ACIT Vs Vishnu Export (ITAT Ahmedabad)
ITAT Ahmedabad held that deprival of deduction u/s 10AA of the Income Tax Act merely on the reasoning that deduction was claimed in the revised return or audit report in Form 56F was filed during the assessment proceedings is unjustified.
Facts- The interconnected issue raised by the Revenue is that the Ld.CIT(A), erred in deleting the disallowance made by the AO for the deduction claimed u/s 10AA of the Act amounting to Rs. 1,49,72,275/- despite the fact that the assessee was not eligible in such deduction.
Conclusion- We hold that the assessee cannot be deprived of the benefit granted under the statute merely on the reasoning that it was claimed in the revised return of income.
In our considered view, the assessee cannot be deprived of the benefit provided under section 10AA merely on the reasoning that the audit report in form 56F was filed during the assessment proceedings.
Held that there remains no ambiguity to the fact that the assessee cannot be denied the benefit upon the conversion from the proprietorship concern to the partnership firm. Likewise, there was also no allegation of the AO that the present assessee came into existence after splitting up or the reconstruction of the existing business or undertaking. It is for the reason that there is no violation of the conditions applicable for claiming the deduction under section 10AA of the Act.
Held that it becomes clear that there was no condition applicable for the year under consideration to bring foreign exchange in India on account of the exports of sales. In view of the above, we hold that the assessee cannot be deprived of the benefit of the deduction granted under section 10AA of the Act merely on the reasoning that the assessee did not receive the convertible foreign exchange on the deemed exports.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-3, Ahmedabad, dated 20/06/2018 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year 2015-16.
2. The Revenue has raised the following grounds of appeal:
(i) The Ld.CIT(A) has erred in law ond on facts in deleting addition of Rs 1,49,72,275/- made by AO u/s 10AA of the act when such deduction was not claimed by the assessee in original return of income.
(ii) The Ld CiT(A) has erred in law and on tacts in holding that filing of return within due dale is not a pre-requisite condition for claim of deduction u/s 10AA of the act.
(iii) The Ld.ClT(A) has erred in law and on facts in not treating conversion of ownership of business from proprietorship to partnership as reconstruction of business and violative of claiming deduction u/s 10AA of the act.
(iv) The Ld ClT(A) has erred in law and on facts in holding usage of pouch making machine by taking ‘ease in conformity with the conditions to claim deduction u/s. 10AA of the Act.
(v) The Id CIT(A) has erred in law and on facts in treating sale of goods by the firm to domestic parties as deemed export and not violative of the conditions of claim deduction u/s 10AA of the act.
(vi) The Ld CIT(A) has failed to appreciate the true material facts brought on record by the assessing officer while disallowing the claim of deduction u/s 10AA of the act.
(vii) On fie facts and circumstances of the case, Ld.CIT(A) ought to have upheld the order of the Assessing Officer.
(viii) It is, therefore, prayed that the order of Ld CIT(A) may be set aside and that of the Assessing Officer be restored.
3. The interconnected issue raised by the Revenue is that the Ld.CIT(A), erred in deleting the disallowance made by the AO for the deduction claimed u/s 10AA of the Act amounting to Rs. 1,49,72,275/- despite the fact that the assessee was not eligible in such deduction.
4. The facts in brief are that the assessee in the present case is a partnership firm and engaged in the manufacturing business of Pan Masala with and without The factory of the assessee is located at Kandla Special Economic Zone, Gandhidham Kachh. The assessee in the revised return of income, dated 19/01/2017, has claimed the deduction of Rs. 1,49,72,275/- under the provisions of section 10AA of the Act. But the same was disallowed by the AO by observing as under:
4. (ii) After careful consideration of the assessee’s submission, it is noticed that the facts and circumstances of cited judgements on which the assessee relied upon are differs from the facts and^ circumstances of the assessee’s case. Further, the submission of the assessee is not found acceptable because the assessee has not fulfilled basic terms & conditions as required for claiming deduction u/s 10AA of the Income tax Act, the discussion on each required terms & conditions are as under: –
I. CONDITION THAT RETURN SHOULD BE FILED WITHIN DUE DATE IS MANDATORY.
The assessee has claimed deduction u/s 10AA of Rs.1,49,72,275/- in the Revised Return of Income filed on 19/01/2017 without filing online required report, documents & Form No. 56F along with e-return of income.
Rajkot ITAT in the case of Saffire Garments v. ITO, 151 TTJ 114 held that The special bench was constituted to decide the following question, “Whether the proviso to section 10A(IA) of the Income-tax Act which says that no deduction under section 10A shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under section 139(1} is mandatory or merely directory?” The Tribunal held that provisions of section 10A(iA) are mandatory and not directory ; deduction under section 10A cannot be allowed to an assessee who does not furnish return on or before due date specified under sub section (1) of section 139. The charging of interest is held to be mandatory. When one of the consequences for not filing return of income within due date prescribed under section 139(1) is mandatory then other consequences cannot be held to be directory and the same is also mandatory.
II. CONVERSION OF EXISTING UNIT
In the assessee’s case, the unit initially installed as proprietorship concern in F.Y. 2013-14 later on from the 01-09-2014 the proprietorship concern converted in partnership concern. All the setup of the concern belongs to proprietor ship concern initially and the firm take this business. Further, the assessee has taken Machine Rotary FFS Pouch Packing Machine of SANKO” on lease basis and the assessee has not set up your infrastructure
