2017 (10) TMI 424 - AT - Income Tax

Allowability of claim of deduction under s.10A - claim not made in Return of income - assessee in its return of income had claimed deduction under s.10B and not 10A - powers vested with Board recognized to be delegated to the Development Commissioner concerned for granting approvals to 100% EOUs for the purposes of s.10B - reopening of assessment - Held that - We find force in the argument of the assessee that any delay in ratification of the action of the Development Commissioner as per prescribed procedure by the Board appointed under s.14 of Industries (Development and Regulation) Act 1951 will not mar the claim of deduction by the assessee altogether. Once the pe mission granted by the office of Development Commissioner stands ratified the ratification would relate back to the date of permission. It is not the case of the AO that other terms and conditions for availing exemption under s.10B of the Act has not been complied with. In the instant case it appears from the communication letter dated 14/03/2013 that letter of permission dated 25/05/2007 issued in favour of the assessee for registration as 100% EOU under STPI Scheme was stated to be ratified in the first meeting of Inter-Ministerial Standing Committee (IMSC) on 2-6-2008 constituted by Central Government for such purposes. As noted the ratification subsequently carried out and communicated will operate from the date of letter of permission issued by the Development Commissioner. Therefore in our considered view the action of the AO and CIT(A) in denying the claim of deduction under s.10B of the Act requires to be set aside as unsustainable in law. Also in view of the merits in the claim of deduction under s.10B we do not consider it necessary to deal with the challenge of the assessee on allegedly wrong assumption of jurisdiction by invoking the section 147 of the Act. Thus the assessee in our considered opinion is rightly eligible for claim of deduction under s.10B of the Act in the facts and circumstances of the case. - Decided against revenue

Summary

Issues:
- Allowability of claim of deduction under s.10A of the Income Tax Act, 1961 in place of s.10B
- Validity of reopening u/s.147
- Eligibility of deduction u/s.10B
- Action of levying interest u/s.234A/B/C
- Initiation of penalty proceedings u/s.271(1)(c)

Analysis:
1. The controversy in the appeals revolves around the allowability of the claim of deduction under s.10A of the Income Tax Act, 1961, which was not claimed in the return of income by the assessee. The Assessing Officer (AO) denied the claim under s.10B, stating that the conditions specified were not fulfilled. The Commissioner of Income Tax (Appeals) allowed the alternate claim under s.10A, leading to appeals by both the Revenue and the assessee.

2. The Revenue challenged the action of the Commissioner in allowing the alternative claim under s.10A, arguing that the conditions for deductions under s.10A and s.10B need to be satisfied independently. The assessee, on the other hand, contended that the approval and subsequent ratification by the Board of Approval were sufficient for the deduction under s.10B, citing relevant CBDT instructions and legal precedents.

3. The Tribunal observed that the CBDT instruction clarified that the powers for granting approvals to 100% EOUs under s.10B were delegated to the Development Commissioner. The delay in ratification by the Board of Approval would not invalidate the claim if the permission granted by the Development Commissioner was eventually ratified. As all conditions for the exemption under s.10B were met, the denial of the claim was deemed unsustainable in law.

4. The Tribunal also noted that since the assessee was eligible for the deduction under s.10B, there was no need to address the challenge regarding the assumption of jurisdiction under s.147. Consequently, the Revenue's appeals were dismissed, and the assessee's cross-objections were allowed based on the merits of the claim under s.10B.

5. In conclusion, all revenue's appeals and cross-objections of the assessee were treated similarly, with the Revenue's appeals being dismissed, and the assessee's cross-objections being allowed in favor of the assessee.