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2015 (11) TMI 749 - AT - Income TaxDisallowance of deduction u/s 10B - whether failure to obtain approval from Board despite fulfilling all the conditions makes the appellant ineligible to claim deduction u/s 10B? - Held that - Approval by Software Technology Parks of India comes under the Ministry of Communication & Information Technology & is a competent authority to grant approval to such units for claiming benefits u/s 10B as 100% Export Oriented Undertaking and the same is possessed by assessee and also looking to the facts of the case of assessee wherein assessee has been allowed deductions u/s 10B in Asst. Years 2007-08, 2010-11 & 2011-12 consistently, we are of the considered view that the assessee s claim of deduction under section 10B is justified and accordingly the order of CIT(A) is quashed and the appeal of assessee is allowed. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of deduction under Section 10B of the Income-Tax Act. 2. Alternative claim for deduction under Section 10A of the Income-Tax Act. 3. Levy of interest under Sections 234B and 234C of the Income-Tax Act. 4. Initiation of penalty under Section 271(1)(c) of the Income-Tax Act. Detailed Analysis: 1. Disallowance of Deduction under Section 10B of the Income-Tax Act: The primary issue in this case was the disallowance of a deduction amounting to Rs. 67,08,733 claimed by the assessee under Section 10B of the Income-Tax Act. The assessee, a private limited company engaged in BPO services, had filed its return of income declaring NIL income and claimed the aforementioned deduction. The Assessing Officer disallowed the claim on the grounds that the assessee had not obtained the necessary approval from the Board as required under Section 10B. This decision was upheld by the CIT(A), who cited the CBDT's clarification that units approved under the Software Technology Parks of India (STPI) scheme are eligible for exemption under Section 10A, not Section 10B. The CIT(A) also referenced a conflicting decision by the Hyderabad Tribunal, which held that approval by the STPI does not equate to approval by the Board appointed under Section 14 of the IDAR Act, 1951. 2. Alternative Claim for Deduction under Section 10A of the Income-Tax Act: The assessee had also raised an additional ground for claiming deduction under Section 10A as an alternative, which was dismissed by the CIT(A) based on the judgment in Goetz (India) Ltd. The CIT(A) argued that the additional ground could not be adjudicated as it was not part of the original claim. 3. Levy of Interest under Sections 234B and 234C of the Income-Tax Act: The assessee contested the levy of interest under Sections 234B and 234C, which was deemed consequential by the Tribunal and thus not a primary issue. 4. Initiation of Penalty under Section 271(1)(c) of the Income-Tax Act: The initiation of penalty proceedings under Section 271(1)(c) was considered premature and was not adjudicated by the Tribunal. Tribunal's Findings: The Tribunal examined the consistency of the assessee's claim under Section 10B, noting that the deduction had been allowed in previous assessment years (2007-08, 2010-11, and 2011-12). Despite the lack of approval from the Board under Section 14 of the IDAR Act, the Tribunal found that approval from the STPI, which operates under the Ministry of Communication and Information Technology, was sufficient. This was supported by various judicial pronouncements, including decisions from the ITAT Delhi Bench in Regency Creators Ltd., the ITAT Ahmedabad Bench in ITO vs. E-Infochip Ltd., and the ITAT Hyderabad Bench in ACIT vs. Vision 2K+ INC. These cases established that STPI approval is adequate for claiming benefits under Section 10B as a 100% Export Oriented Undertaking. Conclusion: The Tribunal allowed the assessee's appeal, quashing the CIT(A)'s order and granting the deduction under Section 10B. The issues regarding interest under Sections 234B and 234C were deemed consequential, and the penalty under Section 271(1)(c) was considered premature and not adjudicated. The appeal was thus allowed in favor of the assessee.
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