2014 (2) TMI 1247 - AT - Income Tax

Deduction u/s.10B - denial of claim on the ground that the assessee company is not a 100% EOU since it is not approved by the Board appointed in this behalf by the Central Government u/s.14 of the Industries (Development and Regulation) Act 1951 - Held that - no approval / ratification of STPI approval is required from BOA formed by Ministry of Commerce u/s 14 of Industries (Development & Regulation) Act 1951. For the above reason the Tribunals have found that the decision of Infotech Enterprises Ltd. (2002 (5) TMI 217 - ITAT HYDERABAD-B) will not be applicable after 2006. In view of the discussions made above from which it is apparent that the overwhelming view of the Tribunals have been to treat the approval granted by the STPI to be enough for the fulfillment of condition prescribed in sec. 10B for approval of the EOU unit under sec. 14 of Industries (Development & Regulation) Act 1951 and on this ground the benefit cannot be denied has to be accepted despite the fact that the sec. 10B specifically talks of only registration u/s.14 of Industries (Development & Regulation) Act 1951. Since the Assessing Officer in this case has only raised this issue the same has to be not allowed in view of the discussions made above. Ground No. 1 therefore is allowed. The Tribunal in the above relied cases have also allowed the benefit on the principle of consistency which is applicable in this case also. It was demonstrated by the AR that similar benefit u/s 10B was allowed by AO in earlier assessment years and no action to J withdraw the same has been taken. - Decided in favour of assessee

Issues Involved:
1. Whether the Commissioner of Income-tax (Appeals) erred in deleting the disallowance of Rs. 1,20,73,454/- made on account of denial of the assessee's claim of exemption under section 10B of the Income-tax Act, 1961.
2. Whether the registration granted by the Software Technology Park of India (STPI) is sufficient for fulfilling the condition prescribed in Section 10B for approval of an Export Oriented Unit (EOU) under section 14 of the Industries (Development & Regulation) Act, 1951.
3. Whether the assessee qualifies as a 100% Export Oriented Unit as specified under Explanation 2(iv) of section 10B of the Income-tax Act.
4. Whether the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Regency Creations Ltd. applies to the present case.
5. Whether the principle of consistency applies to the Revenue not filing an appeal against the order of the CIT(A) in the preceding year on the same issue.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance of Rs. 1,20,73,454/-:
The Revenue contended that the Commissioner of Income-tax (Appeals) erred in deleting the disallowance made by the Assessing Officer regarding the assessee's claim of exemption under section 10B of the Income-tax Act. The Assessing Officer had disallowed the exemption on the grounds that the assessee was not approved by the Board appointed by the Central Government under section 14 of the Industries (Development and Regulation) Act, 1951. However, the CIT(A) allowed the claim of the assessee, leading to the Revenue's appeal.

2. Sufficiency of STPI Registration for Section 10B:
The CIT(A) considered whether the registration granted by the Software Technology Park of India (STPI) was sufficient to fulfill the condition prescribed in Section 10B for approval of an EOU. The Assessing Officer had argued that the STPI registration was not at par with the approval required under section 14 of the Industries (Development & Regulation) Act, 1951. The CIT(A), however, noted that the Ministry of Information Technology had constituted STPI specifically for granting 100% EOU approval to units engaged in software exports, and this approval should be recognized as equivalent to the Board's approval under the Industries (Development & Regulation) Act, 1951.

3. Qualification as a 100% Export Oriented Unit:
The Assessing Officer disallowed the exemption on the grounds that the assessee was not a 100% EOU as per the definition in Explanation 2(iv) of section 10B, which requires approval by the Board appointed by the Central Government. The CIT(A) observed that the assessee had obtained approval from STPI and had fulfilled all other conditions prescribed in section 10B. The CIT(A) relied on various judicial decisions and CBDT Instruction No. 1/2006, which clarified that STPI approval was sufficient for the purpose of section 10B.

4. Applicability of CIT Vs. Regency Creations Ltd.:
The Revenue argued that the CIT(A) failed to apply the ratio of the decision in CIT Vs. Regency Creations Ltd., which they claimed was applicable to the present case. The CIT(A) distinguished the facts of the present case from the Regency Creations Ltd. case and noted that the overwhelming view of the Tribunals was to treat STPI approval as sufficient for section 10B benefits. The CIT(A) also noted that the decision in Infotech Enterprises Ltd. relied upon by the Assessing Officer was not applicable after the issuance of CBDT Instruction No. 1/2006.

5. Principle of Consistency:
The CIT(A) allowed the assessee's claim for the Assessment Year 2008-09 under identical facts and circumstances, and the Revenue did not file an appeal against that order. The CIT(A) noted that the principle of consistency should apply, and the Revenue's failure to appeal in the preceding year indicated acceptance of the CIT(A)'s decision. The Tribunal upheld this view, noting that the CIT(A)'s order was based on various decisions and CBDT instructions, and found no infirmity in the CIT(A)'s order.

Conclusion:
The Tribunal dismissed the appeal filed by the Revenue, upholding the order of the CIT(A) that allowed the assessee's claim of exemption under section 10B. The Tribunal found that the CIT(A) had correctly applied the law and judicial precedents, and the STPI approval was sufficient for the purposes of section 10B. The principle of consistency also supported the CIT(A)'s decision.

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