2017 (3) TMI 684 - AT - Income Tax

Claim of deduction u/s 10A - Held that - We observe that during the course of assessment proceedings ld. Assessing Officer denied exemption u/s 10A of the Act by following his predecessor s order in previous Asst. Year 2004- 05 and ignoring the fact that in assessee s own case the Co-ordinate Bench has confirmed the ld. Commissioner of Income Tax(A) s order allowing assessee s claim of deduction u/s 10B of the Act for Asst. Year 2003-04 to 2007-08. We further observe that ld. Departmental Representative could not controvert the fact that the issue raised in these appeals ia squarely covered by the judgment of Hon. Jurisdictional High Court in the case of Saurashtra Cement & Chemicals Indus. Ltd. (1979 (2) TMI 21 - GUJARAT High Court ) relied on by the ld. Commissioner of Income Tax(A) wherein held once the deduction has been allowed in the first year of operation it cannot be denied in the subsequent year. - Decided in favour of assessee

Summary

Issues Involved:
1. Deduction under Section 10A of the Income-tax Act, 1961.
2. Disallowance under Section 14A of the Income-tax Act, 1961.
3. Admissibility of additional grounds of appeal.

Detailed Analysis:

1. Deduction under Section 10A of the Income-tax Act, 1961:
The assessee, a private limited company engaged in providing customized software, claimed a deduction under Section 10A for Assessment Years (AY) 2008-09 and 2009-10. The Assessing Officer (AO) denied this deduction, referencing previous years' disallowances which were under appeal. The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the deduction, citing the jurisdictional High Court's judgment in the case of Saurashtra Cement and Chemicals Industries Ltd. and previous Tribunal decisions favoring the assessee. The Tribunal upheld the CIT(A)'s decision, noting the AO's mechanical disallowance without considering the assessee's eligibility under Section 10A, as supported by previous Tribunal rulings and the High Court judgment.

2. Disallowance under Section 14A of the Income-tax Act, 1961:
The AO also made an addition under Section 14A for AY 2008-09, which was partly allowed by the CIT(A). The Tribunal did not focus on this issue in detail as the primary contention was the deduction under Section 10A.

3. Admissibility of additional grounds of appeal:
The CIT(A) admitted additional grounds of appeal from the assessee, allowing claims under Section 10A or 10B based on the bona fide nature of the claims and existing records. The Tribunal agreed with this approach, emphasizing that the claims were legal and supported by substantial evidence, thus justifying their admissibility.

Conclusion:
The Tribunal dismissed the Revenue's appeals for both AY 2008-09 and 2009-10, affirming the CIT(A)'s decision to allow the deduction under Section 10A. The Tribunal emphasized the consistency of the assessee's claims with previous years' rulings and the jurisdictional High Court's judgment, concluding that the assessee met all eligibility criteria for the deduction.