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Facts
The assessee, engaged in IT-enabled BPO services, claimed a deduction under Section 10AA for the 12th year of operation. The AO denied this deduction, though the CPC initially accepted it. The CIT(A) directed the AO to allow the deduction.
Held
The Tribunal, in the interest of justice, remitted the issue back to the AO to verify the assessee's details and consider the claim for deduction under Section 10AA in accordance with the law.
Key Issues
Whether the assessee is eligible for deduction under Section 10AA for the 12th year of operation, and whether the AO correctly denied it based on scrutiny.
Sections Cited
10AA, 80G, 80JJAA, 143(1), 139
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SHRI OMKARESHWAR CHIDARA
Per: Smt. Beena Pillai, J.M.: The Present appeal filed by the revenue arises out of order dated 18/10/2024 passed by NFAC Delhi for assessment year 2020-21 on following grounds of appeal:
A.Y. 2020-21 Health Prime Services (India) Pvt. Ltd. “1. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in directing the Assessing Officer to allow the deduction u/s 10AA of the Act by merely relying on the statement of the AO in the assessment order that in view of the reply of the assessee and information available on records no variation is required on the above issues ignoring the computation of income adopted in the Assessment Order."
2. "The appellant craves the leave to add, amend, alter and/or delete any of the grounds of appeal as above."”
Brief facts of the case are as under:
The assessee is engaged in IT enabled business process outsourcing services. For the year under consideration it filed its return of income on 05/12/2020 declaring total income of ₹10,25,08,730/-. Subsequently the case was selected for scrutiny as assessee claimed large deduction under chapter VIA. Accordingly, show cause notice was issued calling upon assessee to furnish various details. 2.1 The Ld.AO noted that assessee claimed deduction under section 80G in respect of donations eligible, section 80JJAA in respect of the additional cost of the employment of new employees and section 10AA of the act, on eligible profits of the undertaking. It was noted that assessee was in the 12th year of the SEZ unit, for claiming deduction under section 10AA of the act.
The CPC in the intimation issued under 143(1) accepted the deduction under section 10 AA of the Act, as claimed by the assessee. It was also principally accepted by the assessing officer in Paris 3.4 of the assessment order by holding that no variation A.Y. 2020-21 Health Prime Services (India) Pvt. Ltd. is required on the issue. However while computing the taxable income in the hands of the assessee, deduction under section 10AA of the ad was denied.
Aggrieved by the order of the Ld.AO assessee preferred appeal before the Ld.CIT(A).
The Ld. CIT(A) after considering the submissions of the assessee observed as under:
“5.3 Ground no 1 also relates to the disallowance of deduction claimed u/s 10AA of Rs. 2.50 crores claimed in the ITR by intimation u/s 143(1). After summary assessment in this case scrutiny assessment was also completed. During assessment proceeding no adverse findings made by AO regarding allow ability of deduction u/s 10AA of the Act. Therefore AO is directed to allow the deduction claimed u/s 10AA of the Act. The necessary rectification order kindly be passed, deduction of Rs. 2.50 crores claimed in the ITR and accepted in the assessment order be allowed.”
Aggrieved by the order of the Ld.CIT(A), revenues and appeal before this Tribunal.
The Ld.AR submitted that relevant year under consideration is the 12th year in which the deduction under section 10AA claimed. You support from the provisions of section 10 AA that reads as under: Special provisions in respect of newly established Units in Special Economic Zones. 10AA. (1) Subject to the provisions of this section, in computing the total income of an assessee, being an entrepreneur as referred to in clause (j) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005), from his Unit, who begins to manufacture or produce articles or things or provide any services during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2006, but before the first day of April, 2021, the following deduction shall be allowed— A.Y. 2020-21 Health Prime Services (India) Pvt. Ltd. (i) hundred per cent of profits and gains derived from the export, of such articles or things or from services for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the Unit begins to manufacture or produce such articles or things or provide services, as the case may be, and fifty per cent of such profits and gains for further five assessment years and thereafter; (ii) for the next five consecutive assessment years, so much of the amount not exceeding fifty per cent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the "Special Economic Zone Re-investment Reserve Account") to be created and utilized for the purposes of the business of the assessee in the manner laid down in sub-section (2): [Provided that no such deduction shall be allowed to an assessee who does not furnish a return of income on or before the due date specified under sub-section (1) of section 139.] Explanation.—For the removal of doubts, it is hereby declared that the amount of deduction under this section shall be allowed from the total income of the assessee computed in accordance with the provisions of this Act, before giving effect to the provisions of this section and the deduction under this section shall not exceed such total income of the assessee. (2) The deduction under clause (ii) of sub-section (1) shall be allowed only if the following conditions are fulfilled, namely :— (a) the amount credited to the Special Economic Zone Re-investment Reserve Account is to be utilised— (i) for the purposes of acquiring machinery or plant which is first put to use before the expiry of a period of three years following the previous year in which the reserve was created; and (ii) until the acquisition of the machinery or plant as aforesaid, for the purposes of the business of the undertaking other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India; (b) the particulars, as may be specified by the Central Board of Direct Taxes in this behalf, under clause (b) of sub-section (1B) of section 10A have been furnished by the assessee in respect of machinery or plant along with the return of income for the assessment year relevant to the previous year in which such plant or machinery was first put to use.
The Ld.AR submitted that assessee has not violated any of the provisions under the relevant section and therefore the deduction cannot be denied for the remaining 5 consecutive A.Y. 2020-21 Health Prime Services (India) Pvt. Ltd. assessment years in respect of the amount not exceeding 50% of the profit as debited to the profit and loss account in the previous year.
On the contrary to Ld.DR relied on orders passed by the authorities.
We have perused submissions advanced by both sides in the light of the records placed before us.
The Ld.AR has argued that assessee is eligible for claiming deduction as per sub clause (i) &(ii) of clause 1of section 10 AA of the act, for a total period of 15 consecutive years, subject to the condition that the assessee has furnished the return of income or not before the specified date under section 139 (1) of the act.
Assessee has furnished before this Tribunal for the acknowledgement of the return of income filed by the assessee for your under consideration under section 139 (1) of the act. Assessee has also provided documents in respect of the proof sum of rupees to 50 crores to the STZ reimbursement reserve account being the 12th year based on which the deduction was claimed under section 10 AA of the act. It is submitted that the assessee e-file Form 56 FF in respect of the deduction claimed as per rule 16 DD of income tax rules.
In the interest of justice we remit this issue back to the Ld.AO to verify the above details filed by the assessee and to consider the claim of deduction in accordance with law.
In the result appeal filed by the assessee stands partly allowed for statistical purposes. Order pronounced in the open court on 28/02/2025