2018 (12) TMI 1707 - HC - Income Tax

Claim deduction u/s 10A on enhanced profit due to statutory disallowance u/s. 40 (a)(ia) - HELD THAT - We find that the impugned order of the Tribunal has held that disallowance made under Section 40(a)(ia) of the Act would not affect the assessee's liability to tax. This is so as even if the above amount are disallowed and added to the income the same would be exempted under Section 10A of the Act. This by following the decision of this Court in Commissioner of Income Tax Vs. Gem Plus Jewellery India Ltd. 2010 (6) TMI 65 - BOMBAY HIGH COURT . As the impugned order of the Tribunal has only followed the binding decision of this Court, the proposed question does not give rise to any substantial question of law. Therefore, not entertained.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding deduction u/s 10A on enhanced profit due to statutory disallowance u/s. 40 (a)(ia) for Assessment Year 2006-07.

Analysis:

1. Question of Law Raised by Revenue:
The main issue in this case was whether the assessee is eligible to claim deduction u/s 10A on enhanced profit due to statutory disallowance u/s. 40 (a)(ia). The Revenue challenged the order of the Income Tax Appellate Tribunal on this question. The Tribunal had held that the disallowance made under Section 40(a)(ia) would not affect the assessee's liability to tax as the amount disallowed and added to income would be exempted under Section 10A of the Act. The Tribunal based its decision on the precedent set by the Bombay High Court in Commissioner of Income Tax Vs. Gem Plus Jewellery India Ltd. (2011)330 ITR 175. The Court found that since the Tribunal's decision was in line with the binding precedent, the proposed question did not give rise to any substantial question of law, and therefore, it was not entertained.

2. Judgment and Dismissal of Appeal:
Based on the above analysis, the High Court dismissed the appeal under Section 260A of the Income Tax Act, 1961. The Court upheld the Tribunal's decision and concluded that the assessee was eligible to claim deduction u/s 10A on the enhanced profit despite the statutory disallowance u/s. 40 (a)(ia). The appeal was dismissed, and no order was issued as to costs.

In conclusion, the High Court upheld the Tribunal's decision regarding the eligibility of the assessee to claim deduction u/s 10A on enhanced profit despite the statutory disallowance u/s. 40 (a)(ia) for the Assessment Year 2006-07. The Court found that the Tribunal's decision was in accordance with the binding precedent set by the Bombay High Court and therefore dismissed the appeal.