2013 (12) TMI 1265 - AT - Income Tax

Exemption u/s 10A The assessee earned profit in STPI unit whereas incurred loss in non-STPI business - Held that - Following CIT v. Yokogawa India Ltd. 2011 (8) TMI 845 - Karnataka High Court - Total income used in Section 10A was to be understood as the total income of the STPI unit, which was clear from the first proviso to Section 10A(1) which made a reference to the total income of the undertaking and not to the total income of the assessee - Assessee was entitled for claiming deduction considering its STPI unit separately - CIT fell in error in concluding that giving-effect order suffered from any error prejudicial to the interests of Revenue Twin conditions for invoking power of CIT under Section 263 of the Act were not satisfied - Decided in favour of assessee. Payment towards gratuity scheme of LIC Held that - Following assessee own case for A.Y. 2002-03 2007 (6) TMI 273 - ITAT MADRAS-C - The assessee company has a scheme with the LIC of India and the payment is made to LIC of India - LIC of India is an approved institution for maintaining gratuity funds The issue was restored for fresh examination. Employee s contribution to ESI and PF Held that - Following CIT v. Alom Extrusion Ltd. 2009 (11) TMI 27 - SUPREME COURT - Amendment to Section 43B made by Finance Act, 2003, would act retrospectively with effect from 1st April, 1988 Amount should be paid during the year irrespective of the fact that the contribution was deposited after due date - Decided against Revenue.

Issues Involved:
1. Delay in filing the appeal by the assessee.
2. Eligibility of the assessee for exemption under Section 10A of the Income-tax Act, 1961.
3. Direction to the Assessing Officer to allow payment to a gratuity scheme of LIC.
4. Direction to the Assessing Officer to allow deduction for delayed remittance to ESI and PF.

Detailed Analysis:

1. Delay in Filing the Appeal by the Assessee:
The appeal by the assessee was delayed by 120 days. The assessee filed a condonation petition, and the tribunal was satisfied with the reasonable cause shown. Consequently, the delay was condoned, and the appeal was admitted.

2. Eligibility for Exemption under Section 10A:
The primary grievance of the assessee was that the order of the Assessing Officer (A.O.) was neither erroneous nor prejudicial to the interests of the Revenue and not amenable to a proceeding under Section 263 of the Income-tax Act, 1961.

The assessee, engaged in developing and selling computer software, claimed exemption under Section 10A for an STPI unit with export sales of Rs. 12,00,90,824/- and a profit of Rs. 2,96,59,353/-. The A.O. denied the exemption, stating the STPI unit was formed by splitting an existing business and that the total income was negative after setting off losses from non-STPI units.

The CIT(Appeals) allowed the exemption, referencing a prior Tribunal decision that the STPI unit was not formed by splitting or reconstruction. The A.O. followed this direction in an order dated 26.8.2008, allowing the exemption.

However, the CIT issued a show-cause notice under Section 263, arguing the A.O. erred by not considering the negative total income. The assessee contended that Section 10A claims should be considered independently for each unit, and the Karnataka High Court's decision in CIT v. Yokogawa India Ltd. supported this view.

The Tribunal found that the A.O. had considered the revised computation and allowed the claim under Section 10A. The CIT's invocation of Section 263 was deemed incorrect as the conditions for invoking this power were not satisfied. Thus, the appeal of the assessee was allowed.

3. Payment to a Gratuity Scheme of LIC:
The Revenue appealed against the CIT(Appeals) directing the A.O. to allow a payment of Rs. 19,49,357/- to a gratuity scheme of LIC. The A.O. had denied this claim as the scheme was not approved by CIT/CCIT.

The Tribunal noted that for the assessment year 2002-03, a similar issue was remitted back to the A.O. for fresh consideration. Thus, for the impugned assessment year, the Tribunal set aside the orders of the authorities and remitted the issue back to the A.O. for fresh consideration.

4. Deduction for Delayed Remittance to ESI and PF:
The Revenue's grievance was against the CIT(Appeals) directing the A.O. to allow a deduction of Rs. 60,02,779/- for delayed remittance to ESI and PF. The Tribunal referenced the Supreme Court's decision in CIT v. Alom Extrusion Ltd., which held that amendments to Section 43B by the Finance Act, 2003, apply retrospectively. This principle was extended to employees' contributions as well. Hence, the CIT(Appeals) was justified in allowing the claim, and the Revenue's appeal on this ground was dismissed.

Conclusion:
The appeal of the assessee was allowed, and the appeal of the Revenue was partly allowed for statistical purposes. The order was pronounced on February 7, 2013, at Chennai.

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