2014 (4) TMI 741 - AT - Income Tax

Stay application Claim for deduction u/s 10B of the Act Out of turn hearing - Held that - It is necessary to evaluate the balance of convenience in order to dispose of the stay application - Be that as it may, on the aspect of the outstanding demand, the adjustment of MAT credit in terms of section 115JAA of the Act sought by the assessee is still not determinate, the same is before the Assessing Officer thus, the AO is directed to consider the assessee s plea for grant of MAT credit claimed to be available for assessment years 2008-09 and 2009-10 and only thereafter determine the net demand outstanding for the year under consideration no specific order has been passed on the application seeking stay on the recovery of outstanding demand - also, the Registry is directed to post the appeal of the assessee for hearing on an out-of-turn basis before the regular Bench - Decided partly in favour of Assessee.

Summary

Issues:
1. Stay on the recovery of outstanding demand due to denial of deduction u/s 10B of the Income Tax Act.
2. Disputed demand arising from denial of deduction u/s 10B in relation to profit from approved undertaking.
3. Eligibility for alternative claim of exemption u/s 10A and unjust disallowance by CIT(A).
4. Denial of deduction u/s 10B due to absence of approval by Central Government-appointed Board.
5. Consideration of MAT credit adjustment and out-of-turn hearing of appeal.

Issue 1: Stay on Recovery of Outstanding Demand:
The assessee sought a stay on the recovery of outstanding demand due to the denial of deduction u/s 10B of the Income Tax Act. The demand amounted to Rs.65,96,700, primarily arising from the disallowance of deduction u/s 10B related to profits from an approved undertaking. The Assessing Officer and CIT(A) had affirmed this denial, leading to the disputed demand. The Tribunal directed the Assessing Officer to consider the plea for MAT credit adjustment before determining the net outstanding demand. No specific order was passed on the stay application.

Issue 2: Disputed Demand from Denial of Deduction u/s 10B:
The disputed demand stemmed from the denial of deduction u/s 10B concerning profits from an undertaking approved as 100% EOU by the Director, STPI. The denial was based on the unit's approval by the Director, STPI, not by a Board appointed by the Central Government under the Industries (Development and Regulation) Act, 1951. The assessee argued for a prima facie case on two grounds: eligibility for an alternative claim of exemption u/s 10A and the debatable nature of the denial based on approval absence by the Central Government-appointed Board.

Issue 3: Eligibility for Alternative Claim of Exemption u/s 10A:
The assessee contended that the CIT(A) unjustly disallowed the claim for deduction u/s 10B as the alternative claim of exemption u/s 10A was not initially made due to past allowance of u/s 10B. The CIT(A) rejected the claim citing insufficient grounds, including non-filing of requisite Form No. 54F. The Tribunal recognized the prima facie case for the assessee's eligibility for the alternative claim of exemption u/s 10A and the unjust disallowance by the CIT(A).

Issue 4: Denial of Deduction u/s 10B based on Approval Absence:
The denial of deduction u/s 10B was primarily due to the absence of approval by the Central Government-appointed Board under the Industries (Development and Regulation) Act, 1951. The assessee argued that this issue was debatable, indicating a prima facie case for success. The Tribunal acknowledged the debatable nature of this issue and directed the Assessing Officer to consider the plea for MAT credit adjustment before determining the net outstanding demand.

Issue 5: Consideration of MAT Credit Adjustment and Out-of-Turn Hearing:
The Tribunal directed the Assessing Officer to evaluate the plea for MAT credit adjustment claimed by the assessee for assessment years 2008-09 and 2009-10 before finalizing the net outstanding demand. Additionally, the Tribunal granted the assessee's request for an out-of-turn hearing of its appeal, scheduling it before the regular Bench on a specified date.

In conclusion, the Tribunal addressed the various issues raised by the assessee regarding the denial of deduction u/s 10B, eligibility for alternative exemption u/s 10A, and the debatable nature of the approval absence issue. The Tribunal directed the Assessing Officer to consider the MAT credit adjustment and granted the out-of-turn hearing request for the appeal.