Ita/828/2009 Of The Commissioner Of Income Tax v. M/S.e 4 E Application Services P. Ltd

IN THR HIGH COURT OF KARNATAKA AT BBNGALURU|DATED THIS THE 16[th]DAY OF FEBRUARY, 2015 PRESENT THERE HON’ BLE MR. JUSTICE N.KUMA ANI) THR HON' BLE MR. JUSTICE B. VEBRAPPA| INCOME TAX APPEAL No. 8828/200 BBRITWHR 1.The Commissioner of Income Tax,|C.R. Building,Queens Road,Bangalore.C.R. Building,Queens Road,Bangalore. ?.The Dy. Commissioner of Income-Tax,Circle-11(4),C.R. Building,Queens Road,Bangalore. |_. APPELLANTS (BY SRI K V ARAVIND, ADVOCATE) ANIL M/s. E 4 E Application Services P. Ltd.,(Formerly M/s. Icelerate Technologies P. Ltd.,)No. 109, Koramangala Industrial Layout,;[th]Cross, 5[th]Block, KOramanegala,Bangalore-560 O95... RESPONDENT (BY SRI CHAITHANYA K.K., ADVOCATE) This [TTA is filed under Section J60-A ot theIncome Tax Act, 1961 arising out of order dated|31.7.2009 passed in ITA No. 471/BNG/2009 for the|assessment year 2004-20095 praying to formulate thesubstantial questions of law stated therein and to allow|the appeal and set aside the orders passed by the ITAT,Bangalore in I.T.A.No.4/71/BNG/2009 dated 31.7.2009confirming the order of the Appellate Commissioner and 2 confirm the order passed by the Deputy Commissioner|of Income Tax, Circle-11(4), Bangalore. This Income Tax Appeal coming on for Hearingthis day, B. VEERAPPA J., delivered the following: JUDGMENT The revenue has preferred this appeal against theorder dated 31[st]July, 2009 passed in ITA No.471/BNG/2009 by the Tribunal upholding the order|passed by the Appellate Authority granting the benefit oftax under the provisions of Section 10A of the Income|Tax Act, 1961 (for short ‘hereinaiter referred to as ‘the|Act). ”.. The brief facts of the case are: That the assessee is engaged in the business ofsoftware development and filed return of income for theassessment year 2004-05 and claimed deduction under|the provisions of Section 1OA of the Act. 3. After considering the entire material on record,the Assessing Authority by its order dated 28.12.2006|has held that the assessee/company was an existing) 3 company. The assessee’s STP unit which came to be|registered on 16.10.2002 was working as non-STP unit|earlier to it. As the assessee was an existing unit, the|new unit under which the claim was made would be!formed out of splitting up or reconstruction of the|business by using the old plant and machinery and|therefore,theaSSe€SSECby|furnishingincorrectparticulars of income has claimed deduction which is notallowableunderSection|10A|ofttheAct.Accordingly, as the claim was not liable to be allowed,|initiated penalty proceedings under the provisions of|section 271(1)(c) of the Act against which the assessee|preferred an appeal before the Commissioner of Income.Tax (Appeals)-I, Bangalore, who after hearing both the|parties, by order dated 11.33.2009, has allowed theappeal in part holding that in view of CBDT Circular|No.1 of 2005 dated 6.1.2005, the deduction claimed by|the assessee which is contrary to the provisions of|section 10A of the Act is still allowable against which|the revenue preferred an appeal — ITA 471/Bang/2009before the Income Tax Appellate Tribunal. The Tribunal | 4 after hearing both the parties, by its order dated|31.7.2009 placing reliance on its earlier order in the|case ofITO -vus- M/s. Foresee Information Systems P.Ltd., (ITA Nos.3014/Bang.2004 and connected casesD.D. 16.3.2007) upholding the findings of the Appellate|Commissioner that the assessee is entitled to claim|deduction under Section 10A of the Act, dismissed the.appeal filed by the revenue. Aggrieved by the same, thepresent appeal is filed by the revenue. 4 after hearing both the parties, by its order dated|31.7.2009 placing reliance on its earlier order in the|case ofITO -vus- M/s. Foresee Information Systems P.Ltd., (ITA Nos.3014/Bang.2004 and connected casesD.D. 16.3.2007) upholding the findings of the Appellate|Commissioner that the assessee is entitled to claim|deduction under Section 10A of the Act, dismissed the.appeal filed by the revenue. Aggrieved by the same, thepresent appeal is filed by the revenue. 4. From the aforesaid facts, it is clear thatprovisions of Section 10OA of the Act provides fordeduction from the total income of the profits derived by|an undertaking from the export of articles or things or computer software for a period of ten consecutive|assessment years. The tax holiday period commences|with the assessment year relevant to the previous year|in which the undertaking begins to manufacture or produce such articles or things or computer soitware.section 1OA(2) of the Act prescribes certain conditions| 5 on the fulfillment of which the benefit of Section 10A|could be availed. oO. In the instant case, the assessee beganoperation in the existing company whereas the STP unitwas registered on 16.10.2002. The STP authorities|could also permit the conversion of an existing unit into)a STP unit. The purpose of the STP scheme is toencourage exports and gain valuable foreign exchange|for the country. The STP scheme provides the benefit of|converting a DTA unit into a STPI unit and the same.should also hold good for tax purposes. CBDT Circular|No.1 ot 2005 dated 6[th]January, 2005 grants certainbenefits under the provisions of Section 10B of the Act.Though the circular is in the context of Section 10B, theratio of the circular equally applies to Section 10A also.In fact, the Commissioner of Income Tax (Appeals) has|referred to various judgments on the point and has|come to the conclusion that the benefit of Section 10A ot|the Act would also be available even when an existing|unit gets converted into a STPI unit. In fact, the| 6 material on record discloses that no export of computer|software was made before 16.10.2002. The exportcommenced only after 16.10.2002. The invoices.produced in the case clearly establish the said fact. In|those circumstances, the Appellate Authority as well asthe Tribunal are justified in extending the benefit of|Section 10A of the Act to the unit of the assessee insquestion. 6. The very identical issues had come up beforethis Court in the case of.Commissioner of Income Tax -vs- Expert Outsource (P) Ltd. reported in [2013] 358 ITRO18 (Kar.). |The Division Bench of this Court by an orderdated l[St]March, 2011 has held that granting of benefitunder Section 10A of the Act is permissible. 7. In view of the same, we do so see any illegalitycommittedby|boththeAppellateAuthority|Commissioner of Income Tax (Appeals) as well as.Tribunal and the finding of fact recorded by them is also|based on legal evidence and in accordance with law laid|down by this Court as stated supra. We do not see any ,3C,�1-�+14�D3),�+#-�#/�41E���1��1.+,),�/#.�0#-,+5).1�+#-� +-���)�=.),)-��1==)14���� �00#.5+-648����)�1==)14�+,�5+,*+,,)5�� ����5%9������� 356)��������������������5%9������� 356) �,3%9�