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The Income Tax Officer Ward-3(2)Hyderabad Appellant Vs. M/s. Supreme Netsoft Pvt.Ltd., Hyderabad
June, 25th 2012


                   ITA No. 1301/Hyd/2011
                   Assessment year 2008-09

The Income Tax Officer       Vs.   M/s. Supreme Netsoft Pvt.
Ward-3(2)                          Ltd., Hyderabad
Hyderabad                          PAN: AAJCS5043H
Appellant                          Respondent

                  Appellant by: Shri K. Viswanatham
                Respondent by: Shri Balaji Nagaraj

               Date of hearing: 28.05.2012
       Date of pronouncement: 22.06.2012



     This appeal by the Revenue is directed against the order of
the CIT(A)-IV, Hyderabad dated 13.5.2011.

2.   The Revenue raised the following grounds of appeal:
     2.    The CIT(A) erred in allowing the appeal of the
     assessee in spite of non-compliance to the statutory

     3.     The CIT(A) should have confirmed the addition/
     disallowance made u/s. 10B since the assessee failed
     to produce the "Ratification" by the Development
     Commissioner as envisaged in instruction dated

     4.    The CIT(A) erred in applying the decision in the
     case of Smt. K. Sudha Rani vs. ITO in ITA No. 1750/
     Hyd/2008 when the facts of the assessee's case do not
     squarely fit in the facts of the above cases.

3.   Brief facts of the case are that the assessee company is
engaged in the business of development of Computer software and
export thereof outside India. During the year it was into the
                                  2                  I.T.A. No. 1301/Hyd/2011
                                                 M/s. Supreme Netsoft Pvt. Ltd.

business   of   consultancy,   project     development,      professional
services and accounting work done as per agreement with M/s.
Supreme Soft Inc., USA. During the year it had claimed deduction
of Rs. 43,22,403/ - under sec. 10B of the Act.

4.    The Assessing officer noticed from the letter issued by the
Director, STPI Hyderabad dated 19.4.2007 that the assessee
company was approved as a 100% EOU under the STP scheme.
From the information filed by the assessee it was noticed that the
assessee had raised four invoices for US$ 4,47,000 and one
invoice for Euro 494.6. Against these invoices, the assessee had
received payments to the tune of Rs. 1,80,13,145/- both in
advance and partly after the invoice were raised. In support of its
claim, the assessee had filed copies of the FICRs relating to the
receipts against export of the software.

5.    However, on being required by the Assessing officer, the
assessee failed to submit the approval of the Board and the
ratification by the Development Commissioner, as envisaged in the
instruction dated 9.3.2009 (file No. 178/19/2008-ITA-1) in
support of its claim for the deduction u/s. 10B, so claimed. The
Assessing officer, therefore, opined that the assessee had failed to
get the necessary approval from the Board appointed by the
Central Government in exercise of the powers conferred by sec. 14
of the Industries (Development and Regulation) Act, 1951 and the
rules made under that Act. Accordingly, he disallowed the claim
made by the assessee.

6.    The learned DR submitted that for granting deduction u/s.
10B the assessee is required to be duly approved by the Board
appointed in this behalf by the Central Government in exercise of
the powers conferred by section 14 of the Industries (Development
and Regulation) Act, 1951 (65 of 1957) and the rules made under
                                         3                    I.T.A. No. 1301/Hyd/2011
                                                          M/s. Supreme Netsoft Pvt. Ltd.

that Act. According to the DR, the assessee is not duly approved
by the competent authority to grant deduction u/s. 10B of the Act.
As the assessee has not furnished necessary approval of the Board
as required under the Act, the deduction u/s. 10B cannot be

7.    On the other hand, the learned AR relied on the order of the
Tribunal in the case of VSN Makro Technologies Pvt. Ltd. in ITA
No. 1057/Hyd/2010 for assessment year 2007-08 dated 13th
January, 2011 wherein at para 10 it was held as follows:
      "10. We have heard both the parties and perused the materials
      available on record. The contention of the assessee's counsel is
      that the assessee is 100% EOU entitled for exemption u/s 10A and
      wrongly claimed the deduction u/s 10B and it was a technical
      mistake in claiming deduction u/s 10B. The assessee's counsel
      further argued that the assessee has fulfilled all the requirements
      of provisions of Section 10A. However, this claim of the assessee
      not examined by the lower authorities and they stick to one
      contention that the assessee claim u/s 10B is not allowable. We
      are agreeing with the department that the condition for allowance
      of deduction u/s 10A and 10B are stood on different footing.
      However, the department cannot thrust upon the assessee to avail
      deduction u/s 10B only. If the assessee entitled for deduction u/s
      10A instead of 10B, that claim required to be examined by the
      assessing officer in all fairness. The issue of allowance of
      deduction u/s 10A though assessee made a claim before the lower
      authorities has not examined by the assessing officer. In the facts
      and circumstances of the case, we are of the considered opinion
      that it shall be in the interest of justice to set aside the issue in the
      grounds of appeal of the assessee to the file of assessing officer
      with a direction to decide the issue in accordance with law after
      providing reasonable opportunity to the assessee, and also to give
      a specific finding whether the assessee is entitled to deduction u/s
      10A of the Act or not. The assessee may file any evidence in
      support of its claim for deduction before the assessing officer. We
      make it clear that our observations herein above shall not have
      any bearing on the decision of the assessing officer with regard to
      the merits of the claim of the assessee for deduction u/s 10A of the
      Act. We direct accordingly."

8.    We have heard both the parties and perused the material on
record.    We have carefully gone through the orders of the lower
authorities.    In our opinion, the CIT(A) has erred in granting
                                       4                   I.T.A. No. 1301/Hyd/2011
                                                       M/s. Supreme Netsoft Pvt. Ltd.

deduction u/s. 10B without due approval from the competent
authority. Accordingly, in view of the order of the Tribunal cited
above, we remit back the issue to the file of the Assessing Officer
in similar lines to examine the issue in the light of the above.

9.      In the result, Revenue appeal is partly allowed for statistical

     Order pronounced in the open court on 22nd June, 2012.

              Sd/-                                  Sd/-
          (SAKTIJIT DEY)                      (CHANDRA POOJARI)
        JUDICIAL MEMBER                      ACCOUNTANT MEMBER

Hyderabad, dated the 22nd June, 2012

Copy forwarded to:

1.      The Income Tax Officer, Ward-3(2),Room No. 726, 7th Floor, I.T.
        Towers, AC Guards, Hyderabad-500 004.
2.      M/s. Supreme Netsoft Pvt. Ltd., 402, Aditya Trade Centre, Ameerpet,
        Hyderabad-500 038.
3.      The CIT(A)-IV, Hyderabad.
4.      The CIT-III, Hyderabad.
5.      The DR ­ A Bench, ITAT, Hyderabad.

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