2018 (12) TMI 1596 - HC - Income Tax

Disallowance of deduction u/s 10A - Held that - In the earlier remand, AO, while passing the giving effect to order, noted the said Circular No.1 of 2013 and assigned certain reasons as to why the disallowance has to be made. The correctness of that order, while being tested by the CIT(A), he had noted the said Circular and given independent reasons as to how the assessee s case is acceptable. Thus, in our considered view, the Tribunal should have considered the correctness of the order passed by the CIT(A), as already the effect of the said Circular was considered by both the Assessing Officer and the CIT(A). The operative portions of the orders passed by both the Assessing Officer and the CIT(A) do not contain any mention about the said Circular. In effect, the parameters required to be examined by the Assessing Officer under the said Circular were examined and in the opinion of the AO, the case of the assessee cannot be accepted. This was reversed by the CIT(A). Therefore, the Tribunal can very well decide the correctness of the order passed by the CIT(A) instead of remanding the matter to the Assessing Officer for a fresh consideration, as, already, such an exercise was done by the Assessing Officer. Furthermore, the order of remand passed for the assessment year 2009-10 is now pending before the Dispute Resolution Panel. Therefore, in the fitness of things, it is for the Tribunal to decide the matters, since this issue arises in the first year, which is the assessment year under consideration namely 2007-08.

Summary

Issues:
Appeals against common order of ITAT regarding deduction under Section 10A of the Income Tax Act for assessment years 2007-08 and 2010-11.

Analysis:
1. Issue 1 - Remand of deduction under Section 10A:
- The Tribunal remanded the matters back to the Assessing Officer to review the assessee's case in light of CBDT Circular No.1 of 2013.
- In the first appeal (TCA.No.880 of 2018), the Tribunal remanded the issue based on the Circular, despite previous consideration by the Assessing Officer and CIT(A).
- The Assessing Officer had noted the Circular and reasons for disallowance, which was reversed by the CIT(A) based on independent reasoning.
- The Tribunal was expected to review the CIT(A)'s decision rather than remanding the case again, especially since the issue was already considered by both the Assessing Officer and the CIT(A).

2. Issue 2 - Perversity in Tribunal's Order:
- The Tribunal's order was challenged for ignoring factual findings of the Appellate Authority and remanding the issue unnecessarily.
- The CIT(A) had concluded that there was no splitting up or reconstruction as per CBDT Circular No.1 of 2013, leading to the direction to delete the disallowance under Section 10A of the Act.
- The Tribunal's decision to remand the matter based on the Circular without considering the CIT(A)'s findings was deemed unwarranted and unsustainable.
- The Tribunal was directed to decide the matter on merits and in accordance with the law for both appeals (TCA.No.880 and TCA.No.881 of 2018) related to different assessment years.

3. Final Decision:
- Both appeals were allowed, setting aside the Tribunal's orders and directing a decision on merits for the deduction under Section 10A for the respective assessment years.
- The substantial questions of law were left open, and no costs were awarded in either case.
- The judgment highlighted the importance of reviewing the existing assessments and decisions made by the lower authorities before remanding the case for further consideration.

In conclusion, the High Court of Madras provided a detailed analysis of the issues raised in the appeals regarding deduction under Section 10A of the Income Tax Act for different assessment years, emphasizing the need for a thorough review of previous decisions before remanding cases for reconsideration based on circulars or other directives.