2014 (1) TMI 1637 - AT - Income Tax

Deduction u/s 10B - Held that - Assessee filed a copy of decision of ITAT Delhi 2014 (4) TMI 929 - ITAT DELHI and submitted that the issue of allowability of deduction u/s 10B of the Act has been decided in favour of the Assessee in Assessee s own case for immediately preceding assessment year to the year under consideration in this appeal. The Ld. Counsel of the Assessee drawn our attention towards Paragraph No. 7 & 8 wherein the CIT(A) concluded its findings and observations by directing the Assessing Officer to grant exemption u/s 10B of the Act to the Assessee and ITAT C Bench, Delhi upholded the findings of the CIT(A) by holding that the Assessee was entitled to exemption u/s 10B of the Act then the period of exemption started from Assessment Year 1998-99 and cannot be said to be exhausted in the year under consideration in the present appeal i.e 2006-07. - Following decision of asessee's own previous case, authorities below were not justified in rejecting the claim of the Assessee for deduction u/s 10B of the Act - Decided in favour of assessee.

Summary

Issues:
1. Deduction u/s 10B disallowed
2. Commencement of business and registration with competent board
3. Claim of deduction u/s 80HHE in earlier years affecting u/s 10B
4. Exemption u/s 10B for 100% export oriented undertaking
5. Approval as 100% EOU in F.Y 1997-98
6. Assessing Officer's denial of exemption u/s 10B based on surmises
7. Assessee entitled to exemption u/s 10B for A.Y 1998-99
8. Grounds of appeal allowed

Analysis:
1. The main issue in this case was the disallowance of deduction u/s 10B of the Income Tax Act by the Assessing Officer. The Assessee argued that the business commenced in A.Y 1998-99, not 1992-93, and that the deduction is allowed for 10 years from the year of commencement of the undertaking. The ITAT held in favor of the Assessee based on precedents and directed the Assessing Officer to grant the exemption u/s 10B for the Assessment Year 2006-07.

2. Another issue raised was regarding the commencement of business and registration with the competent board as specified in Section 10B of the Act. The ITAT observed that the Assessing Officer erred in holding that the prescribed period of 10 years for exemption u/s 10B had ended by A.Y 2001-02. The ITAT upheld the relief granted by the Commissioner of Income Tax (A) and dismissed the Revenue's appeal.

3. The Assessee also contended that the claim of deduction u/s 80HHE in earlier years should not affect the deduction u/s 10B in subsequent years. The ITAT found no legal justification for the objection raised by the Assessing Officer and allowed the Assessee's claim for exemption u/s 10B.

4. The issue of exemption u/s 10B for a 100% export-oriented undertaking was crucial in this case. The ITAT emphasized the distinction between export-oriented undertakings and normal commercial activities and held that the Assessee was entitled to the exemption for the relevant assessment year.

5. The ITAT noted that the Assessee had obtained approval as a 100% Export Oriented Unit (EOU) in the financial year 1997-98. This fact, along with the establishment of the EOU for exporting computer software, supported the Assessee's claim for exemption u/s 10B.

6. The Assessing Officer's denial of exemption u/s 10B was criticized by the ITAT as being based on surmises and conjectures. The ITAT upheld the relief granted by the Commissioner of Income Tax (A) and directed the Assessing Officer to grant the exemption to the Assessee.

7. Based on the judgment of the ITAT in the Assessee's own case for the preceding year, the ITAT held that the issue was squarely covered in favor of the Assessee. The authorities were deemed unjustified in rejecting the claim for deduction u/s 10B for the Assessment Year 2006-07.

8. The ITAT allowed the Assessee's grounds of appeal, directing the Assessing Officer to decide on the issues of Corporate Tax Adjustment, deduction from export profits, and levy of interest u/s 234B in light of the ITAT's findings and observations. The appeal of the Assessee was allowed in the manner indicated in the judgment.