2018 (3) TMI 140 - AT - Income Tax

Tribunal Upholds Deductions for Software Services, Rejects Revision

The Tribunal condoned the delay in filing appeals, allowed deductions under Section 10B for computer software services, and upheld the validity of ... Revision u/s 263 - Eligibility to deduction claimed u/s 10B - Held that:- On verification of the assessment order, it is observed that the assessing officer has examined the issue whether the assessee is carrying on consultancy work or engaged in the manufacturing of computer software. In the reply submitted by the assessee before the A.O. which was reproduced above, the assessee submitted that the it is engaged in the Data processing and Remote Maintenance which is information technology enabled products or services covered u/s 10B of the Act as per the notification issued by the vide CBDT vide Notification No.11521 dated 26.9.2000. Since the issue has been considered by the assessing officer and taken a conscious decision that the assessee is engaged in the computer software after conducting necessary enquiry and analyzing the information filed by the assessee, the Ld. CIT is not permitted to revisit the same issue which was already examined by the assessing officer and allowed the deduction. The issue with regard to the approval from the Board constituted by Central Government was also examined by the assessing officer. The A.O. has conducted enquiries with the Director, Software Technology Parks of India, VSEZ, Duvvada, Visakhapatnam who has clarified vide letter dated 5.12.2012 that once the Director, STPI approves the unit, no further ratification of approval from the inter-ministerial standing committee is required and the income tax benefits should not be denied on the ground that the approval of units have been granted by the Director of STPI. Hence, it is evident from the assessment order passed u/s 143(3) r.w.s. 147/143(3) that the A.O. has examined the issue of requirement of approval from the Board also. - Decided in favour of assessee. Issues Involved:1. Condonation of Delay2. Eligibility for Deduction under Section 10B of the Income Tax Act3. Validity of Assessment Orders and Revision under Section 263Detailed Analysis:1. Condonation of Delay:The assessee filed appeals with a delay of 453 days. The delay was attributed to the assessee's frequent travel and a miscommunication with the accountant. The assessee argued that there was a reasonable and sufficient cause for the delay and requested condonation. The Revenue opposed, stating the delay was not satisfactorily explained. The Tribunal, after examining the evidence and considering the bona fide belief of the assessee, condoned the delay in the interest of justice and admitted the appeal.2. Eligibility for Deduction under Section 10B of the Income Tax Act:The assessee, engaged in computer software services and registered with the Software Technology Park of India (STPI), claimed deductions under Section 10B for the assessment years 2008-09 and 2010-11. The Assessing Officer (A.O.) initially allowed these claims after verifying the necessary conditions and approvals. The CIT later contested this, arguing that the assessee was involved only in consultancy work, which does not qualify under Section 10B, and that proper Board approval was not obtained.The Tribunal noted that the A.O. had thoroughly examined the nature of the assessee's services, which included data processing and remote maintenance, and found them to be covered under the CBDT Notification No. 11521 dated 26-9-2000. The Tribunal also referenced the clarification from the Director, STPI, stating that no further ratification from the Inter Ministerial Standing Committee (IMSC) was required once the STPI Director approved the unit.3. Validity of Assessment Orders and Revision under Section 263:The CIT invoked Section 263, claiming the assessments were erroneous and prejudicial to the revenue. The Tribunal, however, found that the A.O. had conducted necessary inquiries and made a conscious decision to allow the deductions after verifying the assessee's compliance with Section 10B conditions. The Tribunal emphasized that once the A.O. has taken one of the possible views, the CIT cannot revise the order merely because he holds a different view. This principle was supported by precedents from the Hon’ble Supreme Court in the cases of CIT Vs. Max India Limited and CIT Gujarat II Vs. Quality Steel Supply Complex.Conclusion:The Tribunal concluded that the A.O.'s orders were valid as they were based on thorough inquiries and a plausible interpretation of the law. The CIT's revision under Section 263 was deemed unjustified. Consequently, the Tribunal set aside the CIT's order and allowed the appeals filed by the assessee.