2011 (7) TMI 1161 - AT - Income Tax

Tribunal rules in favor of company for tax deduction as 100% Export Oriented Unit

M/s. Visu International Ltd Versus Dy. CIT

The Tribunal ruled in favor of the assessee company, overturning the CIT's decision under section 263. The Tribunal held that the company qualified for ... - Issues involved: The judgment involves the interpretation of provisions u/s. 10B of the Income-tax Act, 1961 regarding the eligibility of the assessee company for exemption as a 100% Export Oriented Unit (EOU) under the STP scheme for the assessment year 2006-07.Assessment and Additions u/s. 143(1): The assessee company, engaged in global educational consultancy and software development, filed its return of income for the assessment year 2006-07. The Assessing Officer made additions on account of disallowance u/s. 40(a)(ia) and u/s. 10B of the Income-tax Act, 1961.Revision u/s. 263 by CIT-III, Hyderabad: The CIT-III, Hyderabad found the order passed by the Assessing Officer u/s. 143(3) to be erroneous and prejudicial to the revenue's interest. The CIT observed that the company was not approved as a 100% EOU by the Board as required by section 10B. Despite multiple opportunities, the assessee failed to provide evidence to support its claim.Contentions and Arguments: The assessee contended that being issued by STPI, it qualified as a 100% EOU under the STP scheme, hence eligible for deduction u/s. 10B. However, the CIT held that specific approval by the Board was necessary, which the assessee lacked. The CIT emphasized that statutory requirements must be met for tax exemption.Legal Interpretation and Decision: The CIT clarified that STP units' approval did not equate to approval by the Board as a 100% EOU. The absence of Board approval rendered the assessee ineligible for exemption u/s. 10B. The Tribunal cited precedents and legislative intent to support this decision.Tribunal's Ruling: The Tribunal, following a similar precedent, quashed the CIT's order u/s. 263, restoring the Assessing Officer's decision to allow the deduction u/s. 10B for the assessee company. The Tribunal emphasized that the CIT's action was based on a change of opinion and not valid grounds.This judgment clarifies the importance of obtaining specific approvals required by law for claiming tax exemptions, highlighting the need for strict adherence to statutory provisions for availing benefits under the Income-tax Act, 1961.