STPI unit deduction rules: section 10B needs separate statutory approval, while an alternate section 10A claim may still be considered.

Approval by the Director, STPI under the Software Technology Park scheme was held insufficient for deduction under section 10B because that provision requires separate approval by the Board appointed by the Central Government, so the 10B claim failed. An STPI-recognised unit could, however, pursue deduction under section 10A as an alternate appellate claim even if it was not raised in the original return, provided the substantive statutory conditions were met and the prescribed audit report was furnished, so the 10A claim was sustained.

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Issues: (i) Whether an STPI-registered unit was entitled to deduction under section 10B of the Income-tax Act, 1961; (ii) Whether the assessee could be allowed deduction under section 10A of the Income-tax Act, 1961 as an alternate claim though it was not claimed in the return of income.

Issue (i): Whether an STPI-registered unit was entitled to deduction under section 10B of the Income-tax Act, 1961.

Analysis: The unit was approved only by the Director, STPI under the Software Technology Park scheme. The statutory requirement for section 10B benefit was approval by the Board appointed by the Central Government, and approval for STPI purposes was not treated as equivalent to such approval. The reasoning adopted was consistent with the view that the distinct statutory procedure for section 10B had to be satisfied independently.

Conclusion: The claim under section 10B was rightly denied and is against the assessee.

Issue (ii): Whether the assessee could be allowed deduction under section 10A of the Income-tax Act, 1961 as an alternate claim though it was not claimed in the return of income.

Analysis: The assessee was a recognised STPI unit and the approval by the Director, STPI was treated as sufficient for section 10A purposes, subject to fulfillment of the remaining statutory conditions. The fact that the claim was not made in the original return did not by itself bar consideration of the alternate claim, since the assessee had raised it before the appellate authority and had furnished the prescribed audit report. The matter was examined on the basis that the substantive eligibility under section 10A could be tested in law.

Conclusion: The alternate claim under section 10A was sustained and is in favour of the assessee.

Final Conclusion: The assessee was not entitled to deduction under section 10B, but the allowance of deduction under section 10A was upheld; both appeals were dismissed.

Ratio Decidendi: Approval by the Director, STPI does not satisfy the separate statutory approval required for section 10B, but an eligible STPI unit may pursue deduction under section 10A even as an alternate appellate claim if the substantive conditions for that deduction are met.

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