2019 (5) TMI 288 - AT - Income Tax

Disallowance of deduction u/s 10AA - insurance claim for damage of fixed assets in a fire accident - as per AR insurance claim received by the assessee was for repairing assets damaged in the fire and the assessee has not purchased any new assets. Therefore, it cannot be said that it is not related to the business activities of the assessee - HELD THAT - On going through the provisions of section 10AA introduced in to the statute by virtue of Special Economic Zones Act, 2005, the amount received towards insurance claim cannot be considered to be a profit derived from export of articles produced or services rendered. That being the case, assessee s claim of deduction under section 10AA of the Act in respect of such income cannot be allowed. Decisions relied upon by AR are rendered in different factual context, hence, not applicable to the facts of the present appeal. Insofar as assessee s claim that the insurance claim cannot be reduced from the block of assets the claim of the assessee in this regard has not been substantiated through proper supporting evidence, therefore,unable to accept the contention of the learned Authorised Representative. That being the case, the grounds raised are dismissed. Alternative claim that if the insurance claim is treated as income from other course, then expenditure relating to such income have to be allowed under section 57 - claim raised in the additional ground needs factual verification by the Assessing Officer. Therefore, while admitting the additional ground raised by the assessee, restore the issue to the file of the Assessing Officer for considering assessee s claim after verifying the relevant facts on record. These grounds are allowed for statistical purposes.

Summary

Issues: Disallowance of deduction under section 10AA of the Income-tax Act for insurance claim.

The main issue in this appeal was the disallowance of a deduction claimed under section 10AA of the Income-tax Act, 1961, in relation to an insurance claim received by the assessee for damage to fixed assets in a fire accident. The Assessing Officer excluded the misc. income, including the insurance claim, from the profits of the business, stating that such income cannot be included for claiming exemption under section 10AA. The assessee challenged this decision before the learned Commissioner (Appeals).

The learned Commissioner (Appeals) upheld the decision of the Assessing Officer, leading to the appeal before the Appellate Tribunal. The authorized representative of the assessee argued that the insurance claim was for repairing assets damaged in the fire and not for purchasing new assets, therefore constituting part of the business income. He contended that the insurance claim should be considered as profit of the business as it was integrally connected to the business activity. The Departmental Representative supported the observations of the Assessing Officer and the learned Commissioner (Appeals).

The Appellate Tribunal analyzed the provisions of section 10AA of the Act, emphasizing that the amount received as an insurance claim for damage to fixed assets could not be considered as profit derived from export activities. Therefore, the claim of deduction under section 10AA for such income was disallowed. The Tribunal dismissed the grounds raised by the assessee, stating that the claim regarding the insurance claim not being reduced from the block of assets lacked substantiated evidence. The Tribunal also addressed the additional grounds raised by the assessee, allowing them for statistical purposes and restoring the issue to the Assessing Officer for factual verification.

In conclusion, the appeal was partly allowed for statistical purposes, with the Tribunal ruling against the assessee's claim for deduction under section 10AA in relation to the insurance claim for damage to fixed assets, and directing further verification by the Assessing Officer for the additional grounds raised by the assessee.