2016 (6) TMI 695 - AT - Income Tax

Allowance of exemption u/s 10B denied - assessee has not received the ratification by the Board of Approval as per section 14 of the Industries Development and Regulation Act - Held that - DR is relying upon the CBDT instructions requiring the approval to be ratified by the Board of Approval, while the learned Counsel for the assessee is relying upon the letters of clarifications issued by the Director of STPI. We find that this Tribunal in the case of ACIT vs. Smt. K. Sudha Rani 2010 (9) TMI 1093 - ITAT HYDERABAD has held that once the STPI has approved a unit as 100% EO Undertaking, it should be allowed deduction u/s 10B subject to the other conditions as specified in that section. The Tribunal also followed the decision of the Hon ble Supreme Court in the case of Bajaj Tempo Ltd vs. CIT (1992 (4) TMI 4 - SUPREME Court) to hold that section 10B being a special incentive provision should be considered liberally. This decision of the Tribunal in the case of Smt. Sudha Rani has been confirmed by the Hon ble High Court of Andhra Pradesh 2013 (6) TMI 783 - ANDHRA PRADESH HIGH COURT Since the Tribunal and the Hon ble High Court have taken cognisance of the relevant provision of law as well as the CBDT instructions and also letters of the STPI, we are of the opinion that the said decision is biding on us. Further, we also find the A.Y 2007-08 is the first year of claim of exemption u/s 10B and the AO was required to verify the assessee s eligibility in the said year. The AO allowed the exemption u/s 10B during the assessment proceedings u/s 143(3) for both A.Ys 2007-08 and 2008-09 and Revenue has also accepted the CIT (A) finding for 2009-10 and 2010-11. Thus, even as per the principle of uniformity and consistency, the AO cannot take a different stand in the 6th year of the claim. In view of the same, we do not see any reason to interfere with the order of the CIT (A) in allowing the claim - Decided against revenue

Summary

Issues:
- Exemption u/s 10B of the Income Tax Act for the A.Y 2011-12.
- Validity of approval granted by the Development Commissioner for 100% EOU.
- Requirement of ratification by the Board of Approval as per section 14 of the Industries Development and Regulation Act.
- Interpretation of CBDT instructions and relevant case laws.

Analysis:

Exemption u/s 10B:
The Revenue appealed against the CIT (A)'s decision directing the AO to allow the exemption u/s 10B for the A.Y 2011-12, despite the absence of ratification by the Board of Approval. The AO observed that the assessee claimed deduction u/s 10B based on approval from the Development Commissioner, Visakhapatnam, which needed ratification by the Board of Approval as per section 14 of the Industries Development and Regulation Act. The assessee argued that the STPI's renewal of the 100% EOU exemption for 5 years should suffice, even without ratification. The Tribunal held that once STPI approved a unit as a 100% EO Undertaking, the deduction u/s 10B should be allowed, citing liberal interpretation due to it being a special incentive provision.

Validity of Approval and Ratification Requirement:
The Revenue relied on CBDT instructions mandating ratification by the Board of Approval for approval granted by the Development Commissioner. However, the assessee argued that the IMSC had replaced the Board of Approval and ratification was unnecessary as per clarifications from the Director of STPI. The Tribunal noted the decision in a previous case where the High Court upheld the allowance of deduction u/s 10B based on STPI's approval, emphasizing the need for a liberal interpretation of such provisions.

Interpretation of CBDT Instructions and Case Laws:
The Tribunal considered the CBDT instructions, the STPI's clarifications, and past judgments to conclude that the assessee should not be denied the exemption u/s 10B solely due to the lack of ratification by the Board of Approval. The Tribunal highlighted the importance of uniformity and consistency in applying tax laws, noting that the AO had previously allowed the exemption for multiple assessment years. Therefore, the Tribunal dismissed the Revenue's appeal, upholding the CIT (A)'s decision to grant relief to the assessee for the A.Y 2011-12.