2016 (3) TMI 748 - AT - Income Tax

Revision u/s 263 - excessive deduction provided to the assessee u/s 10AA - Held that - The total turnover/ export turnover and profit arising from the undertaking located at SEZ shall alone be considered for the working of the deduction under section 10AA(7) of the Act. The total turnover of the assessee shall not be taken into account while working out the deduction under section 10AA of the Act. Thus it is amply clear that the assessee has correctly claimed the deduction under section 10AA of the Act. Therefore the order of the AO is not erroneous and prejudicial to the interest of the Revenue. Accordingly the order of the ld. CIT cannot be held to be sustainable in law and the same is accordingly set aside. - Decided in favour of assessee

Summary

Issues involved:
1. Interpretation of deduction under section 10AA of the Income Tax Act, 1961.
2. Treatment of excessive deduction provided to the assessee under section 10AA of the Act.

Analysis:

Issue 1: Interpretation of deduction under section 10AA:
The appeal arose from the order of the Commissioner of Income Tax, Kolkata, regarding the deduction under section 10AA of the Income Tax Act, 1961. The appellant contested the Commissioner's assessment of the deduction and the applicability of amended provisions of sub-section (7) of section 10AA for the assessment year 2009-10. The appellant argued that the order was erroneous and should be quashed. The Commissioner found the Assessing Officer's order prejudicial to the interest of revenue due to excessive deduction provided to the assessee under section 10AA. The dispute centered around the calculation of deduction based on the export turnover and total turnover of the SEZ unit, leading to a claim of excessive deduction by the assessee.

Issue 2: Treatment of excessive deduction under section 10AA:
The Assessing Officer had accepted the claim of the assessee under section 10AA for its SEZ unit, but the Commissioner deemed the order prejudicial to revenue due to the excessive deduction claimed. The Commissioner observed that the AO failed to interpret the provisions of section 10AA correctly and concluded that the amended provisions were not applicable to the assessee for the relevant year. Consequently, the order was deemed erroneous and prejudicial to revenue, leading to the matter being sent back to the AO for fresh adjudication after necessary verification and providing the assessee with a reasonable opportunity.

The Tribunal, after hearing both parties, examined the relevant provisions of section 263 of the Act and section 10AA(7) to determine the validity of the Commissioner's order. It was established that the total turnover, export turnover, and profit from the SEZ unit should be considered for the deduction under section 10AA(7), excluding the total turnover of the assessee. The Tribunal referred to a CBDT circular to support the applicability of the amended provisions to the assessee for the concerned year. Consequently, the Tribunal allowed the assessee's appeal, setting aside the Commissioner's order as not sustainable in law.

In conclusion, the Tribunal's decision favored the assessee, emphasizing the correct interpretation of the deduction under section 10AA and the applicability of relevant provisions to determine the deduction amount, ultimately overturning the Commissioner's order.