2017 (1) TMI 1213 - AT - Income Tax

Rejection of claim of deduction under section 10B - need for approval of the Board appointed by the Central Government to claim exemption - Held that - The assessee is entitled to exemption under section 10B of the Act subject to fulfillment of other conditions. See Smt. K. Sudha Rani 2013 (6) TMI 783 - ANDHRA PRADESH HIGH COURT Even otherwise, when there are two views possible the one which is in favour of the assessee deserves to be taken into consideration. It is also not out of place to mention that in the case of Smt. K. Sudha Rani the Revenue has accepted the view taken by the Hyderabad Benches for the A.Ys. 2005-06 and 2006-07. The Ld. D.R. could not place anything on record as to why the view taken by the Hyderabad Benches was accepted by the Revenue. In fact, the Hon ble A.P. High Court had taken note of the same and the assessee-company had continuously projected before the Assessing Officer as well as the CIT(A) that in the case of Smt. K. Sudha Rani exemption was granted under section 10B of the Act even though there was no separate approval by the Board. Under these circumstances, the Ld. D.R. ought to have obtained proper details as to why the Revenue has accepted the decision of the ITAT as otherwise the only inference possible is that the Revenue has accepted the legal position and therefore did not prefer to go in further appeal. Thus, even on the principles of consistency the Revenue ought not to have preferred a further appeal even in this case. At any rate, consistent with the view taken in the case of other assessees we accept the view of the assessee and hold that the assessee is entitled to claim exemption under section 10B of the Act.

Summary

Issues involved:
Claim of deduction under section 10B of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Claim of deduction under section 10B

Analysis: The appeal pertains to the rejection of the claim of deduction under section 10B of the Income Tax Act, 1961. The assessee, a 100% Export Oriented Unit (EOU) engaged in software and allied services, claimed deduction under section 10B based on its export turnover. The Assessing Officer and CIT(A) raised concerns regarding the approval requirement by the Board appointed by the Central Government for claiming the exemption under section 10B. They emphasized the necessity of obtaining approval from the Board, as per the language of Explanation-2 to Section 10B, which mandates approval by the Board appointed under the Industries (Development and Regulation) Act, 1951. The tax authorities argued that mere approval by the Software Technology Park of India (STPI) is insufficient to claim the exemption.

Analysis Outcome: The ITAT Hyderabad Bench considered the arguments presented by both sides. The assessee highlighted the delegation of approval power to STPI Directors through an Inter Ministerial Communication, asserting that approval by STPI should be deemed as approval by the Board. The assessee also referenced previous ITAT decisions supporting the view that approval from STPI is sufficient for claiming exemption under section 10B. The tribunal, following the decisions of the A.P. High Court and ITAT Hyderabad Benches, held that the assessee is entitled to exemption under section 10B, provided other conditions are fulfilled. The tribunal also noted that when there are two possible views, the one favorable to the assessee should be considered. Additionally, the tribunal highlighted the principle of consistency, noting that the Revenue had accepted similar decisions in the past for other assessees, further supporting the allowance of the deduction for the assessee in this case.

Conclusion: The appeal filed by the assessee-company was allowed, granting the assessee the entitlement to claim exemption under section 10B of the Income Tax Act, 1961.

This detailed analysis encompasses the key arguments, legal interpretations, and decisions made by the ITAT Hyderabad Bench regarding the claim of deduction under section 10B of the Income Tax Act, 1961.