Exemption under Section 10A once granted cannot be denied in later years without change in facts

The HC held that once exemption under section 10A was granted and accepted for the initial assessment year without withdrawal or set aside, the department cannot deny the same benefit for subsequent years absent any change in facts. Since relief was granted for AY 2000-01 and 2001-02 to the SEEPZ unit and no change in facts was shown for AY 2002-03 to 2004-05, reopening the assessments under section 147 to disallow exemption was not justified. The relief under section 10A was upheld for the later years in favor of the assessee.

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Issues:
- Appeal against common order of Income Tax Appellate Tribunal regarding exemption under Section 10A of the Income Tax Act for assessment years 2002-2003, 2003-04, and 2004-05.
- Justification for allowing exemption to the assessee company's unit at SEEPZ Mumbai despite non-compliance with Section 10A(2)(ii) requirements.

Analysis:
1. The appellant revenue contested the Tribunal's decision to grant exemption to the assessee company's SEEPZ unit under Section 10A of the Income Tax Act for the assessment years in question. The main argument was that the SEEPZ unit was formed by splitting the Fort unit, evidenced by both units developing the same software product, exporting to the same party, and receiving common remittances. The appellant also argued that each assessment year is independent, and the concept of res judicata does not apply in tax matters, allowing the revenue to take a different view in subsequent years.

2. In response, the respondent-assessee relied on legal precedents to support their claim for exemption under Section 10A. Citing cases like Commissioner of Income Tax v. Paul Brothers and M/s. Direct Information Private Ltd. v. ITO, the respondent argued that once a benefit of deduction is granted for specific years without withdrawal, it cannot be denied for subsequent years unless there is a change in facts. The respondent emphasized that the SEEPZ unit was independently functioning, not formed by splitting the Fort unit, as confirmed by the Commissioner of Income Tax (Appeals) and the Tribunal.

3. The High Court considered the arguments presented and referenced the legal principles established in previous judgments. Relying on the decisions in Paul Brothers and Director of Information Pvt. Ltd., the Court upheld the Tribunal's decision, emphasizing that unless relief granted for the first assessment year is withdrawn or set aside, the Income Tax officer cannot deny the relief for subsequent years. Since the relief for the SEEPZ unit was not withdrawn for the initial assessment years, and there was no change in relevant facts, the benefit of Section 10A could not be denied for the subsequent assessment years. The Court concurred with the findings of fact by the lower authorities that the SEEPZ unit was not formed by splitting the Fort unit.

4. Consequently, the Court concluded that the formulated question did not raise any substantial legal issue in the given circumstances. Therefore, the appeal was dismissed, and no costs were awarded.

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