Section 10B deduction upheld for export units where approval and export conditions were substantively satisfied.
A domestic tariff area unit later approved as a 100% export oriented undertaking remains eligible for section 10B deduction from the year of approval for the balance of the statutory period, provided the statutory approval and export conditions are substantively met; the Ahmedabad unit satisfied those requirements and the deduction was allowed. The Pune unit was also found to have the prescribed registration, valid approvals, and compliance with the approval process, and objections regarding STPI terms, customs permission, Softex declarations, and realisation of export proceeds were insufficient to deny relief on the facts, so deduction was likewise allowed.
Issues: (i) whether the assessee was entitled to deduction under section 10B of the Income-tax Act, 1961 in respect of the Ahmedabad undertaking converted into a 100% export oriented undertaking; and (ii) whether the assessee was entitled to deduction under section 10B of the Income-tax Act, 1961 in respect of the Pune undertaking.
Issue (i): whether the assessee was entitled to deduction under section 10B of the Income-tax Act, 1961 in respect of the Ahmedabad undertaking converted into a 100% export oriented undertaking.
Analysis: The deduction under section 10B was examined in the light of the CBDT circular clarifying that an undertaking set up in a domestic tariff area and subsequently approved as a 100% export oriented undertaking remains eligible for deduction from the year of approval for the remaining period of ten consecutive assessment years, subject to the statutory conditions. The unit's status as a 100% EOU and the absence of any disqualifying infirmity in the relevant approval and export activity supported the claim.
Conclusion: The issue was decided in favour of the assessee and against the Revenue.
Issue (ii): whether the assessee was entitled to deduction under section 10B of the Income-tax Act, 1961 in respect of the Pune undertaking.
Analysis: The Pune unit was found to be registered with the prescribed authority, its starting up as a new unit was not in dispute, and the supporting approvals and certificates showed compliance with the approval process. The objections regarding acceptance of the STPI terms, customs permission, filing of Softex declarations, and credit of export realisation were held not to justify denial of the deduction on the facts found by the appellate authority.
Conclusion: The issue was decided in favour of the assessee and against the Revenue.
Final Conclusion: The Revenue's challenge to the grant of deduction under section 10B failed on both undertakings, and the order allowing the assessee's claim was sustained.
Ratio Decidendi: A domestic tariff area unit subsequently approved as a 100% export oriented undertaking remains eligible for section 10B deduction from the year of approval for the balance of the statutory period, and deduction cannot be denied when the prescribed approval and export conditions are substantively satisfied.
TaxTMI 
AI Drafter ✕
TaxTMI 
