Section 263 revision cannot stand when deduction under section 10B was examined and allowed after enquiry.

Revision under section 263 was unsustainable where the Assessing Officer had already examined the assessee's STPI registration, the nature of its services, and the approval requirements before allowing deduction under section 10B. The Tribunal noted that the assessment was made after enquiry on the relevant facts and that the revisional authority was only substituting a different view on issues already considered. An order cannot be treated as erroneous merely because another view is possible, and incentive provisions are to be construed liberally. On the facts, STPI approval was sufficient, and the claim under section 10B could not be disturbed.

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Issues: Whether the revision under section 263 of the Income-tax Act, 1961 could be sustained where the Assessing Officer had examined the assessee's claim under section 10B and allowed the deduction on the basis of STPI approval and the materials placed on record.

Analysis: The assessment records showed that the Assessing Officer had specifically examined both the nature of the assessee's activity and the requirement of approval from the competent authority before allowing deduction under section 10B. The assessee had explained its STPI registration, the services rendered, and the clarification received from the Director, STPI that no further ratification by the Inter Ministerial Standing Committee was required. The Assessing Officer accepted the explanation after enquiry and completed the assessment. The revisionary authority sought to substitute its own view on the grounds that the assessee was engaged in consultancy work and lacked approval from the Board constituted by the Central Government. The Tribunal noted that these very issues had already been examined in assessment proceedings and that the Assessing Officer had adopted one of the possible views. In such a situation, the order could not be treated as erroneous merely because the revisionary authority held a different opinion. The Tribunal also relied on the settled view that incentive provisions are to be construed liberally and that STPI approval was sufficient for the purpose of the claim in the facts considered.

Conclusion: The invocation of section 263 was not justified and the assessee's claim under section 10B could not be disturbed. The issue was decided in favour of the assessee.

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