2018 (6) TMI 269 - AT - Income Tax

Deduction u/s.10B - claim denied as assessee company is not involved/carried out any such of export business which is covered u/s.10B - nature of business of the company - CIT(A) gave relief to the assessee on the basis that assessee was having unit in SEZ and same was approved by the development Commissioner - Held that - Both the lower authorities have been failed to ascertain that what assessee is actually doing and just bury the lead. Assessee is claiming that he has been doing research and development in pharmaceutical in the export drug related services. Assessee claimed that they fall in the category of back office operation and in the audit report it is also mentioned that assessee is doing research and development work related to drugs and healthcare. But both authorities have not ascertained to the effect that what actually assessee is doing. Therefore, we set aside the orders of the CIT(A) in both appeals and remit this matted back to the file of the ld. AO to decide the nature of business of the company. - Decided in favour of revenue by way of remand.

Summary

Issues Involved:
Appeals by revenue against CIT(A) orders for AYs 2008-09 and 2009-10 regarding deduction u/s.10B of the I.T. Act.

Analysis:

Issue 1: Deduction u/s.10B for AY 2008-09
The assessee claimed exemption u/s.10B for income from Research & Development activities. The AO sought clarifications on export-related activities to determine eligibility for the deduction. The assessee justified the claim citing CBDT notifications and permissions from the Development Commissioner. However, the AO rejected the claim due to lack of evidence of software export and non-compliance with reporting requirements under Section 10B. The CIT(A) allowed the appeal based on SEZ unit approval and CBDT instructions. The ITAT found fault with both lower authorities for not properly investigating the nature of the assessee's business. The case was remitted to the AO for further examination.

Issue 2: Deduction u/s.10B for AY 2009-10
In the appeal for AY 2009-10, the department challenged the CIT(A)'s decision to delete the disallowance of deduction u/s.10B. The ITAT's decision in this regard was not explicitly mentioned in the summary provided.

In conclusion, the ITAT allowed both appeals for statistical purposes, directing a reevaluation of the assessee's eligibility for deduction u/s.10B by the AO. The judgment highlighted the importance of properly determining the nature of the business to ascertain the applicability of tax deductions under Section 10B of the I.T. Act.