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2019 (3) TMI 400 - AT - Income TaxDisallowance of deduction claimed u/s 10B on call centre operation - no approval from Deputy Director STPI - Delegation of power to grant approval to other officer - CBDT Instruction (F.No.178/19/2008-IT-I) dated 9th March 2009 - HELD THAT - Relying decision in WIZARD ENTERPRISES PVT. LTD 2016 (3) TMI 1020 - ITAT KOLKATA we direct the AO to grant deduction u/s 10B of the Act to the assessee in the facts and circumstances of the case - decided in favour of assessee.
Issues Involved:
1. Whether the disallowance of deduction claimed under Section 10B of the Income Tax Act, 1961, by the Assessing Officer (AO) and upheld by the Commissioner of Income Tax (Appeals) [CIT(A)] was justified. Issue-wise Detailed Analysis: 1. Background and Facts: The assessee operates two main business verticals: software development and running a call center. The income from the call center was claimed as exempt under Section 10B of the Income Tax Act, 1961. The assessee was registered under the Software Technology Park (STP) scheme as a 100% Export Oriented Unit (EOU) on 28.01.2005, with renewal on 27.07.2010. The AO disallowed the deduction claimed under Section 10B due to the lack of approval from the Board of Approval for the EOU scheme. 2. Conditions for Section 10B Exemption: The AO and the assessee's arguments revolved around the provisions of Section 10B, as clarified by CBDT Instruction No. 2/2009 dated 09.03.2009 and its rectification on 08.05.2009. The instruction specifies that an undertaking must: i) Be approved by the Development Commissioner. ii) Have the approval ratified by the Board of Approval for the EOU Scheme. 3. Assessee's Argument: The assessee relied on an email from the Deputy Director of STP Kolkata dated 27.03.2013, which stated that no ratification by the Board of Approval is required for units approved by the Director STPI after 31.03.1999. The assessee argued that since all Commissioners of STPI are members of the Combined Board of Approval, the approval by a Commissioner should be construed as approval by the Board of Approval. 4. Revenue's Argument: The revenue contended that the Instruction dated 08.05.2009 postdates the year 1999 and that the delegation of power to the Development Commissioners was to be ratified by the Board of Approval. Since the assessee did not obtain such ratification, the exemption under Section 10B was denied. 5. Tribunal's Decision: The Tribunal referred to its previous decision in the case of ITO vs Wizard Enterprises Pvt Ltd, where it was held that approval under the STP scheme by the designated officer is sufficient for claiming Section 10B benefits. The Tribunal emphasized that the green card issued by the designated officer and the approval under the STP scheme should be understood in their true sense to fulfill the purpose of the scheme, which is to promote exports and grant corresponding tax benefits. 6. Alternative Argument for Section 10A: The Tribunal also considered the alternative argument that the assessee, being registered with STP, is entitled to claim deduction under Section 10A of the Act. The Tribunal cited CBDT’s Instruction No. 1/2006, which clarifies that the claim under Section 10A should not be denied merely because the approval was granted by the Director of STPs instead of the Inter-Ministerial Standing Committee. 7. Judicial Precedents: The Tribunal relied on several judicial precedents, including the decision of the ITAT Chandigarh in Bebo Technologies P. Ltd vs. JCIT, where it was held that registration with STPI suffices for claiming Section 10B benefits. The Tribunal also noted the similarities between Sections 10A and 10B and held that the assessee is entitled to claim benefits under both sections. 8. Conclusion: The Tribunal concluded that the assessee is entitled to the deduction under Section 10B of the Income Tax Act, 1961. The Tribunal directed the AO to grant the deduction, thereby allowing the assessee's appeal. Final Order: The appeal of the assessee was allowed, and the order was pronounced in the Court on 05.09.2018.
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