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Before: Shri Inturi Rama Rao & Shri Duvvuru R.L. Reddy
O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
This appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals) 11, Chennai dated 21.02.2019 relevant to the assessment year 2008-09. The effective ground raised in the appeal of the Revenue is that the ld. CIT(A) has erred in deleting the disallowance of deduction under section 10B of the Income Tax Act, 1961 [“Act” in short].
Brief facts of the case are that the assessee filed its return of income on 30.09.2008 for the assessment year 2008-09 declaring income of ₹.6,06,15,150/- after claiming deduction under section 10B of the Act amounting to ₹.80,93,16,710/-. The assessment order under section 143(3) of the Act was completed by computing the taxable income at ₹.26,99,45,604/-. After recording the reasons, the assessment was reopened by issuing notice under section 148 of the Act. After considering the submissions of the assessee, the assessment under section 143(3) r.w.s. 147 of the Act was completed by assessing the taxable income at ₹.112,97,28,501/- after making various disallowances. On appeal, while partly allowing the appeal of the assessee, the ld. CIT(A) has allowed the disallowance made towards the claim of deduction under section 10B of the Act.
Aggrieved, the Revenue is in appeal before the Tribunal. At the outset, the ld. DR has submitted that the identical issue involved in this appeal was subject matter in appeal before the Tribunal in assessee’s own case for the assessment year 2009-10 and pleaded for following the same decision in the assessment year under consideration also. Despite service of notice [RPAD on record], none appeared on behalf of the assessee. Hence, we proceed to decide the issue after hearing the ld. DR.
We have heard the ld. DR, perused the materials available on record and gone through the orders of authorities below. On verification of the records, the Assessing Officer has observed that as per Annexure A to Form 56G, the undertaking commenced its business of manufacture or production in September, 1997 and the same was subsequently registered/converted as a 100% EOU on 15.10.1998. According to the clarification given by the by the Board in Circular 1 of 2005 dated 06.01.2005, the undertaking set up in Domestic Tariff Area (DTA), by which profit is derived from export of articles or thing or computer software manufactured which is subsequently converted into an 100% EOU will be eligible for deduction under section 10B on getting approval as 100% EOU only for the remaining period of 10 consecutive assessment years, beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce article/things or computer software as DTA unit. In the instant case, the deduction will be available from the assessment year 1998-99 to 2007- 08, the ten consecutive assessment years from the year of approval as 100% EOU since the assessee commenced its business as DTA unit in September, 1997. Therefore, the Assessing Officer observed that the assessee is not entitled to claim any deduction under section 10B for the assessment year 2008-09. On appeal against the disallowance under section 10B of the Act of ₹.79,81,31,665/-, by following appellate order for the assessment year 2009-10, the ld. CIT(A) decided the issue in favour of the assessee. Against the order of the ld. CIT(A) for the assessment year 2009-10, the Department preferred further appeal before the Tribunal and vide order in dated 30.05.2019, wherein, while allowing the ground raised
by the Revenue, the Tribunal has observed and held as under:
18. Grounds 2 & 3 challenges the finding of the ld. Commissioner of Income Tax (Appeals) that the assessee unit is eligible for exemption u/s.10B of the Act. Ld. Departmental Representative contended that the finding of the ld. Commissioner of Income Tax (Appeals) is factually incorrect, in as much as, assessee had converted existing unit at CIT Nagar to Sholinganallur unit and the ld. Commissioner of Income Tax (Appeals) ought not have granted exemption. The finding of the Assessing Officer while denying the claim for exemption u/s. 10B of the Act are as under:- “On verification of records in the case of assessee company, it is ascertained that it had started its business activity in September, 1997. The said unit was initially operating at No. 57/1, Thirumalai Pillai Road, T Nagar, Chennai and claiming exemption / deduction u/s 8OHHE for Asst years 1998-99 and 1999-2000. Subsequently, new units were started at No. 40, CIT Nagar, 1st Main Road, Chennai (hereinafter referred as CIT Nagar unit) and at Aishwarya Complex, West CIT Nagar and operated as 100% EOU with the approval of STPI. The assessee has started claiming its 10B deduction from Asst Year 2000- 2001 onwards. Therefore, assessee commenced its business as DTA unit in September, 1997, subsequently converted into 100% EOU. In these circumstances, as per the provisions of 10B as well as clarification issued by the Board in Circular 1 of 2005 dt. January 6, 2005, the deduction will be available only from the year in which it got the approval as 100% EOU. Further deduction will be available only for the remaining period of 10 consecutive years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce article or thing or computer software as DTA unit. Hence, here the period of 10 years tax holiday has already expired.” On perusal of order the ld. Commissioner of Income Tax (Appeals), it is clear that ld. Commissioner of Income Tax (Appeals) had not met reasoning of the Assessing Officer, we reverse the findings of the ld. Commissioner of Income Tax (Appeals) and grounds of appeal 2 & 3 filed by the Revenue are allowed.”
Respectfully following the above decision of the Tribunal, we reverse the findings of the ld. CIT(A) on this issue and sustain the assessment. Thus, the ground raised by the Revenue stands allowed.
In the result, the appeal filed by the Revenue is allowed. Order pronounced on the 20th February, 2020 at Chennai.