Commissioner Of Income Tax, Chandigarh-Ii v. M/S Excel Softech Ltd., H

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No. 156 of 2007DATE OF DECISION : 24.07.2008 Commissioner of Income Tax, Chandigarh-II .... APPELLANT Versus M/s Excel Softech Ltd., H. No. 1257, Sector 37B, Chandigarh ..... RESPONDENT CORAM :- HON'BLE MR. JUSTICE SATISH KUMAR MITTALHON'BLE MR. JUSTICE AUGUSTINE GEORGE MASIH Present:Ms. Urvashi Dhugga, Advocate,for the appellant-revenue. Mr. S.K. Mukhi, Advocate,for the respondent-assessee. * * * SATISH KUMAR MITTAL , J. The Revenue has filed this appeal under Section 260 A of theIncome Tax Act, 1961 against the order dated 25.7.2006 passed by theIncome Tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh(hereinafter referred to as `the Tribunal') in ITA No. 319/Chandi/2005 forthe Assessment Year 2001-2002, raising the following substantial questionof law : “Whether on the facts and in the circumstances of the case, theITAT is right in law in affirming the order of the CIT (A) indirecting the Assessing Officer to allow deduction under section 10B of the Income Tax Act, 1961 in spite of the factthat the assessee company has not fulfilled the conditions laiddown under section 10B of the Income Tax Act, 1961 as it wasnot a newly established undertaking?” The brief facts of the case are that the assessee, who is 100%export oriented undertaking, is engaged in the business of export ofcomputer software. It started production during the year relevant toassessment year 1998-99. In the year under consideration i.e. 2001-2002,the assessee claimed exemption under Section 10B of the Act. TheAssessing Officer asked the assessee to justify its claim of exemption underSection 10B of the Act, as it was not a new unit. The assessee claimed that itis a 100% export oriented undertaking and started production in theassessment year 1998-99 and was registered with the Software TechnologyPark on 23.3.2000. Since the assessee fulfills all the requirements andconditions for claiming exemption under Section 10B of the Act in relationto its profit derived from export of Computer Software, therefore, it claimedthe said exemption. It was further submitted that under Section 10B of theAct, the exemption is available to an assessee for a period of 10 years. Theassessee submitted that merely because in the assessment year 1998-99,upto 2000-01, it claimed deduction under Section 80HHE of the Act, it isnot debarred from claiming exemption under Section 10B of the Act, in theassessment year under consideration, if it fulfills all the conditionsmentioned in the said provision. The Assessing Officer did not allow theplea of the assessee for exemption under Section 10B of the Act on the ground that export undertaking of the assessee was not newly established inthe year under consideration and the exemption under Section 10B of theAct is available to the undertakings, which are newly established. Feeling aggrieved against the said order, the assessee filedappeal before the Commission of Income Tax (Appeals), who vide his orderdated 7.1.2005 allowed the claim of the assessee, while observing that theassessee satisfies all the conditions necessary for claiming exemption underSection 10B of the Act. It was held that the claim under Section 10B of theAct is available for a period of 10 years starting with the assessment year inwhich the unit starts to manufacture. Therefore, the assessee was entitled forthe said benefit upto the year 2007-08. It was further held that it wasoptional for the assessee to either claim the exemption under Section 10B ordeduction under Section 80HHE of the Act in relation to its export profits.Since in the year under consideration, the assessee has not claimeddeduction under Section 80HHE of the Act, therefore, it was entitled toclaim exemption under Section 10B of the Act, as it fulfilled all theconditions. Feeling aggrieved against the said order, the revenue filedappeal before the Tribunal, which was dismissed vide the impugned order. Against the aforesaid order of the Tribunal, the revenue hasfiled the instant appeal. Counsel for the revenue submits that Section 10B of the Act isa special provision and under this provision, the deduction is available onlyto newly established hundred per cent export oriented undertakings. Since the assessee had started production in the assessment year 1998-99,therefore, in the assessment year in question i.e. 2001-02, the assessee unitcannot be taken to be a newly established undertaking. Therefore, theassessee is not entitled to the benefit under Section 10B of the Act. In our opinion, the contention raised by the revenue is liable tobe rejected. Section 10B of the Act reads as under : 10B. Special provisions in respect of newly establishedhundred per cent export-oriented undertakings : (1) Subject tothe provisions of this section, a deduction of such profits andgains as are derived by a hundred per cent export-orientedundertaking from the export of articles or things or computersoftware for a period of ten consecutive assessment yearsbeginning with the assessment year relevant to the previousyear in which the undertaking begins to manufacture orproduce articles or things or computer software, as the casemay be, shall be allowed from the total income of the assessee.”The aforesaid provision provides that subject to the provisions of thissection, a deduction of such profits and gains as are derived by a hundredper cent export-oriented undertaking from the export of articles or things orcomputer software for a period of ten consecutive assessment yearsbeginning with the assessment year relevant to the previous year in whichthe undertaking begins to manufacture or produce articles or things orcomputer software, as the case may be, shall be allowed from the totalincome of the assessee. Sub section (2) provides that this section applies to any undertaking which fulfils certain conditions, mentioned in this subsection itself. The exemption under this section is available for 10 years.The initial year is the year in which the eligible undertaking begins tomanufacture or produce articles or things or Computer Software. It is notdisputed that the assessee unit fulfills all the conditions, as mentioned in subsection (2). In the present case, the assessee had started the development ofComputer Software in the assessment year 1998-99 and was registered withthe Software Technology Park with effect from 24.3.2000, therefore, the 10years period has to be reckoned from the assessment year 1998-99. Theassessee has claimed exemption for the first time in the assessment year2001-02, which is well within 10 years. Therefore, the unit of the assesseecannot be denied the said exemption on the ground that it is not the newlyestablished undertaking in the assessment year in question. In our view, thewords “newly established undertaking” are only to identify the initial yearof the period of 10 years for which the assessee is eligible for claim ofexemption under Section 10B of the Act. Section 10B (1) of the Act doesnot use the words “newly established undertaking”. Only in the heading, thewords “newly established hundred per cent export-oriented undertakings”have been mentioned. It is well settled law that headings or titles prefixed tosections or group of sections can be referred to in construing an Act of thelegislation, only when the enacting words are ambiguous, but when thelanguage of the section is clear, then the heading cannot be used to give adifferent effect to clear words in the section. In our view , there is noambiguity in section 10B of the Act, which provides exemption to certain ITA No. 156 of 2007 ITA No. 156 of 2007 newly established hundred per cent export-oriented undertakings, onfulfilling certain conditions, for a period of ten consecutive assessmentyears. The initial year is the year in which the eligible undertaking begins tomanufacture or produce articles or things or Computer Software. Section10B of the Act does not provide any restriction that in each of the year ofclaim, the export-oriented undertaking should be newly established. Indeed,relevance of “newly established undertaking” is only to identify the initialyear of the period of ten years for which the assessee is eligible for claim ofexemption under Section 10B of the Act. Since in the present case,undisputedly, the initial year is the assessment year 1998-99, therefore, theassessee was rightly held to be fully eligible for exemption under section10B of the Act for the assessment year under consideration i.e. 2001-02, asit was the fourth year, out of ten years beginning with the initial assessmentyear, in which it began to develop and export the computer software. In view of the above, in our opinion, there is no merit in thisappeal, as no substantial question of law arises from the impugned order.Dismissed. ( SATISH KUMAR MITTAL ) JUDGE July 24, 2008 ndj ( AUGUSTINE GEORGE MASIH ) JUDGE Refer to Reporter