STP Scheme Approval Not Equivalent to Section 10-B Approval for 100% EOU Tax Deductions

The HC held that approval granted to a unit under the STP scheme cannot be deemed approval under Section 10-B for claiming deductions, as a 100% EOU must be approved by the Board constituted under Section 14 of the IDR Act, 1951. The conditions governing STP units differ from those for EOUs, and no authority has been designated to equate STP approvals with Section 10-B approvals. The court emphasized that the statute requires strict adherence to the specific approval process for Section 10-B benefits. Consequently, the ITAT's allowance of the claim was set aside, ruling in favor of the revenue.

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Issues: Whether approval granted by the Software Technology Parks of India or the Inter-Ministerial Standing Committee for an STP/EHTP unit could be treated as approval under Section 10B of the Income-tax Act, 1961 for claiming deduction on export profits.

Analysis: The statutory scheme treated deduction under Section 10B as available only to a hundred per cent export-oriented undertaking approved by the Board appointed by the Central Government under Section 14 of the Industries (Development and Regulation) Act, 1951. Approval under the STP/EHTP scheme and approval under Section 10B operated in distinct fields, and the conditions governing the two were not identical. The notifications, circulars and instructions relied upon did not show any express delegation or substitution of the Board's function under Section 10B in favour of the STPI or the Inter-Ministerial Standing Committee. In the absence of clear statutory authorization, approval given for one scheme could not be deemed to satisfy the separate approval requirement under the other scheme.

Conclusion: The assessees were not entitled to deduction under Section 10B merely on the basis of STP approval; the question was answered against the assessee and in favour of the Revenue.

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