back-up form total number oj Man hours spent is 13200.
Once it is undisputed that software was exported its existence could not have been doubted. Software can exist only when either it is "purchased" or it is "developed". The A.O. has, in fact, disbelieved the factum of development by the appellant and have simultaneously held that no evidence for purchase could be produced. On the other hand the appellant submits that there cannot be any evidence of purchase because the software written submissions developed. Similarly all the adverse conclusions drawn by the A.O has been controverted with cogent evidence by appellant. Such rebuttal has not been countered by the A.O. in remand report. It may be noted that Sh. Amod Srivastava had received payment of Rs.4.50 lakhs through account payee cheque and that he was franchisee of ET & T an Central Govt.. Undertaking under the name M/s. IFCOM NETWORK. It shows that he was also engaged in software activities Hence, the statement of Amod Srivastava in contradiction to these undisputed facts has no credentials. Moreover, no opportunity was given to cross examine Shri.Amod Srivastava .It is a trite law that the opportunity of cross-examination must be allowed to the assessee 5 ITA Nos. 3752 & 3753(Del)/2010 if any statement is recorded behind his back. In the facts of the instant case, such a requirement was imperative considering that the averments in the statement were contrary to the facts on record In absence of such cross examination even during remand proceeding such statement cannot be treated as "evidence" or "material" for the purpose of making assessment. Similarly ,in regard to the Inspector's report, it is noticed that the Inspector visited the premises after the 'closure of business. Moreover, the findings therein are in contradiction to the Audit of AG Allahabad and Softex returns filed before the authorities: In regard to the evidence of purchase and sale of computers ,the seller was registered with Sales-tax Department. Even the payment was made through account payee cheque. Regarding the issue of number of hours in development of software as mentioned in the letter of Joint Director, STPI, the total man hours spent for software development were 13200 and thus, it seems that the AO. by mistake had taken the number of hours i. e. 168 hours utilized for uploading the software as man hours utilized for development of software. It may be noted that the appellant submitted monthly reports regarding software export to the competent authority which has accepted the same in discharge of export obligation. It is also noted that the export of software was also declared on exports declaration form softex and the STP I also certified that the software described in the softex form was actually exported The export value has been received in foreign convertible exchange through proper banking channels as certified in Foreign Inward Remittance Certificates (FIRCs). There is no cogent country evidence on record to conclude that the appellant has not exported software to LAM Research USA. The appellant has also furnished a report of the Chartered Accountant in the prescribed format along with the return of income for claim of deduction u/s 10A of the Act. Hence, on consideration of totality of the facts and circumstances of the case, I am of the view that the appellant is eligible for the benefit u/s 10A of the Income-tax Act. Hence, the A.O is directed to allow the benefit u/s 10A of Rs. 5, 64, 62,8501- to the appellant".
28. Before us, learned DR relied upon the order of the Assessing Officer and reiterated the defects pointed out by the Assessing Officer. On the other hand, learned counsel for the assessee relied upon the order of the learned CIT(Appeals}. The Learned counsel for the assessee specifically drew our attention towards the submissions made by the assessee before the Learned First Appellate Authority which has been reproduced in a summarized form in paragraph nos. 4.3 to 4.5. He drew our attention towards the copy of the letter of STP I dated 12.3.2005 available at page Nos. 298 of the paper book. In this letter, STPI has mentioned that M/s Bulbul Kurele Exports is registered under STP Scheme vide approval No.PCMGIPSCI051025- STPNI6476dated 30.1.2002 for the development of computers software from the location 113/27, Swarup Nagar, Kanpur. During the course of hearing, we have confronted the learned counsel for the assessee to show as to how M/s Bulbul Kureley Export is to be considered as a unit developing software from software technology park in accordance with the conditions enumerated in sec. 10A of the Act. In response to our query, he placed on 5 6 ITA Nos. 3752 & 3753(Del)/2010 record copy of software technology park (STP Scheme), notified by the Ministry of Commerce which has been extracted from Chaturvedi Pithisaria's Income-taxLaw,5th Edition, page Nos. 935 to 937. This scheme is available at pageNos.1640to 1642 of Sampath Iyengar Law of Income-tax,10th edition. He pointed out that unit was situated at 113127 Swarup Nagar, Kanpur. It was registered under STP Scheme with designated officer and director, Software Technology Park of NOIDA. The certificate is placed at page Nos. 30 to 43 of the paper book.
The unit has not been formed by transfer of machinery and plant previously used for any purpose, the assessee has produced computer software and transmitted such software from India to places outside India i.e. USA, the sale proceeds have been repatriated within the time limit provided by the RBI as well as in the Act into India in convertible foreign exchange. The assessee has produced copy of FIRCS, export bills and bank certificate in support of these facts Emphasized the meaning of STP, he pointed out that in STP Scheme, it has been clarified that an STP may be an individual unit by itself or it may be one of such units located in an area designated as STP Complex by the Department of Electronics.
29. We have heard the rival contentions and perused the material available on record. The Assessing Officer in the assessment order nowhere doubted about the status of assessee as an STP unit. He has not raised any objection with regard to fulfillment of conditions contemplated insec.10Afor claiming exemption. The STP I is a technical authority consisting of highly technical persons has never charged the assessee with any violation of software development and exporting the same by the assessee. The assessee has produced sufficient evidence in the shape of registration certificate, letter by the Joint Director, STPI, NOIDA to the Assessing Officer in response to his query about the genuineness of assessee's transaction. This may be the reason that Assessing Officer has not doubted the status of assessee as an STP unit. The emphasis of the Assessing Officer for doubting the activity of the assessee is not supported by any evidence. The first apprehension in his mind is that how a company having a strature of LAM Research would enter into an agreement with small entity like assessee. This apprehension cannot be given more weightage then the evidence exhibiting the payment from M/s LAM Research to the assessee through banking channel. The Assessing Officer has not raised any doubt about the receipt of foreign exchange in India by the assessee and such payment is attributable to M/s LAM Research. Similarly, other objection is of internet used that has been demonstrated by the assessee that Assessing Officer miserably failed to understand the use of internet. The assessee, in fact, used 13200 hours of internet for development of software; 168 hours of internet considered by the Assessing Officer were used only for uploading the software from India. The other objection is of office space based on income-tax inspector 6 7 ITA Nos. 3752 & 3753(Del)/2010 report, the assessee has demonstrated that he was having 3000 sq. ft. area which is sufficient. Similarly, assessee has demolished the alleged statement of Shri Amod Srivastava. This statement was recorded at the back of assessee and no opportunity for cross-examination was given. We have perused the statement available at pages 39 to 43 of the paper book. He has denied the receipt of Rs.4,50,000 in the statement. This fact is factually incorrect. Assessee has disproved this denial with the help of bank certificate exhibiting. the clearance of cheques in his favour. Thus, it indicates that this man was deposing falsely. Learned CIT(Appeals) has considered all these aspects in details in the finding extracted supra. If we weigh the evidence produced by the assessee i.e. registration and approval from STPI for development of software, receipt in foreign exchange, employment of more than 30 employees, letter of STPI Authority exhibiting the development of software and its exports, bank certificate in support of receipt of foreign receipt, copy of FIRCS and other documentary evidence vis-a-vis the superficial apprehension harbored by the Assessing Officer discussed above then scale would tilt in favour of the assessee. Thus, in view of the above discussion, we do not find any merit in this ground of appeal. It is rejected. "
4. As the matter has already been decided and no distinction in facts has been pointed out, relying on the same it is held that the ld.
CIT(Appeals) was right in allowing the claim of the assessee u/s 10A of the Act.
5. In the result, both the appeals are dismissed.
Sd/- sd/-
(Diva Singh) (K.G. Bansal)
Judicial Member Accountant Member
SP Satia
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8 ITA Nos. 3752 & 3753(Del)/2010
Copy of the order forwarded to:-
Yogendra Chandra Kurele, New Delhi.
ACIT, Central Circle 23, New Delhi.
CIT
CIT(A)
The DR, ITAT, New Delhi. Assistant Registrar.
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