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2017 (3) TMI 77 - AT - Income TaxEligibility for deduction claimed u/s 10A - assessee being a converted STPI unit from domestic unit - Held that - This issue has already been dealt in assessee s own case for AY 2002-03 wherein the issue has been answered in favour of the assessee that even if, the unit of the assessee has held to be converted from existing domestic unit to a STPI unit, it will still be eligible to claim deduction u/s 10A of the Act from the date of conversion for an unexpired period of 10 years starting from AY 1996-97. So, the first ground taken by the ld. AO/CIT (A) to disallow the claim of the assessee u/s 10A for the assessment year under consideration that the assessee being a converted STPI unit from domestic unit is not eligible for deduction u/s 10A, is not sustainable in the eyes of law. So far as the question of disallowing the claim of the assessee u/s 10A by taking shelter of section 10A(9) of the Act is concerned, this issue has already been dealt with by the Hon ble Karnataka High Court in case of CIT vs. GE Thermometrics India Pvt. Ltd. 2015 (1) TMI 10 - KARNATAKA HIGH COURT as held that once any provision is omitted from the statute book, the result is that it had never been passed and be considered as a law that never exists and as such, the assessee is entitled for benefit of section 10A of the Act and section 10A(9) is not attracted in its case. Thus since the year under assessment falls in the unexpired period of 10 years, the assessee is entitled for exemption u/s 10A of the Act having been wrongly disallowed by the AO - Decided in favour of assessee.
Issues Involved:
1. Disallowance of the claim of exemption under Section 10A of the Income-tax Act, 1961. 2. Eligibility for deduction under Section 10A due to alleged violation of conditions prescribed in sub-section (9) of Section 10A. 3. Interpretation of Section 10A as an incentive provision. 4. Disallowance of employer and employee contributions to PF and ESI. Issue-wise Detailed Analysis: 1. Disallowance of the Claim of Exemption under Section 10A: The primary issue revolves around the disallowance of the assessee's claim for exemption under Section 10A amounting to ?1,87,92,750. The Assessing Officer (AO) disallowed the claim by relying on previous assessment orders for AY 2001-02 and AY 2002-03, which were confirmed by the Commissioner of Income-tax (Appeals) [CIT(A)]. CIT(A) held that the assessee had converted its domestic unit established in 1995 into a Software Technology Parks of India (STPI) unit and had not started a new export unit. Thus, the assessee was not entitled to the deduction under Section 10A. However, the Tribunal found this reasoning unsustainable, as the assessee had started a new export unit in FY 1999-2000, which was registered with STPI on 28.03.2000. The Tribunal referred to its own decision in the assessee's case for AY 2002-03, which held that even a converted STPI unit from an existing domestic unit is eligible for deduction under Section 10A from the date of conversion for the unexpired period of 10 years starting from AY 1996-97. 2. Eligibility for Deduction under Section 10A Due to Alleged Violation of Conditions Prescribed in Sub-section (9) of Section 10A: The second issue pertains to whether the assessee violated the conditions prescribed in sub-section (9) of Section 10A, thereby disqualifying it from claiming the deduction. The Tribunal addressed this by referring to the Hon’ble Karnataka High Court's judgment in CIT vs. GE Thermometrics India Pvt. Ltd. The High Court ruled that the omission of sub-section (9) of Section 10A with effect from 01.04.2004 should be understood as if the sub-section never existed. Therefore, the assessee was entitled to the benefit of Section 10A, and the provisions of sub-section (9) were not applicable. The Tribunal adopted this reasoning and concluded that the assessee was eligible for the deduction under Section 10A. 3. Interpretation of Section 10A as an Incentive Provision: The assessee argued that Section 10A is an incentive provision and should be construed liberally. The Tribunal agreed with this interpretation, noting that the provision aims to promote exports and should be applied in a manner that furthers this objective. The Tribunal's decision to allow the deduction under Section 10A aligns with this liberal interpretation. 4. Disallowance of Employer and Employee Contributions to PF and ESI: The final issue involved the disallowance of ?5,48,462 and ?16,731 on account of late deposits of PF and ESI contributions. The assessee contended that the due date for filing the return for AY 2003-04 was extended to 30.11.2003, and the payment made on 14.11.2003 was within this extended period. The Tribunal referred to the Hon’ble Delhi High Court's judgment in CIT vs. AIMIL Limited, which held that if contributions are deposited before the due date for filing the return, no disallowance can be made under Section 43B as amended by the Finance Act, 2003. Consequently, the Tribunal allowed the assessee's claim for the amount deposited on 14.11.2003 and directed the AO to decide afresh in light of this finding. Conclusion: In conclusion, the Tribunal allowed the assessee's appeal, reversing the disallowance of the exemption under Section 10A and the disallowance of PF and ESI contributions. The Tribunal's decision was based on a thorough analysis of the relevant legal provisions, judicial precedents, and the specific facts of the case. The appeal was allowed for statistical purposes.
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