STPI scheme approval cannot replace Board ratification for Section 10-B exemption under the Income-tax Act.

STPI approval under the EHTP/STP scheme does not by itself satisfy the statutory requirement for exemption under Section 10-B of the Income-tax Act, 1961. The approval for setting up a 100% export-oriented unit operates within the scheme framework, while Section 10-B exemption depends on approval by the Board appointed under the Industries (Development and Regulation) Act, 1951, as reflected in Explanation 2(iv). In the absence of express statutory authorization or delegation extending to tax exemption approvals, scheme approval cannot replace Board ratification. The CBDT clarification requiring such ratification was therefore consistent with the statutory framework.

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Issues: Whether approval granted by the Software Technology Parks of India under the EHTP/STP scheme, without ratification by the Board of Approval, was sufficient to claim exemption under Section 10-B of the Income-tax Act, 1961, and whether the CBDT instruction impugned on that basis was invalid.

Analysis: The approval obtained by the petitioner was for setting up a 100% export-oriented unit under the EHTP scheme and was granted by STPI under delegated powers for scheme purposes. The exemption under Section 10-B depends on approval by the Board appointed by the Central Government under Section 14 of the Industries (Development and Regulation) Act, 1951, as reflected in Explanation 2(iv) to Section 10-B. The scheme approval and the tax exemption approval operate in different fields, and the former cannot be treated as a substitute for the latter in the absence of express statutory authorization or actual delegation covering Section 10-B approvals. The impugned clarification requiring ratification by the Board of Approval was therefore consistent with the statutory framework.

Conclusion: The STPI approval by itself did not entitle the petitioner to exemption under Section 10-B, and the challenge to the CBDT instruction failed.

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