TaxTMI 
TaxTMI 
TaxTMI 
2015 (4) TMI 841
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....t undertakings as opposed to expanded units of a single undertaking (as was done earlier)? (2) Whether, on facts, the appellant's contention that the new units claimed by it to be separate undertakings for the purposes for Section 10A of the Act is correct? 2. The appellant is a public limited company engaged in providing software development services through its software development undertakings set up in the Software Technology Park (STP) in NOIDA and Chennai. During the relevant assessment year, the assessee/appellant had 31 independent software development units or undertakings set up at distinct locations. These were registered under 13 licenses with STP authorities. The appellant filed its original return of income on 31.10.2005, where gross business income of Rs. 2,58,17,15,909/- was shown and deduction under section 10A of the Act was claimed at Rs. 2,57,24,87,070/-, considering 13 mother licenses issued by the STP authorities as 13 eligible undertakings or units. Net taxable business income was shown at Rs. 92,28,838/-. 3. Later, the appellant filed its revised return of income on 30.03.2007, where deduction under section 10A of the Act was enhanced to Rs. 2,75,57,24,99....
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....ellant could not claim enhanced deduction under Section 10A by departing from its earlier position that the units in question were only extension or expansion of the pre-existing units and were not new units. The ITAT held that the fact that the STPI authorities endorsed on the existing licenses meant that the new and separate locations added were in the nature of expansion of the existing unit(s) / undertaking(s). Further, it held that the enhanced claim made through the revised return was clearly belated and could not be said to be in the nature of an inadvertent mistake. Thus, at this belated stage, it was not possible to verify satisfaction of the pre-requisite conditions attached to the formation of the eligible undertakings, which was necessary for allowing the claim of deduction under section 10A of the Act. Submissions made on behalf of the Assessee 7. Mr. Ajay Vohra, learned senior counsel appearing for the assessee, contended that the ITAT failed to appreciate that the mere fact that in the earlier years the appellant did not compute the deduction under section 10A of the Act by considering these 31 units as separate undertakings and instead computed deduction under tha....
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....e it is not disputed that each of the 31 undertakings of the appellant are set up for production of computer software in a Software Technology Park and are registered with STPI Authority, the manner of approval/ registration with STPI authorities would not determine whether each of the 31 units qualify as an undertaking eligible for deduction under section 10A of the Act. 10. The assessee submits that the ITAT did not apply the ratio of the Supreme Court's decision in Textile Machinery Corporation Ltd. v. CIT, 107 ITR 195, which settled the principles regarding setting up of a new unit. Further, the ITAT did not deal with the various decisions of the co-ordinate benches of the ITAT which were relied upon during the hearing (one of which is approved by the Bombay High Court) and which, relying on Textile Machinery Corporation Ltd. (supra), had laid down that the manner of seeking approval from the STPI was irrelevant. The assessee contends that these units were set up as independent viable units with investment of fresh capital, having separate identifiable work force, etc., and fully satisfied the tests laid down in Textile Machinery Corporation Ltd. (supra). 11. It is highlighte....
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....sions made by the appellant, including the decision in Textile Machinery Corporation Ltd., and rightly held that the said ruling does not assist the appellant in any manner whatsoever. Analysis and Conclusion 15. The first issue that this Court has to determine is whether in the event of an assessee's failure to avail the benefits of a statutory provision, such as Section 10A of the Act, creates an estoppel precluding it from availing such benefits in future. The AO, DRP as well as the ITAT concurrently have rejected the appellant's claims under its revised return primarily on the ground that the appellant itself did not treat all 31 units as separate undertakings previously, and in fact, for the subject assessment year as well, it originally adopted its earlier approach. On an examination of the authorities relied upon by the appellant, this Court notices that they are overwhelmingly in its favour and therefore, this Court answers the first question in favour of the appellant. 16. The starting point for the discussion is the Supreme Court's decision in CIT v. C.Parakh & Co. (supra), where the Court held that the assessee's treatment of a claim would not be determinative of the ....
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....ng the assessee's claim made under a revised return, whereunder the asseessee had put forward a more favourable claim before the tax authorities. The Court also relied upon the Apex Court's decision in C. Parakh (supra) in this regard. 19. This Court notices that the approach of other High Courts on this issue is in consonance with the appellant's contention. For instance, the Allahabad High Court in Laxmi Metal Industries (supra) in the context of Section 80J of the Act held that the assessee's failure to claim benefit under the said provision initially would not constitute a bar from the grant of such benefit, if claimed subsequently. The Court noted: "Learned standing counsel could not bring to our notice any statutory compulsion or a provision which may go to show that if the claim under section 80J is not made in any one or more of the assessment years comprising the period of five years, then the relief will not be admissible during the balance of the exemption period notwithstanding that all other conditions of section 80J stand satisfied. It has to be borne in mind that the provisions under consideration are relating to exemption and are, therefore, to be construed libera....
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.... revenue. 21. On the second issue, this Court affirms that the concurrent findings approved by the ITAT as justified in the facts and circumstances of the case. As noted by the AO and the ITAT, the pre-requisites for availing the benefit under Section 10A(2) of the Act are as follows: a) The unit must begin manufacture or production of computer software in STP in the previous year relevant to AY 1994-95 or thereafter and should be set up in a STP. b) The unit should not be formed by splitting up/reconstruction of a business already in existence. c) The unit should not be formed by transfer to a new business of machinery or plant previously used for any purpose. d) The assessee must furnish a report of an accountant in the prescribed format certifying that the exemption has been properly claimed. This report should be submitted alongwith the return of income. 22. The appellant, as proof of the fact that each and every location with a single license is a separate undertaking and that there 31 distinct undertakings, has submitted that there are separate lease deeds for each premise, separate STPI approval documents, and separate Customs Bond certificates, and has relied upon app....
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....e AO while looking at the concept of expansion of an undertaking under the relevant regulations, held that: "the mere expansion of the undertaking does not lead to the formation of a new undertaking. In fact the term used in the STPI Regulations is the extension of the premises. Hence an undertaking established in a STPI is permitted to seek new premises for carrying out its operation i.e. a single undertaking can have multiple locations within the STPI. This is termed as expansion of an undertaking and hence is not issued a separate license but merely an extension certificate". The AO, in his conclusions, held as follows: "There has been no emergence of a fresh new undertaking and no fresh investments have been made. The profits and capital of the 31 units have been carved out from the original 13 units. The assessee has not been able to produce any documentary evidence to show that in the years in which the units were formed, there was a separate capital investment: No record of profits has been shown by the assessee from the year of inception thus clearly showing that the so called separate units did not exist prior to the current Assessment Year. No evidence has been prov....