2009 (5) TMI 612 - AT - Income Tax

Summary

Issues Involved:
1. Whether the assessee is eligible for deduction under section 10A of the Income-tax Act, 1961.
2. Whether there was a change in ownership or beneficial interest in the assessee-company during the relevant previous year.
3. Verification of filing of Form No. III with the Registrar of Companies.
4. Alternative claim of the assessee regarding deduction under section 80HHE of the Income-tax Act.

Detailed Analysis:

1. Eligibility for Deduction under Section 10A:
The assessee, engaged in the business of development and export of IT-related software solutions, claimed an exemption of Rs. 65,75,677 under section 10A of the Income-tax Act for the assessment year 2001-02. The Assessing Officer allowed this claim during the assessment under section 143(3). However, the Commissioner of Income-tax (CIT) challenged this decision, asserting that the Assessing Officer did not properly examine the claim, particularly regarding a purported change in ownership or beneficial interest in the assessee-company.

2. Change in Ownership or Beneficial Interest:
The CIT argued that the initial allotment of 7,000 shares to Shri Ashish Vibhakar was in his individual capacity, not as a nominee of ebyz.com.LLC. This was based on various documents, including a letter from Shri Ashish Vibhakar dated 6-3-2000, minutes of the Board of Managers of ebyz.com.LLC dated 15-3-2000, and a declaration under section 187C of the Companies Act, 1956. The CIT concluded that the shareholding pattern had changed during the relevant previous year, thus impacting the eligibility for deduction under section 10A. The CIT's analysis of the shareholding patterns indicated a shift in ownership or beneficial interest, which he believed made the assessment erroneous and prejudicial to the revenue's interests.

3. Verification of Filing of Form No. III:
The assessee contended that Shri Ashish Vibhakar had always held the 7,000 shares on behalf of ebyz.com.LLC, as supported by declarations and filings with the Registrar of Companies. The CIT, however, rejected these documents as insufficient and self-serving. The Tribunal noted that the critical issue was whether the declaration in Form No. III, indicating beneficial interest, was filed within the prescribed period. The Tribunal found that neither the Assessing Officer nor the CIT had verified this crucial aspect. Therefore, the Tribunal set aside the CIT's order and remitted the case back to the CIT for verification of whether Form No. III was filed timely. If it was, the assessee's claim under section 10A should be accepted, and there would be no error in the assessment prejudicial to the revenue's interests.

4. Alternative Claim under Section 80HHE:
The Tribunal allowed the assessee to raise an alternative claim for deduction under section 80HHE of the Act before the CIT during the fresh proceedings. The CIT was directed to consider this alternative claim if the primary claim under section 10A was denied.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, emphasizing the need for the CIT to verify the timely filing of Form No. III with the Registrar of Companies. If the form was filed within the due period, the assessee's claim under section 10A should be allowed. The Tribunal also permitted the assessee to raise an alternative claim under section 80HHE during the fresh proceedings.