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2010 (4) TMI 1097 - AT - Income TaxDeduction u/s 10B denied - STP unit cannot automatically be regarded as a 100% EOU - whether CIT(A) has erred allowing deduction u/s 10B to the assessee company which is in contravention of the statutory requirement contained in Explanation 2(iv) of section 10B which stipulates a mandatory condition that a hundred per cent export oriented undertaking means an undertaking 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 1951)and the rules made under the Act? HELD THAT - We find that this issue has been decided by Ld CIT(A) on the basis of Instruction No.1 dated 31.3.2006 issued by CBDT and Minutes of Industrial Ministerial Communication vide letter dated 23.3.2006 issued by the Ministry of Communication and Technology. Since the facts are identical in the present case, this Tribunal decision rendered in the case of regency Creations Ltd. 2011 (5) TMI 943 - ITAT DELHI is directly applicable in the present case and respectfully following this Tribunal decision, We hold that the STIP registration granted to the assessee on 16.11.1998 is valid for allowing deduction to the assessee u/s 10B and hence we do not find any reason to interfere in the order of the Ld CIT(A) on this issue. We would also like to point out that in an earlier year i.e. AY 2004-05, the AO himself has allowed deduction u/s 10B to the assessee in a scrutiny assessment. It is also not brought on record by the revenue that this order is revised u/s 263 or reopened u/s 147. Under these facts, we feel that having decided in assessment year 2004-05 that the assessee is eligible for deduction u/s 10B, it cannot be denied in this subsequent year on the basis that the assessee is not an 100% EOU for the reason that necessary approval is not with the assessee. This is against the rule of consistency. For this reason also, we decline to interfere in the order of Ld CIT(A). In the result, the appeal of the revenue is dismissed.
Issues Involved:
1. Exemption claim under Section 10B of the Income Tax Act, 1961. 2. Validity of approval by the Software Technology Park of India (STPI) as a 100% Export Oriented Unit (EOU). 3. Consistency in the application of tax exemptions across assessment years. 4. Alternative claim for deduction under Section 10A of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Exemption Claim under Section 10B: The primary issue was whether the assessee was entitled to an exemption under Section 10B of the Income Tax Act, 1961, amounting to Rs. 1,70,17,473/-. The Assessing Officer (AO) disallowed this claim, stating that the assessee did not have the necessary approval from the Board appointed by the Central Government as required under Explanation 2(iv) of Section 10B. The AO referenced a previous Tribunal decision (Infotech Enterprises Ltd. v. JCIT) to support this disallowance. 2. Validity of Approval by STPI as a 100% EOU: The assessee provided an approval dated 16.11.1998 from the Deputy Director (Tech.) of STPI, Noida, which the AO did not consider valid for Section 10B purposes. The CIT(A) reversed this decision, citing Instruction No.1/2006 from the CBDT and a letter from the Ministry of Communication and Technology, which clarified that approvals by STPI Directors are valid for 100% EOU status. The Tribunal upheld this view, noting that a similar issue was resolved in the assessee's favor in the case of Regency Creations Ltd., where STPI approval was deemed sufficient for Section 10B deductions. 3. Consistency in Tax Exemptions: The CIT(A) and the Tribunal emphasized the principle of consistency, noting that the assessee had been granted the Section 10B exemption in previous years (2003-04 and 2004-05) under scrutiny assessments. The Tribunal held that without any change in facts or law, the AO could not deny the exemption in the subsequent year (2005-06). The Tribunal cited the rule of consistency and noted that the AO had not revised or reopened the previous year's assessment where the exemption was allowed. 4. Alternative Claim for Deduction under Section 10A: The assessee made an alternative claim for deduction under Section 10A in case the Section 10B exemption was denied. However, since the Tribunal upheld the Section 10B exemption, the alternative claim under Section 10A was deemed unnecessary and dismissed as infructuous. Conclusion: The Tribunal dismissed the revenue's appeal and upheld the CIT(A)'s decision to allow the Section 10B exemption to the assessee. The Tribunal also dismissed the assessee's cross-objection as infructuous, given the favorable decision on the primary issue. The judgment reinforced the validity of STPI approvals for Section 10B purposes and the importance of consistency in tax assessments across different years.
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