Whether if assessee was originally claiming Sec 10B benefits, it can claim Sec 10A benefits once it acquires a running business having entitlement for claiming deduction u/s 10A - YES: ITAT

THE issue before the Bench is - Whether if assessee was originally claiming Sec 10B benefits, it can claim Sec 10A benefits once it acquires a running business having entitlement for claiming deduction u/s 10A. YES is the answer.

Facts of the case

The assessee company had contended that CIT(A) erred in holding that assessee was not entitled to claim relief u/s 10A only on the technical ground that the claim had been made u/s 10B in the return of income for the AY under consideration and not u/s 10A in respect of its profit derived from its 100% EOU from export of computer software registered with STPI. The assessee filed return of income claiming deduction u/s 10B. Assessment was completed u/s 143(3) denying the claim of the assessee for deduction u/s 10B. In the course of assessment proceedings, assessee submitted that assessee was claiming deduction u/s 10B in earlier AYs. During this AY, the assessee claimed deduction u/s 10A and filed report in Form 56F as required u/s 10A. Assessee submitted that it satisfied all the conditions relating to section 10A and therefore entitled to deduction u/s 10A. The AO while completing the assessment denied deduction stating that assessee claimed deduction u/s 10B and in view of the decision of the Delhi HC in the case of Regency Creations Pvt. Ltd. 2012-TIOL-760-HC-DEL-IT, the assessee was not entitled for claim of deduction u/s 10B, since the assessee was only 100% EOU setup under STPI scheme and not approved by the Board appointed in this behalf by the Central Government in exercise of powers conferred by section 14 of Industries (Development and Regulation) Act, 1951. On appeal, CIT(A) sustained the order of the AO in denying claim of the assessee u/s 10A / 10B. The CIT(A) was of the view that the assessee claimed deduction u/s 10B in the return of income, AO found that assessee was not entitled for exemption u/s 10B and therefore AO was right in denying the claim of the assessee. CIT(A) held that since the assessee had not claimed deduction u/s 10A in the return of income, the assessee cannot claim exemption under section 10A in the appellate proceedings.

Having heard the matter, the Tribunal held that,

++ the Delhi HC in the case of CIT Vs. Regency Creations Pvt.Ltd. 2012-TIOL-760-HC-DEL-IT held that in order to claim exemption u/s 10B, an undertaking must have been approved by the Board appointed in this behalf by the Central Government in exercise of powers conferred by section 14 of the Industries (Development & Regulation) Act, 1951 and rules made thereunder. In this case, assessee is a unit recognized by the STPI. It was not placed on record to suggest that unit was approved by the Board appointed by the Central Government under section 14 of Industries (Development and Regulation) Act, 1951, therefore assessee is not eligible for 10B deduction. However, if the assessee is not entitled for deduction under section 10B, the claim made by the assessee u/s 10A should be considered by the lower authorities. The Madras High Court in the case of CIT Vs. Heartland KG Information held that dismissing the appeal, (i) that the transfer was not that of plant and machinery alone but of sale of the whole business unit of the transferor company which was primarily only to the export of articles or things. Even though the assessee originally claimed relief u/s 10B, it was cautious enough to make an alternative plea u/s 10A in view of the fact that the assessee's vendor had the benefit u/s 10A. It was not denied by the Revenue that the assessee had the whole business transferred to its favour and that the factum of transfer was also intimated to the Software Technology Park of India. Thus, as a software technology park, the assessee was entitled to place its claim u/s 10A. In any event, even assuming for a moment, the assessee had not referred to the section correctly, the fact remained that if the claim could be favourably considered under any of those special deduction provisions and on the conditions specified therein being satisfied, there did not exist any justifiable ground for the Revenue to contend that the assessee shall not be entitled to have the benefit of section 10A. The assessee was entitled to exemption u/s 10A. Respectfully following the said decision, we set aside the orders of lower authorities and remit the matter back to the file of Assessing Officer with a direction to consider the claim of the assessee under section 10A after examining the allowability of the claim afresh in accordance with law and in light of the above observations. In the result, appeal of the assessee is allowed for statistical purposes.