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2019 (8) TMI 161 - HC - Income TaxDisallowance of deduction u/s 10B - AO alleged that assessee had not fulfilled the conditions as specified in Section 10B(ii) and (iii) - AO has not disputed the EOU status of the unit of M/s. KMMI Exports and there eligibility for deduction u/s 10B, now issue relates that after the merger of the firm M/s. KMMI Exports with the assessee firm, whether the assessee firm is entitled for deduction u/s 10B or not - HELD THAT - The coordinate Bench of this court in assessee own case 2018 (12) TMI 640 - KARNATAKA HIGH COURT has held that the limitations specified in sub-sections 9 and 9A of Section 10B of the Act do not exist from 1.4.2004 and therefore, the conclusion of the AO that deduction u/s 10B cannot be granted on the merger of firms is not correct. In the light of the above finding in respect of the very same assessee by co-ordinate bench, we are of the considered view that present appeal is to be necessarily dismissed by answering the substantial question of law against the revenue and in favour of the assessee
Issues:
1. Disallowance of deduction under Section 10B of the Income Tax Act. 2. Interpretation of conditions specified in Section 10B(ii) and (iii) of the Act. 3. Merger of firms and entitlement for deduction under Section 10B of the Act. Issue 1: Disallowance of deduction under Section 10B of the Income Tax Act: The High Court considered the appeal concerning the disallowance of deductions claimed by the assessee under Section 10(B) of the Income Tax Act. The Assessing Officer disallowed the claim of the assessee under Section 10(B) for the assessment year 2010-11, similar to the earlier assessment year. However, the CIT (Appeals) ruled in favor of the assessee by referring to a previous tribunal decision. The tribunal had allowed the appeal of the assessee, leading to a challenge by the revenue. The co-ordinate Bench dismissed the appeal, confirming the tribunal's order, which found that the assessee was entitled to the deduction under Section 10B of the Act. Issue 2: Interpretation of conditions specified in Section 10B(ii) and (iii) of the Act: The court examined whether the assessee had fulfilled the conditions as specified in Sections 10(B)(ii) and (iii) of the Act. The tribunal found that the unit of the assessee firm was a 100% Export Oriented Unit (EOU) entitled to the deduction under Section 10B. The court noted that the limitations specified in sub-sections 9 and 9A of Section 10B did not exist from 1.4.2004. Therefore, the assessing officer's conclusion that the deduction cannot be granted on the merger of firms was deemed incorrect. The court upheld the tribunal's decision, emphasizing the entitlement of the assessee for the deduction under Section 10B of the Act. Issue 3: Merger of firms and entitlement for deduction under Section 10B of the Act: The court considered the impact of the merger of firms on the entitlement for deduction under Section 10B of the Act. It was highlighted that after the merger of the firm M/s. KMMI Exports with the assessee firm, the assessee firm was entitled to the deduction under Section 10B of the Act. The court referred to the historical provisions related to the deduction and concluded that the assessing officer's denial of the deduction post-merger was incorrect. Consequently, the court dismissed the appeal in favor of the assessee based on the findings of the co-ordinate Bench in a previous case. In conclusion, the High Court dismissed the appeal by answering the substantial question of law in favor of the assessee and against the revenue. The court confirmed the order passed by the Income Tax Appellate Tribunal, Bangalore Bench, in the case, aligning with the findings of a previous judgment.
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