TaxTMI 
TaxTMI 
2021 (12) TMI 803
X X X X Extracts X X X X
X X X X Extracts X X X X
.... appreciating the findings of the AO that unit for which the deduction u/s 10A was claimed was converted from the existing unit and therefore, the business being already in existence, the assessee was not entitled for deduction u/s 10A of the Act for the Assessment Year under consideration. 2.b) Whether the Ld. CIT(A) has erred in not appreciating the fact that Hon'ble ITAT, in AY 2002-03, after duly considered the submission/arguments made by the assessee, had given a finding of fact that the unit for which STPI approval was received by the assessee was an existing unit and not a new unit. Though the Hon'ble ITAT, while restoring the matter to the AO for examination of the additional evidence in the year under consideration, had observed that the AO shall consider the same without being constrained by order of ITAT for A Y 2002-03, the said observation, by necessary implication, was limited to examining the effect of the some documents ( agreement with the foreign party, advance received from the said party, project report, resolution passed by the board of the assessee company etc.) and could not have been constructed as overturning the aforesaid finding of fact ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... return of income on 30/9/2015 declaring income of Rs. 5,182,846/-. The assessment u/s 143 (3) was passed on 30/12/2010 at an income of Rs. 107,054,310/- wherein disallowance u/s 10 A of Rs. 49,709,121/- and disallowance of depreciation on computer necessary is of Rs. 519,042 was made. Against this order the assessee preferred an appeal before the learned CIT - (A) who passed an order dated 26/10/2012 rejecting the appeal of the assessee. The appeal of the assessee was filed before the coordinate bench against the order of the learned CIT- A. The coordinate bench passed an order in ITA number 6387/Del/2012 setting aside the matter back to the file of the learned assessing officer for fresh adjudication on the issue of deduction u/s 10 A. Consequent to that the order u/s 143 (3) read with Section 254 of the income tax act was passed by the learned assessing officer on 30/12/2017 wherein the learned assessing officer once again disallowed the deduction claimed u/s 10 A of Rs. 4 97,09,121/-. Accordingly the total income of the assessee was determined at Rs. 107,179,307/-. The learned assessing officer dealt with the above disallowance as Under:- "5. During the course of asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es (2nd Floor) used by the assessee should be used for the new export unit and the domestic unit of the assessee should be shifted on ground floor of the same building. 14-17 8 Ledger A/c of Direct Credit Exchange (London) Advance was received by the assessee from Direct Credit Exchange Ltd, UK Company 18 9 Profit and Loss account and balance sheet for the year ended 31.03.2000 i) On page 139 of P.B Schedule of fixed assets for the year ended 31.03.00 shows that there is huge addition of computer equipments and furniture and fixtures which also supports the fact that new export unit was started in F.Y. 1999-00. ii) On page 141 of P.B. it can be seen that there is substantial increase in salaries since a new export unit was started by the assessee. 19-25 10 FAQ for STPI Scheme download from website of STPI This shows the condition of 50% of export sale of preceeding year and the domestic sale cannot be made from export unit. 26-29 11 Guidelines for sale of goods in Domestic Tariff Area (DTA) issued by STPI It states that if a STPI unit wants to make domestic sales, an application has to be submitted prior to making such ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt with M/s. Polymer Chemical Pvt. Ltd. for Ground floor Karamyog Building Parsi Panchayat road, Andheri (E) Mumbai on IIth December 1999 (Copy of the Ground floor agreement attached as Annexure 1). The Domestic business of products was shifted to Ground Floor of the Karamyog Buildine. All the employees who were part of the domestic business along with their computers and machines were shifted to the Ground Floor. The company raised its First Export Invoice on Direct Credit Exchange Limited, London for GBP 100,000 as part of advance payment for commencement of Operation Software on successful completion of the Demonstrator Software. The income was not taken in March 2000 accounts on conservative accounting norms of revenue recognition as the partial work done and the same was not satisfactory and required major changes. The invoice was raised as it was pre-requisite and as per terms of the agreement for the customer to remit money. The amount was received in newly opened EEFC account on 7th Feb 2000 (Copy of invoice & FIRC attached as Annexure 7). The Company received approval from STPI for setting up 100% Export Oriented Unit vide letter no STPl/MUM/VIII....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he STPI initial registration certificate dated 28.03.2000, STPI extension letter dated 19.03.2005 for further extension of next years. Also assessee has submitted Green Card for STPI valid upto 31.03.2010. The same has been perused. b. In earlier years i.e. from A. Y. 2001-02 onwards, the claim of the assessee is not being allowed. The issue of non- allowance of deduction u/s 10A has been discussed in detail in the assessment order passed u/s 143(3) (ii) of the Act for A.Y. 2001-02 as under: "The principal object of the provision of section 10A is to encourage setting up of new industrial undertakings by offering tax incentives. It is most essential to give fillip to trade and industry and this is the background for the enactment of these provisions. In the instant case, the principal object of section 10A is getting defeated as no new industrial undertaking has been set up, as the old industrial undertaking on which the assessee company was hitherto claiming deduction u/s 80HHE, has been used for the purpose of claim of section 10A, by taking undue advantage of the provisions/notification of the Act. " Sub-section (1) of 10A not satisfied: It would be pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd existing infrastructure is being used and there has been no creation of a new establishment/undertaking, which is imperative to claim deduction u/s 10A." c For A. Y.2005-06, the assessee has also made claim of deduction u/s 10A of the I.T. Act. The assessee was asked to justify the claim because in earlier years, the assessee had made claim u/s 80HHE of the IT. Act. As per provisions of sub-section (5) of section 80HHE of the I. T. Act, once the deduction is claimed under this section, no deduction can be allowed for the same or any other year. Hence, the assessee was' provided an opportunity to show cause why the claim of deduction u/s 10A of the IT. Act should not be disallowed. The assessee repeated the arguments which were put up during the course of assessment proceedings for A.Y.2001-02. The arguments put forth have been considered but the same are not acceptable for the reasons discussed in the order of A. Y. 2001-02. Further, this is to be pointed that the claim of deduction u/s 10A of the IT Act is not bona fide for the reasons discussed below. Why switched over to deduction u/s 10A of the I.T. Act: d. The assessee had been claiming deduct....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uine but has been made merely with an intention to defraud the revenue. h. The deduction u/s 10A is available only in respect of new industrial undertaking where as the assessee company was established in 1995 and claiming deduction u/s 80HHE in earlier years. i. The deduction u/s 80HHE would be available to the assessee only up to assessment year 2004-05 that also not 100% from assessment year 2002-03. It is to be pointed out that against the disallowance of deduction u/s 10A of the I.T. Act for AY 2001-02, the assessee filed appeal before CIT (A). The CIT (A)-XIV, New Delhi has confirmed the disallowance u/s 10A of the I.T. Act for AY 2001-02. 7. During the year under consideration the assessee claimed exemption u/s 10A of the Act of Rs. 4,97,09,121/- and during the assessment proceedings u/s 143(3) assessee did not furnished any evidence so as to deviate from the stand already taken by the Department on the issue. 8. Without prejudice to the above, the facts and the additional evidences as submitted by the assessee during the fresh assessment in hand which stated to have also filed before Hon'ble Tribunal is being considered and perus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned assessing officer and submitted that even after despite the admission of additional evidences by the learned assessing officer is directed by the coordinate bench the learned assessing officer has disallowed the claim. He referred to the various paragraphs of the order of the learned assessing officer and submitted that the claim of the assessee is not admissible. He therefore supported the order of the learned assessing officer. 6. The learned authorised representative referred to the paper book filed before us containing 149 pages. He first took us to the order passed by the learned assessing officer in the first round of appeal dated 30/12/2010. He further referred to the order of the learned CIT - A passed in the first round of appeal on 26/10/2012. He further referred to the order of the coordinate bench dated 3/05/2016. He extensively referred to the paragraph number 7.2 of the order of the coordinate bench where the additional evidences were laid before the coordinate bench and therefore admitted and the matter was sent back to the file of the learned assessing officer. He further stated that the assessee is unit was recognized as STPI on 28th of March 2000. He referr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to 31 March 2000 from the books of the assessee where the credit of Rs. 6,973,230 was received. He further referred to page number 54, which is an application for registration of export unit Under STPI scheme where the new address of the assessee was available. He also referred to the brief background of the applicant where the project report was enclosed. He further stated that it was a proposal for conversion of an existing software export unit to STPI unit. He submitted that it was a mistake in the application filed. To show that it is a mistake, He further referred to page number 105 of the paper book where the year -wise breakup of the gross income with respect to the years 1996-97 to 2010-11 was provided. He submitted that the income of the export started from assessment year 2001-02. He further referred to page number 121 of the paper book, which is a database of employees as on 31st of March 2000 for export unit u/s 10A. He further referred to the designation of such employees and the salary structure. He further referred to page number 123 - 124 of the paper book, which is a separate database of employees of the domestic unit as on 31st of March 2000 therefore; he submitte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roval of the STPI unit dated 28th of March 2000, which states that there is a specific reference to the unit located at the new premises. The assessee has also shown the investment in the fixed assets separately maintained for STPI unit. We find that the learned CIT - A has dealt with the issue as Under:- "6.1.10 I have considered the finding of the AO, however, there is a flaw in the same. The aforesaid finding arrives at conclusion without any reasoning for the same. It is a trite law that the AO should provide proper reasoning on the basis of the documents filed on record for its conclusion. A conclusion without any reasoning and basis to arrive at such conclusion is baseless. 6.1.11 I have independently considered the documents filed on record such as application form for approval of STPI; approval received from STPI authority; Project Report, Board resolution and power of attorney; Rent agreement for 2nd floor, Karmayog Building, Parsi Panchayat Road, Andheri (East), Mumbai; Rent agreement for Ground floor of the same building; NOC for custom bonding; Annual accounts for the year ending March 31, 2000; Auditors certificate in Form 56F for AY 2007-08; Audited ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es that it was resolved that the domestic unit be shifted to the ground floor with all its assets/ equipment's and a new STPI unit would be set up for the exports at the second floor for which the company already had the lease in its favour. 6.1.15 To substantiate the intention of the appellant company to establish a new export oriented unit registered with STPI along with the purchase of new plant and machinery at the second floor of the building, and to shift the present domestic operation from second floor to ground floor with its old plant and machinery used for domestic operations, the appellant company submitted separate schedule of fixed assets for export unit and domestic unit for the AY 2000-01 (i.e. FY 1999-2000). From the perusal of the fixed asset schedule, it is noted that the company has purchased new computer equipments for Rs. 41,10,608/- in FY 1999-2000. Further, I have also considered the financials for the current financial year, which also suggest that investment in fixed assets have been separately maintained for the STPI Unit, in furniture and fixture, office equipment's, electric fittings, computers etc. Total investment is to the tune of Rs.....