2018 (3) TMI 1171 - AT - Income Tax

Deduction claimed u/s 10A - Held that - Benefit of deduction is available from the profits and gains derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be. Undisputedly, the assessee (the undertaking) manufactured or produced such articles or things or computer software, as the case may be, and exported them from assessment year 2000-01 only, as extracted above, and hence it is eligible for such deduction for a period of ten consecutive ays beginning with ay 2000-01 i.e., up to assessment year 2009-10, ie upto this ay, being the 10th consecutive year. Therefore, the orders of the lower authorities in this regard are set aside, the AO is directed to allow the impugned deduction. Corresponding appeal grounds are allowed. On the validity of reopening the assessment, we have considered the rival submissions. The assessee has taken similar plea before the CIT(A) and the CIT(A) after examining the submissions and relevant material and the Explanation u/s 147, has recorded a finding that on the impugned issue the AO has not formed any opinion at the time of original assessment, hence there is no change of opinion and upheld the action of the AO. Since, the assessee has not laid any material to refute such findings, we do not find any infirmity in the order of the CIT(A)

Summary

Issues:
Appeal against order of CIT(A) disallowing deduction u/s 10A for assessment year 2009-10. Validity of reopening assessment based on change of opinion. Interpretation of Section 10A eligibility for deduction.

Analysis:
1. The assessee, engaged in software development, appealed against CIT(A)'s order disallowing deduction u/s 10A for AY 2009-10. Original assessment made disallowances u/s 40(a)(i) & 14A. CIT(A) granted relief, but ITAT set aside the order and remitted the matter back to AO for reconsideration.
2. AO issued notice u/s 148 and completed re-assessment disallowing deduction u/s 10A. Assessee challenged it, arguing reopening was based on a change of opinion and deduction should be allowed from the year of commencement of manufacturing. CIT(A) upheld AO's view.
3. AR submitted that the assessee started software development in FY 1999-2000 and claimed deduction u/s 10A from AY 2000-01. They argued for eligibility based on the year of commencement of manufacturing. The AR cited a relevant case to support their claim.
4. The Tribunal analyzed the facts and Section 10A, which allows deduction for ten consecutive years from the year of commencing manufacturing. As the assessee started manufacturing software in AY 2000-01, they were eligible for the deduction up to AY 2009-10. The lower authorities' orders were set aside, directing the AO to allow the deduction.
5. Regarding the validity of reopening the assessment, the Tribunal found no change of opinion by the AO during the original assessment. The CIT(A) upheld the AO's action, and as the assessee failed to provide material refuting this, the Tribunal dismissed the appeal grounds on this issue.
6. The Tribunal partly allowed the assessee's appeal, directing the AO to allow the deduction u/s 10A. The order was pronounced on February 1, 2018, in Chennai.