IN INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI Before Shri A. Mohan Alankamony, Accountant Member & Shri Duvvuru RL Reddy, Judicial Member IT.A. No. 1030/Mds/2016 Assessment Year :2011-12 Prumatech Infosystems Pvt. Ltd., Deputy Commissioner of No. 18, Lady Madhavan Road, Vs. Income Tax, Company Circle V(2), Mahalingapuram, Nungambakkam, Chennai. Chennai 600 034. [PAN:AACCM6405C] (Appellant) (Respondent) Appellant by : Shri S. Pattabiraman, C.A. Respondent by : Shri Supriyo Pal, JCIT Date of hearing : 19.07.2016 Date of Pronounce ment : 07.10.2016 ORDER PER DUVVURU RL REDDY, JUDICIAL MEMBER: This appeal filed by assessee is directed against order of ld. Commissioner of Income Tax (Appeals) 3, Chennai, dated 18.02.2016 relevant to assessment year 2011-12. main issued raised in appeal of assessee is that ld. CIT(A) has erred in confirming disallowance of claim of deduction of .4,21,648/-made under section 10B of Income Tax Act, 1961 [ Act in short]. 2 I.T.A. No.1030/M/16 2. Brief facts of case are that assessee is engaged in business of Information Technology and Information Technology enabled Services. assessee has filed its return of income on 30.11.2011 admitting total income of .6,61,970/- and book profit under section 115JB of Act was .14,09,991/-. case of assessee was selected for scrutiny and in order to examine claim of exemptions under section 10B of Act, notice under section 143(2) of Act was issued on 03.08.2012. Thereafter, notice under section 142(1) of Act along with questionnaire was issued on 06.11.2013. After considering submissions of assessee and by following decision in case of CIT v. Regency Creation Ltd. 353 ITR 326 (Del), Assessing Officer completed assessment under section 143(3) of Act by determining income of assessee at .13,57,110/- after making various additions. 3. assessee carried matter in appeal before ld. CIT(A). With regard to denial of deduction claimed under section 10B of act, after considering submissions of assessee and by relying on decision in case of CIT v. Live Connection Software Solution Pvt. Ltd. [no citation was mentioned by ld. CIT(A)], confirmed disallowance made by Assessing Officer. 4. On being aggrieved, assessee is in appeal before Tribunal. By filing copy of communication from STPI granting permission as 100% 3 I.T.A. No.1030/M/16 EOU, ld. Counsel for assessee has pleaded that assessee should be allowed to claim deduction under section 10B or alternatively under section 10A of Act. 5. On other hand, ld. DR supported orders of authorities below. 6. We have heard both sides, perused materials on record and gone through orders of authorities below. During course of assessment proceedings, Assessing Officer has noticed that assessee has claimed deduction under section 10B of Act. In view of Explanation 2(iv) to section 10B of Act, expression 100% EOU means undertaking which has been approved as 100% EOU by Board appointed in this behalf by Central Government under section 14 of Industrial (Development & Regulations) Act, 1951, and no such board has been established, assessee was requested to show cause as to why deduction under section 10B of Act should not be denied. assessee vide its letter dated 28.02.2014 has submitted before Assessing Officer that assessee company has been registered with Software Technology Parks of India as 100% EOU and complied with all requirements as stipulated in provisions of Income Tax Act viz., maintenance of separate books of accounts, receipt of export proceeds within stipulated period, etc. It was also submitted that approval under section 10B of 4 I.T.A. No.1030/M/16 Act as 100% EOU has been granted by competent authorities and assessee having complied with all requirements and is entitled for deduction as claimed by it. Admittedly, in this case, Director of STPI has granted permission to assessee as 100% export oriented unit under STP scheme. 7. It is pertinent to mention here that Assessing Officer viz., ACIT, Company Circle V(1), Chennai, in case of M/s. Ply Technology Solutions Private Limited for assessment year 2011-12 has allowed assessee to claim deduction under section 10B of Act since assessee was approved as 100% EOU by Director, STPI, Chennai. Whereas, in present case, Assessing Officer viz., DCIT, Company Circle V(2) has taken different stand. In latter case, against order of Assessing Officer, ld. PCIT was of opinion that assessee has not received approval from Board appointed on this behalf, by Central Government, as result of which, assessee s undertaking cannot be defined as 100% EOU and eligible to claim exemption under section 10B of Act and by passing order under section 263 of Act, he held that assessment order passed was erroneous and prejudicial to interest of Revenue directing Assessing Officer to pass fresh order. By respectfully following decision of Pune Benches of ITAT in case of ITO v. Cat Labs Pvt. Ltd. I.T.A. No. 131/PN/2013 for assessment 5 I.T.A. No.1030/M/16 year 2009-10 dated 26.02.2014, Coordinate Bench of Tribunal in case of M/s. Ply Technology Solutions Private Limited v. ACIT in I.T.A. No. 544/Mds/2016 dated 27.07.2016 has observed as under: 9. In view of above decision of Pune Benches of Tribunal, wherein, it is apparent that overwhelming view of various Benches of Tribunals have been discussed and arrived at conclusion to treat approval granted by STPI to be enough for fulfillment of condition prescribed in section 10B of Act for approval of EOU unit under section 14 of Industries (Development & Regulation) Act, 1951. Therefore, we are of opinion that benefit cannot be denied to assessee despite fact that section 10B of Act specifically talks of only registration under section 14 of Industries (Development & Regulation) Act, 1951. Thus, respectfully following decision of Pune Benches of Tribunal in case of ITO v. Cat Labs Pvt. Ltd. (supra), we set aside order passed by ld. PCIT and hold that Assessing Officer has rightly allowed deduction under section 10B of Act. Accordingly, ground raised by assessee is allowed. 8. For sake of reference, relevant findings of Pune Benches in case of ITO v. Cat Labs Pvt. Ltd. (supra) is reproduced as under: 7. We have considered rival arguments made by both sides, perused orders of Assessing Officer and CIT(A) and Paper Book filed on behalf of assessee. We have also considered various decisions cited before us. We find Assessing Officer in assessment order for A.Y. 2008-09 has also denied claim of deduction u/s.10B on ground that assessee company is not 100% EOU since it is not approved by Board appointed in this behalf by Central Government u/s.14 of Industries (Development and Regulation) Act, 1951. Further, 100% EOU as per STPI is not at par with 100% EOU approved by Board appointed u/s.14 of IDRA, 1951 by Central Government. Relying on decision of Hyderabad Bench of Tribunal in case of Infotech Enterprises Ltd. (Supra) Assessing Officer disallowed claim. We find on appeal filed by assessee, Ld.CIT(A) allowed claim of deduction u/s.10B of by observing as under : "3.3.1. I have carefully considered facts of case and law as are apparent from records. Ground No. 1 which is under consideration has been raised in argumentative manner and 6 I.T.A. No.1030/M/16 therefore, what is being considered for adjudication are "Whether in facts and circumstances of case, appellant company can be denied deduction u/s 10B only because approval was taken from body of STPI formed under Ministry of Information Technology, formed by Government for Control, monitoring and regulation of software exports and not from Board appointed on behalf of Central Government u/s 14 of Industries (Development & Regulation) Act, 1951, despite fact that in similar facts and circumstances this deduction has been allowed in earlier assessment years." From perusal of assessment order it is abundantly clear that AO has mainly relied on non-fulfillment of condition provided in section, to obtain approval from Board appointed on behalf of Central Government u/s 14 of Industries (Development & Regulation) Act, 1951 which was found specifically available in Explanation 2 to sec. 10B which defines 100% Export Oriented Unit (EOU), to which this provision applies. AO found that Explanation says that 100% export oriented undertaking means undertaking which has been approved as 100% export oriented undertaking by Board appointed in this behalf by Central Government in excise of power conferred by section 14 of Industries (Development & Regulation) Act, 1951 (65 of 1951, and rules made under that Act). As appellant had taken approval of 100% export oriented unit from STPI, technical body of Ministry of Information & Technology formed for purpose of control, monitoring and regulation of software exports, it was held by AO that status of EOU for purpose of deduction u/s 10B cannot be recognized. AO for above has also placed reliance on decision given by ITAT, Hyderabad in case of Infotech Enterprises Ltd. Vs. Jt.CIT (2003) 85 ITD 325 (Hyd). appellant has contended in detail in their submission that finding of AO is hyper technical. Ministry of Information Technology has specifically constituted STPI for granting 100% EOU approval to units engaged in manufacturing of softwares and its exports and therefore, this approval must be given recognition equivalent to Board constituted under Industries Development & Regulation) Act. appellant has placed reliance on different judgments, as can be seen from submissions quoted above, which has approved allowability of this deduction on basis of STPI registration and it was also claimed that above referred judgments have been given after taking into account judgment of Infotech Enterprises Ltd. relied upon by AO. appellant has claimed that all conditions prescribed in section have been fulfilled. From perusal of assessment order also it is evident that appellant has submitted submissions claiming that all conditions are satisfied and AO after examining submissions made by appellant has mainly held that 7 I.T.A. No.1030/M/16 appellant is not eligible because it has not obtained approval under Industries (Development & Regulation) Act, 1951. brief reference can also be seen in assessment order, which can be considered to be saying that AO was of opinion that appellant is not engaged in manufacturing of software. However, above inference of AO seems to be lacking any conviction. She has only referred to salary of directors to conclude that appellant is not engaged in business of manufacturing of software, despite fact that in submission made before her, which has been quoted in assessment order, it is evident that appellant had claimed before AO that it holds IPR for antivirus software, which are adopted and modified according to requirements of clients and countries to whom softwares are exported after putting them on compact disks. appellant has also contended that Supreme Court in case of Oracles Software India Ltd., quoted supra had held that process of transforming blank compact disks into software loaded disks amounts to manufacturing. appellant had also contended before AO that definition available in section in Explanation 2 of section 10B clearly says that computer software means any computer programme recorded on any disk, tape, perforated media, or other information storage device or any customized electronic data or any product or service of similar nature will constitute software which are exported or transmitted from India to any place outside India by any means. AO has not examined any of these claims of appellant before saying in ambiguous manner that appellant is not engaged in activity of software manufacturing on basis of salary and note on activity. Therefore, it is clear from perusal of assessment order that AO has failed to appreciate materials placed before her in light of provisions contained u/s 10B and interpretations given to relevant issues in different judgments and has concluded without any basis that appellant is not engaged in business of manufacturing of software. In view of above and fact that submissions of appellant has remained uncontroverted, demonstrating that appellant is engaged in activity of manufacturing of softwares, it has to be held that aforesaid finding of AO is not correct. Therefore, it has to be considered in facts of case available on record that appellant is engaged in business of software manufacturing and export. Now coming to main objection of AO that approval is not under sec. 14 of Industries (D&R) Act, 1951, it is noted that there is no dispute to fact that approval for EOU available with appellant is not from Board constituted u/s 14 of Industries (D&R) Act, 1951, but is from STPI. However, claim of appellant that STPI is body constituted by Govt. of India for specific purpose of granting approval of EOU status to units engaged in manufacturing and exports of softwares and therefore, same is equivalent and serving same purpose is required to be considered, is required to examined. For this purpose, appellant has referred to comparative table giving reference to benefit of section 10B in Foreign Trade Policy of 2004-2009 vis-a-vis Export Import Policy, 2002- 8 I.T.A. No.1030/M/16 2007 and Export Import Policy 1992-1997, to bring point to fore that Government has accepted grant of benefit u/s 10B under approval granted by STPI. appellant has also claimed that Assessing Officer has incorrectly followed decision of ITAT, Hyderabad given in case of Infotech Enterprises Pvt. Ltd. Vs. JCIT (2003) 80 TTJ (Hyd) 589, which was delivered before issuance of Instruction No. 1 of CBDT dated 31.3.2006 and Minutes of Industrial Ministerial Communication vide letter dated 23.3.2006 issued by Ministry of Communication & Technology. For above, appellant relied on Instruction No. 1 of 2006 of CBDT and decision of ITAT, Delhi 'H' Bench given in case of DCIT Vs. Valliant Communications Ltd. (ITA No. 2706/Del/2008/ A.Y. 2005-06). appellant has also placed reliance on decision of ITAT Delhi 'F' Bench given in case of Regency Creations Ltd. Vs. ACIT Cir.15(1), New Delhi, ITA No. 1588/Del/2010/A.Y. 2007-08); ITAT, Ahmedabad 'B' Bench given in case of ITO Ward 4(1) Vs. E-Enfochip Ltd. (ITA No. 2311/Ahd/2008/A.Y. 2005-06); ITAT Delhi 'H' Bench decision given in case of DCIT, Cir.16(1) Vs. Technovate E-Solutions Pvt. Ltd. (ITA No. 135/Del/2011/A.Y. 2003-04); CIT Vs. Excell Softech Ltd. (2008)219 CTR (P&H) 405. It can be seen that finding of Assessing Officer that sec. 10B required registration by Board constituted u/s 14 of Industries (Development & Regulation) Act, 1951, is perfectly correct but claim of appellant that above requirement should be construed to have been legally fulfilled as per directions of Ministry of Communication & Technology and Instruction issued by CBDT on similar issue for registration u/s 10A, also looks correct. Instruction No. 1 of 2006 of CBDT dated 31.3.2006, is in respect of sec. 10A but in this Instruction it has been accepted that confusion existed in respect of authorities whose approval should be considered to be fulfilling conditions prescribed in sec. 10A and in view of same Instruction directed Assessing Officer as under: "6. matter has been examined in consultation with Officers of Department of Information Technology (earlier, Department of Electronics). In view of ambiguity in legal status of approval by Director of STPs, Inter-Ministerial Standing Committee will meet to consider approvals by Directors of STPs issued in past. Therefore, with view to avoid infructuous demand raised in assessment and reassessment of assesses claiming deduction u/s 10A, it has been decided that claim of deduction u/s 10A of Income tax Act, shall not be denied to STP units only on ground that approval/ registration to such unit has been granted by Directors of Software Technology Parks. However, it has to be ensured that all other conditions specified in sec. 10A are fully satisfied before allowing any such claim." 9 I.T.A. No.1030/M/16 Tribunals have in judgments relied upon by appellant, after 2006 have come to conclusion that registration granted by STPI should be considered as enough for fulfillment of this condition. Tribunals have also considered Minutes of Industrial Ministerial Communication vide letter dated 23.3.2006 issued by Ministry of Communication &Technology, as discussed in detail in case of DCIT Vs. Vallient Communications Ltd. In Regency Creation Ltd. judgment given in ITA No. 1588/Del/2010/ A.Y. 2007- 08, Hon'ble ITAT also relied on clarification obtained under RTI, which had stated that no approval / ratification of STPI approval is required from BOA formed by Ministry of Commerce u/s 14 of Industries (Development & Regulation) Act, 1951. For above reason, Tribunals have found that decision of Infotech Enterprises Ltd., 85 ITD 325 (Hyd) will not be applicable after 2006. In view of discussions made above, from which it is apparent that overwhelming view of Tribunals have been to treat approval granted by STPI to be enough for fulfillment of condition prescribed in sec. 10B for approval of EOU unit under sec. 14 of Industries (Development & Regulation) Act, 1951 and on this ground benefit cannot be denied has to be accepted despite fact that sec. 10B specifically talks of only registration u/s.14 of Industries (Development & Regulation) Act, 1951. Since Assessing Officer in this case has only raised this issue, same has to be not allowed in view of discussions made above. Ground No. 1 therefore, is allowed. Tribunal in above relied cases have also allowed benefit on 'principle of consistency', which is applicable in this case also. It was demonstrated by AR that similar benefit u/s 10B was allowed by AO in earlier assessment years and no action to withdraw same has been taken. Thus on this basis also Ground No. 1 is required to be allowed." 7.1 We find although tax effect was more than prescribed monetary limit Revenue has not filed any appeal against order of CIT(A) for A.Y. 2008-09. We find CIT(A) while allowing appeal of assessee for A.Y. 2009-10 has followed his earlier order under identical facts and circumstances. We find Ld.CIT(A) in his order for A.Y. 2008-09 has distinguished decision of Hyderabad Bench of Tribunal in case of Infotech Enterprises Ltd. (Supra) and following various other decisions has allowed claim of deduction u/s.10B. Ld. Departmental Representative could not point out any mistake in order of Ld.CIT(A) nor could cite any other decision to controvert finding given by Ld.CIT(A). Since order of CIT(A) is based on various decisions including CBDT Instruction No.1/2006, therefore, in absence of any contrary material brought to our notice, we find no infirmity in order of CIT(A). Accordingly, we uphold same. grounds raised by Revenue are accordingly dismissed. 10 I.T.A. No.1030/M/16 In view of above findings, it has been concluded that to treat approval granted by STPI to be enough for fulfillment of condition prescribed in section 10B of Act for approval of EOU unit under section 14 of Industries (Development & Regulation) Act, 1951. Therefore, we are of opinion that benefit cannot be denied to assessee despite fact that section 10B of Act specifically relates to registration under section 14 of Industries (Development & Regulation) Act, 1951. However, in present case, assessee has filed copy of order of Director, STPI, Chennai, Ref. No. STPIC/IMSC/2005-06/2163 dated 8/12.12.2005, wherein, as per terms of conditions at para 3, it has been mentioned that above letter of permission is valid for 3 years from its date of issue and validity has to be get extended before lapse of term. Moreover, assessee has not filed any other details as to whether it has complied with terms and conditions as laid down letter of permission accorded by STPI. To that extent, Assessing Officer is directed to verify and if assessee is found to have been complied with terms and conditions stipulated by STPI, then assessee should be allowed to claim of deduction under section 10B of Act. 9. alternative plea raised by assessee for claiming deduction under section 10A of Act become infructuous and does not warrant adjudication by us since we hold that assessee is eligible to claim 11 I.T.A. No.1030/M/16 deduction under section 10B of Act if assessee has complied with terms and conditions of STPI granting permission as 100% EOU. 10. In result, appeal filed by assessee is allowed for statistical purposes. Order pronounced on 07th October, 2016 at Chennai. Sd/- Sd/- (A. MOHAN ALANKAMONY) (DUVVURU RL REDDY) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, 07.10.2016 Vm/- Copy to: 1. Appellant, 2. Respondent, 3. CIT(A), 4. CIT, 5. DR & 6. GF. Prumatech Infosystems Pvt. Ltd. v. Deputy Commissioner of Income-tax, Company Circle-V(2), Chennai