2015 (11) TMI 121 - AT - Income Tax

Exemption u/s 10B - as per AO assessee did not have approval of prescribed authority as required by CBDT and the green card issued by Chairman Inter Ministerial Standing Committee (IMSC), as software technology park scheme, is merely a concession provided by the Government to the units set up on STP Zones to avail certain facilities on priority basis but does not have any bearing with the allowance and/or disallowance of deduction u/s 10B Held that - The Assessing Officer has not disputed the activities of software development of the assessee. Certain additional evidences were filed before the ld. First Appellate Authority in the form of Circulars, notifications, letter with respect to delegation of power to the Director STPI/IMSC with respect to granting permission, which were forwarded for the comments of the AO under Rule 46A of the Rules. The Assessing Officer was of the view that green card is merely a concession, provided by the Government, to set up units in STP zones to avail certain facilities on priority basis and was of the view that for claiming deduction u/s 10B, the assessee is expected to obtain approval of CEO of STPI, as required in CBDT instructions dated 18/10/2010. The assessee filed further communication, pursuant to the report of the Assessing Officer. Again, remand report was sought from the Assessing Officer. Admittedly, there is no dispute with respect to fulfillment of other conditions as provided u/s 10B of the Act for claiming such deduction. The stand of the assessee is that automatic route is available to the units, which are having investment less than 100 millions as is the case of the assessee, therefore, the approval by the Director of STPI is sufficient to claim the deduction u/s 10B of the Act. Even, the green card is issued by the designated officer on behalf of the Secretary, Govt. Of India, Ministry of Information Technology and Chairman Inter Ministerial Standing Committee. It is also noted that for A.Y. 2008-09, the claim of the assessee, identically, was allowed and the claimed deduction amounting to ₹ 3,24,70,565/- was granted u/s 10B of the Act. This factual matrix was not controverted by the Revenue. In view of this factual position, unless and until, contrary facts are brought to our notice, the department is not expected to deny the claimed deduction. Our view is fortified by the decision of Western Outdoor Interacting Pvt. Ltd. (2012 (8) TMI 709 - BOMBAY HIGH COURT) wherein held that the relief granted in the first Assessment year in which claim was made and accepted then the Income Tax Officer cannot withdraw the relief for subsequent years, more specifically, so, when the Revenue has not even suggested that there was any change in the facts warranting a different view for subsequent years. We find that there is no change in facts and identical facts are existing which were available for A.Y. 2008-09, therefore, it is not open to the department to deny claimed deduction. - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of deduction u/s 10B of the Income Tax Act, 1961.

Analysis:
The Revenue appealed against the order of the First Appellate Authority, challenging the deletion of the disallowance of deduction u/s 10B of the Income Tax Act. The main contention was that the assessee did not have the approval of the prescribed authority as required by the CBDT for claiming the deduction. The Tribunal considered the arguments presented by both sides. The assessee, a private limited company engaged in software development, claimed the deduction based on its activities. The Assessing Officer disallowed the deduction on the grounds that the company was not approved by the prescribed authority and was only involved in normal software export business. However, the assessee provided necessary details like STP registration, green card, and agreements to support its claim. The Tribunal noted that the green card issued by the designated officer was sufficient for claiming the deduction u/s 10B of the Act, especially considering the previous year's approval for a similar deduction. The Tribunal also referred to a High Court decision supporting the assessee's position. As there were no contrary facts presented, the Tribunal upheld the First Appellate Authority's decision to grant the deduction, dismissing the Revenue's appeal.

The Tribunal emphasized that the green card issued by the designated officer, on behalf of the Secretary, Govt. of India, and Chairman Inter Ministerial Standing Committee, was crucial for claiming the deduction. It highlighted that the approval by the Director of STPI was adequate for units with investments less than 100 million, as in the assessee's case. The Tribunal also noted that for the previous assessment year, a similar deduction was allowed to the assessee, which the Revenue did not contest. Based on the factual consistency and legal precedents, the Tribunal concluded that the Revenue could not deny the claimed deduction without valid reasons. The Tribunal further explained that the green card issuance process was part of a streamlined system to assist software development entrepreneurs, ensuring no undue hardship. Therefore, the Tribunal affirmed the First Appellate Authority's decision, dismissing the Revenue's appeal.

Regarding the cross objection filed by the assessee, it was not pressed during the proceedings, leading to its dismissal. Ultimately, both the appeal of the Revenue and the cross objection of the assessee were dismissed by the Tribunal. The order was pronounced in the open court in the presence of representatives from both sides, concluding the hearing on the specified date.