ITAT upholds AO's order on deduction u/s.10A for STP units, dismissing CIT's order u/s.263. Special Bench ruling applied.

The ITAT allowed the assessee's appeal, upholding the AO's order and dismissing the ld. CIT's order u/s.263 regarding deduction u/s.10A for STP units. The decision was based on the Special Bench ruling that certain expenses should be excluded from both turnovers, finding no contrary material against the assessee's position. The ITAT found the AO's order not erroneous in prejudicing revenue interests, emphasizing adherence to the Special Bench decision.

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Issues:
Challenge against order passed by the ld. CIT u/s.263 of the IT Act, 1961 regarding deduction u/s.10A for STP units.

Analysis:
The appeal was filed against the ld. CIT's order regarding the deduction claimed u/s.10A for eight STP units. The ld. CIT observed an excess deduction of Rs.37,31,761/- allowed by the AO. The assessee argued that Post & Communication and Insurance expenses were not separately recovered in the invoices, thus should not be excluded from the export turnover. The ld. CIT set aside the assessment for further scrutiny. The assessee challenged this order before the ITAT.

The assessee contended that the issue was covered by a Special Bench decision in ITO vs. Sak Soft Ltd., which held that certain expenses should be excluded from both export turnover and total turnover. The ld. CIT argued that these expenses were not deducted from the total turnover to arrive at the export turnover as per provisions of sec.10A. The ITAT noted that the issue was squarely covered by the Special Bench decision, which stated that such expenses should be excluded from both turnovers. As there was no contrary material against the factual matrix shown by the assessee, the ITAT upheld the order passed by the AO and cancelled the ld. CIT's order u/s.263.

Therefore, the ITAT allowed the assessee's appeal, emphasizing that the order passed by the AO was not found to be erroneous in prejudicing the interests of the revenue. The ITAT's decision was based on the precedent set by the Special Bench decision, dismissing the ld. CIT's order and upholding the AO's order regarding the deduction u/s.10A for the STP units.

(Order pronounced in the open court on 4.3.2010.)

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