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TMI Blog2016 (2) TMI 790X X X X Extracts X X X X X X X X Extracts X X X X ..... it is brought on records that there is transfer to a new business of machineries or plant previously used for any purpose. The circular no 1 of 2005 issued in context of Section 10B of the Act which is reproduced below supports the stand of the assessee company. Thus, we hold that assessee company is duly entitled for exemption u/s. 10A of the Act and in our considered view, the assessee company has rightly claimed deduction of ₹ 47,13,192/- u/s. 10A of the Act w.e.f. 1st October , 2005 which the assessee company is duly entitled for the said deduction of ₹ 47,13,192/- u/s 10 A of the Act. Hence, we set aside the orders of the CIT(A) and hold that the assessee company is entitled for the deduction of ₹ 47,13,192/- u/s.10A of the Act w.e.f. 1st October, 2005 which has been rightly claimed by the assessee company in the return of income filed with the Revenue - Decided in favour of assessee - I.T.A. No. 3147/Mum/2014 - - - Dated:- 18-1-2016 - SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri Paras Savla, Shri Viraj Mehta and Shri Pratik Poddar For The Revenue : Shri C.W. Angolkar, DR O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued to the assessee company by the AO on 30-03- 2012 and served on the assessee company. In response to this, the assessee company requested the AO vide letter dated 10-04-2012 that return of income filed on 29-11-2006 be treated as return of income in response to the notice u/s. 148 of the Act. The assessee company requested the AO to provide the reasons for re-opening vide letter dated 10-04-2012 which were furnished to the assessee company by the AO vide letter dated 14-12-2012 along with notice u/s 143(2) of the Act. The assessee company vide letter dated 10-01- 2013 has objected to the reopening of assessment u/s. 147 of the Act, which has been disposed off by the AO vide orders dated 24-01-2013 passed u/s 147 of the Act disposing of the objections raised by the assessee company and upholding the validity of invoking the provisions of Section 147/148 of the Act. The assessee company has set up the undertaking at Mumbai and Nashik. For the year under consideration, the assessee company got the letter of permission from STPI, Navi Mumbai on 19-09-2005 for 100% Export Oriented Unit (EOU) at Mumbai. It was observed by the AO that assessee company was incorporated on 10th March, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, the setting up of the New Unit and it s registration under STPI are the twin conditions which should be satisfied to be eligible for deduction u/s.10A of the Act. Hence, deduction of ₹ 47,13,192/- claimed by the assessee company u/s 10A was disallowed to the assessee company by the AO vide orders dated 04-03-2013 passed u/s 143(3) of the Act read with section 147 of the Act. 4. Aggrieved by the orders dated 04-03-2013 of the AO passed u/s 143(3) of the Act read with Section 147 of the Act, the assessee company filed first appeal before the CIT(A) and submitted that re-assessment proceedings are not justified in law in view of the decision of the Hon ble Supreme Court in the case of Kelvinator of India Ltd., [(2010) 320 ITR 561(SC)] and also relied on the decision of ITAT, Indore Bench in [302 ITR 42]. Ld. AR of the assessee company also contended that there is absence of sanction u/s. 151 of the Act and also absence of allegation in the recorded reasons that the assessee company did not disclose fully and truly all material facts necessary for the assessment. The AO has not pointed out the precise material facts which were not disclosed by the assessee company and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assessee company also claimed depreciation on the fixed assets. Thus, CIT(A) held that there is no new industrial undertaking which came into existence and the same old established company continued to do its business with the same clients and hence, the CIT(A) held that assessee company is claiming deduction u/s.10A of the Act which clearly envisages the setting up of new industrial unit which in this case is not the case and hence, the claim of deduction u/s.10 of the Act was denied to the assessee company by the CIT(A) vide orders dated 14-02-2014. 5. Aggrieved by the orders dated 14-02-2014 passed by the CIT(A), the assessee company filed appeal before us. 6. The Ld. Counsel for the assessee company submitted that the proceedings u/s. 147 and 148 of the Act has not been properly initiated and the proceedings need to be dropped on this short ground itself, the Ld. Counsel submitted that assessee company filed its return of income u/s. 139 of the Act and the assessee company made true and full disclosure in the return of income which was filed with the Revenue. The case was originally processed u/s. 143(3) r.w.s. 143(2) of the Act and the assessment order u/s 143(3) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n u/s. 10A of the Act amounting to ₹ 47,43,192/- w.e.f. 1st Oct, 2005 till 31st March, 2006. The assessee company submitted that the whole unit which has been set up at Mumbai is a new unit and is not an old unit and the only thing is that, after the unit has been set up and started operating from April, 2005, the permission was applied in July, 2005 which was granted by the Software Technology Park on19th September, 2005 with respect to Mumbai unit. Hence, the Ld. Counsel contended that Mumbai unit is not an old unit rather it is a new unit set up in April 2005 having obtained STPI approval on 19-09-2005. Thus, Ld. Counsel of the assessee company submitted that the reopening has been done based on the audit objection after four years from the end of the relevant assessment year which is not tenable in law as the assessee company has disclosed fully and truly all the material facts and there is no failure on the part of the assessee company whereby the assessee company has truly and fully declare the facts in the return of income filed with the Revenue and in the original assessment proceedings carried out u/s. 143(3) r.w.s. 143(2) of the Act. The assessee company submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the deduction has been denied u/s. 10A of the Act merely on the ground that assessee company has received the approval from STPI on 19th September, 2005 while it commenced operation from April, 2005. The Ld. Counsel also submitted that approvals from the CIT has been obtained by the AO on the same date of sending the proposal i.e. 30-03-2012 and the assesse company has placed on record in paper book the documents relating to the proposal dated 30-3-2012 sent by the AO to the CIT and the approval dated 30-03-2012 granted by the CIT, which in the opinion of the assessee company is grant of approval in mechanical manner by the CIT without application of mind as the same is granted on the same date by the CIT without any comments. The Ld. Counsel for the assessee company relied on the following decisions to contend that the assessee company is entitled for the deduction u/s. 10A of the Act: i. Nagesh Chundur Vs. CIT [(2013) 358 ITR 521] (Mad); ii. Super Auto Forge Ltd., Vs. Add. CIT [(2014)365 ITR 318] (Mad); iii. CIT Vs. Foresee Information Systems (P) Ltd., [(2014)365 ITR 335] (Kar); iv. CIT Vs. Excel Softech Ltd [(2008)175 Taxman 257 (P H-HC)]; v. CIT Vs. Quan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 47,43,192/- u/s 10A of the Act. The assessee company has claimed depreciation from 1st April, 2005 on the fixed assets, while the assessee company claimed deduction u/s.10A of the Act from 01st October 2005 as the permission has been obtained from STPI from 19th September, 2005 . In our considered view, the proceedings u/s. 147 and 148 of the Act initiated against the assessee company need to be dropped as the same was not validly initiated and is merely a change of opinion by the AO based upon the audit objections and AO has not independently applied his mind before re-opening the proceedings u/s 147/148 of the Act against the assessee company while there is no failure on the part of the assessee company in truly and fully disclosing all material and relevant facts concerning the Mumbai unit, as the proceedings have been initiated after four years from the end of the relevant assessment year and the proviso to Section 147 of the Act is applicable , the original assessment having being processed u/s. 143(3) of the Act culminating into an assessment order dated 28-11-2008. Even alternatively otherwise on the merits of the appeal, we have observed that assessee company has set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, no deduction under section 10B is available after assessment year 2009-10. 2. The deduction under section 10B is available to an undertaking which fulfils all the following conditions:- (i) it manufactures or produces any article or thing or computer software; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence except in the circumstances specified under section 33B of the IT Act. (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. 3. Representations have been received from various quarters as to whether an undertaking set up in Domestic Tariff Area, which is subsequently approved as 100% EOU by the Board appointed by the Central Government in exercise of powers conferred under section 14 of the Industries (Development and Regulation) Act, 1951, is eligible for deduction under section10B of the Income-tax Act. 4. The matter has been examined and it is hereby clarified that an undertaking set up in Domestic Tariff Area (DTA) and deriving profit from export of articles or things or computer software manufactured or produced by it, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board for the purposes of section 10B. In financial year 2002- 03, it acquires more than 20% of old plant and machinery and starts manufacturing computer software. It also gets approval as 100% EOU in financial year 2002-03. Undertaking C shall not be eligible for deduction under section 10B, as there has been transfer of old plant and machinery. (iv) Undertaking D is set up and starts producing computer software in financial year 2003-04 relevant to assessment year 2004-05. It gets approval as 100% EOU in financial year 2006-07 relevant to assessment year 2007-08. It shall be eligible for deduction under section 10B from assessment year 2007-08. However, the deduction shall not be available after assessment year 2009-10. (v) Undertaking E is set up and starts producing computer software prior to 31-3-1994. It gets approval as 100% EOU in financial year 2004-05 relevant to assessment year 2005-06. Undertaking E shall not be eligible for deduction under section 10B as the period of deduction of 10 years expires prior to assessment year 2005-06. The following case laws also support the stand and contentions of the assessee company: i. Nagesh Chundur Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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