2017 (2) TMI 69 - AT - Income Tax

Applicability of section 10A - disallowance holding that section 10A would apply only to the income that has been brought into India by way of convertible Foreign Exchange as no Foreign Exchange had been brought into India no deduction was granted under section 10A - Commissioner (Appeals) concluded that no additional fact have been brought on record by the assessee during appellate stage thus he had no reason to deviate from the finding of the Assessing Officer - Held that - We are of the considered view that no material had been placed on record by ld AR for assessee much the less a working in support of its claim toward claim of deduction u/s 10A, pursuant to disallowance carried out by AO under section 41(1) of the Act. Still further no concrete material had been placed on record by ld AR to support the averments so raised, we therefore in all fairness restored the matter to the file of AO for fresh adjudication on this issue with regard to the entitlement of assessee under section 10A of the Act as per law. Needless to say during the course of setaside proceedings the AO shall afford reasonable opportunity to the assessee to produce all necessary documentary evidence in support of its claim under section 10 A. Thus this ground of appeal raised by assessee is allowed for statistical purposes.

Summary

Issues:
1. Cessation of liability and addition to total income.
2. Deduction under section 10A not allowed by AO.

Analysis:

Issue 1: Cessation of liability and addition to total income:
The appeal was directed against the order of Commissioner (Appeals) for the assessment year 2008-09. The assessee contested the conclusion of the CIT(A) regarding the liability due to Paradigm Geophysical Sdn Bhd Malaysia, which was added to the total income. The AO disallowed the liability of ?8,44,05,218/-, and the CIT(A) restricted it to ?6,34,12,696/-. The assessee argued that the liability ceased to exist only in the financial year 2008-09 and should not be added to the income for the relevant assessment year. The AO contended that the transaction was a device to avoid tax by shifting income to a subsequent year when a loss was reported. The Tribunal observed that the CIT(A) considered all relevant material and granted appropriate relief to the assessee. The Tribunal found no reason to interfere with the order.

Issue 2: Deduction under section 10A not allowed by AO:
The assessee raised a ground of appeal regarding the denial of a proportionate deduction under section 10A by the AO. The AO disallowed the deduction under section 10A as no foreign exchange had been brought into India. The CIT(A) upheld this decision, stating that no additional facts were presented during the appellate stage. However, the Tribunal noted that the assessee did not provide substantial evidence or workings to support the claim for deduction under section 10A. Consequently, the Tribunal remanded the matter to the AO for fresh adjudication on the entitlement of the assessee under section 10A, with the direction to afford the assessee a fair opportunity to produce necessary documentary evidence.

In conclusion, the Tribunal partially allowed the appeal filed by the assessee, upholding the decision on the cessation of liability issue while remanding the matter concerning the deduction under section 10A for further consideration by the AO.

This judgment highlights the importance of presenting concrete evidence and complying with legal provisions to support claims for deductions and liabilities in income tax assessments.