2021 (8) TMI 260 - HC - Income Tax

Reopening of assessment u/s 147 - Deduction u/s 10A - HELD THAT - The scope of provisions would unambiguously portrays that the case of the petitioner is falling u/s 10A of sub-section (2) to sub-clause (i)(c) of the Income Tax Act, and therefore, if the petitioner is manufacturing or producing articles or things of computer software, it must be in any Special Economic Zone. The Form 56-F submitted by the petitioner would reveal that they are not mentioned about their location of functioning - they have furnished their address and the respondents have filed counter stating that the Unit is not located in Special Economic Zone. This being the factum established, the petitioner-Company is not entitled to avail the benefit of Section 10A and if at all any contra materials are available with the petitioner, it is for them to place it before the Assessing Authority for the purpose of availing the benefit for which they are entitled under the provisions of the Income Tax Act - adjudication in this writ petition is done with reference to the interpretations to be considered for the purpose of availing the benefit of Section 10A and regarding all other factual disputes, it is for the Assessee to pursue the same before the Assessing Authority for the purpose of completion of reassessment proceedings. If at all the writ petitioner-Company has already claimed the benefit and in order to establish the said claim, the writ petitioner is at liberty to submit the documents and materials at the time of participating in the reassessment proceedings. WP dismissed.

Issues Involved:
1. Jurisdiction for reopening the assessment under Section 147 of the Income Tax Act.
2. Eligibility for deduction under Section 10A of the Income Tax Act.
3. Compliance with procedural requirements for reopening the assessment.
4. Interpretation of Section 10A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Jurisdiction for reopening the assessment under Section 147 of the Income Tax Act:
The petitioner challenged the reopening of the assessment for the year 2009-2010 under Section 147 of the Income Tax Act, arguing that it was beyond the scope of jurisdiction. The petitioner contended that the reopening was based on a change of opinion, as the issues had already been adjudicated in the original assessment proceedings. The reopening was initiated beyond four years but within six years, requiring compliance with the proviso clause to Section 147, which was allegedly not met.

2. Eligibility for deduction under Section 10A of the Income Tax Act:
The petitioner, a wholly-owned subsidiary of a Netherlands-based company, claimed eligibility for deduction under Section 10A as a 100% Export Oriented Unit (EOU) engaged in providing engineering and design services. The petitioner argued that the benefit of Section 10A had been extended in other assessment years and should apply here as well. The respondent countered that the petitioner had not fully disclosed required information and was not functioning in a Special Economic Zone (SEZ), a condition for eligibility under Section 10A.

3. Compliance with procedural requirements for reopening the assessment:
The petitioner argued that the reasons furnished for reopening were not in consonance with the mandatory requirements under Section 147 of the Income Tax Act, and thus, the initiation of proceedings was without jurisdiction. The respondents contended that the petitioner had not fully disclosed the necessary information, specifically the location of their functioning, which was a requirement under Section 10A.

4. Interpretation of Section 10A of the Income Tax Act:
The court analyzed Section 10A, particularly sub-section (2), which outlines conditions for eligibility. The court noted that different commencement dates and zones were stipulated under sub-clauses (i)(a), (i)(b), and (i)(c). The petitioner’s case fell under sub-clause (i)(c), as their manufacturing commenced in 2008, requiring them to be in an SEZ to claim the benefit. The petitioner’s Form 56-F did not mention the location of functioning, and the respondents confirmed the unit was not in an SEZ, disqualifying them from the benefit under Section 10A.

Conclusion:
The court concluded that the petitioner was not entitled to the benefit under Section 10A of the Income Tax Act as they did not meet the requirement of being located in an SEZ. The petitioner’s failure to disclose the location of their unit in Form 56-F and the respondents' confirmation that the unit was not in an SEZ were critical factors. The court dismissed the writ petition, allowing the petitioner to present any contrary materials during the reassessment proceedings before the Assessing Authority. All other factual disputes were to be pursued before the Assessing Authority. The writ petition was dismissed with no order as to costs, and the connected miscellaneous petition was also dismissed.

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