2014 (2) TMI 742 - AT - Income Tax

ITAT Remits Deduction Issue, Disallows 10B Claim, Suggests Exploring 10A

The ITAT allowed the appeal of the assessee for statistical purposes, remitting the issue of deduction eligibility under section 10A back to the Assessing ... Exemption claimed u/s 10B of the Act – Held that:- The decision in CIT vs. Valiant Communications [2012 (11) TMI 382 - ITAT DELHI] followed - the undertaking which has not been approved as a 100% EOU, by the Board appointed by the Government, as required under section 10B, the assessee will not be entitled to deduction under section 10B - Deduction for export of software is available under section 10A, 10B and 80HHE - If the assessee is not entitled to deduction under one section, his claim for deduction under another section of the Act should be considered - the claim of the assessee for deduction under section 10A requires to be examined in accordance with law – thus, the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Issues:1. Eligibility for deduction u/s 10B of the Income Tax Act.2. Requirement of approval from the Board appointed by the Central Government for 100% EOU.3. Disallowance of deduction claimed by the assessee.4. Consideration of alternate claim for deduction under different sections of the Act.Analysis:Issue 1: Eligibility for deduction u/s 10B of the Income Tax ActThe appellant, a software exporter registered as a 100% EOU, claimed exemption u/s 10B of the IT Act. The Assessing Officer disallowed the claim as the appellant did not furnish approval from the Board appointed by the Central Government. The CIT(A) upheld the disallowance, emphasizing the essential condition of Board approval for 100% EOU under section 10B. The appellant contended that the approval by STPI was equivalent to Board approval, citing a similar ITAT decision. However, the CIT(A) maintained the disallowance due to the lack of Board approval.Issue 2: Requirement of approval from the Board appointed by the Central Government for 100% EOUThe central issue revolved around the necessity of approval from the Board appointed by the Central Government for 100% EOU to claim deduction u/s 10B. The CIT(A) stressed the statutory requirement of Board approval for such undertakings. The absence of Board approval led to the disallowance of the deduction claimed by the appellant, as per the provisions of section 10B.Issue 3: Disallowance of deduction claimed by the assesseeThe Assessing Officer disallowed the deduction claimed by the appellant under section 10B due to the lack of Board approval for the 100% EOU status. Despite the appellant's submission of STPI approval, the authorities maintained that specific approval from the Board appointed by the Central Government was indispensable for claiming the deduction under section 10B.Issue 4: Consideration of alternate claim for deduction under different sections of the ActThe ITAT, Hyderabad, considered the possibility of examining the appellant's claim for deduction under an alternate section of the Act. Referring to a Delhi High Court decision, the ITAT highlighted the need to explore other deduction options if the appellant did not qualify for deduction under section 10B. Consequently, the ITAT remitted the issue to the Assessing Officer to evaluate the appellant's claim for deduction under section 10A, emphasizing the importance of considering all available deduction provisions.In conclusion, the ITAT allowed the appeal of the assessee for statistical purposes, remitting the issue of deduction eligibility under section 10A back to the Assessing Officer for further assessment.