Limtex Infotech Ltd. Vs ITO (ITAT Kolkata)
1. This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax(Appeals)-11, Kolkata [in short the ld CIT(A)] in Appeal No. 583/CIT(A)-11/7(4)/Kol/14-15/Kol dated 24.03.2017 against the order passed by the ITO, Ward-7(4), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 26.03.2013 for the Assessment Year 2010-11.
2. The only effective issue involved in this appeal is as to whether the ld CITA was justified in upholding the disallowance of deduction claimed u/s 10B of the Act in the facts and circumstances of the case.
3. The brief facts of this case are that the assessee has two main verticles in its business. One vertical comprises development of software and other vertical comprises of running a call centre, income from which has been claimed as exempt u/s 10B of the Act. The assessee was registered under the Software Technology Park (STP in short) scheme as 100% Export Oriented Unit (EOU in short) on 28.1.2005. The same was subsequently renewed on 27.7.2010. The green card was issued to the assessee by the designated officer for Secretary to the Government of India, Department of Information Technology and Chairman Inter Ministerial Standing Committee on Software Technology Park Scheme. The assessee does not have any approval from the Board of Approval for EOU Scheme. The claim of deduction u/s 10B of the Act was disallowed by the ld AO.
4. The entire debate and argument of the A.O. who has disallowed the benefit u/s 10B and the assessee who has argued his case for eligibility of exemption of its income u/s 10B revolves around certain provisions of Sec. 10B which is clearly mentioned in CBDT Instruction No. 2/2009 dated 09.03.2009 as rectified by Instruction of even number on 08.05.2009. The following is extract of instruction:
“Section 10B of the Income Tax Act provides for exemption of income in case of hundred per cent export oriented undertakings subject to prescribed conditions. Explanation 2(iv) below to the said section defines a ‘hundred per cent export oriented undertaking’ as an undertaking so approved by the Board appointed in this behalf by the Central Government u/s 14 of the Industries Development and Regulation Act, 1951. Subsequent to the delegation of this power by the Ministry of Commerce and Industries to the Development Commissioners, such approvals to 100 per cent EOU’s are now being granted by the Development Commissioners which are later ratified by the Board of Approvals.
The matter regarding validity of approvals given by Development Commissioners has been examined in the Board it has been decided that an approval granted by the Development Commissioner in the case of an hundred per cent export oriented unit will be considered valid once such an approval is ratified by the Board of Approval for EOU Scheme.”
As per this instruction, which tries to interpret the requirement of an enterprise as per section 10B for an undertaking to be eligible as 100% Export Oriented Undertaking, it should fulfill the following conditions:
i) The undertaking must have approved by the Development Commissioner
ii) The approval so granted by the Development Commissioner should be subsequently ratified by the Board of Approval for Export Oriented Unit (EOU) Scheme.
This clarificatory instruction was required to be issued by the Board as the explanation to (iv) of Sec. 10B requires approval to be given by the Board. Subsequently, the Ministry of Commerce made certain delegation of the power whereby the power conferred to the Board u/s 14 of Industries Development and Regulation Act, 1951 was delegated to Development Commissioner.
5. The assessee also placed reliance on the email received from Deputy Director STP Kolkata on 27.3.2013 which is extracted hereunder:-
Dear Mr Ramal,
With regard to rectification, IMSC has clarified that no ratification is required for units approved by the Director STPI after 31/03/1999.
Thanks and regards
6. The assessee stated that based on the above email, it is clear that the ratification by the Board of Approval is not required by STPI units. It was further argued that since all the Commissioner of STPI are members of Combined Board of Approval and therefore, approval granted by a Commissioner of concerned STPI should be construed as approval of Board of Approval as well. The second argument offered by the assessee gives simplistic interpretation that few constituents of the Board constitute the entire Board.
7. The revenue pointed out that the above cited Instruciton of the Board dated 8.5.2009 was much more subsequent to the year 1999, the delegation of which has been made the basis of the opinion of the Deputy Director, STPI has been considered by the Board., as it mentions –
“Subsequent to the delegation of this power by the Ministry of Commerce and Industries”
Accordingly, the ld AO observed that it could be concluded that in order to avail the exemption of income u/s 10B of the Act, the assessee must fulfill the two conditions mentioned above i.e. it should be approved by Deputy Director STPI and subsequent to the same, the approval must be ratified by the Board of Approval. As no such approval has been obtained by the assessee in the instant case, the exemption sought by them u/s 10B of the Act is to be denied. This action of the ld AO was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us.
8. We have heard the rival submissions. We find that this issue is already settled in favour of the assessee by the decision of this tribunal which was authored by the undersigned in the case of ITO vs Wizard Enterprises Pvt Ltd in ITA No. 628/Kol/2011 for Asst year 2007-08 ; Assessee’s CO No. 134/Kol/2013 for Asst Year 2007-08 ; ITA No. 65/Kol/2012 for Asst year 2008-09 ; Assessee’s CO No. 133/Kol/2013 for Asst Year 2008-09 dated 4.3.2016 wherein it was held as under:-
“10. We have heard the ld.AR and perused the materials available on record including the paper book as filed by the assessee before us. The facts as stated herein above remain undisputed and hence the same are not reiterated for the sake of brevity. We find from page 43-46 of the assessee’s paper book containing an agreement entered into by the assessee for software export technology park with the Central Government on 20th day of January, 2006, wherein the following clauses require careful consideration:-
WHEREAS the Government have communicated vide STP:DIR 441:2005-06: 1548 dated 10.01.2006 to the unit the terms and conditions for setting up of the 100% export oriented Software Technology Park under software export scheme of Ministry of Communications & Information Technology for the execution of IT enabled services and the unit has duly accepted the said terms and conditions vide their letter No. NIL dated 13th January, 2006.
AND WHEREAS the unit has been granted the status of 100% export oriented unit as defined in Ministry of Commerce Resolution No. 33/(RE)/92-97 dated 2nd March, 1994 in Technology Park.
AS WHEREAS the unit has been allowed to import the capital goods, raw materials, spares and consumables etc free of import duty for the execution of IT enabled services for export through satellite data link or in form of physical export.”
