2017 (7) TMI 1252 - AT - Income Tax

Deduction u/s 10A/10AA - Held that - If the first sale is effected after the unit is recognized as STP, then the assessee is entitled to benefit of sec 10A even though the unit started production before it become a STP unit. In the instant case, the assessee has demonstrated that first invoice has been raised after it has obtained the approval of STPI. Thus, the issue of claim of exemption u/s 10A is covered by the decisions of this Bench in the case of M/s Infosys Technologies ltd 2005 (7) TMI 667 - ITAT BANGALORE . Following that order, we hold that the Id. CIT(A) was justified in allowing exemption u/s 10A for units 2, 3 and 4. In respect of unit 4, the deduction is held as admissible as the first invoice is raised after STPI approval. - Decided in favour of assessee.

Summary

Issues:
- Disallowance of deduction under section 10A for Unit 4
- Interpretation of conditions under section 10A of the Act
- Reliance on decisions challenged before appellate authorities
- Dismissal of Revenue's appeal against the order of the CIT-A

Disallowed Deduction under Section 10A for Unit 4:
The appeal by the Revenue challenged the CIT-A's order directing the AO to delete the additions made with regard to the deduction availed under section 10A for Unit 4. The AO disallowed the deduction under section 10A for Unit 4, amounting to &8377; 15,94,71,545, as the unit was not considered eligible for the deduction since it did not commence production in the customs bonded area. The CIT-A allowed relief to the assessee, following the order of the ITAT, Bangalore bench for several assessment years. The CIT-A's decision was based on the assessee's initiation of production before obtaining the license for the bonded warehouse, which led to the deduction being disallowed by the AO. However, the CIT-A found that the issue was decided in favor of the appellant by the ITAT in previous years with similar facts, allowing the deduction for Unit 4 under section 10A.

Interpretation of Conditions under Section 10A of the Act:
The case involved the interpretation of conditions under section 10A of the Act regarding eligibility for deductions. The AO disallowed the deduction for Unit 4 based on the premise that the unit was not set up in accordance with the STPI scheme and was not custom bonded at the time of establishment. The CIT-A, following the ITAT's decision in previous years, allowed the deduction under section 10A for Unit 4, emphasizing that the first invoice was raised after obtaining STPI approval, which aligned with the conditions for claiming exemption under section 10A. The CIT-A's decision was supported by the ITAT's ruling in the appellant's own case for earlier assessment years.

Reliance on Decisions Challenged Before Appellate Authorities:
The Revenue raised concerns regarding the decisions relied upon by the CIT-A, stating that those decisions had been challenged before various appellate authorities. However, the ITAT found that the CIT-A's order was well-reasoned and in line with the ITAT's previous decisions in the appellant's favor. The ITAT noted that the CIT-A's decision was based on the specific facts of the case and the application of relevant legal provisions, and no adverse findings from higher appellate courts were presented to warrant interference with the CIT-A's order.

Dismissal of Revenue's Appeal:
Ultimately, the ITAT dismissed the Revenue's appeal against the CIT-A's order, upholding the decision to allow the deduction under section 10A for Unit 4. The ITAT found no errors in the CIT-A's reasoning and decision-making process, concluding that the order was well-founded and did not require any intervention. Consequently, the appeal of the Revenue was dismissed, affirming the CIT-A's decision in favor of the assessee.

This judgment highlights the meticulous analysis of the eligibility criteria for deductions under section 10A of the Act, emphasizing the importance of adhering to statutory requirements and precedent-based interpretations in tax assessments.