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TMI Blog2013 (12) TMI 1265X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 263 of Income-tax Act, 1961 (in short 'the Act'). 5. Facts apropos are that assessee, engaged in the business of developing and selling of computer software, had claimed exemption under Section 10A of the Act in respect of an STPI unit, which had effected export sales of Rs. 12,00,90,824/- during the relevant previous year. The STPI unit had a profit of Rs. 2,96,59,353/-, on which exemption under Section 10A was claimed by the assessee. Assessing Officer was of the opinion that assessee could not satisfy the conditions specified under sub-section (2) of Section 10A. According to him, the STPI unit was formed by splitting of an existing business. Assessing Officer further noted that assessee had returned a loss of Rs. 85,33,958/- by setting off STPI profit of Rs. 2,38,34,430/- with non-STPI loss of Rs. 3,23,82,281/-. According to him, since assessee had returned a loss of Rs. 85,33,958/-, it was not entitled to claim any deduction under Section 10A of the Act. As per the A.O., such deduction could be given only if total income was positive. 6. Assessee moved in appeal before CIT(Appeals) and the CIT(Appeals) held that assessee was eligible for claiming deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch claim. 9. However, ld. CIT was not impressed. According to him, Assessing Officer had disallowed the claim also for a reason that total income of the assessee was negative. But, in the order giving effect to CIT(Appeals)'s order for impugned assessment year, Assessing Officer had started computation with the business loss computed by him in the original assessment and such total income being negative, there was an error which was prejudicial to the interests of Revenue when he allowed the claim. CIT was of the opinion that deduction under Section 10A could be allowed only if total income was a positive one. He, therefore, directed the Assessing Officer, in his order dated 7.3.2011 under Section 263 of the Act, to disallow the deduction claimed by the assessee under Section 10A of the Act. 10. Now before us, learned A.R., assailing the order of CIT, submitted that CIT was trying to do something indirectly which could not be achieved directly. He was trying to bend the laws to the advantage of the Revenue. Higher authorities had given a clear finding that STPI unit was eligible for exemption under Section 10A of the Act. Assessee had in the original return claimed exemption unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer that assessee had negative total income was never agitated by the assessee before any other authorities. Hence, the Assessing Officer while giving effect to the direction of the CIT(Appeals) ought not have ignored the loss worked out by him in the original assessment. He could not have ignored his own finding that assessee was not eligible for deduction under Section 10A of the Act by virtue of the loss returned by the assessee. By ignoring this, a definite error was committed by the A.O. in the giving effect order and CIT was justified in invoking powers vested on him under Section 263, since such error was prejudicial to the interests of Revenue. 12. We have perused the orders and heard the rival submissions. In original assessment, assessee was denied exemption on STPI unit for two reasons. One was that it was formed by split up and second was that it had a loss of Rs. 85,47,851/-. But, nevertheless, original assessment order dated 27.2.2006 has extensively dealt with the claim made by the assessee under Section 10A of the Act. Relevant portions appearing in para 3 of the assessment order, is reproduced for brevity:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under Section 10A for a reason that it was formed by splitting or re-construction of its business. CIT(Appeals) had held in favour of the assessee and the directions of the CIT(Appeals) are reproduced hereunder:- "5.3 I have carefully considered and examined the facts of the case. The appellant company is engaged in the business of trading in computer software and hardware and its development and export. It has therefore, made a claim u/s. 10A amounting to Rs. 2,96,59,353/-. The Assessing Officer has discussed the issue in detail in assessment year 2001-02 and following the assessment order of that year disallowed the exemption u/s. 10A. In this connection, it is found that on identical facts the ITAT in the appellant's own case for A.Y. 2001-02 has decided the issue in favour of the appellant in ITA No. 1806/Mds/2005 vide order dated 15-06-2007. The Hon'ble Tribunal has held that it cannot be said that the STP Unit of the assessee was established as a result of splitting or reconstruction of the old unit, therefore, the exemption u/s. 10A was directed to be allowed. In view of this decision of the Hon'ble Tribunal and respectfully f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, duly considered revised computation of income furnished by the assessee. The said giving effect order clearly mentioned in a note, as under:- "Note: The assessee has filed a revised computation of income during the course of hearing and as per the revised computation the claim of exemption u/s. 10A is Rs. 2,14,43,676/-. However, while passing order u/s. 143(3) the claim u/s.10A disallowed was wrongly mentioned as Rs. 2,96,59,253/- and the same amount was mentioned by the Learned CIT(A). Since the claim as per revised computation filed by the assessee himself is Rs. 2,14,43,676/-, the exemption u/s. 10A is restricted to the amount." 16. We are thus of the opinion that CIT fell in error in concluding that giving-effect order suffered from any error prejudicial to the interests of Revenue. Twin conditions for invoking power of CIT under Section 263 of the Act were not satisfied. Order of the CIT stands quashed. 17. In the result, appeal of the assessee is allowed. 18. Now we take up Revenue's appeal. Revenue has raised five grounds in toto, out of which, ground Nos.1 and 5 are general needing no adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... represents payments made to LIC of India as per the scheme administered by them and as LIC of India is an approved institution for maintaining gratuity funds, he directed the Assessing Officer to allow the claim of deduction for payments of gratuity. We have heard both the counsels and persued the relevant records. We find that matters that payments were made to LIC of India are not emanating from Assessing Officer's order. Hence, we remit this issue to the file of the Assessing Officer to examine the facts and grant necessary relief to the assessee if the provision represents payments made to LIC of India. The assessee should be given adequate opportunity of being heard." We are, therefore, of the opinion that for impugned assessment year also, the matter requires a fresh look by the Assessing Officer. We set aside the orders of authorities below and remit the issue back to the file of the A.O. for consideration afresh. 27. Ground No.3 of the Revenue is allowed for statistical purposes. 28. Vide its ground No.4, grievance raised by the Revenue is that CIT(Appeals) directed the A.O. to allow claim of deduction of Rs. 60,02,779/- for delayed remittance to ESI and PF. 29. This ..... X X X X Extracts X X X X X X X X Extracts X X X X
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