Section 10AA Deduction allowable on enhanced profits after considering section 69C disallowance

Amrapali Exports Vs DCIT (ITAT Jaipur)

The issue under consideration is whether the deduction u/s 10AA is allowed on the enhanced profits after considering the disallowance u/s 69C?

In the present case, assessee engaged in manufacturing and export of gold, silver and base material jewellery plain and studded with precious and semi precious stones was eligible for deduction under section 10AA. AO treated 25% of purchases as claimed by the assessee as non-genuine and made addition under section 69C. Assessee claimed deduction under section 10AA as regards the amount subjected to addition. Revenue denied this on the ground that section 69C is deeming provision where income is taxed as deemed income without specifying any head of income. Thus, any disallowance made under section 69C could not be considered for benefit under any other section. Further, section 10AA considers benefit for SEZ units only to the extent of profits and gains derived from export. As deemed income under section 69C was not the income derived from export activities, addition made could not be considered for granting benefit under section 10AA.

ITAT states that it is not in dispute that the assessee is eligible for claim of deduction u/s 10AA of the Act. It is also not in dispute that the assessee has only one business undertaking which is engaged in the business of manufacturing and export of gold, silver and base material jewellery plain & studded with precious & semi precious stones situated at Sitapura Industrial Area, Jaipur and the total turnover of the business is equivalent to the total turnover of the undertaking as well as the export turnover. The expenditure to the extent of 25% of purchases where are held as non-genuine and disallowed by the Assessing officer relates to the same business activity of manufacture and export in respect of which assessee is held eligible for deduction under section 10AA of the Act. The deduction under section 10AA therefore needs to be allowed on the enhanced profits after taking into consideration the disallowance in light of accepted legal position by the CBDT and following the consistent position taken by the Co-ordinate Benches. The Assessing Officer is therefore directed to recompute the deduction u/s 10AA taking into consideration the addition u/s 69C.

Therefore, the appeal filed by the assessee allowed.

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