Ita/1013/2008 Of The Commissioner Of Income Tax v. M/S Cypress Semi Conductor Technology India

1. IN THB HIGH COURT OF KARNATAKA AT BANGALOREDATEBRD THIS THE DAY OF NOVEMBER, 2014 PRESENT_ THR HON BLE MR.JUSTICEK N.KUMAR ANT) THR HON BLE MR.JUSTICEKE B.MANOHAR ITA NO.1013 OF 2008C/W ITA NOS.1014 OF 2008 & 1015 OF 2008 IN [ITA NO.1013 OF 200BRETWRB 1.THE COMMISSIONER OF INCOME TAXC.R.BUILDING, QUEENS ROAD,BANGALORE. 2 THER DEPUTY COMMISSIONER OF INCOME TAXCIRCLE-11(2)C.R.BUILDING, QUEENS ROAD, BANGALORE. .. APPBLLANTS (By Sri. K V ARAVIND — ADV.) AND M/S CYPRESS SEMI CONDUCTOR |TRHCHNOLOGY [INDIA PVT LISHARADA TOWERSIST FLOOR, 56, NANDIDURGA ROAD BENSON TOWN, BANGALORE .. RESPONDENT| (By Sri T.SURYANARAYANA — ADV. FOR M/S KING & PATRIDGE) 2 THIS ITA IS FILED U/S.260-A OF I.T.ACT, 1961 ARISING|OUTOF.ORDER.DATED21-06-2008PASSED)IN|ITA|NO.819/BNG/2007 FOR THE ASSESSMENT YEAR 2004-05,PRAYING THAT THIS HON'BLE COURT MAY BER PLEASBKD TO: [FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED|THEREIN, Il. ALLOW THE APPEAL AND SET ASIDE THE ORDER|PASSED BY THE ITAT BANGALORE IN ITA NO. 819/BNG/2007DATEHR21-06-2008,CONFIRMTH EORDERS|OF|THEAPPBERELLATK COMMISSIONBR AND CONFIRM THR ORDPASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX,|CIRCLE-11(2) BANGALORE. IN ITA NO 1014 OF 2008 BETWEEN 1. THE COMMISSIONER OF INCOMB TAX.C.R.BUILDING, QUEENS ROAD,BANGALORE. 2 THE INCOME TAX OFFICERWARD-11(1)C.R.BUILDING, QUEENS ROAD,BANGALORE —. APPBLLANTS (By Sri. K V ARAVIND, ADV..,) ANT M/S CYPRESS SEMI CONDUCTOR |TRHCHNOLOGY [INDIA PVT LISHARADA TOWERSIST FLOOR, 56, NANDIDURGA ROADBENSON TOWN,BANGALORE .. RESPONDENT (By Sri T.SURYANARAYANA —- ADV.FOR M/S.KING & PARTRIDGE ) THIS ITA IS FILED U/S.260-A OF I.T.ACT, 1961 ARISING|OUT OF ORDER DATED 21-06-2008 PASSED IN IIA NO.892/BNG/2007,KORTHEASSESSMENTYEAR2003-04, 3 PRAYING THAT THIS HON'BLEKE COURT MAY BRB PLEASED TO:I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATEDTHEREIN, Il. ALLOW THE APPEAL AND SET ASIDE THE ORDERPASSED BY THE ITAT BANGALORE IN ITA NO. 852/BNG/2007DATEHR21-06-2008,CONFIRM|TH EORDERSOF|THEAPPBERELLATK COMMISSIONBR AND CONFIRM THR ORDPASSED)BY|THEINCOMETAXOFFICER,WARD-11(1),|BANGALORE. | IN ITA NO 1015 OF 2008 BERETWRH 1.THE COMMISSIONER OF INCOME TAX,C.R.BUILDING, QUEENS ROAD,BANGALORE.2 ‘THR INCOME TAX OFFICEBWARD-11(1)|C.R.BUILDING, QUEENS ROAD,BANGALORE ... APPBLLANTS (By Sri.K V ARAVIND —- ADV.) AND, M/S CYPRESS SEMI CONDUCTORTRHCHNOLOGY INDIA PVT LIDSHARADA TOWERS, IST FLOOR,06, NANDIDURGA ROADBRENSON TOWNBANGALORE .. RESPONDENT (By Sri T.SURYANARAYANA —- ADV.FOR M/S.KING & PARTRIDGE) THIS ITA IS FILED U/S.260-A OF I.T.ACT, 1961 ARISING|OUT OF ORDER DATED 21-06-2JO0O08 PASSKD IN [TTA 148/BNG/2007,KHOR‘THEASSESSMENTYEAR2002-03, PRAYING THAT THIS HON'BLBK COURT MAY BE PLEASED TO: I.FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATEDTHEREIN, Il. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA NO.748/BNG/2007,DATED 21-06-2008 CONFIRM THER ORDERS OF THERE APPELLACOMMISSIONER AND CONFIRM THE ORDER PASSED BY THE!INCOME TAX OFFICER,WARD-11(1), BANGALORE THESE APPEALS COMING ON FOR HEARING THIS DAY,|N.KUMAR J.,DELIVERED THE FOLLOWING: JUDGMENT The Revenue has preferred these three appealsagainst the common order passed by the Tribunalholding that the software was exported only during January, 2002 by which time STPI approval has beenreceived and that the STPI unit-IIJ was not set up byreconstruction or splitting up and therefore, theassessee is entitled to the benefit of deduction under|section 10A in respect of the STPI undertaking. 2. The appeal was admitted to consider the substantial questions of law :- 1. Whether the Tribunal was correct in|holding that Unit III was entitled to deduction|u/s.10A of the Act which was taken overfrom| 5 M/s.Lara Networks despite the unit-I notbeen q new establishment and the same had|been functioning earlier? JUDGMENT The Revenue has preferred these three appealsagainst the common order passed by the Tribunalholding that the software was exported only during January, 2002 by which time STPI approval has beenreceived and that the STPI unit-IIJ was not set up byreconstruction or splitting up and therefore, theassessee is entitled to the benefit of deduction under|section 10A in respect of the STPI undertaking. 2. The appeal was admitted to consider the substantial questions of law :- 1. Whether the Tribunal was correct in|holding that Unit III was entitled to deduction|u/s.10A of the Act which was taken overfrom| 5 M/s.Lara Networks despite the unit-I notbeen q new establishment and the same had|been functioning earlier? 2. Whether the Tribunal was correct inallowing deduction u/s.10A of the Act on|Unit-III even though the assessee had been)reconstituted/ reconstructed by virtue of abusinessalready in existence M/s.LaraNetworkds which would defeat the purpose ofthe provision? 3. Whether the Tribunal twas correct inallowing deduction u/s.10A of the Act on|Unit-III without alternatively considering the|disallowance made by the Assessing Officer|that the telecommunication charges would be|liable to be deducted from export turnover|before allowing deduction u/s.10A of the Act? 3. The undisputed facts are, the assessee is a. software unit. It started production on 1.10.2001. |Licence for custom bonding was granted on 29.1.2002. 6 The STPI approval was granted on 31.1.2002. The firstinvoice is dated 31.1.2002 and the relevant assessment|year is 2002-03. Therefore, the assessee satisfies all theconditions stipulated in Section 10A of the Income TaxAct, 1961 (for short hereinafter referred to as ‘the Act’)and is eligible for deduction. 4Thecontentionot theRevenueWas,production was commenced even before the registrationof the STPI and therefore, they are not entitled todeduction. The other ground was, the unit wasacquired on 1.10.2001 and therefore it is a case forreconstruction and therefore, they are not entitled to thesaid benefit. The Tribunal by looking into the materialon record by a considered and reasoned order hascategorically recorded a finding that Lara Net works didnot have STPI net work by the time the unit taken overby the assessee. The circular No.1 of 2005 dated6.1.2005 by CPDT makes it clear that even if the existing undertaking receives STPI approval, it wouldstill be entitled to deduction under Section 1OA and/therefore, it was held that the business of STPI Unit-IIIwas not set up by reconstruction or splitting up. —Further it was held though registration was subsequentto the production, that is not a condition which isstipulated in Section 10A for claiming the benefit of thesaid deduction and therefore, the assessee is entitled to.the said benefit. In fact, these questions were thesubject matter of ITA Nos.403 of 2008 c/w.402 of 2008decided on 20.6.2014 in the case oftCommissioner ofIncome Tax and another — us — Caritor (India) Put. Ltd,and also in the case of.Commissioner of Income Tax andAnother — vs — Expert Outsource P. Ltd. reported in (2013)358 [TR 518where, on interpreting the aforesaidprovisions, it was held neither the customs bonding noroTPI registration before production is not a conditionprecedent. In that view of the matter, the substantial question of law are answered in favour of the assesseeand against the Revenue. There is no merit in thisappeal and it is accordingly dismissed. _ However, while giving effect to these orders, theAssessing Authority also shall give effect to thejudgment of this court in the case of Commissioner ofIncome Tax — vs — Tata Elxsi Ltd. & Ors. reported in(2012) 349 ITR 98. The said judgment is the subjectmatter of appeal before the Apex Court. However, in theevent of the revenue succeeding before Apex Court, thenconsequential order in terms of Section 260(1)(1A) of theIncome Tax Act should be passed and given effect to. sd/-. JUDGE| od/-|JUDGE|