2014 (2) TMI 1225 - AT - Income Tax

Eligible profit u/s 10B - inclusion of export profits as claimed by the assessee - reveision u/s 263 - Held that - Since the issue in question stands squarely decided in favour of the assessee by the ITAT Special Bench order in the case of Maral Overseas Ltd. (2012 (4) TMI 345 - ITAT INDORE ), which has not been disturbed by any superior authority, is binding on us. Respectfully following the same, we hold that on merits the assessee s computation of eligible profit u/s 10B is to be allowed after including the export profits as claimed by the assessee. In view thereof, without going into technicalities of validity of sec. 263 we uphold the action u/s 263 and the issue on merits is decided in favour of the assessee

Summary

Issues:
1. Validity of assessment order passed by AO under section 143(3) of the Income-tax Act, 1961.
2. Correctness of the claim of deduction under section 10B as worked out by the assessee.
3. Jurisdiction of CIT under section 263 to set aside the assessment order.
4. Interpretation of provisions of section 10B for computing eligible profits.

Analysis:

Issue 1:
The assessee appealed against the order of CIT-VIII, New Delhi dated 29-01-201307 passed under section 263 of the Income-tax Act, 1961 relating to A.Y. 2008-09. The assessing officer did not record observations or findings about the allowability of the claim of deduction under section 10B as worked out by the assessee.

Issue 2:
The CIT set aside the assessment order back to the assessing officer, finding it erroneous and prejudicial to the interests of revenue. The CIT directed the assessing officer to examine whether the deduction claimed and allowed under section 10B is in accordance with the law, citing the decision of the Hon'ble Supreme Court in the case of Liberty India. The assessee contended that the issue stands settled in their favor by the ITAT Special Bench judgment in the case of Maral Overseas Ltd., where it was held that the calculation of eligible profits under section 10B should include export profits.

Issue 3:
The CIT's order under section 263 was challenged by the assessee. The ITAT upheld the action under section 263, relying on the ITAT Special Bench judgment in the case of Maral Overseas Ltd., which had decisively ruled in favor of the assessee. The ITAT held that the Special Bench judgment was binding and that the assessee's computation of eligible profit under section 10B, including export profits, should be allowed.

Issue 4:
The ITAT analyzed the provisions of section 10B for computing eligible profits. It noted that section 10B(1) allows deduction for profits derived by a 100% EOU, and section 10B(4) provides a formula for computing profits derived by the undertaking from export. The ITAT emphasized that the calculation of eligible profits under section 10B should include export incentives, as per the ITAT Special Bench judgment and CBDT Circular.

In conclusion, the ITAT allowed the assessee's appeal, setting aside the CIT's order and upholding the computation of eligible profit under section 10B as claimed by the assessee, in line with the ITAT Special Bench judgment.