The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) held that Denial of export benefits merely due to non-availability of International Private Leased Circuit connection when the evidence for rendering of services, invoicing for the services done and realization of foreign currency are established, is not justified.
The A.R. submitted that the assessee had claimed a sum of Rs. 18,14,03,235/- as deduction under Section 10AA of the Act in respect of its SEZ unit at Chennai. It is submitted that the claim for deduction under Section 10AA of the Act commenced in the year 2010-11 when the Chennai unit was part of the erstwhile company i.e., Perot Systems Business Process Solutions India Pvt. Ltd. which was subsequently merged with the Assessee’s company.
It was submitted that the Perot was engaged in the business of process outsourcing services in the nature of data processing and software development since 1998. Until 2009, Perot had two units, one in Chennai and one in Coimbatore. Perot later set up a third unit in Chennai in a Special Economic Zone (“SEZ”) and was registered with the SEZ authorities in 2008 and the said unit commenced its activities in the year 2009. Thereby, FY 2009-10 was the first year of claim of deduction under Section 10AA of the Act for the Chennai SEZ unit.
The claim of Perot came to be disallowed by the Assessing Officer in the year AY 2010-11 on the ground that (i) the Softex forms were not certified by the SEZ/STPI authorities; (ii) the Chennai unit was formed by splitting up or reconstruction of a business already in existence and; (iii) the unit did not export any computer software. Following the order for AY 2010-11, the Assessing Officer disallowed the claim for the present assessment year also, on the basis that there was no change in the facts. The DRP remanded the issue to the Assessing Officer with a direction to verify the information furnished by the Assessee and thereafter make a disallowance, if any deficiencies were found in the information furnished.
It was further submitted that similar disallowance was made in the Assessee’s case for assessment year 2012-13 on the basis of the order for assessment year 2010-11. She submitted that this Tribunal vide its order dated 14.11.2022 in Dell International Services India Private Limited, (for the merged entity Dell India Private Limited) v. JCIT for the assessment year 2012-13 in IT(TP)A No. 932/Bang/2017 he that submission of Softex form and certification of the said form by the STIP authorities is a post facto procedure prescribed by the Reserve Bank of India and not a pre-requisite under Section 10AA. With respect of the denial of claim on the ground that the Chennai Unit was formed by splitting up of the existing units, this Tribunal he that condition set out in Section 10(4) of the Act regarding formation are to be established only in the year of formation.
After hearing both the parties, two member bench of the tribunal consisting of Beena Pillai (Judicial member) and Chandra Poojari (Accountant member) held that the denial of export benefits merely due to non-availability of International Private Leased Circuit connection when the evidence for rendering of services, invoicing for the services done and realisation of foreign currency are established, is not justified. Thus the appeal was allowed.
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