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2013 (9) TMI 883 - HC - Income TaxApplicability of section 10A(2)(i) of the Income Tax Act - Software Technology Park (STPI) Unit the contention of the Revenue is that the assessee, which is already in existence cannot take the benefit of Section 10A of the Act - AO denied the exemption on the ground that assessee commenced its business even before the date of registration i.e., on 27.03.2002 - Held that - The assessee took advantage of the scheme notified by the Government of India in the Ministry of Commerce and Industry of the software technology park and sought for registration as STPI on 2002 - In order to claim deduction, an undertaking in hardware technology park or software technology park must be in existence commencing its production on or after the 1st day of April, 1994. Given the fact that the assessee is not formed by splitting up or transfer to a new business and got registration even since 2002, the fact that it has been in existence ever since 1999, does not militate against the applicability of Section 10A of the Act. The case on hand falls under Section 10A(2)(b) of the Act - Section 10A(2)(i) of the Act shows that it has relevance to industry that has begun to manufacture or produce articles or things or computer software on or after the 1st day of April, 1994 Decided in favor of Assessee.
Issues Involved:
1. Eligibility for deduction under Section 10A of the Income Tax Act. 2. Jurisdiction of the Commissioner of Income Tax to invoke Section 263 of the Income Tax Act. Issue-Wise Detailed Analysis: 1. Eligibility for Deduction under Section 10A of the Income Tax Act: The primary issue in the appeals was whether the assessee was eligible for deduction under Section 10A of the Income Tax Act despite not meeting certain conditions stipulated under Sections 10A(2)(i)(b) and 10A(2)(i)(c). The assessee, a Proprietary Concern engaged in Electronic Data Transmission, had its unit approved as a Software Technology Park (STP) by the Government of India on 27.03.2002 and claimed the benefit of deduction under Section 10A for the assessment year 2003-04. The Revenue argued that since the assessee commenced production in the Financial Year 1999-2000 and only got registration as an STP in 2002, it did not meet the eligibility criteria under Section 10A. The Commissioner of Income Tax initiated proceedings under Section 263 on the grounds that the assessee had transferred previously used plant and machinery to the STP, which disqualified it from claiming the deduction. The Income Tax Appellate Tribunal (ITAT) dismissed the assessee's appeal, leading to the present appeals. The ITAT relied on the Karnataka High Court's decision in CIT vs. M/s. Expert Outsource (P) Ltd., which held that the purpose of the STP scheme was to encourage exports and that an existing unit could convert into an STP unit for tax purposes. The Tribunal allowed the assessee's claim, stating that the fact of the assessee being in business prior to the STP registration did not disqualify it from claiming the deduction. The High Court agreed with the ITAT's reasoning, emphasizing that the purpose of the STP scheme was to encourage exports and gain valuable foreign exchange. The Court held that the mere fact that the assessee was in existence before its STP registration did not disentitle it from claiming the deduction under Section 10A. The Court also noted that the Department had accepted the assessee's claim for the assessment years 2003-04 and 2004-05, and there was no justifiable ground for questioning the claim from the assessment year 2005-06 onwards. 2. Jurisdiction of the Commissioner of Income Tax to Invoke Section 263: The second issue was whether the Commissioner of Income Tax had the jurisdiction to invoke Section 263 to revise the assessment order. The assessee contended that the ITAT upheld the order under Section 263 without considering the merits of the case regarding the deduction under Section 10A. The High Court, in its judgment, did not delve deeply into the correctness of the ITAT's order on the jurisdiction of the Commissioner to invoke Section 263, as it had already decided on the primary issue of eligibility for deduction under Section 10A. The Court disposed of the appeal concerning the jurisdiction of the Commissioner, stating that the decision on the primary issue rendered the question of jurisdiction moot. Conclusion: The High Court dismissed the Revenue's appeals, confirming the ITAT's order that the assessee was eligible for deduction under Section 10A of the Income Tax Act. The Court held that the purpose of the STP scheme was to encourage exports and that an existing unit could convert into an STP unit for tax purposes. The Court also disposed of the appeal concerning the jurisdiction of the Commissioner to invoke Section 263, as the decision on the primary issue rendered the question of jurisdiction moot.
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