2015 (7) TMI 108 - AT - Income Tax

Tribunal directs re-examination of deduction claim under Section 10A, dismisses Section 10B grounds.

The Tribunal partly allowed the appeal, directing the Assessing Officer to re-examine the alternative claim for deduction under Section 10A while ... Exemption U/s 10B denied - assessee in its return of income had claimed deduction under Section 10B in respect of export of computer software in its STPI unit since it is registered as a 100% EOU exporting software products - whether the assessee is eligible for deduction under Section 10B of the Act in the absence of requisite approval from the Board of Approval ratifying the permission granted by the Development Commissioner? - Held that:- Admittedly, the assessee had not obtained the required approval envisaged under Section 10B of the Act. The assessee's alternate claim raised in appellate proceedings before the learned CIT(A) was that it be allowed deduction under Section 10A of the Act, for which it had the required approvals, which was not accepted. With regard to the question as to whether the assessee can be allowed to shift its claim for deduction under Section 10B to Section 10A of the Act; in our considered view the decision rendered in the case of Valiant Communications Ltd.,[2013 (1) TMI 734 - DELHI HIGH COURT] allowing the change of the alternate claim of that assessee to consider its eligibility deduction under Section 10A in place of 10B of the Act, squarely covers the issue in favour of the assessee. We find that from a perusal of the orders of the authorities below, since this issue of the assessee's alternate claim for deduction under Section 10A of the Act has not been considered by them, we are of the view that in the interest of equity and justice, this issue be examined by the Assessing Officer afresh in the light of the findings and observations thereon in the decisions of the Hon'ble High Court of Delhi in the case of Valiant Communications Ltd. (supra) - Decided in favour of assessee for statistical purposes Issues Involved:1. Deduction under Section 10B of the Income Tax Act.2. Alternative claim for deduction under Section 10A of the Income Tax Act.3. Consideration of EOU circular No.68, dated 14.05.2009.4. Consistency in granting exemptions across assessment years.5. Principles of natural justice and procedural fairness.Detailed Analysis:1. Deduction under Section 10B of the Income Tax Act:The assessee, a software development export company, filed its return for the Assessment Year 2010-11, claiming a deduction under Section 10B of the Act. The Assessing Officer disallowed this deduction due to the lack of requisite approval from the Board of Approval ratifying the permission granted by the Development Commissioner. The CIT (Appeals) upheld this disallowance, leading to the assessee's appeal before the Tribunal. The Tribunal noted that the assessee failed to produce the necessary approval under Section 10B, thereby justifying the disallowance of the deduction.2. Alternative Claim for Deduction under Section 10A of the Income Tax Act:The assessee raised an alternative claim for deduction under Section 10A before the CIT (Appeals), which was not considered in the initial order but was rejected in a subsequent order under Section 154. The Tribunal referenced the Hon'ble Delhi High Court's decision in the case of Valiant Communications Ltd., which allowed the consideration of an alternative claim under Section 10A. The Tribunal directed the Assessing Officer to examine the assessee's claim for deduction under Section 10A afresh, considering the auditor's report in Form No.56F and other relevant documents.3. Consideration of EOU Circular No.68, dated 14.05.2009:The assessee argued that the EOU circular dated 14.05.2009, which clarified the delegated powers of the Development Commissioner, was not properly considered by the Assessing Officer and the CIT (Appeals). The Tribunal did not specifically address this argument in isolation but considered it within the broader context of the eligibility for deduction under Section 10B and the alternative claim under Section 10A.4. Consistency in Granting Exemptions Across Assessment Years:The assessee contended that the deduction under Section 10B was allowed in the previous assessment year 2008-09, and there was no change in facts and circumstances. The Tribunal acknowledged this argument but emphasized the necessity of obtaining the requisite approval for the current assessment year, which the assessee failed to provide.5. Principles of Natural Justice and Procedural Fairness:The assessee claimed that the CIT (Appeals) did not grant an opportunity for a personal hearing as requested in a miscellaneous application dated 02.09.2013. The Tribunal recognized the importance of procedural fairness and directed the Assessing Officer to provide the assessee with an adequate opportunity to present its case during the fresh examination of the alternate claim under Section 10A.Conclusion:The Tribunal partly allowed the assessee's appeal for statistical purposes, directing the Assessing Officer to re-examine the alternative claim for deduction under Section 10A while dismissing the grounds related to the deduction under Section 10B. The Tribunal emphasized the need for procedural fairness and the consideration of relevant judicial precedents.