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2022 (6) TMI 1162 - AT - Income TaxExemption u/s 10AA or 10A - Claim denied due to the error of the software used by the tax professional while claiming the deduction deduction u/s 10AA - whether the assessee was eligible for deduction under section 10A or 10AA? - assessee also contended that the claim of the assessee under section 10AA of the Act was disallowed by the AO without issuing any show cause notice which is against the principle of justice - HELD THAT - Deduction under section 10A of the Act has been discontinued with effect from A.Y. 2012-13 for the newly undertaking/unit. Therefore, it was not possible for claiming the deduction under this said section. Thus, any deduction claimed under section 10A of the Act cannot be said that it was claimed by the assessee with mala-fide intent - assessee has already paid the taxes under the advance tax and self-assessment scheme which is an undisputed fact. The assessee being intending to avoid the alternative minimum tax in pursuance to the provisions of section 115JC of the Act, it would have not paid any self-assessment tax on the date of filing the return of Income. The payment of the self-assessment tax does not raise any doubt on the intention of the assessee merely on the reasoning that the assessee has claimed refund in the income tax return. As such the assessee during the assessment proceedings has come forward and filed the revised return of income declaring income under the provisions of AMT under section 115JC of the Act. Furthermore, the assessee cannot be deprived from the benefit granted under the statute merely on the reasoning that the assessee failed to claim the same in the income tax return. It is incumbent upon the revenue to allow the alleged claimed of deduction for which the assessee is entitled under the provisions of law. As it is an admitted position that the form 56F is applicable for claiming the deduction under section 10A of the Act. However, we find that at that point of time when the assessee was claiming the exemption under section 10AA of the Act, there was no form prescribed by the CBDT. Thus in the absence of any specific form prescribed by the CBDT, the assessee has opted to use form 56F for claiming the exemption. To our understanding, it was an inadvertent mistake and therefore the assessee cannot be deprived from the benefit available under the provisions of law. The assessee has made the claim for the exemption under section 10AA of the Act before the issuance of show cause notice by the Income Tax Department with respect to the deduction claimed under section 10A of the Act. Thus, the revised claim by the assessee was made before detection of the same by the AO. As relying on M/S. RAJASTHAN FASTENERS PVT. LTD. 2014 (6) TMI 291 - RAJASTHAN HIGH COURT we are of the view that the assessee is entitled to benefit u/s 10AA of the Act though it wrongly claim the deduction u/s 10A of the Act at the time of filing the return of Income. Whether the assessee is engaged in the manufacturing activity or not ? - It is undisputed fact that the assessee was established in SEZ located at Sachin. It has granted the letter of permission to begin the manufacturing activity from 25-02-2012 by the SEZ authority. Therefore, we are of the view that the letter of permission was granted by the SEZ authority after satisfying the condition of the term manufacture as discussed above. The agreement entered with the supplier of Gold Ornaments, point no. 9 specified that the assessee is responsible to assemble, studded/mounting of precious and semi-precious stones, Oxidishing, finishing and packaging etc. The assessee has purchased the Gold Ornaments in the form of raw materials with specification and design given by it and make the studded Gold Jewellery for export. The assessee has sufficient labour manpower to manufacture the gold ornaments into studded gold jewellery as seemed from the payment vouchers issued to labourers by it and gate pass issued by the SEZ authorities. Thus in view of the above, we do not find any infirmity in the order of the learned CIT-A. Hence the ground of appeal of the Revenue is hereby dismissed.
Issues Involved:
1. Eligibility for deduction under section 10AA of the Income Tax Act, 1961. 2. Whether the assessee was engaged in manufacturing activities as required under section 10AA. Detailed Analysis: 1. Eligibility for Deduction under Section 10AA: The Revenue contested that the CIT(A) erred in allowing the deduction under section 10AA, which was initially claimed under section 10A. The AO disallowed the deduction, arguing that the assessee did not claim it in the original or revised return and did not file the statutory form required for section 10AA. The AO suggested that the assessee claimed deduction under section 10A to avoid Alternate Minimum Tax (AMT) under section 115JC. The Tribunal noted that deduction under section 10A was discontinued from AY 2012-13 for new units, making it impossible for the assessee to claim it deliberately. The assessee had paid advance and self-assessment tax, indicating no intention to avoid AMT. The Tribunal emphasized that the assessee cannot be deprived of statutory benefits due to a technical error in filing. The Tribunal cited the Rajasthan High Court ruling in CIT vs. Rajasthan Fasteners Ltd., where a clerical mistake in claiming the correct section was not grounds for disallowing eligible exemptions. The Tribunal concluded that the assessee's use of form 56F (meant for section 10A) was due to the absence of a prescribed form for section 10AA at that time, and the error was inadvertent. 2. Engagement in Manufacturing Activities: The AO argued that the assessee was not engaged in manufacturing activities, a prerequisite for section 10AA benefits. The AO based this on several findings, including the purchase of finished gold ornaments from a sister concern, lack of necessary plant and machinery, insufficient raw material purchases, and minimal salary expenses implying insufficient skilled manpower. The Tribunal examined the definition of "manufacture" under section 10AA and the SEZ Act, which includes activities like assembling, processing, and bringing into existence a new product. The Tribunal found that the assessee's unit in SEZ Sachin was granted permission for manufacturing activities, and the assessee had entered into an agreement specifying responsibilities for assembling and processing gold ornaments into studded jewellery. The Tribunal noted that the assessee had sufficient labor and incurred significant labor expenses, supporting the claim of manufacturing activities. Conclusion: The Tribunal upheld the CIT(A)'s order, allowing the deduction under section 10AA. It found that the assessee was eligible for the deduction despite the initial clerical error in filing under section 10A and confirmed that the assessee was engaged in manufacturing activities as required under section 10AA. The appeal filed by the Revenue was dismissed.
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