ITAT confirms deduction under section 10B for export activities based on sales to 100% EOU.

The ITAT upheld the CIT(A)'s decision, dismissing the Revenue's appeal and confirming the assessee's eligibility for deduction under section 10B. The deduction was allowed based on the description of exported goods as 'rough block' or 'crude block' in sales invoices, with the ITAT emphasizing the continuity of the business and similarity in export activities. Additionally, the deduction was permitted on sales to 100% Export Oriented Undertakings (EOU) by a third party exporter, aligning with a previous decision and the Trade Policy.

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Issues:
1. Eligibility for deduction u/s 10B based on the description of exported goods.
2. Allowance of deduction u/s 10B on sales to 100% Export Oriented Undertakings (EOU) by a third party exporter.

Issue 1: Eligibility for deduction u/s 10B based on the description of exported goods
The appeal pertained to the assessment year 2007-08, where the assessee-firm, engaged in exporting granite, claimed a deduction u/s 10B of the Income-tax Act, 1961. The dispute arose from the description of the exported goods as 'rough block' or 'crude block' in sales invoices, leading the Assessing Officer to believe that the granite was not polished. The ITAT had previously allowed the deduction for the assessee in the assessment year 2005-06, noting that the granite was polished before export. The Revenue contended that the Tribunal order from 2005-06 was not final and had been appealed, but the facts for both years were similar. The CIT(A) found the facts identical and granted the deduction u/s 10B. The ITAT, concurring with the CIT(A), upheld the deduction, emphasizing the continuity of the business and the similarity in export activities between the years.

Issue 2: Allowance of deduction u/s 10B on sales to 100% EOU by a third party exporter
The second issue concerned the allowance of deduction u/s 10B on sales to 100% Export Oriented Undertakings (EOU) by a third party exporter. The ITAT referred to a decision by the Bangalore Bench in a similar case, ruling that third-party exports to 100% EOU were eligible for the benefit u/s 10B. The ITAT noted that the Trade Policy aligned with the Foreign Trade Policy, allowing sales to other 100% EOU to be considered as 'deemed export.' The assessee had exported goods to 100% EOU, which were treated as deemed export. The ITAT observed that the goods were manufactured by the 100% EOU (the assessee) and exported as per the Foreign Trade Policy, with evidence of foreign exchange realization provided. Citing the Bangalore Bench decision, the ITAT dismissed the Revenue's appeal, affirming the eligibility of the assessee for deduction u/s 10B on sales to 100% EOU by a third party exporter.

In conclusion, the ITAT upheld the CIT(A)'s decision and dismissed the Revenue's appeal, confirming the eligibility of the assessee for deduction u/s 10B based on the description of exported goods and on sales to 100% EOU by a third party exporter.

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