Revised computation of deduction u/s 10A of Income Tax Act allowable-HC

Revised computation of deduction u/s 10A of the Income Tax Act, 1961 permissible having regard to Section 10A (5) and Section 80A(5) of the Act

ABCAUS Case Law Citation:
ABCAUS 2736 (2019) (01) HC

Important Case Laws Cited/relied upon:
Goetze (India) Ltd. Vs. Commissioner of Income Tax (2006) 284 ITR 323 (SC)

Nath Brothers Exim International Ltd. Vs. Union of India & Ors., (2017) 394 ITR 577 (Del.).
Influence Vs. Commissioner of Income Tax (2015) 55 192 (Delhi)
Principal Commissioner of Income-tax Vs. E-Funds International India Pvt. Ltd. (2015) 379 ITR 292 (Delhi)

The respondent assessee filed return of income claiming deduction under Section 10A of the Income Tax Act, 1961 (the Act) with NIL taxable income under the head of “income from business and profession”. In order to claim deduction under Section 10A of the Act the -assessee had filed Form 56F along with its return.

During the course of the assessment proceedings, the assessee had filed a revised computation of income making suo motu both disallowance and allowance from business income as declared which it claimed was inadvertently missed out. Exemption under Section 10A of the Act was accordingly revised followed by a revised Form 56F.

The Assessing Officer made adjustment for the disallowances made but did not allow allowances claimed.

The Commissioner of Income Tax (Appeals) observed and held that the findings of the Assessing Officer were contradictory for he had partly accepted the revised computation by allowing declared disallowances, but had disallowed other allowances claimed by the respondent assessee in the revised computation.

CIT(A) allowed the appeal filed by the respondent-assessee, by accepting the revised computation of income furnished by it during the course of the assessment proceedings.

The Tribunal dismissed the appeal preferred by the Revenue and held that the assessee was indisputably eligible for deduction under Section 10A and the revised computation was filed when the assessment proceedings were in progress. Further, the assessee had duly explained the reasons for revising the computation, which was otherwise genuine and not disputed.

Aggrieved, the Revenue had filed the instant appeal before the Hon’ble High Court.

The contention of the revenue was that the revised computation should not have been accepted. It was also submitted that the first Appellate Authority and the Tribunal have failed to take notice of the amendment to Section 80A (5).

The Hon’ble High Court observed that the revenue did not dispute the correctness of the revised computation made by the respondent assessee. Revenue also did not dispute and had not challenged that the disallowance made by the assessee in the revised computation could not be adjusted and treated as income taxable under the head Income from Other Sources.

The Hon’ble High Court opined that the disallowance made would result in enhancement of the business income which was exempted under Section 10A of the Act. It would not be taxable. This would be the position even if the respondent assessee had not filed the revised computation and an enhancement or disallowance had been made by the Assessing Officer in the course of the assessment proceedings. Thus, the disallowance made was revenue neutral.

The Hon’ble High Court clarified that a distinction has to be drawn between a new claim, which is barred and not permissible and a request or prayer made by the assessee for recomputation of the deduction already claimed. Latter was permissible and not barred in terms of the decision of the Hon’ble Supreme Court.

The Hon’ble High Court noted that the Division Bench of the Court had found that the objective behind the amendment in Chapter VIA to prevent abuse of tax incentives was to defeat multiple claims of deduction and ensure better compliance.

The Hon’ble High Court opined that the reference to the expression “multiple claims of deduction” would be with reference to the stipulation that deduction should be claimed under a particular provision and it cannot be shifted and treated as deduction claimed under the other provision.  

The Hon’ble High Court opined that the language of Sub-section 5 to Section 80 A does not state that the deduction once claimed under a particular section cannot be corrected and modified before the Assessing Officer. Indeed, the Assessing Officer can examine the claim for deduction and can make adjustment/ disallowance. We would not read in the amended provision, a stipulation barring and restricting the assessee from revising the computation/ claim for deduction made in accordance with Section 80A (5) of the Act.

Accordingly, the substantial question of law was answered against the appellant-revenue and in favour of the respondent assessee.

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