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TMI Blog2016 (9) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ld. PCIT and hold that the Assessing Officer has rightly allowed deduction under section 10B of the Act. - Decided in favour of assessee. - I T.A. No. 544/Mds/2016 - - - Dated:- 27-7-2016 - Shri Chandra Poojari, Accountant Member and Shri Duvvuru RL Reddy, Judicial Member For The Appellant : Shri M. Karunakaran, Advocate For The Respondent : Smt. Parminder, CIT ORDER PER DUVVURU RL REDDY, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order of the ld. Principal Commissioner of Income Tax, Chennai -5, Chennai, dated 22.02.2016 relevant to the assessment year 2011-12. The assessee challenged the order passed under section 263 of the Income Tax Act, 1961 [ Act in short]. 2. The assessee is engaged in the business of computer software and filed its return of income admitting NIL income on 29.09.2011. The return filed by the assessee was processed under section 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny and notice under section 143(2) of the Act dated 03.08.2012 was served on the assessee. Notice under section 142(1) of the Act was also issued on 06.11.2013. In response thereto, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the submissions of the assessee, the ld. PCIT has held that the deduction under section 10B of the Act has been wrongly allowed to the assessee and consequently, the assessment order is erroneous and prejudicial to the interest of Revenue. Accordingly, he directed the Assessing Officer to withdraw the deduction claimed under section 10B of the Act and modify the assessment order. 6. Aggrieved, the assessee is in appeal before the Tribunal. 7. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The main issue for adjudication is whether the assessee is eligible to claim deduction under section 10B of the Act for the assessment year 2011-12 since the assessee got the approval from STPL for setting up of 100% EOU on 07.10.2010 and signed the agreement with STPL on 18.11.2010. 8. Admittedly, vide Ref. No. STPIC/G/958/2010-11/571 dated 07.10.2010 of Director of the STPI, Chennai has conveyed approval for setting up of 100% EOU under the Software Technology park Scheme of Government of India and also conveyed that the assessee would be entitled to get the benefits under the STP Scheme only after entering into the lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1951, despite the fact that in similar facts and circumstances this deduction has been allowed in earlier assessment years. From the perusal of the assessment order it is abundantly clear that the AO has mainly relied on the nonfulfillment of condition provided in the section, to obtain the approval from the Board appointed on behalf of the Central Government u/s 14 of the Industries (Development Regulation) Act, 1951 which was found specifically available in Explanation 2 to sec. 10B which defines a 100% Export Oriented Unit (EOU), to which this provision applies. The AO found that the Explanation says that 100% export oriented undertaking means an undertaking which has been approved as a 100% export oriented undertaking by the Board appointed in this behalf by the Central Government in excise of power conferred by section 14 of the Industries (Development Regulation) Act, 1951 (65 of 1951, and the rules made under that Act). As the appellant had taken the approval of 100% export oriented unit from the STPI, a technical body of Ministry of Information Technology formed for the purpose of control, monitoring and regulation of software exports, it was held by the AO that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the process of transforming blank compact disks into software loaded disks amounts to manufacturing. The appellant had also contended before the AO that the definition available in the section in Explanation 2 of section 10B clearly says that a computer software means any computer programme recorded on any disk, tape, perforated media, or other information storage device or any customized electronic data or any product or service of similar nature will constitute software which are exported or transmitted from India to any place outside India by any means. The AO has not examined any of these claims of the appellant before saying in an ambiguous manner that the appellant is not engaged in the activity of software manufacturing on the basis of salary and note on activity. Therefore, it is clear from the perusal of the assessment order that the AO has failed to appreciate the materials placed before her in the light of the provisions contained u/s 10B and the interpretations given to the relevant issues in different judgments and has concluded without any basis that the appellant is not engaged in the business of manufacturing of software. In view of the above and the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT Delhi 'H' Bench decision given in the case of DCIT, Cir.16(1) Vs. Technovate ESolutions Pvt. Ltd. (ITA No. 135/Del/2011/A.Y. 2003-04); CIT Vs. Excell Softech Ltd. (2008)219 CTR (P H) 405. It can be seen that the finding of the Assessing Officer that sec. 10B required registration by the Board constituted u/s 14 of Industries (Development Regulation) Act, 1951, is perfectly correct but the claim of the appellant that the above requirement should be construed to have been legally fulfilled as per the directions of the Ministry of Communication Technology and the Instruction issued by the CBDT on a similar issue for registration u/s 10A, also looks correct. Instruction No. 1 of 2006 of the CBDT dated 31.3.2006, is in respect of sec. 10A but in this Instruction it has been accepted that confusion existed in respect of the authorities whose approval should be considered to be fulfilling the conditions prescribed in sec. 10A and in view of the same the Instruction directed the Assessing Officer as under: 6. The matter has been examined in consultation with the Officers of the Department of Information Technology (earlier, Department of Electronics). In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 'principle of consistency', which is applicable in this case also. It was demonstrated by the AR that similar benefit u/s 10B was allowed by AO in earlier assessment years and no action to withdraw the same has been taken. Thus on this basis also Ground No. 1 is required to be allowed. 7.1 We find although the tax effect was more than the prescribed monetary limit the Revenue has not filed any appeal against the order of the CIT(A) for the A.Y. 2008-09. We find the CIT(A) while allowing the appeal of the assessee for A.Y. 2009-10 has followed his earlier order under identical facts and circumstances. We find the Ld.CIT(A) in his order for A.Y. 2008-09 has distinguished the decision of the Hyderabad Bench of the Tribunal in the case of Infotech Enterprises Ltd. (Supra) and following various other decisions has allowed the claim of deduction u/s.10B. The Ld. Departmental Representative could not point out any mistake in the order of the Ld.CIT(A) nor could cite any other decision to controvert the finding given by the Ld.CIT(A). Since the order of the CIT(A) is based on various decisions including the CBDT Instruction No.1/2006, therefore, in absence of any contrar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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