Case Law Details

Case Name : Quality BPO Services Pvt Ltd, Vs ACIT (OSD) (ITAT Ahmedabad)
Appeal Number : ITA No.120/Ahd/2012
Date of Judgement/Order : 04/11/2015
Related Assessment Year : 2008-09
Courts : All ITAT (4611) ITAT Ahmedabad (344)

Quality BPO Services Pvt Ltd, Vs ACIT (OSD) (ITAT Ahmedabad)-  The issue under appeal relates to examination of the claim of assessee under section 10B of the Act at Rs.67,08,733/- which hitherto has been disallowed by the Assessing Officer and further sustained by CIT(A). From perusal of records we find that assessee was duly allowed deduction u/s 10B of the Act for Asst. Year 2007-08 and the same has not been challenged by the Assessing Officer by way of reopening of the case for Asst. Year 2007-08 and assessee has been consistently allowed deductions u/s 10B of the Act by the Assessing Officer for Asst. Years 20010-11 and 2011-12 in the assessment orders u/s 143(3) of the Act. Assessee is providing similar type of services as required under the provisions of section 10B of the Act and the Assessing Officer has accepted the same and the only reason revolves here for which Assessing Officer has denied the claim u/s 10B of the Act is that it does not possess proper approval as a 100% export oriented undertaking by the Board appointed by the Central Government in exercise of powers conferred by section 14 of the Industries (Development & Regulation) Act, 1951 (65 of 1951) and the rules made under that Act. On the other hand, ld. AR of the assessee has referred to various judicial pronouncements wherein letter of approval received from STPL is treated as proper approval, as required by the provisions of section 10B.

Held- In the light of decisions of Co-ordinate Bench as well as other Benches of the Tribunal, wherein it has been categorically held that approval by Software Technology Parks of India comes under the Ministry of Communication & Information Technology & is a competent authority to grant approval to such units for claiming benefits u/s 10B as 100% Export Oriented Undertaking and the same is possessed by assessee and also looking to the facts of the case of assessee wherein assessee has been allowed deductions u/s 10B in Asst. Years 2007-08, 2010-11 & 2011-12 consistently, we are of the considered view that the assessee’s claim of deduction under section 10B at Rs.67,08,733/- is justified and accordingly the order of CIT(A) is quashed and the appeal of assessee is allowed.

IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD ”B” BENCH – AHMEDABAD

Before S/Shri Rajpal Yadav, JM, & Manish Borad, AM.

ITA No.120/Ahd/2012-  Asst. Year: 2008-09

Quality BPO Services Pvt Ltd,  Vs ACIT (OSD)

Appellant by Shri Tushar Hemani, AR
Respondent by Shri Dipak Sutaria, Sr. D.R.

Date of hearing: 23/10/2015

Date of pronouncement: 4/11/2015

ORDER

PER Manish Borad, Accountant Member.

This appeal of the assessee is filed against the order of CIT(A)- XI, Ahmedabad dated 18.11.2011 in appeal No.CIT(A)-XI(362/10-11. Assessment for Asst. Year 2008-09 was completed on 6.12.2010 u/s 143(3) of the Income-Tax Act, 1961 (hereinafter referred to as the Act). Assessee has raised following grounds in its appeal:-

1. Ld. CIT(A) erred in law and on facts in confirming disallowance of deduction of Rs.67,08,733/- u/s 10B of the Act. Both the lower authorities erred in holding that the failure to obtain approval from Board despite fulfilling all the conditions makes the appellant ineligible to claim deduction u/s 10B of the Act. Ld. CIT(A) ought to have appreciated ratio of the decisions  relied upon that units approved under Software Technology Parks of India (STPI) entitles the appellant to claim benefits under 100% EOU Scheme and hence ought to have granted claim of deduction made by the appellant.

2. Ld. CIT(A) erred in law and on facts in dismissing the additional ground taken by the appellant to alternatively grant deduction u/s 10A of the Act. Ld. CIT(A) gravely erred in rejecting to adjudicate additional ground that goes to the root of the matter by wrongly placing reliance on judgment of Goetz (India) Ltd. Ld. CIT(A) ought to have granted deduction as all the conditions laid down u/s 10A of the Act were fulfilled by the appellant.

3. Levy of interest u/s 234B & 234C of the Act is not justified.

4. Initiation of penalty u/s 271(1)(c) of the Act is not justified.

The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.

2. Briefly stated the facts of the case are that the assessee company is a Private Ltd. Co. carrying on the business of providing services as BPO (Business of Process Outsourcing) for providing accounting services. Assessee has filed its return of income on 29.9.2008 declaring total income at Rs.NIL. Assessee claimed deduction of Rs.67,08,733/- u/s 10B of the Act, which is available for newly established 100% Export Oriented Undertaking Scheme. During the course of assessment proceedings, the Assessing Officer observed that as the assessee has not produced any approval taken from appropriate authority as per the provisions of section 10B of the Act and therefore disallowed the claim of deduction u/s 10B of the Act and assessed the income of the assessee at Rs.67,08,733. Aggrieved, assessee went in appeal before the CIT(A) which also could not bring any relief to the assessee as the ld. CIT(A) confirmed the disallowance made by the Assessing Officer u/s 10B of the Act by observing as under :-

“2.3 I have carefully considered the ratio of Regency Creations Ltd. (supra) case. In this case, it is clearly mentioned that as per CBDT’s clarification circular vide DOF No.178/30/09-ITA(1) dated 6.5.2009, it is clarified that a unit approved by director )IT) under Software Technology Park Scheme will be eligible for exemption u/s 10A of the IT Act and not u/s 10B of the IT Act. This clarification has not been over ruled by the CBDT and accordingly, I am inclined to follow the CBDT’s circular in this regard.

Secondly, there is a conflicting decision by the Hon’ble Hyderabad Tribunal. In the case of Infotech Enterprises Ltd. vs. Joint CIT (2003) 85 ITD 325, it was held that for the purpose of section 10B, 100% EOU is only that which is so approved by the Board appointed by Central Government in exercise of powers conferred in the section 14 of the IDAR Act, 1951 and 100% export oriented unit under Software Technology Park Scheme cannot be equated with 100% exported oriented unit approved by board u/s 14 of the IDAR Act. The assessee was not therefore, entitled to exemption u/s 10B in the absence of such approval.

In the instant case also, the appellant is having approval from Director (IT) Software Technology Park of India and not from Board constituted u/s 14 of IDAR Act, 1951. This respectfully following the CBDT clarification bearing DOF No. 178/30/09-ITA(1) dated 6.5.2009 and ITAT order in the case of Infotech Enterprise Ltd. (supra). I am inclined to agree with the AO on this point. Even the appellant is also not very sure for mantainability of deduction u/s 10B of the IT Act and moved on additional ground of appeal on 17.11.2011, contending that it is eligible for deduction u/s 10A of the IT Act and deduction may be allowed u/s 10A of the IT Act to it.

2.4 In view of above fact, I hold that the appellant had not fulfilled eligibility condition as laid down in sub-clause IV to explanation 2 to section 10B of the IT Act and accordingly, it is not eligible for deduction u/s 10B of the I.T. Act. This way, disallowance of deduction of Rs.67,08,733/- claimed u/s 10B of the I.T. Act is confirmed. This ground of appeal is dismissed.”

3. Aggrieved, the assessee is now in further appeal before the Tribunal. At the outset the ld. AR of the assessee submitted that the appellant is carrying on the business of process outsourcing activities like Revenue Accounting, Back Office Operations, Call centre, Data Processing etc. It is undisputed fact that the appellant is registered with Software Technology Park of India, Gandhinagar, Gujarat, as “Hundred Percent Export Oriented Undertaking” under STP Scheme for development of computer software and enabled services w.e.f. 28.06.2006. A copy of letter of approval is forming part from pages 1 to 4 of the Paper Book dated 15.3.2012. The ld. AR submitted that assessee is claiming deduction under section 10B of the Act with effect from Asst. Year 2007-08 onwards. So much so that assessee claimed deduction u/s 10B for Asst. Year 2007-08 at Rs.23,68,544/- in the return of income submitted on 20.11.2007 and the same has been accepted by the Assessing Officer as no action has been taken against the claim of deduction u/s 10B of the Act for this year. Further for the Asst. Year 2010-11, the Assessing Officer has allowed the deduction of Rs.57,56,945/- as against the claim of assessee at Rs.82,55,275/- in its assessment order under section 143(3) of the Act and similarly for Asst. Year 2011-12 also the Assessing Officer in his assessment order dated 6.1.2014 framed under section 143(3) of the Act has allowed deduction under section 10B of the Act at  Rs.56,96,695/-. The ld. AR with the help of the facts of its case for Asst. Years, 2007-08, 2010-11 and 2011-12 tried to bring focus to the fact that the assessee has been getting the claim of deduction under section 10B of the Act from the year before the year under appeal and also in the years following the year under appeal which tentamounts to prove that assessee was fulfilling the required eligibility criteria meant for getting claim of deduction under section 10B of the Act for profits/gains derived by it 100% export oriented undertaking from the export of articles or things or computer software. The only reason out of which Assessing Officer denied the deduction u/s 10B of the Act for the year under appeal was that assessee was not possessing approval taken from appropriate authority as per the provisions of section 10B 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 14 of the Industries (Development and Regulation) Act, 1951 )65 of 1951) and the rules made under that Act.”
4. However, the ld. AR submitted that the assessee received letter of permission dated 28.6.2006 from Software Technology Parks of India (An autonomous Society under the Department of Information Technology, Ministry of Communication & Information Technology, Government of India) which fulfills the requirement of being approved as 100% export oriented undertaking by the Board appointed in this behalf by the Central Government, as Software Technology Parks of  India (STPL), comes under the Ministry of Communication and Information Technology, Government of India. In support of its claim under section 10B of the Act being holding of letter of approval from STPL the ld. AR relied on the judgment of ITAT, Delhi Bench in the case of Regency Creators Ltd. in ITA No.1588/Del/2010; the order of ITAT, Ahmedabad Bench in the case of ITO vs. E-Infochip Ltd. in ITA No.2311/Ahd/2008 dtd.24th September, 2010; order of ITAT, Hyderabad Bench in the case of ACIT vs. Vision 2h + INC (2014) 34 ITR (Trib) 0510 (Hyderabad).

5. The ld. DR supported the orders of lower authorities.

6. We have heard the rival contentions and perused the material on record and gone through the judicial pronouncements referred by the ld. AR. The issue under appeal relates to examination of the claim of assessee under section 10B of the Act at Rs.67,08,733/- which hitherto has been disallowed by the Assessing Officer and further sustained by CIT(A). From perusal of records we find that assessee was duly allowed deduction u/s 10B of the Act for Asst. Year 2007-08 and the same has not been challenged by the Assessing Officer by way of reopening of the case for Asst. Year 2007-08 and assessee has been consistently allowed deductions u/s 10B of the Act by the Assessing Officer for Asst. Years 20010-11 and 2011-12 in the assessment orders u/s 143(3) of the Act. Assessee is providing similar type of services as required under the provisions of section 10B of the Act and the Assessing Officer has accepted the same and the only reason revolves here for which Assessing Officer has denied  the claim u/s 10B of the Act is that it does not possess proper approval as a 100% export oriented undertaking by the Board appointed by the Central Government in exercise of powers conferred by section 14 of the Industries (Development & Regulation) Act, 1951 (65 of 1951) and the rules made under that Act. On the other hand, ld. AR of the assessee has referred to various judicial pronouncements wherein letter of approval received from STPL is treated as proper approval, as required by the provisions of section 10B.

7. In the case of Regency Creators Ltd. vs. ACIT in ITA No.1588/Del/2010, ITAT, Delhi Bench has held as under:

“7. We have heard both the parties and have perused the material on record. No doubt, the CBDT Clarification (supra) states that exemption in respect of a unit set up in Software Technology Park is granted to a unit approved u/s 10A of the Act and not u/s 10B thereof. However, the Press Notes 5 & 2 (supra) are to the contrary. Press Note No.5 (1997 Series) was issued on 21.5.97 by the Deputy Secretary to the Government of India, whereas Press Note No.1993 Series), was issued on 9.3.93 by the Deputy Economic Adviser. Further, vide the aforesaid communication dated 31.3.2011, it has been stated by the CPIO and Director under the RTI, as follows :

“Subject: RTI application received from Shri Mahesh Shrivastaa, Keshavpuram, Delhi, regarding approval or ratification of STPL, approval by BOA formed by MOC to claim benefits of 100% EOU Scheme.

Please refer to your RTI application dated March 10,2011 received on 17.03.2011 on the subject mentioned above and to inform that no approval/ratification of STPI approval is required from BOA formed by Ministry of Commerce by power conferred  under section 14 of IDR Act, 1951. Inter-Ministerial Standing Committee for EHTPs and ESTPs (IMSC) is competent in grant approval for STPI unit to claim all benefits under 100% EOU Scheme as per Press Note 2 of 1993 (copy enclosed)”.

8. In view of the above, we find the grievance of the assessee to be justified and it is accepted as such. We hold that the assessee is entitled to claim of deduction u/s 10B of the Act.”

In the case of ITO vs. E-Infochip Ltd. in ITA No.2311/Ahd/2008, pronounced on 24th September, 2014, the Co-ordinate Bench held as under :-

“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 exercised 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 the approving authority has not taken any adverse view. As regards to export realization by the unit which is deposited in Ahmedabad units bank account the foreign inward remittance certificates 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.”

In the case of ACIT vs. Vision 2K+INC (supra), ITAT, Hyderabad Bench held as under :-

“We have considered the rival submissions and perused the material available on record. We find that it is admitted fact that the assessee has obtained the approval from STPI, Hyderabad as 100% EOU. The CIT’s finding is that the assessee is not eligible for relief under  section 10B of the Act only on the ground that 100% EOU under STPI Scheme cannot be equated with the 100% EOU approved by the Board. Since we have already held in the case of Sudharani (supra) that the approval of 100% EOU by the Board and STPI is one and the same and hence the assessee is eligible for exemption under section 10B of the Act. It is to be noted that the validity of an order under section 263 of the Act has to be tested with regard to the position of law as it exists on the date on which such an order is passed by the CIT. In the case under consideration, it is clear that on the date, when the CIT passed his order under section 263 of the Act, the view taken by the Tribunal in the case of Sudharani (supra). It is settled law that when two views are possible on the date of the order passed by the Commissioner, the CIT should agree with the view taken by the assessing officer was in consonance with view taken by this Tribunal, even if there has been a loss of revenue. Hence, powers under section 263 of the Act cannot be exercised by the CIT. Our view is fortified by the judgment of Delhi High Court in the case of CIT vs. Honda Siel Power Products Pvt. Ltd. in ITA Nos.1376/2009 and 1382/2009 dated 5.7.2010. In view of the above, we reverse the order of the CIT and allow the appeal filed by the assessee.

7. In the light of decisions of Co-ordinate Bench as well as other Benches of the Tribunal, wherein it has been categorically held that approval by Software Technology Parks of India comes under the Ministry of Communication & Information Technology & is a competent authority to grant approval to such units for claiming benefits u/s 10B as 100% Export Oriented Undertaking and the same is possessed by assessee and also looking to the facts of the case of assessee wherein assessee has been allowed deductions u/s 10B in Asst. Years 2007-08, 2010-11 & 2011-12 consistently, we are of the considered view that the assessee’s claim of deduction under section 10B at Rs.67,08,733/- is justified and accordingly the order of CIT(A) is quashed and the appeal of assessee is allowed.

8. Ground No.3 relates to interest u/s 234B & 234C of the Act. This is consequential.

9. Ground No.4 is regarding penalty u/s 271(1)(c). This ground is premature hence not adjudicated.

10. In the result, the appeal of assessee is allowed.

Order pronounced in the open Court on 4/11/2015

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Tags : ITAT Judgments (4792) section 10a (89) section 10b (58)

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