2016 (4) TMI 255 - HC - Income Tax

Eligibility for exemption u/s 10B - whether assessee had established a new 100% Export Oriented Undertaking eligible for exemption u/s 10B of the Income Tax Act and not SEZ Unit as held by ITAT? - Held that - From the facts as emerging from the record, it is evident that the assessee s Unit was granted approval as a 100% Export Oriented Undertaking by a letter of permission dated 02.02.2007, which was ratified in the second meeting of the Board for Approval held on 17.05.2007. The assessee being a 100% Export Oriented Undertaking, was therefore, entitled to claim deduction under section 10B of the Act. The Commissioner of Income Tax, on an erroneous reading of the facts on the record, has come to the conclusion that the assessee is a Unit under the SEZ and not a 100% Export Oriented Undertaking and has, accordingly, come to the conclusion that since the assessee s unit is not located within a defined SEZ it is not entitled to the benefit of deduction under section 10B of the Act. Evidently therefore, the conclusion arrived at by the Commissioner of Income Tax is based upon an erroneous finding of fact. The Tribunal, therefore, did not commit any error in holding that the assessee was a 100% Export Oriented Undertaking and not an SEZ Unit and therefore, entitled to deduction under section 10B of the Act. - Decided in favour of assessee

Summary

Issues:
1. Interpretation of whether the respondent assessee established a new 100% Export Oriented Undertaking eligible for exemption u/s 10B of the Income Tax Act and not SEZ Unit.

Analysis:
The appellant, the revenue, challenged the order of the Income Tax Appellate Tribunal regarding the assessee's eligibility for exemption under section 10B of the Income Tax Act. The assessee, a firm developing software for foreign clients, claimed deduction under section 10B. The Commissioner of Income Tax contended that the approval granted to the assessee as a 100% Export Oriented Unit did not align with the definition of an Undertaking under section 10B. The Commissioner sought to reverse the assessment, leading to an appeal by the assessee before the Tribunal.

The Tribunal, after reviewing the evidence, noted that the Development Commissioner had approved the assessee as a 100% Export Oriented Undertaking, not an SEZ Unit. Citing a Delhi High Court decision, the Tribunal held that the assessee had indeed established a new 100% Export Oriented Undertaking under section 10B, contrary to the Commissioner's interpretation. The Tribunal overturned the Commissioner's order issued under section 263 of the Act.

The Commissioner revised the assessment order based on the belief that the assessee did not qualify as a 100% Export Oriented Undertaking. However, upon clarification by the assessee, it was confirmed that the approval and status as a 100% Export Oriented Undertaking were in place. The Commissioner argued that a 'Unit' under SEZ did not equate to an 'Undertaking' under section 10B. The Tribunal disagreed, emphasizing the approval granted to the assessee and its entitlement to deduction under section 10B.

The Tribunal's decision was supported by the fact that the assessee received approval as a 100% Export Oriented Undertaking, ratified by the Board of Approval. The Commissioner's conclusion that the assessee was an SEZ Unit outside the defined SEZ was deemed erroneous. Therefore, the Tribunal's ruling in favor of the assessee's status as a 100% Export Oriented Undertaking and eligibility for deduction under section 10B was upheld. The appeal by the revenue was dismissed, affirming the Tribunal's decision.