2016 (9) TMI 1547 - AT - Income Tax

Tribunal dismisses appeal on deduction claims under Income Tax Act, allows some deductions.

The tribunal dismissed the assessee's appeal regarding the addition of unbilled revenue, deduction claims under Sections 10B and 10A of the Income Tax ... Addition of unbilled revenue and non-grant of deduction u/s. 10B - Erroneous addition of unbilled revenue to the taxable income - HELD THAT:- We are not in agreement with the contentions raised by the assessee. The assessee has failed to furnish any evidence during the assessment stage and at the appellate stage to substantiate the fact that the unbilled revenue has been included in the revenue earned during the year under consideration. The source of the said revenue, too, is unexplained in as much as there are no bills, vouchers from the persons to whom the services pertaining to the unbilled revenue were rendered by the assessee company. The assessee has failed to substantiate as to why the said amount was not included in the receivable account or in the sundry debtors account. In view thereof, the Ground No. 1 raised by the assessee is dismissed. Deduction claimed by the assessee u/s. 10B - Competent authority to grant approval - assessee has obtained approval as a 100% export oriented unit from the director, Software Technology Parks of India (STPI) and had been claiming deduction u/s. 10B from the year 2001 - AO disallow the entire claim of deduction made by the assessee by holding that for claiming such deduction, the approval ought to have been taken from the Central government through the appropriate authority constituted u/s. 14 of the Industries (Development and Regulations) Act, 1951 as against the Director, STPI - HELD THAT:- As decided in Regency Creations Ltd [2012 (9) TMI 627 - DELHI HIGH COURT] there is no notification or official document suggesting that either the Inter Ministerial Committee, or any other officer or agency was nominated to perform the duties of the Board (constituted u/s. 14 of the IDR Act), for purpose of approvals u/s. 10-B. Though the considerations which apply for granting approval u/s. 10-A and 10-B may to an extent, overlap, yet the deliberate segregation of these two benefits by the statute reflects Parliamentary intention that to qualify for benefit under either, the specific procedure enacted for that purpose has to be followed. There is nothing in any of the Circulars or instructions relied on by the Tribunal in all the orders, implying that approval for purposes of an STP also entitled the unit to a benefit u/s. 10-B. The orders of the Tribunal are consequently erroneous, and its reasoning, unsupportable. - Decided in favour of assessee. Deduction of bonus paid to employees u/s. 43B - HELD THAT:- In the present case, the assessee has filed a revised return of income alongwith Form 56F before the Ld. CIT(A). In an identical case before us in ACIT vs. M/s. Q Burst Technologies P Ltd. [2015 (11) TMI 1755 - ITAT COCHIN] we had dismissed the appeal of the revenue on this issue. CBDT Circular No. 14 (XL-35) dated 11.4.1955 has clarified that the revenue shall not take advantage of ignorance of the assessee as to his rights and the officers are duty bound to grant deduction legally available to the assessee. The CIT(A) also relied the judgment in the case of CIT vs. Technovate E Solution P. Ltd. [2013 (3) TMI 372 - DELHI HIGH COURT] wherein it was held that registration with Software Technology Parks of India is sufficient to allow deduction u/s. 10A of the Act. The copies of the certificate of registration issued by STPI and the certificate of the Chartered Accountant in Form 56F are also enclosed in the paper book filed by the assessee for the respective assessment years. On examination of the certificates of registration under STPI and the certificate of the Chartered Accountant in form 56F, we are of the view that the CIT(A) is justified in allowing the alternative claim of deduction u/s. 10A Deduction of bonus payment u/s. 43B - HELD THAT:- We are in agreement with the Ld. CIT(A) on this issue. The said addition cannot be sustained as the provision for bonus is already debited in the profit and loss account of the assessee company and the sme was first added to the total income of the assessee and then reduced to the bonus actually paid during the year. We find no infirmity with the order passed by the Ld. CIT(A) Thus Ground No. 4 raised by the Department is dismissed. Issues Involved:1. Addition of unbilled revenue.2. Deduction under Section 10B of the Income Tax Act.3. Deduction under Section 10A of the Income Tax Act.4. Deduction of bonus payment under Section 43B of the Income Tax Act.5. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act.Issue-wise Detailed Analysis:1. Addition of Unbilled Revenue:The assessee contested the addition of Rs. 7,93,47,506 as unbilled revenue, arguing it was already included in the total revenue of Rs. 1,97,49,30,133 for AY 2007-08. The Assessing Officer and CIT(A) rejected this claim due to lack of evidence showing the unbilled revenue as part of the total revenue. The tribunal upheld this decision, noting the absence of supporting documents like bills or vouchers and the failure to include the amount in the receivable or sundry debtors account. Thus, the ground raised by the assessee was dismissed.2. Deduction under Section 10B of the Income Tax Act:The assessee claimed a deduction of Rs. 26,94,61,666 under Section 10B, which was disallowed by the Assessing Officer based on a Delhi High Court judgment in CIT vs. Regency Creations Ltd. The judgment stated that approval for 100% EOU should come from the Central Government, not STPI. The CIT(A) upheld this disallowance. The tribunal agreed, emphasizing that the correct income must be assessed each year independently, and previous errors do not bind the department. Consequently, the ground raised by the assessee was dismissed.3. Deduction under Section 10A of the Income Tax Act:The assessee's alternative claim for deduction under Section 10A was allowed by the CIT(A), despite the Department's objection that the claim was not made in the original return and lacked Form 56F. The tribunal upheld the CIT(A)'s decision, distinguishing it from the Goetze (India) Ltd. case, as the assessee had filed a revised return with Form 56F during appellate proceedings. The tribunal referenced similar cases where alternative claims under Section 10A were permitted when Section 10B claims were denied.4. Deduction of Bonus Payment under Section 43B of the Income Tax Act:The Department argued against the deduction of Rs. 1,17,47,167 for bonus payments due to lack of evidence. The CIT(A) allowed the deduction, reasoning that the bonus provision was already debited in the profit and loss account and then adjusted for actual payments. The tribunal found no error in the CIT(A)'s decision and dismissed the Department's ground.5. Initiation of Penalty Proceedings under Section 271(1)(c) of the Income Tax Act:The assessee's appeal included a ground against the initiation of penalty proceedings under Section 271(1)(c). However, this issue was not elaborated upon in the tribunal's decision, implying it was not a focal point of the judgment.Conclusion:The appeals of both the assessee and the Revenue were dismissed, and the Cross Objection filed by the assessee became infructuous. The tribunal's order was pronounced in the open court on 26-09-2016.