IN INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.No.1307/Hyd/2015 Assessment Year 2011-2012 M/s. Mouri Tech P. Ltd., vs. Income Tax Officer, (Formerly Mouri Soft Solutions P. Ward-16(1), Ltd.,), Hyderabad 500 090. Hyderabad. PAN AAECM8324J (Appellant) (Respondent) For Assessee : Mr. K.C. Devdas For Revenue : Smt. Suman Malik Date of Hearing : 19.09.2016 Date of Pronouncement : 21.09.2016 ORDER PER D. MANMOHAN, V.P. This appeal by assessee company is directed against order passed by CIT(A)-IV, Hyderabad and it pertains to A.Y. 2011-2012. only issue urged before us is with regard to rejection of claim of deduction under section 10B of I.T. Act, 1961. 2. Facts necessary for disposal of appeal are stated in brief. assessee-company is engaged in business of software and allied services. It is 100% EOU and registered under Software Technology Parks of India, Hyderabad. gross receipts of assessee was Rs.3.71 crores. For year under consideration, assessee admitted total income of Rs.31,08,807 and book profit under section 115JB was admitted at Rs.1,64,02,680. When case was taken-up for scrutiny, 2 ITA.No.1307/Hyd/2015 M/s. Mouri Tech P. Ltd., Hyderabad. assessee furnished details of income declared wherein it was submitted that total turnover was Rs.3.67 crores and export turnover was Rs.3.06 crores, out of which, deduction under section 10B was claimed at Rs.1,35,17,323. 2.1. Assessing Officer observed that deduction for 100% EOU has to be approved by Board appointed on behalf of Central Government. In this case, no doubt, approval was given by Software Technology Park of India (in short STPI ) but to allow claim of deduction, assessee undertaking has to get approval as 100% EOU by Board appointed in his behalf by Central Government under section 14 of Industries (Development and Regulation) Act, 1951. Since, there was no proof of obtaining approval from Board, assessee was called-upon to explain/furnish evidence. In response thereto, assessee submitted that it is manufacturer and producer of computer software and I.T. enabled services and it exports same. It was registered as 100% EOU with STPI, Hyderabad vide its letter dated 28.07.2008. It was new unit started on 19.12.2005. As per Explanation-2 to Section 10B, in order to get exemption assessee should be 100% export oriented undertaking approved by Board. assessee placed before Assessing Officer communication dated 23.03.2006 issued by Secretary, Ministry of Communication and Technology wherein it was stated that STPI Directors are duly authorised and fully empowered to issue approvals as 100% EOU to units under STPI Scheme and delegated powers and thus Directors have authority of Inter Ministerial Standing Committee. In otherwords, approval granted by STPI Directors is deemed to be valid approval by Board. assessee 3 ITA.No.1307/Hyd/2015 M/s. Mouri Tech P. Ltd., Hyderabad. also relied upon decision of ITAT, Hyderabad Bench dated 10th April, 2012 in case of M/s. Secunderabad Software Services P. Ltd., Hyderabad wherein Bench observed that any EOU which has been registered with STPI is entitled for deduction under section 10B of Act since it is enough if assessee is registered with STPI. Inter Ministerial Communication letter dated 23.03.2006 issued by Secretary, Ministry of Communications and Technologies and decision of ITAT, Hyderabad Benches were strongly relied upon to contend that assessee company is entitled to exemption under section 10B of Act since it has obtained approval from STPI. Assessing Officer as well as CIT(A) rejected claim of assessee and in this regard reliance was heavily placed on language used in sub-clause (iv) of Explanation-2 to Section 10B of Act which reads as under : (iv) hundred percent export-oriented undertaking means undertaking which has been approved as hundred per cent export-oriented undertaking by Board appointed in this behalf by Central Government in exercise of powers conferred by section 14 of Industries (Development and Regulation) Act, 1951 (65 of 1951), and rules made under that Act. 2.2. According to tax authorities approval of Board appointed by Central Government is must for claiming exemption under section 10B of Act. Assessing Officer as well as CIT(A) further observed that Hon ble Delhi High Court in case of Regency Creations Limited (353 ITR 326) refers to express authorisation by Board and hence, mere approval by STPI is not sufficient to claim exemption under section 10B of Act. 4 ITA.No.1307/Hyd/2015 M/s. Mouri Tech P. Ltd., Hyderabad. 3. Aggrieved, assessee is in appeal before us. At time of hearing, Learned Counsel for assessee, adverted our attention to written submissions filed before Assessing Officer as well as CIT(A) to highlight that Inter Ministerial Communication dated 23.03.2006 issued by Secretary, Ministry of Communication and Technologies has delegated power of approval to STPI Directors and hence, approval granted by STPI should be deemed to be approval by Board and this issue has not been considered by Assessing Officer as well as CIT(A). It was further submitted that ITAT, Hyderabad Benches have consistently taken stand that assessee who obtains approval from STPI is entitled to claim exemption under section 10B of Act and in this regard, relied upon decision of ITAT, Hyderabad Bench in case of ITO vs., M/s. Megha Cyber Tech P. Ltd., vide order dated 06.06.2014 which in turn, relied upon decision of ITAT, Hyderabad Bench in case of Smt. K. Sudha Rani (ITA.No.1750/Hyd/2008 dated 30.10.2009). During course of hearing, Learned Counsel for assessee also adverted our attention to page-90 of paper book to submit that in case of Smt. K. Sudha Rani following ground was urged by Revenue but Tribunal observed that it is not relevant as to how statutory obligation or authority is delegated to STPI, since it is internal matter of Government and once STPI approves unit as 100% EOU it should be allowed exemption under section 10B of Act since it is deemed to have complied with conditions for obtaining approval from Board. CIT(A) erred in facts and in law in ignoring fact that assessee s business is not approved by Board appointed by Central Govt. in exercise of powers u/s 14 5 ITA.No.1307/Hyd/2015 M/s. Mouri Tech P. Ltd., Hyderabad. of Industries (Development and Regulation) Act, 1951 and rules made thereunder which is prescribed under Income Tax Act, for purpose of claiming deduction u/s.10B. 3.1. In this regard, Tribunal had also taken into consideration decision of Hon ble Supreme Court in case of Bajaj Tempo Limited 196 ITR 188 wherein Court observed that provision in taxing statute, granting incentives for promoting growth and development, should be construed liberally so as to advance objective of provision and not to frustrate it. Learned Counsel for assessee had also adverted our attention to page 89 of paper book to submit that in case of Smt. K. Sudha Rani Hon ble A.P. High Court (ITA.No.87 of 2013 dated 25th June, 2013) rejected appeal filed by Revenue by observing that even in assessee s own case for earlier year Revenue has accepted order passed by ITAT. Recently i.e., on 17.06.2016 ITAT, Bench, Hyderabad (ITA.No.1675/Hyd/2014) in case of DCIT, Circle-16(2), Hyderabad vs., M/s. Pennywise Solutions P. Ltd., Hyderabad had taken note of decision of Hon ble Delhi High Court in case of Regency Creations but chose to follow consistent view taken by ITAT, Hyderabad Benches which inturn, were passed inconformity with decision of Hon ble A.P. High Court as well as Hon ble Gujrat High Court, and held that assessee who obtains approval from STPI can be said to have obtained approval from Board and in such cases exemption under section 10B is allowable. Learned Counsel for assessee also referred to page-14 of paper book to submit that when there are two views possible one which is favourable to assessee should be followed, as held by 6 ITA.No.1307/Hyd/2015 M/s. Mouri Tech P. Ltd., Hyderabad. Hon ble Supreme Court in case of CIT vs. Vegetable Products Ltd., (1973) 88 ITR 192. He thus strongly submitted that view taken by Assessing Officer as well as CIT(A) deserves to be set aside and assessee should be permitted to claim exemption under section 10B of Act. 4. On other hand, Ld. D.R. strongly relied upon decision of Hon ble Delhi High Court in case of CIT vs. Regency Creations Ltd., [(2013) 353 ITR 326] to submit that interpretation placed upon Explanation to section 10B of Act deserves to be followed since law mandates obtaining approval from Ministry, independent of registration with STPI. Ld. D.R. thus strongly relied upon orders passed by tax authorities. 5. We have carefully considered rival submissions and perused record. We have also carefully perused judgment of Hon ble Delhi High Court as well as decisions rendered by ITAT, Hyderabad Benches which in turn, were confirmed by Hon ble A.P. High Court. Since we are functioning under jurisdiction of A.P. High Court which is binding on this Bench, we respectfully follow decision of Hon ble A.P. High Court as well as ITAT, Hyderabad Bench in preference to view taken by Hon ble Delhi High Court and therefore, hold that assessee is entitled to exemption under section 10B of Act subject to fulfillment of other conditions. 5.1. Even otherwise, when there are two views possible one which is in favour of assessee deserves to be taken into consideration. It is also not out of place to mention that in case of Smt. K. Sudha Rani Revenue has accepted view 7 ITA.No.1307/Hyd/2015 M/s. Mouri Tech P. Ltd., Hyderabad. taken by Hyderabad Benches for A.Ys. 2005-06 and 2006-07. Ld. D.R. could not place anything on record as to why view taken by Hyderabad Benches was accepted by Revenue. In fact, Hon ble A.P. High Court had taken note of same and assessee-company had continuously projected before Assessing Officer as well as CIT(A) that in case of Smt. K. Sudha Rani exemption was granted under section 10B of Act even though there was no separate approval by Board. Under these circumstances, Ld. D.R. ought to have obtained proper details as to why Revenue has accepted decision of ITAT as otherwise only inference possible is that Revenue has accepted legal position and therefore did not prefer to go in further appeal. Thus, even on principles of consistency Revenue ought not to have preferred further appeal even in this case. At any rate, consistent with view taken in case of other assessees we accept view of assessee and hold that assessee is entitled to claim exemption under section 10B of Act. 6. In result, appeal filed by assessee-company is allowed. Order pronounced in open Court on 21.09.2016. Sd/- Sd/- (S.Rifaur Rahman) (D.Manmohan) Accountant Member. Vice President Hyderabad, Dated 21st September, 2016 VBP/- 8 ITA.No.1307/Hyd/2015 M/s. Mouri Tech P. Ltd., Hyderabad. Copy to: 1. M/s. Mouri Tech P. Ltd., (Formerly Mouri Soft Solutions P. Ltd.,), 6-3-83, 3rd Floor, Loukya Towers, Mallampet Road, Bachupally, Hyderabad 500 090. 2. Income Tax Officer, Ward-16(1), Hyderabad. 3. CIT(A)-IV, 3rd Floor Annexe, Aayakar Bhavan, Basheerbagh, Hyderabad 500 004. 4. Pr. Commissioner of Income Tax-IV, Hyderabad 5. Departmental Representative ITAT, Bench, Hyderabad 6. Guard File. M/s. Mouri Tech P. Ltd., (Formerly Mouri Soft Solutions P. Ltd.) v. Income-tax Officer, Ward-16(1), Hyderabad