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2019 (1) TMI 1087 - HC - Income TaxExemption u/s 10A - computation/ claim for deduction made in accordance with Section 80A(5) - multiple claims of deduction - filling of returns within limitation period - Held that - Sub-section 5 to Section 80A states that if assessee has failed to make its claim on return under 10AA or 10B or any other provisions of Chapter VIA, no deduction shall be allowed to him thereunder. This bars and prohibits the assessee from claiming the deduction under Sections 10A and 10B and Chapter VIA if no such claim was made in the return of income. It is also mandatory that the return of income for claiming such deduction should be filed within the time stipulated under Section 139 (1) of the Act, as was held in the case of Nath Brothers Exim International 2017 (4) TMI 1036 - DELHI HIGH COURT . The amendment made cannot be faulted and quashed on the ground that it was discriminatory, arbitrary, unreasonable and violative of Article 14, observing that it was within the legislative domain to prescribe the limitation period and also stipulate that the assessee to claim deduction must file returns during the limitation period, so as to enable the Department to take up these cases for scrutiny assessment. Plea of arbitrariness was rejected. The decision and ratio is distinguishable as the assessee had claimed deduction under Section 10A of the Act in the return of income filed within the limitation period. It was, therefore, not a new claim. Question of revision of deduction was not the issue and question raised and answered in Nath Brothers Exim International 2017 (4) TMI 1036 - DELHI HIGH COURT . The objective behind the amendment was to defeat multiple claims of deduction and ensure better compliance. Certainly, the amended provisions ensure better compliance of the statutory provisions. Reference to the expression multiple claims of deduction would be with reference to the stipulation that deduction should be claimed under a particular provision and it cannot be shifted and treated as deduction claimed under the other provision. Language of Sub-section 5 to Section 80 A does not state that the deduction once claimed under a particular section cannot be corrected and modified before the Assessing Officer. Indeed, AO can examine the claim for deduction and can make adjustment/ disallowance. We would not read in the amended provision, a stipulation barring and restricting the assessee from revising the computation/ claim for deduction made in accordance with Section 80A(5) of the Act. We answer the substantial question of law against the appellant-revenue and in favour of the assessee.
Issues Involved:
1. Permissibility of revised computation of deduction under Section 10A of the Income Tax Act, 1961. 2. Treatment of disallowances and allowances in revised computation. 3. Applicability of Section 80A(5) of the Income Tax Act, 1961. 4. Relevance of the Supreme Court judgment in Goetze (India) Ltd. Vs. Commissioner of Income Tax. Detailed Analysis: 1. Permissibility of Revised Computation of Deduction under Section 10A: The respondent-assessee engaged in 'Processing Outsourcing Services' filed a return claiming a deduction of ?17.87 crores under Section 10A with NIL taxable income from business and profession. During assessment proceedings, a revised computation was submitted, resulting in a disallowance of ?2,14,50,610 and an allowance of ?33,25,522. The Assessing Officer (AO) partially accepted the revised computation by allowing ?6,13,047 for leave encashment but treated the balance as income from 'Other Sources'. The Commissioner of Income Tax (Appeals) (CIT(A)) found the AO's approach contradictory and allowed the revised computation. The Tribunal upheld this decision, confirming the eligibility of the respondent-assessee for deduction under Section 10A and acknowledging the genuineness of the revised computation. 2. Treatment of Disallowances and Allowances in Revised Computation: The AO's partial acceptance of the revised computation was deemed contradictory by the CIT(A), as the AO only considered the revised computation to the extent beneficial to the Revenue. The CIT(A) and Tribunal emphasized that the disallowance of ?2,14,50,610 should be under 'profit and gains from business' and not 'Other Sources', making it eligible for exemption under Section 10A. The Tribunal noted that the revised computation was filed during ongoing assessment proceedings and was genuine. 3. Applicability of Section 80A(5) of the Income Tax Act, 1961: The Revenue argued that the revised computation should not be accepted, citing Section 80A(5) and a Supreme Court judgment. However, the court clarified that Section 80A(5) does not apply to this case as the respondent-assessee had claimed the deduction under Section 10A in the original return filed within the limitation period. The revised computation did not constitute a new claim but a correction of the existing one. The court distinguished this case from Nath Brothers Exim International Ltd., where a new claim was made in a revised return. 4. Relevance of the Supreme Court Judgment in Goetze (India) Ltd. Vs. Commissioner of Income Tax: The Revenue relied on Goetze (India) Ltd., which bars an assessee from making a claim for deduction by filing a revised computation. However, the court noted that this judgment does not impinge on the power of appellate authorities to entertain such claims. The court referred to its own decisions in Influence Vs. Commissioner of Income Tax and Principal Commissioner of Income-tax Vs. E-Funds International India Pvt. Ltd., which clarified that while an AO may not grant a deduction based on a revised computation, appellate authorities have the power to do so. The court reiterated that the purpose of assessment proceedings is to assess the correct tax liability, and the revised computation in this case was a request for recomputation, not a new claim. Conclusion: The court concluded that the revised computation was permissible and genuine, and the disallowance made was revenue neutral. The substantial question of law was answered in favor of the respondent-assessee, and the appeal by the Revenue was dismissed. The court emphasized that the objective behind the amendments to Section 80A was to prevent multiple claims of deduction and ensure compliance, not to bar genuine corrections in computation.
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