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

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TAXAP/412/2018HC GujaratGJHC24011292201830 April 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that since the approval from the Board of Approval was produced before it, and in view of such approval, the assessee was eligible for the deduction under Section 10B of the Income-tax Act, 1961. The Tribunal found no reason to interfere with the assessee's claim for deduction under Section 10B. The reasoning was based on the belatedly produced approval, which the Tribunal accepted as valid for granting the deduction. The ratio decidendi is that a deduction under Section 10B can be allowed if the necessary approval, even if produced belatedly before the appellate authority, is eventually obtained and demonstrates eligibility. The operative direction was to grant the deduction under Section 10B. No issue was expressly left undecided.

What were the facts?

The Revenue has filed these appeals challenging a common judgment of the Income Tax Appellate Tribunal (ITAT), Ahmedabad, dated September 5, 2017. The assessee, Mednautix Outsourcing Pvt. Ltd., for the assessment year 2010-2011, claimed a deduction of Rs. 97.65 lakhs under Section 10B of the Income-tax Act, 1961. The Assessing Officer disallowed this claim due to the assessee's failure to produce the approval from the Board of Approval for registration as an Export Oriented Unit (EOU). The CIT(A) upheld the disallowance under Section 10B but granted partial relief by allowing a deduction under Section 10A. Both parties appealed to the ITAT. Before the ITAT, the assessee submitted a belated approval from the Board, arguing that the delay was beyond their 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 for registration as an EOU was produced belatedly before the Tribunal. Assessee's Contention: The assessee contended that the belated approval from the Board of Approval was not within their control and that it should be accepted. The assessee relied on the fact that the approval was eventually granted and produced before the Tribunal. Revenue's Contention: The Revenue argued that the ITAT erred in accepting the assessee's claim for deduction under Section 10B, implicitly questioning the allowance of the deduction based on a belatedly produced approval, especially after the lower authorities had disallowed it.

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 2010-2011, the assessee had filed return of income in which the assessee had claimed deduction of Rs. 97.65 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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