CIT Vs Sociedade De Fomento Industrial Pvt. Ltd. (Supreme Court of India)
Background and High Court Proceedings
The dispute concerned the assessee’s entitlement to deduction under Section 10B of the Income Tax Act, 1961 in respect of a new 100% Export Oriented Unit (EOU). The assessee was engaged in extraction, processing and sale of iron ore and had an existing EOU established in 1985-86. Subsequently, because the quality of ore had deteriorated and the assessee sought to produce ore with higher ferrous content, it established a new unit adjacent to the existing unit.
For AY 2006-07, the Assessing Officer disallowed the assessee’s Section 10B deduction of ₹90,75,14,396/-, treating the new plant and machinery as an expansion of the existing undertaking. The Commissioner (Appeals) agreed with the Assessing Officer. The Income Tax Appellate Tribunal, however, held that the assessee had established a new unit and had secured the necessary approvals, and consequently allowed the Section 10B benefit.
The Bombay High Court at Goa considered the Revenue’s challenge in Tax Appeal No.25 of 2012 and the connected appeals. The principal questions were whether the assessee had merely expanded its existing processing capacity or had established a separate new undertaking, and whether approval granted by the Development Commissioner was sufficient where the Board of Approval had delegated its powers to that authority.
