2019 (12) TMI 758 - AT - Income Tax

Claim of deduction u/s. 10B/10A - first appellate authority power to entertain a fresh claim of deduction not been made before the Assessing Officer - Whether deduction u/s. 10A shall not be admissible unless the assessee furnishes Form No. 56F along with the return of income and the report of an accountant as specified? - assessee made an alternative claim of deduction u/s.10A of the Act by filing a revised return but the same has not been entertained by the AO as there was no consistency in the claim of deduction and not supported by recognized certification - HELD THAT - C IT(A) held that the assessee is eligible for deduction u/s. 10A of the Act and he relied on the judgment of the Delhi High Court in the case of CIT vs Technovate E Solutions P Ltd 2013 (3) TMI 372 - DELHI HIGH COURT Considering the fact that the assessee itself had claimed two different amounts for the deduction to be allowed u/s 10A and the Assessing Officer also had mentioned in the remand report submitted about change in the turnover subsequent to the order passed u/s 263, the Assessing Officer was directed to work out the claim of deduction to be allowed u/s 10A afresh in accordance with the Act. Accordingly, the CIT(A) allowed the appeal of the assessee. Eligible for alternate claim of deduction u/s. 10A - No such claim was made by the appellant in the return of income filed and this was not raised as an additional ground/claim but as an alternative claim before the appellate authority, where as a claim for deduction u/s. 10B was already mad ein the return of income - HELD THAT - As decided in M/S FLYTXT TECHNOLOGY P. LTD. 2017 (10) TMI 872 - KERALA HIGH COURT no reason to think that the Tribunal has committed an illegality by directing the Assessing Officer to decide the matter afresh duly adverting to the claim of the assessee for the benefit of Section 10A. Ground relating to entertaining a new claim of deduction u/s. 10A - There is no bar to entertain such claim by the CIT(A) otherwise than by filing a revised return as held by the Supreme Court of India in the case of Goetze (India) Ltd. 2006 (3) TMI 75 - SUPREME COURT Disallowance of interest on diverted fund - HELD THAT - Even if disallowance is made towards notional interest on account of diversion of funds to the sister concerns, it is of no consequence since the assessee s income is exempted u/s. 10A of the I.T. Act.

Summary

Issues Involved:
1. Withdrawal of Cross Objection by the assessee.
2. Condonation of delay in filing the appeal by the Revenue.
3. Eligibility of the assessee for deduction under Section 10A of the Income Tax Act.
4. Deletion of disallowance of proportionate amount of interest related to amounts diverted to associate concerns.

Issue-wise Detailed Analysis:

1. Withdrawal of Cross Objection by the Assessee:
The assessee's representative indicated that the assessee was not interested in pursuing the Cross Objection in C.O. No.47/Coch/2019. Consequently, the Cross Objection filed by the assessee was dismissed as withdrawn.

2. Condonation of Delay in Filing the Appeal by the Revenue:
There was a delay of 496 days in filing the appeal before the Tribunal. The Department filed a condonation petition accompanied by an affidavit explaining that the delay was due to inadvertent delivery of documents to the wrong office. The Tribunal found the reasons advanced by the Department to be bona fide and with sufficient cause. Therefore, the delay was condoned, and the appeal was admitted for adjudication.

3. Eligibility of the Assessee for Deduction under Section 10A:
The core issue was whether the assessee was eligible for deduction under Section 10A despite not filing the required Form No. 56F along with the original return of income. The CIT(A) allowed the deduction, relying on the ITAT Cochin Bench's decision in CWP Taylor Vs DCIT and the Supreme Court's decision in National Thermal Power Corporation Vs. CIT, which clarified that appellate authorities have the power to entertain fresh claims not made in the original return. The CIT(A) verified the facts and concluded that the assessee fulfilled all conditions under Section 10A, including the commencement of manufacturing in a Software Technology Park and compliance with all statutory requirements.

4. Deletion of Disallowance of Proportionate Amount of Interest:
The Assessing Officer had disallowed a proportionate amount of interest on the grounds that the assessee had diverted interest-bearing funds to associate concerns without charging interest. The CIT(A) deleted this disallowance, referencing the ITAT Cochin Bench's decision in the assessee's own case for AY 2008-09, which found that the advances were made in earlier years and were covered by the assessee's reserves and surplus. The Tribunal upheld this view, noting that the facts of the case did not support the Assessing Officer's presumption of fund diversion during the year under consideration.

Conclusion:
The Tribunal dismissed both the Revenue's appeal and the assessee's Cross Objection. The Tribunal upheld the CIT(A)'s decision allowing the deduction under Section 10A and the deletion of the disallowed interest, following precedents and the jurisdictional High Court's judgments. The order was pronounced in the open court on 4th December 2019.