STPI approval is essential for claiming section 10 B benefit

As per a recent judgement by the Madras High Court, benefit under section 10 B is not available in the same assessment year in which the assessee got itself registered with the Software Technology Parks of India (STPI).

Live Connection Software Solutions Pvt. Ltd. applied had applied for registration as 100 per cent Export Oriented Unit before the competent authority in March 2005 but got the approval in May 2005. It taxpayer claimed benefit u/s 10B for AY 2005-06. The AO denied the benefit as the registration was obtained in the May 2005 itself, i.e after the end of the previous year relevant to the AY 2005-06. The AO placed reliance on Circular 1 of 2005 dated 6 January 2005 for the same.

In an appeal, the CIT(A) and the Tribunal both ruled in favour of the taxpayer. Aggrieved, the tax department preferred an appeal before the Madras High Court, which ruled in favour of the department.

The High Court observed that in this case, such approval was granted during May 2005 only and therefore, prior to that date or the assessment year, relevant to the date of registration, the benefit of Section 10B would not be available as the requirement of approval by the competent authority is not available as on the date, from which the taxpayer claimed exemption. Thus, the High Court states that the section itself clearly says unless and until the taxpayer gets an approval in the manner prescribed under Section 10B, the question of granting the benefit would not arise.

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