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2016 (7) TMI 8 - AT - Income TaxEligibility of deduction u/s 10B/10A - STPI unit - whether the assessee was eligible for deduction under section 10B or 10A of the Act? - Held that - The assessee is admittedly, recognized by the Director of STPI and in view of the ratio laid down by the Hon ble Delhi High Court in CIT vs. Regency Creations Ltd. (2012 (9) TMI 627 - DELHI HIGH COURT ), we hold that the assessee is not entitled to the claim of deduction under section 10B of the Act. On the other hand, the assessee once satisfied the conditions laid down in section 10A of the Act, is entitled to the said claim of deduction irrespective of the fact that the assessee in the original return of income had not made such claim under section 10A of the Act, but had made a claim for deduction under section 10B of the Act. Following the same parity of reasoning, we uphold the order of CIT(A) in allowing the claim of assessee under section 10A of the Act. Accordingly, the grounds of appeal raised by the assessee in allowing the said deduction under section 10B of the Act are dismissed. Similarly, the appeal filed by the Revenue is against the order of CIT(A) in allowing the claim of deduction under section 10A of the Act is also dismissed.
Issues Involved:
1. Eligibility of the assessee for exemption under Section 10B of the Income Tax Act, 1961. 2. Allowance of deduction under Section 10A of the Income Tax Act, 1961, when not claimed in the return of income. 3. Applicability of the principle of res judicata. 4. Compliance with procedural requirements for claiming deductions under Sections 10A and 10B. Detailed Analysis: Issue 1: Eligibility for Exemption under Section 10B The primary issue was whether the assessee, engaged in the export of computer software and registered as a Software Technology Park of India (STPI) unit, was eligible for exemption under Section 10B of the Income Tax Act, 1961. The Assessing Officer (AO) noted that the assessee was not approved as a 100% Export Oriented Unit (EOU) by the Board appointed by the Central Government, a requirement under Section 10B. Consequently, the AO denied the deduction under Section 10B and added ?30,70,367 to the assessee's income. The CIT(A) upheld this decision, stating that the assessee failed to meet the specific approval conditions under Section 10B. Issue 2: Deduction under Section 10A The CIT(A) allowed the assessee's alternate claim for deduction under Section 10A, despite it not being claimed in the return of income. The AO had initially denied this alternate claim due to the absence of the claim in the return. However, the CIT(A) found that the assessee fulfilled all requisite conditions for Section 10A, which provides a deduction for profits from export of software by units registered under the STPI scheme. The Tribunal upheld the CIT(A)'s decision, citing the ratio laid down by the Hon'ble Delhi High Court in CIT vs. Regency Creations Ltd. and other similar cases, which supported the allowance of Section 10A benefits even if not claimed initially in the return. Issue 3: Principle of Res Judicata The assessee argued that the principle of res judicata should apply as the deduction under Section 10B was allowed in previous assessment years. However, the CIT(A) dismissed this plea, and the Tribunal agreed, noting that the approval under Section 10B requires specific compliance, which was not met in this case. The Tribunal referenced the Hon'ble Bombay High Court's decision in CIT vs. Western Outdoor Interactive (P.) Ltd., which emphasized that benefits allowed in earlier years cannot be withdrawn unless there is a change in facts or legal provisions. Issue 4: Procedural Compliance for Deductions The Tribunal discussed the procedural compliance required for claiming deductions under Sections 10A and 10B. It noted that while the assessee did not claim Section 10A deduction in the return, the submission of the prescribed audit report in Form No. 56F before the CIT(A) was sufficient for considering the claim. The Tribunal emphasized that the AO should verify the conditions for Section 10A deduction and provide the assessee a reasonable opportunity to present their case. Conclusion: The Tribunal concluded that the assessee was not entitled to the deduction under Section 10B due to non-compliance with the specific approval requirements. However, it upheld the CIT(A)'s decision to allow the deduction under Section 10A, provided all conditions were met, despite the initial claim not being made in the return. Both the appeals by the assessee and the Revenue were dismissed, affirming the CIT(A)'s order. The judgment underscores the importance of procedural compliance and the flexibility in considering alternate claims if the substantive conditions are satisfied.
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