2017 (10) TMI 1588 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on Income Tax Act section 10A claim for software unit.

The Tribunal upheld the CIT(A)'s decision to allow the alternative claim under section 10A of the Income Tax Act for the assessee's unit, despite denying ... Alternative claim of the assessee u/s. 10A - Denial of deduction u/s 10B - export oriented unit of the assessee had obtained approval only from the Director of the Software Technology Parks of India which is not a valid approval for the purpose of claim of deduction u/s. 10B - HELD THAT:- Sec.10A(2)(i)(b) states that benefit of 10A applies to any undertaking commencing its operation on or after 01st day of April 1994 in any Electronic Hardware Technology Park or as the case may be Software Technology Park. The units commencing its operations on or after 01st day of April, 1981 in any Free Trade Zone is separately dealt with in sub-clause (a) of Clause (i) of sub-section 2 of section 10A and hence, the submissions of the learned Departmental representative that only units set-up in Free Trade Zone are eligible and are covered by Section 10A of the Income-tax Act, 1961 is not correct. In the Paper Book filed by assessee the certificate of the Chartered Accountant filed in Form 56F for the financial years 2009-10, and 2010-11 corresponding to assessment years 2010-11 and 2011-12 respectively certifying the compliance of the claim made for deduction under section 10A of the Income Tax Act, 1961 has been enclosed. The certificate of registration issued by Electronic Software Technology Park of India, Thiruvananthapuram in the name of the assessee has been enclosed . The eligibility of the unit registered with STPI to claim deduction u/s. 10A of the Act has been discussed at length in the order of the Hon’ble Co-ordinate Bench of this Tribunal in the case of M/s. QBurst Technologies Pvt. Ltd. [2015 (11) TMI 1755 - ITAT COCHIN] - we hold that the CIT(A) is justified in allowing the alternative plea of the assessee u/s. 10A of the I.T. Act. - Decided against revenue. Issues:1. Whether the CIT(A) was justified in allowing the alternative claim of the assessee under section 10A of the Income Tax Act.Analysis:1. The appeals involved a common issue regarding the CIT(A)'s decision on the alternative claim under section 10A of the Income Tax Act. The Revenue challenged the CIT(A)'s decision, arguing that the assessee's unit was not eligible for the deduction under section 10A as it was not situated in a Free Trade Zone. The assessee, on the other hand, contended that the unit's eligibility was supported by various Tribunal orders and compliance with necessary requirements.2. The CIT(A) upheld the Assessing Officer's decision to deny the deduction under section 10B but considered the alternative claim under section 10A in favor of the assessee. The CIT(A) relied on the Tribunal's order in a similar case and judicial pronouncements to support the decision. The Revenue challenged this decision through appeals, emphasizing the unit's location and eligibility criteria under section 10A.3. The Tribunal analyzed the relevant provisions of section 10A, emphasizing the requirements for units located in Electronic Hardware Technology Park or Software Technology Park. The Tribunal reviewed the documentation provided by the assessee, including certificates of compliance and registration with the Software Technology Park of India. Referring to a Co-ordinate Bench's decision, the Tribunal concluded that the CIT(A) was justified in allowing the alternative claim under section 10A based on the unit's registration and compliance.4. The Tribunal highlighted the duty of the Assessing Officer to consider alternative deductions when one claim is denied, as supported by judicial precedents. It noted that the Assessing Officer's technical objection regarding the claim not being made in the return of income was not substantial, especially considering past practices and legal clarifications. The Tribunal upheld the CIT(A)'s decision to allow the deduction under section 10A, dismissing the Revenue's appeals.5. In a separate issue related to the assessee's appeal for the assessment year 2010-11, the Tribunal addressed a delay in filing the appeal. After condoning the delay, the Tribunal proceeded to review the matter on its merits. The Tribunal considered the treatment of management fee charges and their impact on the deduction under section 10B. While the Assessing Officer disallowed the deduction under section 10B, the CIT(A) allowed the alternative claim under section 10A, directing the computation of the deduction accordingly.6. The Tribunal emphasized the importance of considering the deduction under section 10A when the claim under section 10B is denied. It directed the Assessing Officer to compute the deduction under section 10A in accordance with the law and relevant judicial pronouncements. As a result, the Tribunal dismissed the Revenue's appeals and allowed the assessee's appeal for statistical purposes.7. The judgment concluded by pronouncing the orders in the open court on the specified date, resolving the issues raised in the appeals comprehensively.