2015 (5) TMI 230 - HC - Income Tax

Disallowance of deduction under Section 10B - CIT(A) deleting the disallowance admitting additional evidence in the form of approval granted by the Board of Approval (BOA) to the alleged export oriented Unit - Held that - The moment the decision / approval of the Development Commissioner is ratified by the Board of Approval it will relate back to the date on which the approval was granted by the Development Commissioner. If that be so, it cannot be said that the assessee was not a Export Oriented Unit, which was entitled to the deduction under Section 10B of the Act. Incidentally it is to be noted that in the subsequent circular No.68 issued by the Export Promotion Council for Eous & SEZS dated 14/05/2009 it mentions that from 1990 onwards Board of Approval had delegated the power of approval of 100% to the Development Commissioner and, therefore, it can be very well argued and said that the Development Commissioner while granting the approval of 100% EOU exercises delegated powers. In any case and apart from the above when it is found that at the relevant time the Development Commissioner granted the approval of 100% EOU in favour of the assessee-Company, which came to be subsequently ratified by the Board of Approval and as observed hereinabove as such the ratification shall be from the date on which the Development Commissioner granted the approval, both the learned CIT(A) as well as the learned Tribunal have rightly held that the assessee was entitled to deduction under Section10B of the Act as claimed. We confirm the view taken by both the authorities below holding that the assessee was entitled to 100% EOU as claimed. No substantial question of law arises in the present Tax Appeal. - Decided against revenue.

Summary

Issues:
1. Disallowance of exemption claimed under Section 10B of the Income Tax Act.
2. Validity of approval granted by the Board of Approval for deduction under Section 10B.
3. Interpretation of circulars and instructions issued by CBDT and Export Promotion Council.

Analysis:
1. The appellant challenged the dismissal of their appeal by the Income Tax Appellate Tribunal regarding the disallowance of exemption claimed under Section 10B of the Income Tax Act for the Assessment Year 2007-08. The Assessing Officer initially disallowed the deduction based on the absence of approval from the Board of Approval despite approval from the Development Commissioner. The CIT(A) reversed this decision, stating that subsequent ratification by the Board of Approval validated the initial approval. The Tribunal upheld the CIT(A)'s decision, leading to the current appeal.

2. The appellant argued that the Tribunal erred in interpreting the circular issued by CBDT on 09/03/2009, which clarified the requirement of Board of Approval's approval for Section 10B deduction. They contended that the initial approval by the Development Commissioner alone did not entitle the assessee to the deduction. However, the respondent emphasized a subsequent circular by the Export Promotion Council, stating that the Development Commissioner had the delegated power to grant approval for 100% EOU. The ratification by the Board of Approval was seen as a formality, and the deduction was deemed valid.

3. The High Court examined the sequence of events and circulars to determine the validity of the deduction claimed under Section 10B. The Court noted that the ratification by the Board of Approval retroactively validated the initial approval by the Development Commissioner. The subsequent circular from the Export Promotion Council further supported the position that the Development Commissioner had the authority to grant approval for 100% EOU. Consequently, the Court upheld the decisions of the lower authorities, ruling in favor of the assessee and dismissing the Tax Appeal.