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TMI Blog2014 (10) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration as a Software Technology Park in accordance with the scheme of Government of India, the assessee stands benefited by the provisions of Section 10A of the Act -Decided against revenue. Amount spent on Work in Progress deleted - Held that:- CIT(A) did not adjudicate any such issue in those years - CIT(A) has accepted the contentions of the assessee that the work is normally completed within 12 years without causing any verification of the claim - it is also the contention of the assessee before CIT(A) that the AO has made the addition without providing an opportunity to the assessee – the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of revenue. - ITA Nos. 4485 & 4486/Mum/2011, ITA Nos. 6875 & 6877/Mum/2011 - - - Dated:- 12-9-2014 - B. R. Baskaran, AM And Sanjay Garg, JM,JJ. For the Appellant : Shri Durga Dutt For the Respondent : Shri Niraj Sheth ORDER Per B. R. Baskaran, Accountant Member: All the four appeals, filed at the instance of the Revenue, are directed against the orders passed by Ld CIT(A)-I, Mumbai and they relate to the assessment years 2005-06 to 2008-09. Since identical issues are agitated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has not set up a new unit after obtaining registration as Software Technology Park. Since the assessee has obtained STP registration for the existing unit, it amounts to using of old Plant and machinery. We notice that the Ld CIT(A) has placed reliance on the Circular No. 1 of 2005 issued by the CBDT in the context of deduction u/s 10B of the Act, wherein it was clarified that an undertaking set up in Domestic Tariff Area (DTA) and deriving profit from export of Computer Software manufactured or produced by it, which is subsequently converted into EOU, shall be eligible for deduction u/s 10B of the Act on getting approval as 100% Export Oriented Undertaking. It was further clarified that the deduction, in such type of cases, shall be available only from the year in which it has got the approval as 100% EOU and shall be available only for the remaining period. 6. According to the assessee herein, it has started claiming deduction u/s 10A of the Act only for the period commencing from the date of approval as STP. The Ld CIT(A) has accepted the contention of the assessee that the ratio of the Circular No.1 of 2005 (referred supra) shall equally apply to the deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; that the Software Technology Park authorities could also permit the conversion of an existing unit into a STPI unit. Thus, based on the decision of the Karnataka High Court, the Income Tax Appellate Tribunal allowed the assessee's claim, that, the fact of the assessee being in the business prior to the date of the registration of the STPI would not stand in the way of granting relief to the assessee. 12. Learned Standing counsel appearing for the Revenue took us through the provisions under Section 10A of the Act and Section 10B of the Act and submitted that the reliance placed on by the assessee on the decision of the Karnataka High Court has no relevance, because it operated on a different field; the relief under Section 10A of the Act has to be seen in the context of the provisions contained therein. 13. Reiterating the stand taken before the Income Tax Appellate Tribunal as well as the order passed against the assessee in the course of assessment proceedings, learned Standing counsel appearing for the Revenue submitted that the admitted fact is that the assessee commenced its business even before the date of registration i.e., on 27.03.2002 and when the Section cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s registration on 27.03.2002 is not a fact that the Department did not know and by mistake it allowed the benefit for the year 2003-04 and 2004-2005. In the circumstances, with the orders thus becoming final, principally stating, we do not find any justifiable ground for the Revenue to question the claim of the assessee from the assessment year 2005-06. 17. Even otherwise, we find that the claim of the Revenue could not be sustained. The provisions contained in Section 10A of the Act grants 100% deduction on profits and gains derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software. Section 10A(2) of the Act refers to the undertaking which are entitled to the benefit of Section 10A of the Act. The Section reads as under:- Section 10A(2):- This Section applies to any undertaking which fulfils all the following conditions, namely :- (i) it has begun or begins to manufacture or produce articles or things or computer software during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... software technology park and sought for registration as STPI on 2002. In so getting the registration, the question that arises for consideration is as to whether the claim of the assessee would be covered by Clause (b) of Sub clause (i) of Sub Section 2 of Section 10A of the Act. A reading of the above Sub Section shows that in order to claim deduction, an undertaking in hardware technology park or software technology park must be in existence commencing its production on or after the 1st day of April, 1994. Given the fact that the assessee is not formed by splitting up or transfer to a new business and got registration even since 2002, the fact that it has been in existence ever since 1999, does not militate against the applicability of Section 10A of the Act. The case on hand falls under Section 10A(2)(b) of the Act. As already pointed out, even the cursory reading of Section 10A(2)(i) of the Act shows that it has relevance to industry that has begun to manufacture or produce articles or things or computer software on or after the 1st day of April, 1994. Thus, the moment the assessee satisfies this clause and it goes for the second requirement namely, registration as a Software ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses to the tune of ₹ 2,29,16,769/-. The AO further noticed that the assessee has raised invoices to the extent of ₹ 29,75,853/- on 30.4.2008, i.e., during the first month of succeeding year. Hence, the AO took the view that the expenses relating to the above said invoices would have been incurred during the year under consideration. Accordingly he treated the above said amount of ₹ 29,75,853/- as Work in progress as on 31.3.2008 and added the same to the total income of the assessee. 12. Before Ld CIT(A), the assessee contended that the work of digitization does not involve more than 4 hours of work and almost all the work are completed within 12 hours. Accordingly, it was contended that the AO was not justified in presuming that the work relating to the bills raised on 30.4.2008 was done in March 2008. It was also contended that the AO has made the impugned addition without calling for explanations from the assessee. 13. The Ld CIT(A) accepted the above said contentions and accordingly directed the AO to delete the addition. The Ld CIT(A) also noted that his predecessor has considered identical issues in AY 2006-07 and 2007-08 and has deleted identical ad ..... 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