Tribunal upholds assessee's exemption claim under section 10B, citing STPI registration and EOU criteria.

ITO, Ward-1 (1), Pune Versus Cat Labs Pvt. Ltd.

ITO, Ward-1 (1), Pune Versus Cat Labs Pvt. Ltd. - TMI Issues Involved:
1. Whether the Commissioner of Income-tax (Appeals) erred in deleting the disallowance of Rs. 1,20,73,454/- made on account of denial of the assessee's claim of exemption under section 10B of the Income-tax Act, 1961.
2. Whether the registration granted by the Software Technology Park of India (STPI) is sufficient for fulfilling the condition prescribed in Section 10B for approval of an Export Oriented Unit (EOU) under section 14 of the Industries (Development & Regulation) Act, 1951.
3. Whether the assessee qualifies as a 100% Export Oriented Unit as specified under Explanation 2(iv) of section 10B of the Income-tax Act.
4. Whether the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Regency Creations Ltd. applies to the present case.
5. Whether the principle of consistency applies to the Revenue not filing an appeal against the order of the CIT(A) in the preceding year on the same issue.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance of Rs. 1,20,73,454/-:
The Revenue contended that the Commissioner of Income-tax (Appeals) erred in deleting the disallowance made by the Assessing Officer regarding the assessee's claim of exemption under section 10B of the Income-tax Act. The Assessing Officer had disallowed the exemption on the grounds that the assessee was not approved by the Board appointed by the Central Government under section 14 of the Industries (Development and Regulation) Act, 1951. However, the CIT(A) allowed the claim of the assessee, leading to the Revenue's appeal.

2. Sufficiency of STPI Registration for Section 10B:
The CIT(A) considered whether the registration granted by the Software Technology Park of India (STPI) was sufficient to fulfill the condition prescribed in Section 10B for approval of an EOU. The Assessing Officer had argued that the STPI registration was not at par with the approval required under section 14 of the Industries (Development & Regulation) Act, 1951. The CIT(A), however, noted that the Ministry of Information Technology had constituted STPI specifically for granting 100% EOU approval to units engaged in software exports, and this approval should be recognized as equivalent to the Board's approval under the Industries (Development & Regulation) Act, 1951.

3. Qualification as a 100% Export Oriented Unit:
The Assessing Officer disallowed the exemption on the grounds that the assessee was not a 100% EOU as per the definition in Explanation 2(iv) of section 10B, which requires approval by the Board appointed by the Central Government. The CIT(A) observed that the assessee had obtained approval from STPI and had fulfilled all other conditions prescribed in section 10B. The CIT(A) relied on various judicial decisions and CBDT Instruction No. 1/2006, which clarified that STPI approval was sufficient for the purpose of section 10B.

4. Applicability of CIT Vs. Regency Creations Ltd.:
The Revenue argued that the CIT(A) failed to apply the ratio of the decision in CIT Vs. Regency Creations Ltd., which they claimed was applicable to the present case. The CIT(A) distinguished the facts of the present case from the Regency Creations Ltd. case and noted that the overwhelming view of the Tribunals was to treat STPI approval as sufficient for section 10B benefits. The CIT(A) also noted that the decision in Infotech Enterprises Ltd. relied upon by the Assessing Officer was not applicable after the issuance of CBDT Instruction No. 1/2006.

5. Principle of Consistency:
The CIT(A) allowed the assessee's claim for the Assessment Year 2008-09 under identical facts and circumstances, and the Revenue did not file an appeal against that order. The CIT(A) noted that the principle of consistency should apply, and the Revenue's failure to appeal in the preceding year indicated acceptance of the CIT(A)'s decision. The Tribunal upheld this view, noting that the CIT(A)'s order was based on various decisions and CBDT instructions, and found no infirmity in the CIT(A)'s order.

Conclusion:
The Tribunal dismissed the appeal filed by the Revenue, upholding the order of the CIT(A) that allowed the assessee's claim of exemption under section 10B. The Tribunal found that the CIT(A) had correctly applied the law and judicial precedents, and the STPI approval was sufficient for the purposes of section 10B. The principle of consistency also supported the CIT(A)'s decision.