2011 (7) TMI 518 - HC - Income Tax

Deduction u/s 10A - Revenue contended that it was a case of reconstruction and therefore the assessee is not entitled to the benefit of Section 10A - Held that - The material set out amply proves that it is not a ease of reconstruction as mistook by the assessing authority. The facts disclosed that the assessee commenced production from 01.05.2002 and the assessee was entitled to the benefit under Section 80HHE. However, after approval was granted by the Director of STPI on 31.12.2002, the assessee was entitled to the benefit of Section 10A of the Act This is supported by the circular No. 1/05 dated 06.01.2005 issued by the CBDT - Decided in favour of assessee.

Summary

Issues:
1. Entitlement to benefit under Section 10A of the Income Tax Act.
2. Interpretation of the term "reconstruction" in relation to tax benefits.
3. Application of CBDT Circular No. 1/05 dated 06.01.2005 to the case.
4. Justification for extending the benefit of Section 10A to the assessee.

Analysis:
1. The appeal was filed by the Revenue challenging the Tribunal's decision granting the assessee the benefit of Section 10A, overturning the orders of the Assessing Authority and the Appellate Commissioner. The assessee, a captive center providing software services, claimed the benefit for the period from 01.01.2003 to 31.03.2003. The Assessing Authority initially rejected the claim, stating the application to STPI was for a new unit, not an existing one. However, the Appellate Commissioner found the assessee to be a maiden business and granted the relief under Section 10A.

2. The Revenue contended that the case involved reconstruction, disqualifying the assessee from Section 10A benefits. The Court disagreed, finding that the facts showed the assessee started production before the STPI approval, making them eligible for Section 10A benefits. Referring to CBDT Circular No. 1/05 dated 06.01.2005, the Court supported the assessee's entitlement to the benefit post-STPI approval.

3. Citing a previous case, the Court emphasized that the benefit of Section 10A can apply even when an existing unit converts into an STPI unit. The Court noted that no export of software occurred before a specific date, supporting the extension of Section 10A benefits to the assessee. The appellate authority and the Tribunal were deemed justified in granting the benefit.

4. Based on the legal position and precedents, the Court found no grounds to interfere with the Tribunal's decision. No substantial legal questions arose for consideration, leading to the dismissal of the Revenue's appeal. The Court concluded that the appeal lacked merit, affirming the extension of Section 10A benefits to the assessee.