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2014 (4) TMI 929 - AT - Income TaxDeletion of deduction u/s 10B of the Act Held that -The revenue has not disputed the point that the assessee got approval as 100% EOU as per approval dated 27.01.1997 CIT (A) has held that the AO was completely in error in holding that since the assessee started its business in AY 1992-93, then the prescribed period of 10 years for the purpose of exemption u/s 10B of the Act had come to an end by AY 2001-02 - section 10B envisages setting up of export oriented undertaking which is altogether different and distinct from setting up of a normal commercial activity unit - The AO has not controverted the fact that the assessee company established 100% EOU in FY 1997-98 for exporting of computer software Relying upon LEGATO SYSTEMS INDIA (P) LTD. Versus INCOME TAX OFFICER 2005 (7) TMI 663 - DELHI HIGH COURT - the CIT(A) rightly granted relief to the assessee by directing the AO to grant exemption u/s 10B of the Act for the assessee Decided against Revenue. Deletion on account of TDS Held that - The assessee company filed some proof explaining the difference in question which could not be confronted to the AO, neither during the assessment proceedings nor during the appellate proceedings - The issue is related to the reconcilement of the difference thus, the matte is required to be remitted back to the AO for fresh adjudication Decided in favour of Revenue.
Issues Involved:
1. Deletion of addition on account of deduction under Section 10B of the Income Tax Act, 1961. 2. Deletion of addition on account of TDS (Tax Deducted at Source). Issue-wise Detailed Analysis: Ground No. 2: Deletion of Addition on Account of Deduction under Section 10B The revenue contested the deletion of an addition amounting to Rs. 5,88,28,278 on account of deduction under Section 10B. The Assessing Officer (AO) argued that the assessee company, incorporated on 14.05.1991 and claiming deductions under Sections 80HHE and 10B, was not entitled to the deduction under Section 10B for AY 2005-06. The AO's contention was based on the premise that the 10-year period for claiming deductions had expired by AY 2001-02, and the switch from Section 80HHE to Section 10B was an attempt to claim excess deductions and avoid tax. The assessee countered this by referring to the Delhi High Court's decision in *CIT vs Legato Systems India Pvt. Ltd.*, which allows for the determination of eligibility for deductions under Section 10A and 80HHE by the AO. The assessee also cited the Punjab & Haryana High Court's decision in *CIT vs Excel Softec Limited*, which clarified that the 10-year period begins from the year the eligible undertaking starts producing or manufacturing, and not necessarily from the year of incorporation. The Commissioner of Income Tax (Appeals) [CIT(A)] accepted additional evidence from the assessee, which showed that the undertaking was approved by the Secretariat for Industrial Approvals (EOU Section). The CIT(A) found that the AO had not expressed any intention to deviate from the earlier years' acceptance of the assessee's eligibility for deductions under Section 10B. The CIT(A) held that the AO's rejection of the claim was unjustified and based on a misinterpretation of the law, as the 10-year period should be reckoned from the year the assessee got approval as a 100% Export Oriented Undertaking (EOU) in FY 1997-98, not from the year of business commencement. The Tribunal upheld the CIT(A)'s decision, noting that the AO ignored the fact that the assessee's 100% EOU was established in FY 1997-98. The Tribunal found no ambiguity or perversity in the CIT(A)'s findings and dismissed the revenue's ground. Ground No. 3: Deletion of Addition on Account of TDS The revenue argued that the AO correctly added Rs. 57,594 to the total income due to a discrepancy between the professional receipts as per TDS certificates (Rs. 8,59,730) and the amount taken in the accounts (Rs. 8,02,136). The CIT(A) granted relief to the assessee based on evidence that was not confronted to the AO. The assessee explained that the difference was due to service tax and admitted that the relevant explanation and evidence were not provided to the AO during the assessment. The Tribunal observed that the issue related to reconciling the difference and found it appropriate to restore this issue to the AO for fresh adjudication. The AO was directed to decide the issue de novo, providing due opportunity of hearing to the assessee and without prejudice from the earlier orders. Conclusion: The appeal of the revenue was partly allowed for statistical purposes. The Tribunal upheld the CIT(A)'s decision regarding the deletion of the addition under Section 10B and remanded the issue of the TDS discrepancy back to the AO for fresh adjudication. The order was pronounced in the open court on 29.11.2013.
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