Tribunal upholds deduction under section 10A for assessee, citing precedent and principle of continuity.

The Tribunal dismissed Revenue's appeals against CIT(A) orders for assessment years 2004-05, 2006-07, and 2008-09, upholding the allowance of deduction u/s. 10A for the assessee. The dispute arose from the use of old machineries transferred from a sister concern, initially disallowed by the AO but later permitted by the CIT(A). Relying on precedent and the principle of continuity, the Tribunal affirmed the CIT(A)'s decision, emphasizing that once a deduction is granted in the initial year, it should continue unless circumstances change.

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Issues:
- Appeal against CIT(A) orders for assessment years 2004-05, 2006-07, and 2008-09.
- Allowance of deduction u/s. 10A.
- Use of old machineries transferred from sister concern.
- Disallowance of deduction by AO.
- Decision based on previous Tribunal orders.
- Interpretation of relevant legal provisions.
- Application of precedent set by the Bombay High Court.

Analysis:
1. The appeals were filed by the Revenue against the CIT(A) orders for the assessment years 2004-05, 2006-07, and 2008-09. The main contention revolved around the allowance of deduction u/s. 10A by the CIT(A) despite the AO's disallowance based on findings from earlier proceedings related to the initial year of business operations.

2. Specifically, the AO had disallowed the deduction u/s. 10A due to the assessee's use of old machineries transferred from its sister concern, which was deemed a violation of section 10A(2)(iii). The CIT(A) directed the AO to allow the deduction, leading to the Revenue's appeal against this decision.

3. The Tribunal noted that the assessee was initially allowed the deduction u/s. 10A by the AO, except for income from foreign exchange fluctuation. However, the CIT(A) extended the deduction to cover foreign exchange fluctuation as well. The Tribunal upheld the CIT(A)'s decision, which was based on previous Tribunal orders and subsequent dismissal of Revenue's appeals and M.A.

4. During the proceedings, the Departmental Representative argued against the deduction u/s. 10A for the assessee, while the AR contended that the deduction should be maintained based on the initial year's allowance. The AR relied on the Bombay High Court's decision in a similar case to support the argument that once a deduction is granted for the initial year, it should continue in subsequent years unless there are changes in circumstances.

5. The Tribunal considered the arguments from both parties and held that since the deduction u/s. 10A was granted in the initial year without being set aside, the principle established by the Bombay High Court's decision was applicable. Consequently, the Tribunal declined to interfere with the relief granted by the CIT(A) for the years under consideration, leading to the dismissal of the Revenue's appeals.

6. In conclusion, the Tribunal dismissed the appeals filed by the Revenue, maintaining the allowance of deduction u/s. 10A for the assessee based on the principle of continuity established by previous decisions and legal interpretations.

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