2017 (12) TMI 869 - AT - Income Tax

Deduction u/s 10A - Held that - When the assessee company is undisputedly eligible for deduction u/s 10A of the Act, it is entitled for consequential deduction u/s 10A also. So, the foreign exchange gain to the taxable income of the assessee company cannot be added which amounts to double taxation and as such, the ld. CIT (A0 has rightly deleted the same. When the AO has accepted the suo motu disallowance made by the assessee company in the revised computation of income, the suo motu claim made by the assessee company on account of bonus cannot be disallowed. AO has selectively accepted the revised computation of income to the extent of the benefit to the revenue while completing the assessment. - Decided against revenue

Summary

Issues:
- Disallowance of deductions claimed by the assessee through revised computation of income during assessment proceedings.
- Disallowance of deductions under section 10A of the Income-tax Act.
- Challenge to the impugned order passed by the Commissioner of Income-tax (Appeals).
- Validity of deductions claimed by the assessee.

Analysis:
1. The Appellant, Deputy Commissioner of Income-tax, sought to set aside the order passed by the Commissioner of Income-tax (Appeals) regarding the deduction claims made by the assessee through revised computation of income during the assessment proceedings. The Revenue contended that such deductions were impermissible under the Act.

2. The assessee, a BPO service provider, faced disallowances by the Assessing Officer (AO) for various deductions claimed through revised computation, including foreign exchange loss and unpaid bonus. The AO disallowed these deductions, stating they would increase the claim of deduction under section 10A of the Act.

3. The matter was appealed by the assessee to the CIT (A), who partly allowed the appeal. The Revenue challenged this decision before the Tribunal, arguing in line with the AO's order.

4. The Tribunal considered the arguments presented by both parties and reviewed the orders of the revenue authorities. The Revenue's representative relied on the AO's order to support their challenge against the CIT (A)'s decision.

5. Upon examination of the assessment order, it was found that the AO had partially accepted the revised computation of income filed by the assessee. The Tribunal noted that the assessee was eligible for deduction under section 10A of the Act, and thus, entitled to consequential deductions as well.

6. The Tribunal observed that the assessee's claims for deductions, including foreign exchange gain and unpaid bonus, were valid. It emphasized that disallowing these deductions would result in double taxation and that the CIT (A) was correct in deleting the additions made by the AO.

7. The Tribunal further explained that the AO had selectively accepted certain parts of the revised computation that benefited the revenue, while disallowing others. This approach was deemed unsustainable in the eyes of the law, leading to the Tribunal upholding the deductions claimed by the assessee.

8. Referring to relevant case law, the Tribunal highlighted that exemptions and deductions should be granted based on the genuine claims made by the assessee, even if not part of the original or revised return. The Tribunal concluded that the AO's disallowance of deductions under section 10A was unjustified.

9. Ultimately, the Tribunal found no illegality or infirmity in the CIT (A)'s order and dismissed the Revenue's appeal. The decision was pronounced in open court on October 31, 2017.