2010 (10) TMI 624 - AT - Income Tax

Exemption u/s 10B - Since, in the present year, the assessee is eligible for deduction u/s 10B and not u/s 10A and by mistake, the assessee claimed deduction u/s 10A but instead of that, the assessee should be allowed u/s 10B of the Act - It was also submitted that the amount of deduction to be allowable to the assessee will remain the same even u/s 10B - Therefore, merely because the claim was made under the wrong section, the claim of the assessee should not be rejected if it is found that otherwise, the assessee is eligible for deduction u/s 10B - Hence, set aside the order of the Ld CIT(A) on this issue and restore back the entire matter to the file of the Assessing Officer for a fresh decision after examining the claim of the assessee as to whether the assessee is eligible for deduction u/s 10B - Appeal filed by the assessee stand allowed for statistical purposes.

Summary

Issues:
Assessee's eligibility for deduction u/s 10B instead of u/s 10A.

Detailed Analysis:

1. Assessee's Claim for Deduction: The assessee filed an appeal against the order of Ld CIT(A) upholding the decision that the profit of the undertaking did not qualify for exemption u/s 10A. The assessee argued that they were entitled to exemption u/s 10B instead, based on the conversion and registration of the unit as a 100% EOU. The Assessing Officer disallowed the claim of deduction u/s 10A without considering the alternate claim for deduction u/s 10B. The Ld CIT(A) also failed to examine the eligibility of the assessee for deduction u/s 10B. The appellant submitted a certificate from auditors certifying that the claim for deduction u/s 10A was a mistake and that the correct claim should be u/s 10B.

2. Legal Provisions and Circular: The appellant relied on Board's Circular No.1 of 2005, which allows deduction u/s 10B for undertakings previously set up in the domestic tariff area and subsequently converted into 100% EOU. The appellant's undertaking was initially established as a DTA unit and later approved as a 100% EOU. The validity of the approval was until 31.3.2010. The appellant argued that they fulfilled the conditions for deduction u/s 10B as per the Circular.

3. ITAT Decision: The ITAT found merit in the appellant's argument that they should be allowed deduction u/s 10B instead of u/s 10A. The ITAT held that even though the claim was initially made under the wrong section, if the appellant was eligible for deduction u/s 10B, the claim should not be rejected solely based on the incorrect section mentioned. Therefore, the ITAT set aside the order of Ld CIT(A) and remanded the matter to the Assessing Officer to re-examine the claim of the assessee for deduction u/s 10B. The Assessing Officer was directed to provide a fresh decision after giving the assessee a fair opportunity to present their case.

4. Outcome: The ITAT allowed the appeal filed by the assessee for statistical purposes, indicating that the matter was remanded back to the Assessing Officer for a fresh decision on the eligibility of the assessee for deduction u/s 10B. The order was pronounced in the open court on 26th October 2010.