Ratification Required for Tax Exemption: Court Dismisses Writ Petition

The court dismissed the writ petition, affirming that the petitioner must obtain ratification from the Board of Approval to claim the Section 10-B exemption under the Income Tax Act. The CBDT Instruction No.2/2009 and its corrigendum were upheld as valid, and the petitioner's approval from the Software Technology Parks of India was deemed insufficient for tax exemption purposes without further ratification.

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Issues involved:
1. Validity of CBDT Instruction No.2/2009 dated 9.3.2009 r/w Corrigendum dated 8.5.2009.
2. Entitlement of the petitioner to Section 10-B exemption under the Income Tax Act, 1961.
3. Requirement of ratification from the Board of Approval for 100% Export Oriented Units (EOUs) under the STP/EHTP scheme.

Issue-wise detailed analysis:

1. Validity of CBDT Instruction No.2/2009 dated 9.3.2009 r/w Corrigendum dated 8.5.2009:
The petitioner challenged the CBDT Instruction No.2/2009 and its corrigendum, arguing that these instructions were in violation of Section 10-B r/w Section 14 of the Industries (Development and Regulation) Act, 1951. The petitioner claimed that the approval granted by the Development Commissioner (Director of Software Technology Parks of India) should be deemed as approval by the Board of Approval, thus not requiring further ratification.

2. Entitlement of the petitioner to Section 10-B exemption under the Income Tax Act, 1961:
The petitioner contended that their approval as a 100% EOU under the EHTP scheme should automatically qualify them for the Section 10-B exemption. They argued that the approval granted by the Development Commissioner was sufficient and no further ratification was required. However, the respondents argued that the approval by the Software Technology Parks of India was valid only for setting up the unit, not for claiming tax exemptions under Section 10-B, which required ratification by the Board of Approval.

3. Requirement of ratification from the Board of Approval for 100% EOUs under the STP/EHTP scheme:
The court examined whether the approval by the Development Commissioner under the STP/EHTP scheme could be deemed as approval under Section 10-B of the Income Tax Act. The respondents relied on the Delhi High Court judgment in Commissioner of Income Tax Vs. Regency Creations Limited, which clarified that the approval by the Inter-Ministerial Standing Committee under the STP scheme does not replace the need for ratification by the Board of Approval for the purposes of Section 10-B exemption. The court agreed with this interpretation, stating that the approval granted by the Software Technology Parks of India was for setting up the unit and not for tax exemption purposes.

The court concluded that the approval for setting up a 100% EOU under the EHTP scheme by the Software Technology Parks of India did not automatically qualify the petitioner for the Section 10-B exemption. The petitioner needed to obtain further ratification from the Board of Approval, as mandated by the Income Tax Act. The court found no inconsistency in the requirement for such ratification and dismissed the writ petition, upholding the validity of the CBDT instructions and the need for compliance with the statutory provisions for claiming tax exemptions.

Conclusion:
The court dismissed the writ petition, affirming that the petitioner must obtain ratification from the Board of Approval to claim the Section 10-B exemption under the Income Tax Act. The CBDT Instruction No.2/2009 and its corrigendum were upheld as valid, and the petitioner's approval from the Software Technology Parks of India was deemed insufficient for tax exemption purposes without further ratification.

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