2017 (3) TMI 1658 - AT - Income Tax

Denial of deduction u/s 10B - claim not allowable to the assessee in respect of the production of non-EOU unit - Held that - The claim of deduction under Section 10B of the Act cannot be denied merely on the ground that the iron ore excavated from the mining area belonging to EOU got processed through its plant and machinery located outside the bonded area. Further the raw material as well as the finished product both belong to assessee and exported by the assessee therefore, there is no violation of any condition as provided under Section 10B of the Act for claim of benefit of deduction under Section 10B of the Act. Accordingly, we set aside the orders of the authorities below on this issue and allow the claim of the assessee. - Decided in favour of assessee.

Summary

Issues:
- Denial of deduction under Section 10B of the Income Tax Act for the Assessment Years 2009-10 to 2011-12.
- Charging of interest under Section 234B & 234C of the Act.

Analysis:
1. Denial of Deduction under Section 10B:
The case involved a partnership firm engaged in mining of iron ore for export, with one undertaking as a 100% Export Oriented Unit (EOU). The dispute centered around the deduction under Section 10B for the EOU unit. The firm claimed the deduction for profits of the EOU, which was accepted in previous assessments. The Assessing Officer denied the claim citing that production was done outside the bounded area by a plant called Sesa Plant. The firm argued that all exports were approved by authorities and no violation occurred. The Tribunal noted that the EOU unit was approved for the entire mining area, and while iron ore processing was done outside the bounded area, both raw material and finished product belonged to the firm. Relying on relevant case law, the Tribunal held that the claim of deduction under Section 10B could not be denied based on the location of processing, as no conditions were violated. The orders of the authorities denying the claim were set aside, and the firm's claim was allowed.

2. Charging of Interest under Section 234B & 234C:
The issue of charging interest under Sections 234B & 234C of the Act was deemed consequential in nature, following the decision in favor of the firm on the deduction under Section 10B. As the appeals of the firm were allowed concerning the deduction, the charging of interest was considered consequential. Therefore, the appeals of the firm were allowed, and the interest issue was not separately addressed.

In conclusion, the Appellate Tribunal ITAT Bangalore ruled in favor of the firm regarding the denial of deduction under Section 10B for the Assessment Years 2009-10 to 2011-12. The Tribunal found that the location of processing outside the bounded area did not disqualify the firm from claiming the deduction under Section 10B. As a result, the firm's appeals were allowed, and the issue of charging interest under Sections 234B & 234C was considered consequential and not separately addressed.