PRINCIPAL COMMISSIONER OF INCCOME TAX - 2 vs. MEDNAUTIX OUTSOURCING PVT. LTD.

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TAXAP/409/2018HC GujaratGJHC24011289201830 April 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that since the approval from the Board of Approval was produced before the Income Tax Appellate Tribunal, and the Tribunal, in view of such approval, granted the deduction under Section 10B of the Income-tax Act, 1961, there was no reason to interfere with the Tribunal's order. The reasoning was that the crucial document (approval) was placed on record, and the Tribunal had considered it. The ratio decidendi is that if a necessary statutory approval, though belatedly produced, is accepted by the appellate authorities and forms the basis for granting a deduction, the High Court may not interfere in appeal. The operative direction was that the Tax Appeals filed by the Revenue are dismissed.

What were the facts?

The Revenue has filed these appeals challenging the common judgment of the Income Tax Appellate Tribunal (ITAT) dated September 5, 2017. The assessee, Mednautix Outsourcing Pvt. Ltd., for the assessment year 2009-2010, claimed a deduction of Rs. 66.62 lakhs under Section 10B of the Income-tax Act, 1961. The Assessing Officer disallowed this claim for want of approval from the Board of Approval for registration as an Export Oriented Unit (EOU). The CIT(A) upheld the disallowance but granted partial relief under Section 10A of the Act. Both the assessee and the Revenue filed cross-appeals before the ITAT. Before the ITAT, the assessee produced a belated approval from the Board, arguing that the delay was beyond its control. The ITAT accepted this contention and granted the deduction under Section 10B.

What were the issues?

1. Whether the Income Tax Appellate Tribunal committed an error in accepting the assessee’s claim of deduction under Section 10B of the Income-tax Act, 1961, when the approval from the Board of Approval was produced belatedly before the Tribunal? Assessee's Contention: The assessee contended that the belated approval from the Board of Approval was a procedural delay beyond its control and therefore, the deduction under Section 10B should be allowed. The assessee relied on the fact that the approval was eventually granted. Revenue's Contention: The Revenue argued that the assessee failed to produce the necessary approval from the Board of Approval for registration as an EOU before the Assessing Officer, which led to the disallowance of the deduction under Section 10B. The Revenue's appeal challenges the ITAT's acceptance of the belated approval.

Which sections of the Income-tax Act were involved?

Section 10B,Section 10A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Ahmedabad dated 5th September 2017 [“the Tribunal” for short].

This question arises in the following background.

For the assessment year 2009-2010, the assessee had filed return of income in which the assessee had claimed deduction of Rs. 66.62 lakhs [rounded off] under Section 10B of the Income-tax Act, 1961 [“the Act” for short]. The Assessing Officer did not accept such a claim since the assessee failed to produce the approval granted by the Board of Approval for registration as a EOU.

In appeal, CIT [A] did not disturb this finding, but held that the assessee did qualify for deduction under Section 10A of the Act, and accordingly, granted partial relief. Both the sides were aggrieved by this order of CIT [A] which gave rise to two cross appeals before the Tribunal.

Before the Tribunal, the assessee produced belated approval granted by the Board and contended that it was not within the control of the assessee when such approval may be granted. The Tribunal accepted assessee’s contention and granted deduction under Section 10B of the Act.

In view of the fact that approval was produced before the Tribunal, even the Tribunal, in view of such approval has granted deduction under Section 10B of the Act, we see no reason to interfere.

Tax Appeals are dismissed. [Akil Kureshi, J.] [B.N Karia, J.] Prakash

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