2016 (2) TMI 824 - AT - Income Tax

Claim of deduction u/s 10B - Assessee had claimed deduction u/s 10B on the ground that it has been registered and approved under the STP scheme of the Government of India as 100% EOU for the period of 5 years effective from 7.3.2007 to 6.3.2012 - Held that - In terms of Explanation II(iv) to Sec. 10B, 100% EOU has been defined as an undertaking which has been approved as 100% EOU by the Board appointed in this behalf by the Central Government in view of Sec. 14 of Industries (Development & Regulation) Act, 1951 and rules made thereunder. The Assessee s unit has not been approved by the said authority. Thus the Assessee is not eligible for claim of deduction u/s 10B and accordingly, the decision of the ld. CIT(A) on this score is reversed and the ground raised by the Revenue is treated as allowed. Eligibility of deduction u/s 10A - Held that - We are inclined to accept the additional plea raised by the ld. Counsel before us, that its claim for eligibility of deduction u/s 10A needs to be examined afresh. Accordingly, we remit the matter to the file of the Assessing Officer to see, whether the Assessee is eligible for claim of deduction u/s 10A or not and examine the eligibility criteria of the Assessee and whether the conditions laid down u/s 10A stands fulfilled and accordingly decide this issue afresh and in accordance with the provisions of the law. Thus, with this direction the appeal of the Revenue is treated as partly allowed for statistical purpose.

Summary

Issues:
1. Disallowance of deduction u/s.10B of the I.T Act
2. Approval requirement for deduction u/s.10B
3. Interpretation of green card under the Software Technology Park Scheme
4. Eligibility for deduction u/s.10A
5. Entertaining alternate plea for deduction u/s.10A

Issue 1: Disallowance of deduction u/s.10B of the I.T Act:
The Revenue filed an appeal against the CIT(A)'s order deleting the disallowance of the deduction u/s.10B amounting to Rs. 50,10,459 for the A.Y 2009-10. The Assessee, an export-oriented unit, claimed the deduction based on an audit report. The Assessing Officer denied the claim as the Assessee did not have approval as a 100% EOU by the Board appointed by the Central Government. The Assessee argued that it had a green card issued by the Chairman of the Inter Ministerial Standing Committee on Software Technology Park Scheme. The CIT(A) allowed the claim, following a Delhi Tribunal decision, but the High Court reversed this decision, stating that STP scheme approval does not suffice for Sec. 10B deduction. Consequently, the Assessee was deemed ineligible for the deduction.

Issue 2: Approval requirement for deduction u/s.10B:
The Assessee's unit was not approved by the authority specified in Sec. 14 of the Industries (Development & Regulation) Act, 1951, as required for a 100% EOU under Sec. 10B. The green card from the STPI was deemed insufficient by the AO, emphasizing the need for proper approval. The High Court's ruling emphasized the necessity of approval by the Central Government-appointed Board for claiming the deduction u/s.10B, thereby reversing the CIT(A)'s decision.

Issue 3: Interpretation of green card under the Software Technology Park Scheme:
The green card issued under the Software Technology Park Scheme was considered by the Assessee as sufficient for claiming the deduction u/s.10B. However, the AO and the High Court clarified that such approval must be from the Board appointed by the Central Government, as per the statutory requirements, which the Assessee failed to fulfill.

Issue 4: Eligibility for deduction u/s.10A:
The Assessee alternatively argued for eligibility for deduction u/s.10A, fulfilling all conditions for the claim. The Counsel submitted an audit report for the claim, which was certified by the Auditor in Form 56F. The matter was suggested to be examined afresh by the Assessing Officer to determine if the Assessee qualifies for the deduction u/s.10A.

Issue 5: Entertaining alternate plea for deduction u/s.10A:
The Tribunal entertained the Assessee's alternate plea for deduction u/s.10A, despite not being raised earlier, citing the Supreme Court's and High Court's decisions emphasizing the Tribunal's power to consider additional grounds beyond those in the appeal memorandum. The case was remitted to the Assessing Officer for fresh examination of the Assessee's eligibility for the deduction u/s.10A, allowing the Assessee to raise new claims based on fulfilled criteria.

In conclusion, the Revenue's appeal was partly allowed for statistical purposes, with the Tribunal reversing the decision on the deduction u/s.10B and remitting the case to the Assessing Officer for reevaluation of the Assessee's eligibility for deduction u/s.10A.