Commissioner of Income Tax, Bangalore vs Maxim India Integrated Circuit Design (P.) Ltd.

N. Kumar, J.—This appeal is by the Revenue challenging the order passed by the Tribunal which has held that the assessee is entitled to the benefit of Section 10A by setting aside the order passed by the Assessing Authority as well as the Appellate Commissioner.

Assessee was incorporated on 13.03.2002 and commenced business on 1-5-2002. The assessee is a 100% captive centre providing software design and development services to its parent company M/s Maxim Integrated Products Inc. earning revenue from its services on a ''Cost Plus Model''. The assessee in the return of income filed claimed benefit u/s 10A of the income tax Act, 1961, hereinafter referred to as the Act, for the period from 1-1-2003 to 31-3-2003. The assessee had made an application to the Director, Software Technology Parks of India (STPI) at Bangalore, on 23-12-2002 and the approval, was granted by letter dated 31-12-2002. The assessee thereafter moved the Customs authorities to derive benefit granted to an STPI Unit under the Customs Regulations. The certificate of bonding was issued to the assessee on 21-1-2003. However, the Assessing Authority did not accept the case of the assessee on the ground that the application filed before STPI on 20-12-2002 was, for seeking approval to establish a new unit and not for recognizing an existing unit. Therefore, it declined to grant benefit u/s 10A of the IT Act. The appellate Commissioner held that the undertaking of the assessee in question was not formed by splitting. Therefore he held that it was a maiden business which was commenced on 1-5-2002 and the provisions of Section 10A(ii) are not applicable to the assessee''s case. Therefore, he granted the relief to the assessee as provided u/s 10A of the Act.

Challenging the aforesaid order the Revenue preferred an appeal before the Tribunal. The Tribunal declined to interfere with the order passed by the Appellate Commissioner and dismissed the appeal. Aggrieved by the same the Revenue is in appeal.

The learned Counsel appearing for the Revenue assailing the impugned order contended that it was a case of reconstruction and therefore the assessee is not entitled to the benefit of Section 10A of the Act.

The material set out amply proves that it is not a case of reconstruction as mistook by the assessing authority. The facts disclosed that the assessee commenced production from 1-5-2002 and the assessee was entitled to the benefit u/s 80HHE. However after approval was granted by the Director of STPI on 31-12-2002 the assessee was entitled to the benefit of Section 10A of the Act. This is supported by the circular No. 1/05 dated 6-1-2005 issued by the CBDT.

In fact, this Court had an occasion to consider similar case in the case of CIT v. Expert Outsource (P.) Ltd (IT Appeal No. 323 (Kar.) of 2011 dated 1-3-2011), where it has been held as under:

CBDT Circular No. 1/2005 dated 6-1-2005 grants certain benefits u/s 10B. Though the circular is in the context of Section 10B, the ratio of the circular equally applies to Section 10A also. In fact the CIT(A) has referred to various judgments on the point and had come to the conclusion that the benefit of Section 10A would also be available even when an existing units gel converted into a STPI unit. In fact the material on record discloses that no export of computer software was made before 4-8-2004. The export commenced only after 4-8-2004, The in voices produced in the case clearly establish the said fact. The appellate authority as well as the Tribunal was justified in extending the benefit of Section 10A of the unit in question.

In view of the aforesaid legal position we do not see any justification to interfere with the well considered orders passed by the appellate Tribunal. No substantial question of law do arise for consideration in this appeal. Appeal is devoid of merits and accordingly it is dismissed.