2009 (7) TMI 1271 - AT - Income Tax

Summary

Issues involved: Appeal against denial of deduction u/s 10A of the Income-tax Act, 1961 for the assessment year 2005-06.

Facts of the case:
The assessee, a private limited company engaged in software development and services, filed a return of income for the assessment year declaring income after claiming deduction u/s 10A. The assessment completed by the Assessing Officer denied the claimed exemption u/s 10A on the grounds of violating conditions specified in the Act.

Contentions raised by the assessee:
1. The existing unit was registered as an STPI unit.
2. Rules permit registration of an existing unit as an STPI unit.
3. The assessee satisfied the conditions prescribed in section 10A(2)(i)(b).
4. CBDT Circular No.1 of 2005 examples are applicable for section 10A.
5. Conversion into an STP unit does not constitute a new undertaking but a change in status.
6. Reliance on the order of the Tribunal in a similar case.

Decision of the CIT(A):
The CIT(A) allowed the appeal, stating that benefits of sec.10A are available even when an existing unit converts into an STPI unit. Citing precedents and CBDT circulars, the CIT(A) directed the Assessing Officer to allow the deduction u/s 10A.

Arguments before the Tribunal:
The issue was argued to be covered by the judgment of the Punjab and Haryana High Court and the order of the Tribunal in a similar case. The Department's appeal against the Tribunal's order was pending.

Tribunal's decision:
The Tribunal noted the High Court's decision on deduction availability on conversion of units. It upheld the order of the CIT(A) based on precedents and rejected the grounds raised by the revenue.

Conclusion:
The appeal filed by the revenue was dismissed, affirming the decision to allow the deduction u/s 10A for the assessee.