2020 (10) TMI 838 - AT - Income Tax

Deduction u/s 10A - CIT(A) submitted that the provisions of Section 10A of the Act does not require the assessee to be situated within the area of Software Technology Park - Whether the assessee should be registered with the Software Technology Park scheme and it should commence manufacturing producing computer software on or after 1stApril 1994 which has been duly fulfilled? - HELD THAT - It is transpired that it is not necessary for the assessee to be situated within the area of Software Technology Park. As such unit/undertaking located within the jurisdiction of the designated officer of Software Technology Park can be registered on standalone basis. Delhi Tribunal in the case of Xerox India Ltd. 2009 (10) TMI 71 - ITAT DELHI-B has taken a view that the registration with Software Technology Park is sufficient compliance for claiming the deduction under Section 10A of the Act. Moving forward it is pertinent to mention that Revenue itself has allowed deduction under Section 10A of the Act to the assessee for first time in the A.Y. 2004-05. In subsequent assessment years, the assessee by following the same claimed deduction under Section 10A and Revenue has not disputed the same. However, in the year under consideration the AO disallowed the deduction only after Learned Commissioner set aside the Assessment Order u/s 263 of the Act. Hence, it is transpired that the Revenue was convinced to the fact that assessee is eligible for deduction under Section 10A. Ground of appeal of the Revenue is dismissed.

Summary

Issues:
1. Whether the assessee is eligible for deduction under Section 10A of the Income Tax Act.
2. Whether the location of the unit within the Software Technology Park is a mandatory requirement for claiming the deduction.
3. Whether the order of the Learned CIT(A) is justified in allowing the deduction under Section 10A.

Issue 1: Eligibility for Deduction under Section 10A:
The appeal and cross-objection were filed by the Revenue and the assessee, respectively, for the Assessment Year 2010-11 concerning the deduction under Section 10A of the Income Tax Act. The assessee, a partnership firm engaged in computer software development, claimed the deduction under Section 10A, which was initially accepted by the Assessing Officer. However, the Commissioner of Income Tax under Section 263 found the order erroneous, stating the assessee did not comply with the location requirement under Section 10A(2)(i)(b) as it was situated in Ahmedabad, not Gandhinagar. The assessee argued that registration with the Software Technology Park was sufficient, and compliance was duly met.

Issue 2: Mandatory Location Requirement for Deduction:
The main contention revolved around whether the unit must be situated within the Software Technology Park for claiming the deduction under Section 10A. The Assessing Officer insisted on physical location within the Park, while the CIT(A) disagreed, emphasizing that registration with the Park sufficed. The Director of Gandhinagar Software Technology Park clarified that a unit could be registered from any location, as long as it met the necessary conditions. The Delhi Tribunal in a similar case supported this interpretation, highlighting that registration with the Park was adequate for claiming the deduction under Section 10A.

Issue 3: Justification of CIT(A) Order:
After thorough consideration, the CIT(A) allowed the deduction under Section 10A for the assessee, emphasizing that compliance with the registration requirement was sufficient. The Tribunal upheld this decision, citing past approvals and notifications supporting the interpretation that physical location within the Park was not mandatory. Additionally, the Revenue had previously allowed the deduction for the assessee in earlier assessment years, indicating a consistent understanding of eligibility. Consequently, the Tribunal dismissed the Revenue's appeal and the assessee's cross-objection, affirming the CIT(A)'s order.

In conclusion, the judgment clarified that registration with the Software Technology Park was a key factor for claiming the deduction under Section 10A, and physical location within the Park was not a mandatory requirement. The decision provided a comprehensive analysis of the legal provisions and past precedents, ultimately upholding the assessee's eligibility for the deduction.