2010 (9) TMI 96 - HC - Income Tax

Exemption under Section 10B - 100% export oriented unit - assessing authority has rejected the claim of exemption on the ground that the certificate issued by the Joint Commissioner, NEPZ, Noida is not the certificate issued by the competent authority and the requisite report has not been filed along with the return - Held that - Section 10B(5) of the Act only requires furnishing of Form 56G. The Accountant has certified that the unit is eligible for exemption. No other certificate is being provided under Section 10B of the Act or any Rule made thereunder. There is no reason to disbelieve the claim of the respondent that the unit was 100% export oriented unit established in NEPZ, Noida merely on the ground that the certificate was issued by the Joint Commissioner, NEPZ, Noida, who was not competent to issue certificate. Moreover the department was not able to establish that the unit of the assessee is not 100% export oriented unit

Issues:
1. Exemption claim under Section 10B of the Income Tax Act for export business.
2. Rejection of exemption claim by assessing authority.
3. Appeal before Joint Commissioner of Income Tax (Appeals) and subsequent order.
4. Appeals filed before the Tribunal by both respondent and revenue.
5. Tribunal's decision to uphold exemption claim and rejection of revenue's appeal.
6. Legal interpretation of Section 10B of the Act and competency of the authority issuing certificates.
7. Determination of substantial question of law and final dismissal of the appeal.

Analysis:
1. The respondent, an exporter of various handicraft items, claimed exemption under Section 10B of the Income Tax Act for its export business as a 100% export-oriented unit in NEPZ, Noida. The claim was supported by a certificate from the Joint Commissioner, NEPZ, Noida, and a requisite report in Form 56G.

2. The assessing authority rejected the exemption claim due to the delayed filing of the required report and questioned the competency of the authority issuing the certificate. Additionally, the authority disallowed certain expenses and added an amount towards extra profit due to alleged discrepancies in maintaining stock registers.

3. Upon appeal before the Joint Commissioner of Income Tax (Appeals), the addition towards extra profit was deleted, but the exemption claim was partially rejected based on the issue of the certificate's issuing authority not being considered competent.

4. Both the respondent and the revenue filed appeals before the Tribunal, which ultimately allowed the respondent's appeal, accepting the exemption claim under Section 10B and dismissing the revenue's appeal.

5. During the hearing, the Tribunal affirmed the deletion of the additional profit and found no error in accepting the respondent's claim as a 100% export-oriented unit, contrary to the revenue's contentions.

6. The High Court analyzed Section 10B of the Act, emphasizing that only Form 56G is required for exemption under this provision. The Court noted that the authority's competence to issue the certificate was not a valid ground to reject the claim, especially when the unit's export-oriented status was not disproved by the department.

7. Considering the facts and legal provisions, the High Court concluded that no substantial question of law arose in the appeal, leading to the dismissal of the appeal. The Court affirmed the Tribunal's decision in accepting the respondent's exemption claim under Section 10B of the Act as a 100% export-oriented unit in NEPZ, Noida.

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