2013 (1) TMI 1037 - AT - Income Tax

Summary

Issues Involved:

1. Disallowance of deduction u/s 10A for AY 2003-04.
2. Disallowance of deduction u/s 10A for AY 2006-07.
3. Additional grounds of appeal for AY 2006-07.

Summary:

1. Disallowance of deduction u/s 10A for AY 2003-04:

The Department filed an appeal against the CIT(A)'s order allowing the assessee's claim for deduction u/s 10A. The AO had disallowed the deduction of Rs.1,43,53,355/- on the grounds that the assessee received sale proceeds in Indian Rupees and not in Foreign Convertible Exchange, thus not meeting the mandatory conditions u/s 10A(3). The CIT(A) allowed the claim, interpreting that deemed export qualifies for deduction u/s 10A, supported by various judicial authorities and the EXIM Policy.

2. Disallowance of deduction u/s 10A for AY 2006-07:

The assessee appealed against the CIT(A)'s order disallowing the deduction u/s 10A of Rs.43,18,584/-. The CIT(A) held that the appellant did not make physical exports or receive realizations in foreign exchange, thus failing to meet the conditions stipulated in section 10A(1) and 10A(3). The CIT(A) differed from the predecessor's decision for AY 2005-06, emphasizing that the specific conditions of section 10A must be complied with.

3. Additional grounds of appeal for AY 2006-07:

The assessee also raised additional grounds regarding the addition of Rs.1,79,863/- as profit on sales of assets, charging of interest u/s 234A, 234B, 234C, and 234D, and levying of penalty u/s 271(1)(c). These grounds were neither pressed nor argued at the time of hearing and were dismissed for lack of argument.

Judgment:

The Tribunal allowed the Department's appeal for AY 2003-04, reversing the CIT(A)'s order and restoring the AO's disallowance of deduction u/s 10A. The Tribunal dismissed the assessee's appeal for AY 2006-07, upholding the CIT(A)'s disallowance of deduction u/s 10A and dismissing the additional grounds for want of argument. The Tribunal's decision was influenced by the judgment of the Hon'ble Kerala High Court in CIT v. Electronic Controls & Discharge Systems (P) Ltd., which held that deemed export under the Special Economic Zones Act does not apply to section 10A of the Income-tax Act.