2013 (10) TMI 1240 - AT - Income Tax

Tribunal overturns order on Section 10B deduction, stresses documentation and evaluation criteria

The Tribunal set aside the Commissioner's order, directing the Assessing Officer to reconsider the disallowance of Section 10B deduction due to the ... Exemption u/s 10B – The assessee failed to furnish the approval of the Board appointed by the Central Government in exercise of power conferred by section 14 of the Industries - The assessee also failed to submit the ratification by the Development Commissioner as envisaged in the Instruction dated March 9, 2009 - Held that:- The assessee produced the registration from Software Technology Park of India which was notified by the Ministry of Commerce, Government of India vide Notification No. 33/(RE)/92-97 dated March 22, 1994. The notification states that the Software Technology Park (STP) Scheme is a 100 per cent. export-oriented undertaking scheme – The registration certificate was produced only before CIT(A) but not before AO – The issue set aside for fresh adjudication after consideration of necessary material. Issues:- Disallowance of section 10B deduction for failure to produce ratification by the Board appointed by the Central Government.- Interpretation of Central Board of Direct Taxes Instruction No.2 of 2009.- Exemption under section 10B on sale proceeds not brought into India within the specified time frame.Issue 1: Disallowance of Section 10B Deduction:The Revenue appealed against the Commissioner of Income-tax (Appeals) IV, Hyderabad's order for the assessment year 2008-09, contending that the assessee failed to produce ratification by the Board appointed by the Central Government, as required by section 10B of the Income-tax Act, 1961. The Assessing Officer noted the absence of the Board's approval and the Development Commissioner's ratification, as mandated by the relevant provisions. However, the Commissioner of Income-tax (Appeals) relied on a Tribunal order in a similar case to allow the deduction, stating that the approval of the export-oriented undertaking by the Board and the Software Technology Park was equivalent. The Tribunal set aside the Commissioner's order, directing the Assessing Officer to reconsider the matter in light of the material provided by the assessee, emphasizing the need for proper documentation.Issue 2: Interpretation of CBDT Instruction No.2 of 2009:The Revenue argued that the Commissioner of Income-tax (Appeals) failed to appreciate the intent of Central Board of Direct Taxes Instruction No.2 of 2009, dated March 9, 2009. The instruction's relevance was in question concerning the approval process for the section 10B deduction. The Tribunal's decision to remit the issue back to the Assessing Officer for a fresh assessment indicates the necessity to align the assessee's claim with the specific requirements outlined in the CBDT instruction, emphasizing the importance of adhering to statutory guidelines.Issue 3: Exemption under Section 10B for Sale Proceeds:Another point of contention was the exemption under section 10B on the sale proceeds not repatriated to India within the stipulated timeframe. The Commissioner of Income-tax (Appeals) allowed the exemption based on the Software Technology Park's registration and a Tribunal order, despite the Assessing Officer not considering this evidence. The Tribunal's decision to send the issue back for reassessment underscores the significance of proper evaluation of all relevant material by the Assessing Officer to determine the eligibility for the claimed exemption under section 10B.In conclusion, the Tribunal's judgment highlights the importance of complying with statutory requirements, proper documentation, and thorough assessment by the Assessing Officer in determining the eligibility for deductions under section 10B of the Income-tax Act, 1961. The decision emphasizes the need for alignment with regulatory instructions and the significance of substantiating claims with appropriate evidence to avail of tax exemptions lawfully.