STPI approval cannot replace statutory export-oriented undertaking approval, while a belated audit report can support section 10A relief.

Approval under the Software Technology Park of India scheme did not satisfy the statutory requirement of approval as a hundred per cent export-oriented undertaking for section 10B, because the Act contemplated approval by the designated Board under the Industries (Development and Regulation) Act, 1951; deduction under section 10B was therefore denied. The alternative claim under section 10A was entertainable where the prescribed audit report was filed during assessment proceedings, since filing with the return was treated as directory and not mandatory; that claim was allowed subject to fulfilment of the substantive conditions. The appeal was thus partly allowed.

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Issues: (i) Whether approval under the Software Technology Park of India scheme constituted approval as a hundred per cent export-oriented undertaking for deduction under section 10B. (ii) Whether the alternative claim for deduction under section 10A could be entertained when supported by the prescribed audit report filed during assessment proceedings.

Issue (i): Whether approval under the Software Technology Park of India scheme constituted approval as a hundred per cent export-oriented undertaking for deduction under section 10B.

Analysis: The definition of a hundred per cent export-oriented undertaking under the Explanation to section 10B requires approval by the Board appointed by the Central Government under section 14 of the Industries (Development and Regulation) Act, 1951. Approval under the STPI scheme is not the same as such approval, and the statutory requirements for the two regimes are distinct. The reasoning followed the Delhi High Court view that STPI approval does not by itself satisfy the statutory pre-condition for section 10B.

Conclusion: The assessee was not entitled to deduction under section 10B.

Issue (ii): Whether the alternative claim for deduction under section 10A could be entertained when supported by the prescribed audit report filed during assessment proceedings.

Analysis: The audit report in the prescribed form was furnished before completion of assessment. The requirement of filing the report along with the return was treated as directory and not mandatory, and an alternative claim could be considered on the facts if the statutory conditions were otherwise satisfied. The matter was supported by prior Tribunal and High Court authorities allowing such consideration during assessment.

Conclusion: The alternative claim under section 10A was to be granted, subject to satisfaction of the necessary conditions in the assessee's case.

Final Conclusion: The Revenue succeeded on the section 10B issue, while the assessee succeeded on the alternative section 10A claim, resulting in a partly allowed appeal.

Ratio Decidendi: For section 10B, the specific statutory approval contemplated by the Act is indispensable and cannot be substituted by STPI approval; for section 10A, filing of the prescribed audit report during assessment is a directory compliance that may sustain the claim if the substantive conditions are met.

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