2022 (12) TMI 547 - HC - Income Tax

Exemption claimed u/s.10(A)/10B - Failure to furnish audit report in form 56G - Assessee had been claiming 100% deduction u/s 10B since AY 2004-05 - Whether the Assessee was entitled to exemption under Section 10B of the Act as claimed by it? - Tribunal reject the Tax Exemption claimed u/s.10(A) of the Act stating the reason that the appellant is not a unit under Special Economic Zone - HELD THAT - As far as the above question is concerned, there can be no doubt that with the Assessee not having satisfied the mandatory requirement under Section 10B(5) of the Act of filing Form-56G, the exemption under Section 10B of the Act cannot be allowed. The question is accordingly answered in the negative, i.e., in favour of the Revenue and against the Assessee. Whether under the facts and circumstances there exists any issues to be decided by the Appellant Tribunal when the respondent himself settles the issue revising the Original assessment and original demand (U/s.156 of I.T. Act) ? - As regards the second question framed by this Court, Mr. Ray submitted that the Revenue had in fact given appeal effect to the order of the CIT(A) but failed to bring this to the notice to the ITAT when the appeal was argued. According to Mr. Ray, having accepted the verdict of the CIT(A), the Revenue could not have gone in appeal to the ITAT. The Court is unable to accept the above submission. The mere fact that the computation giving appeal effect to the order of the CIT(A) may have been prepared by the Revenue does not mean that it is precluded from challenging that order before the ITAT. Such computation by way of giving appeal effect would obviously be subject to the result of the Revenue s appeal before the ITAT. Consequently, the second question is answered in the negative, i.e., in favour of the Revenue and against the Appellant/Assessee.

Summary

Issues:
1. Entitlement to exemption under Section 10B of the Income Tax Act.
2. Validity of the appeal filed by the Revenue before the ITAT.

Analysis:

Entitlement to exemption under Section 10B of the Income Tax Act:
The appeal was filed against the order of the ITAT which disallowed the Assessee's claim for deduction under Section 10B of the Act due to non-compliance with the mandatory requirement of filing Form-56G. The Assessee had initially claimed deduction under Section 10A but later corrected it to claim exemption under Section 10B. The CIT(A) allowed the appeal, stating that the Assessee had the right to correct the claim made during assessment proceedings. However, the ITAT upheld the AO's decision, stating that the Assessee was not entitled to deduction under Section 10B as it did not file Form-56G. The High Court affirmed this decision, emphasizing that the Assessee's consistent claim under Section 10B meant it could not now seek deduction under Section 10A. Therefore, the Assessee was not entitled to exemption under Section 10B of the Act.

Validity of the appeal filed by the Revenue before the ITAT:
The second issue revolved around the validity of the Revenue's appeal before the ITAT. The Appellant argued that the Revenue had already given appeal effect to the CIT(A)'s order, making the appeal before the ITAT unnecessary. However, the Court rejected this argument, stating that the Revenue had the right to challenge the CIT(A)'s order before the ITAT, despite preparing a computation giving appeal effect. The Court ruled in favor of the Revenue on this issue. Consequently, the appeal was dismissed, and the interim order was vacated.

In conclusion, the High Court upheld the ITAT's decision, denying the Assessee's claim for exemption under Section 10B of the Act due to non-compliance with filing requirements. Additionally, the Court ruled in favor of the Revenue regarding the validity of their appeal before the ITAT, ultimately dismissing the appeal filed by the Assessee.