2018 (10) TMI 1099 - AT - Income Tax

Disallowance of exemption u/s. 10B - specified conditions were not fulfilled - approval of STPI units of the assessee was not ratified by the Board of approvals as mandated u/s 10B - CIT(A) reversed the order of AO by observing that the approval from STPI is sufficient enough to meet the requirements as specified u/s 10B - Held that - We note that in the case of Cat Lab Pvt. Ltd. 2014 (2) TMI 1247 - ITAT PUNE in the identical facts and circumstance held that there is no need to take separate approval from the BOA for claiming the deduction u/s 10B of the Act. CIT(A) in the own case of the assessee for the Asst. Year 2009-10 allowed the exemption u/s 10B of the Act after due verification. Against the order of ld CIT(A) for Asst. Year 2009-10, the Revenue has not preferred any appeal which implies that the order of the ld CIT(A) has reached to its finality. Learned DR has also not disputed the fact that the appeal was not preferred by the Revenue against the order of CIT(A) for the A.Y. 2009-10 on the issue of exemption u/s 10B of the Act. In such circumstances we are of the view that no appeal can be filed by the revenue, once, the order of ld. CIT(A) in any of the year has reached to its finality. See UNION OF INDIA AND OTHERS VERSUS KAUMUDINI NARAYAN DALAL AND ANOTHER 2000 (12) TMI 101 - SUPREME COURT - decided against revenue.

Summary

Issues Involved:
1. Deletion of disallowance of exemption under Section 10B of the Income Tax Act.
2. Fulfillment of conditions laid down for exemption under Section 10B.
3. Approval by the Software Technology Parks of India (STPI) and ratification by the Board of Approvals (BOA).
4. Eligibility for exemption under Section 10A without a claim in the return of income.
5. Validity of the order of the Commissioner of Income Tax (Appeals) [CIT(A)].
6. Restoration of the Assessing Officer's (AO) order.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance of Exemption under Section 10B:
The primary issue was whether the CIT(A) erred in deleting the disallowance of exemption under Section 10B of ?1,27,84,850/-. The AO had disallowed the exemption claimed by the assessee on the grounds that the STPI unit was not approved by the BOA as required under Section 10B. However, the CIT(A) allowed the exemption, citing that the approval from STPI was sufficient and that there was no need for ratification by the BOA. The CIT(A) relied on various circulars and instructions issued by the CBDT and judgments from other tribunals and high courts, which supported the view that STPI approval sufficed for Section 10B purposes.

2. Fulfillment of Conditions Laid Down for Exemption under Section 10B:
The AO contended that the assessee failed to fulfill the conditions for exemption under Section 10B, specifically the requirement for BOA approval. The CIT(A) countered this by stating that the CBDT had clarified that STPI approval was valid for Section 10B claims. The CIT(A) referenced several circulars, including Circular No. 684 and Circular No. 01/2005, which indicated that STPI's approval should be treated as valid for Section 10B purposes. Additionally, the CIT(A) noted that the assessee had consistently received this exemption in previous and subsequent years.

3. Approval by STPI and Ratification by BOA:
The AO's disallowance was based on the lack of BOA ratification for the STPI approval. The CIT(A) and subsequent tribunal judgments clarified that the approval from STPI, a government-authorized body, was sufficient for claiming the exemption under Section 10B. The tribunal judgments, such as those in the cases of Cat Labs Pvt. Ltd. and Quality BPO Services Pvt. Ltd., supported the view that STPI approval did not require further ratification by BOA for Section 10B claims.

4. Eligibility for Exemption under Section 10A Without a Claim in the Return of Income:
One of the grounds raised by the revenue was that the CIT(A) erred in holding the assessee eligible for exemption under Section 10A, despite no such claim in the return of income. However, this issue was not elaborated upon in the judgment, as the primary focus remained on the Section 10B exemption.

5. Validity of the Order of the CIT(A):
The revenue argued that the CIT(A) should have upheld the AO's order. The CIT(A) had allowed the exemption based on the consistent treatment of the assessee's claims in previous years and the interpretation of relevant circulars and tribunal judgments. The tribunal upheld the CIT(A)'s order, noting that the exemption had been allowed in other years and that the principle of consistency should apply.

6. Restoration of the AO's Order:
The revenue prayed for the restoration of the AO's order, which disallowed the exemption. However, the tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to allow the exemption under Section 10B. The tribunal emphasized that the STPI approval was sufficient and that the revenue had not contested the CIT(A)'s decision in previous years, thereby upholding the principle of consistency.

Conclusion:
The tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to allow the exemption under Section 10B. The tribunal concluded that the STPI approval sufficed for claiming the exemption and that the principle of consistency should apply, given the exemption was allowed in previous and subsequent years.