The Principal Commissioner Of Income Tax, Vadodara 1 v. M/S. Web Gazer Software Company

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 82 of 2022 =============================================THE PRINCIPAL COMMISSIONER OF INCOME TAX, VADODARA 1 Versus M/S. WEB GAZER SOFTWARE COMPANY ============================================= Appearance: MR.VARUN K.PATEL(3802) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ============================================= CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALAandHONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 17/01/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1.This Tax Appeal under Section 260A of the Income TaxAct, 1961 (for short ‘the Act, 1961) is at the instance of theRevenue and is directed against the order passed by theIncome Tax Appellate Tribunal, ‘A’ Bench, Ahmedabad dated24.02.2021 in the ITA No.1559/Ahd/2017 for the A.Y. 2009-10by which the appeal preferred by the Revenue came to bedismissed. 2.The Revenue has proposed the following questions of lawfor the consideration of this Court: “(a)Whether in the facts and circumstances of the case and inlaw, the Hon’ble ITAT is justified in deleting the addition ofRs.39,20,823/- made by the Assessing Officer on account ofdisallowance of exemption u/s. 10B of the Act, even though theassessee has flouted the prerequisite condition laid down forclaiming due exemption u/s. 10B of the Act regarding authoritygranting approval as a 100% Export Oriented Undertaking (EOU)? (b)Whether in the facts and circumstances of the case and inlaw, the Hon’ble ITAT is justified in not upholding the addition of Rs.39,20,823/- made by the Assessing Officer on account ofdisallowance of exemption u/s. 10B of the Income Tax Act claimedby the assessee, event though the assessee has failed to get theapproval from the Board as defined u/s. 14 of the Industries(Development & Regulations) Act, 1951 as mandated underExplanation to Section 10B of the Act or from the DevelopmentCommissioner under the Ministry of Commerce and Industry asmentioned in CBDT Instruction dated 09.03.2009 in this respectand accordingly the assessee was not eligible for claimingexemption u/s. 10B of the I.T. Act? (c)Whether in the facts and circumstances of the case and inlaw, the Hon’ble ITAT is justified in holding that a valid claim of theassessee cannot be deprived merely because the assessee has notmade such claim in return of income filed u/s 139 of the I.T. Actwithout appreciating that Hon’ble Supreme Court in the case ofGoetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC) held that theclaim of deduction not made in the return cannot be entertained bythe Assessing Officer otherwise than by filing a revised return? (d)Whether in the facts and circumstances of the case and inlaw, the Hon’ble ITAT is justified in holding that the reopening isnot valid, without appreciating the fact that reopening of the caseon the basis of factual error pointed out by the Audit party ispermissible under the law as held by the Hon’ble Supreme Court inthe case of CIT Vs. P.V.S. Beedies Pvt. Ltd. (1999) 237 ITR 13 (SC)? (e)Whether in the facts and circumstances of the case and inlaw, the Hon’ble ITAT is justified in allowing the groundschallenging the validity of assessment completed u/s. 143(3) r.w.s.147 of the Act ignoring the fact that assessee has claimeddeduction u/s 10B of the Act without obtaining approval of theCompetent Authority as mandated under the provisions of Section10B of the Act?” 3.We have heard Mr. Varun Patel, the learned SeniorStanding Counsel appearing for the Revenue and Mr. Manish J.Shah, the learned counsel appearing for the respondent –assessee. (e)Whether in the facts and circumstances of the case and inlaw, the Hon’ble ITAT is justified in allowing the groundschallenging the validity of assessment completed u/s. 143(3) r.w.s.147 of the Act ignoring the fact that assessee has claimeddeduction u/s 10B of the Act without obtaining approval of theCompetent Authority as mandated under the provisions of Section10B of the Act?” 3.We have heard Mr. Varun Patel, the learned SeniorStanding Counsel appearing for the Revenue and Mr. Manish J.Shah, the learned counsel appearing for the respondent –assessee. 4.It appears that the Appellate Tribunal while dismissingthe appeal filed by the Revenue has placed reliance on itsearlier order passed in the case of Quality BPO Services Pvt.Ltd., ITA No.120/Ahd/2012. This order passed by the Tribunal inthe case of Quality BPO Services Pvt. Ltd. was questionedbefore this High Court by filing the Tax Appeal No.439 of 2016.The Tax Appeal No.439 of 2016 came to be dismissed videorder dated 14.06.2016. The order reads thus: “1. Revenue is in appeal against the judgement of the Income TaxAppellate Tribunal dated 04.11.2015 raising following question forour consideration: “a) Whether on the facts and circumstances of the case, thelearned Income Tax Appellate Tribunal has erred in lawdeleting the disallowance of deduction of Rs. 67,08,733/-claimed u/s 10B of the Income Tax Act, 1961?” 2. The issue pertains to the assessment year 2008-09 and concernsthe respondent-assessee's deduction of Rs. 67.08 lacs (roundedoff) claimed under Section 10B of the Income Tax Act, 1961 ['theAct' for short]. The contention of the Revenue is that, the assesseehad not produced the approval by the Board appointed for suchpurpose by the Central Government in exercise of powersconferred under Section 14 of the Industries (Development andRegulation) Act, 1951, as required under Explanation 2 Clause (iv)to Section 10B of the Act. 3. Learned counsel Mr. Patel for the Revenue vehementlycontended that the assessee had obtained such approvalcertificate from the Director, Software Technology Park of India,which may be a Government of India Authority cannot substitutethe authority prescribed in Clause (iv) to the said explanation. 3. Learned counsel Mr. Patel for the Revenue vehementlycontended that the assessee had obtained such approvalcertificate from the Director, Software Technology Park of India,which may be a Government of India Authority cannot substitutethe authority prescribed in Clause (iv) to the said explanation. 4. This contention we are not inclined to examine in view of thefact that, admittedly, in the first year of claim of the assesseeunder Section 10B of the Act i.e. the assessment year 2007-08,such claim was granted. In the subsequent assessment years also,i.e. in the assessment years 2010-11 and 2011-12, such claim wasmade and accepted by the Department. We may notice thatSection 10B pertains to special provisions in respect of newlyestablished hundred per cent export-oriented undertakings. Sub-section (1) of Section 10B provides for deduction of profits andgains derived by a hundred per cent export-oriented undertakingfrom the export of articles or things or computer software for aperiod of ten consecutive years beginning with assessmentrelevant to the previous year in which the undertaking begins tomanufacturer, produce articles or things or computer softwarefrom the total income of the assessee. Thus, the provisionenvisaged is for a period of ten consecutive years commencingfrom the first year during which the undertaking begins tomanufacture or produce articles, things or computer software, asthe case may be. When the Revenue therefore, did not questionthe certification by the Director, Software Technology Park of India,in the initial year of the claim made by the assessee as well as inthe subsequent years, it would not be open for the Revenue to pickone year out of a total of ten consecutive years for differenttreatment that too without offering any explanation for the same.We would refer to Gujarat High Court Judgement in case ofSaurashtra Cement & Chemical Industries Ltd. vs. Commissioner ofIncome Tax, Gujarat-V reported in 123 ITR 669 and a laterjudgement in Tax Appeal No. 1367 of 2010 dated 14.09.2011 incase of Commissioner of Income Tax vs. M/s. T.J.Agro FertilizersPvt. Ltd. 5. In the result, tax appeal is dismissed.” 5.Thus, so far as the question as regards the claim underSection 10B of the Act is concerned, the findings recorded bythe Tribunal cannot be faulted. So far as the other questions asproposed by the Revenue are concerned, those are kept openfor being considered in some appropriate matter. 6.With the aforesaid, this appeal fails and is herebydismissed. 7.We clarify that the Tax Appeal No.439 of 2016 referred toabove, came to be dismissed on the ground that if theRevenue had not thought fit to question the certification by theDirector, Software Technology Park of India, in the initial yearof the claim made by the assessee as well as in thesubsequent years, it would not be open for the Revenue to pickone particular year out of the total ten consecutive years thattoo without offering any explanation for the same. 8.Mr. Patel, invited our attention to paragraph 11.2 of theorder passed by the Appellate Tribunal wherein the Tribunalhas relied upon the ITAT decision passed by the Delhi Bench inthe case of Regency Creators Ltd. vs. ACIT. Mr. Patel, broughtto our notice that this order passed by the ITAT Delhi Benchrelied upon in the present case was questioned by theRevenue before the Delhi High Court and the Revenuesucceeded in getting the order passed by the ITAT Delhi Benchset aside. All that Mr. Patel wants to this Court to clarify thatthe issue as regards the approval of the STP Authority can bedeemed as an approval under Section 10B or not. 9.We are not going into this question because according toMr. Shah, the learned counsel appearing for the assessee other High Court seems to have taken contrary view. We dismissedthis appeal only keeping in mind the aspect of consistency. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J) NEHA