2014 (12) TMI 1275 - AT - Income Tax

Disallowance u/s 10A - Assessee company had already commenced manufacturing even before approval was granted by software technology park of India (STPI) - Held that - We find that the appellant authority has accepted the contention of the assessee that after receipt of the approval of STPI from 23rd September 2008, the assessee is entitled to the exemption u/s 10A of the Act. However he denied the claim since he was handicapped from determining the amount of exemption post 23.09.2008 because the assessee could not place the necessary details apportioning the profits before him. We further find that in the subsequent Assessment Year, the AO himself has allowed the assessee exemption u/s10A by order dated 17.02.2014 for Assessment Year 2011-12. Therefore we find that the limited issue that is before us is to determine the profits derived by the assessee from the date of approval from STPI i.e. post 23rd September 2008. For that we are inclined to remit the issue back to the file of AO to determine the profits eligible for exemption to the assessee from 23rd September 2008. For that, the assessee shall produce all the relevant documents necessary for the AO to determine the profits derived by the assessee from 23rd September 2008 and the AO shall pass fresh order on this issue.

Summary

Issues: Disallowance of claim u/s 10A of the Income Tax Act, 1961

In this case, the appellant, a company engaged in website development and promotion, outsourcing, and search optimization, appealed against the disallowance of a claim under section 10A of the Income Tax Act, 1961. The Assessing Officer (AO) denied the claim on the basis that the company had commenced manufacturing before receiving approval from the Software Technology Park of India (STPI). The AO held that the company needed to set up a new unit to qualify for the claim under section 10A. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this disallowance, stating that only profits derived from software exports after the STP unit's approval date would be eligible for deduction under section 10A. The CIT(A) referred to Circular No.1/2005 issued by the Central Board of Direct Taxes (CBDT) to support this decision. The appellant failed to provide evidence that the profits were derived from software exports post-approval. However, the appellate tribunal found that the appellant was entitled to the exemption under section 10A from the date of STPI approval, but the AO lacked necessary details to determine the exempt amount post-approval. The tribunal remitted the issue back to the AO to ascertain the profits eligible for exemption from the approval date onwards, directing the appellant to provide all relevant documents for this determination. The tribunal allowed the appeal for statistical purposes, emphasizing the need for a fresh order by the AO on this issue.