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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri Aby. T. Varkey&Shri Rajesh Kumar]
ORDER
Per Shri Rajesh Kumar, AM:
This is an appeal preferred by the assessee against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] dated 26.10.2021for the assessment year 2016-17.
The only issue raised in ground no. 1 to 5 in the grounds of appeal is against the order of Ld. CIT(A) in dismissing the appeal of the assessee by not condoning the delay of the assessee thereby not deciding the appeal on merit.
The facts in brief the assessee is engaged in manufacturing of specializedRefractories at its facility situated at new area of Kandla Special Economic Zone. The said unit is eligible for exemption u/s 10AA of the Income Tax Act, 1961 (hereinafter referred to as the Act) @ 100% of profits and gains derived from exports for a period of five consecutive assessment years beginning with the assessment year relevant to previous year in which it commenced manufacturing. In the instant case the unit has commenced manufacturing on 1.5.2012 relevant to assessment year 2013-14. During the instant year i.e. AY 2016-17, the assessee had derived profits from business and profession of Rs. 6,48,75,288/- and claimed exemption of Rs. 6,45,41,233/- u/s M/s IFGL Refractories Ltd. 10AA of the Act in respect of profit derived from exports. The assessee filed its return of income on 24.11.2016 which was revised on 25.11.2016 on the online portal of the deparment. However due to inbuilt e-filing system ,the assessee was not able to first avail of the exemption u/s 10AA of the Act of Rs. 6,45,41,233/- . The inbuilt e-filing system adjusted the brought forward business losses amounting to Rs. 4,41,02,986/- automatically against the eligible business profits resulting into the exemption u/s 10AA of the Act being restricted and reduced to only Rs. 2,07,72,302/- instead of Rs. 6,45,41,233/-. The assessee immediately informed the ITO, Ward-6(2), Kolkata on 01.12.2016 explaining the entire scenario which deprived the assessee from claiming the exemption u/s 10AA of the Act to the tune of Rs. 4,37,68,931/-. The assessee did not get any reply from the AO and in the mean time the revised return was processed u/s 143(1) of the Act vide order dated 7.7.2017 passed by CPC, Bangalore wherein the actual claim of exemption u/s 10AA of the Act Rs. 6,45,41,233/- got restricted to 2,07,72,302/- due automatic adjustment of brought forward losses from earlier years of Rs. 4,41,02,986/-.
The assessee challenged the intimation/order passed u/s 143(1) of the Act before the Ld. CIT(A) by filing an appeal on 13.02.2018 with a delay of 187 days. The assessee moved a condonation petition before the Ld. CIT(A) for condoning the delay and admitting the appeal for adjudication. The Ld. CIT(A) however dismissed the appeal of the assessee by holding that the intimation u/s 143(1) of the Act dated 7.7.2017 was sent through e-mail on 11.07.2017 and the appeal should have been filed on or before 10.08.2017. The Ld. CIT(A) observed that the letter dated 1.12.2016 could not be considered as rectification petition u/s 154of the Act because there was no order existed on that date against which the rectification petition could be filed and therefore the delay in filing the appeal is without sufficient reasons and thus dismissed the appeal as barred by limitation.
5. We have heard the rival parties and perused the records as placed before us carefully. The undisputed facts are that the assessee has set up a unit at new area of Kandla Special Economic Zone for manufacturing of Specialized Refractories and is M/s IFGL Refractories Ltd. entitled to exemption u/s 10AA of the Act equal to profits and gains derived from exports for a period of five consecutive assessment years beginning with the assessment year 2013-14 in which manufacturing was commenced. During the instant year , the assessee derived profits from exports to the tune of Rs. 6,45,41,233/- which were eligible for exemption u/s 10AA of the Act. The total business profits of the assessee were Rs. 6,48,75,288/- and there were brought forwards losses from earlier years of Rs. 4,41,02,986/-. The assessee filed its original return of income on 24.11.2016 which was revised on 25.11.2016 on the e-filing portal of the Income Tax department however due to in-built e-filing system, the assessee could not get the full exemption u/s 10AA of the Act in respect of profits of Rs. 6,45,41,233/- derived from exports. This has occurred due to brought forward losses of Rs. 4,37,68,831/- getting automatically adjusted against the said eligible profits u/s 10AA of the Act resulting into exemption u/s 10AA of the Act being restricted to Rs. 2,01,72,302/- instead of Rs. 6,45,41,233/-. Thereafter the counsel of the assessee filed a communication dated 1.12.2016 intimating the AO about this wrong adjustment of brought forward losses against the profits eligible for exemption u/s 10AA of the Act and requested the AO to do the needful to allow the assessee’s claim of exemption of Rs. 6,45,41,233/- but in the meantime the return of the assessee was processed u/s 143(1) of the Act vide order dated 7.7.2017 by CPC, Bangalore wherein the exemption u/s 10AA of the Act was restricted to Rs. 2,07,72,302/-. The intimation was sent through e-mail on 11.07.2017 whereas the appeal was filed on 13.02.2018 with a delay of 187 days. The assessee has filed condonation petition before the Ld. CIT(A) explaining the reasons for late filing of appeal. We note that the similar exemption was allowed in the preceding and succeeding assessment years. In our considered view even if where the assessee has committed mistake by making a wrong claim or not claiming the exemption at all, even then this being legitimate and legal claim has to be allowed to the assessee. In the present case before us we find that it has happened due to in-built e-filing portal of the department and it the authorities are under duty to allow the exemption to the assessee u/s 10AA of the Act as the assessee has fulfilled all the conditions as envisaged u/s 10AA of the Act in the very first assessment year. The claim of the M/s IFGL Refractories Ltd. assessee should not be rejected on the technicalities. The assessee has not filed the appeal before the Ld. CIT(A) within the due time which is explained with reasons but CIT(A) going into the technicalities of the things dismissed the appeal as barred by limitation. In our opinion appeal is a legal right vested in a person who is aggrieved by an order of the lower authority and should not be deprived of the same on technical issues. The case of assessee findssupport from the decision of Hon’ble Supreme Court in the case of Collector, Land Acquisition vs. MST Katiji & Ors. Reported in [1987] 167 ITR 471 (SC) wherein the Apex Court has held that the legislature has conferred power to condone the delay by enacting section 5 of the Limitation Act, 1963 in order to enable the courts to do substantial justice to parties by disposing of matter on merits and the expression “sufficient cause” as provided in Section 5 is adequately elastic to enable the court to apply the law in a meaningful manner so that the ends of justice is served. The court observed that “everyday’s delay must be explained” does not imply a pedantic approach. The doctrine must be applied in a rational, common sense and pragmatic manner. The court held that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. In the present case, the assessee is not benefitted in any manner by filing the appeal before the Ld. CIT(A) after the due time. We, accordingly set aside the order of the Ld. CIT(A) .The ground nos. 1 to 5 are allowed.
In the ground nos. 6 & 7, the assessee has challenged the order of the Ld. CIT(A) in not deciding the issue on merit and thereby not allowing the exemption u/s 10AA of the Act of Rs. 6,45,41,233/- from business profit of Rs. 6,48,75,288/-.
The facts of the case have already been discussed at length in the preceding paras while disposing the ground nos. 1 to 5 (supra). The only issue before us is whether the assessee is entitled to exemption u/s 10AA of the Act of Rs. 6,45,41,233/- in respect of profit from export out of total business profit of Rs. 6,48,75,288/- before setting of the brought forward losses of 4,41,02,986/-. We have considered the facts and circumstances of the case in the light of various decisions cited before us by Ld. Sr. Counsel of the assessee Shri S.K. Tulsiyan and hold that the assessee has to be M/s IFGL Refractories Ltd. allowed exemption u/s 10AA of the Act in respect of profits derived from exports before allowing any setting off of brought forward losses. In other words where the has a unit which is eligible for exemption u/s 10AA of the Act , then the income must first be computed for that unit alone by allowing exemption u/s 10AA of the Act meaning thereby that exemption u/s 10AA of the Act must precede any other adjustment of brought forward losses. The case of the assessee is squarely covered by the decisions as discussed hereinafter. In the case of CIT & Another vs. Yokogawa India Ltd. [2017] 391 ITR 274 (SC) wherein the Hon’ble Apex Court has held that in case of undertaking in free trade zone which is the export oriented undertaking, the deduction u/s 10A of the Act in respect of profits from the unit in the said zone has to be allowed while computing the income of the eligible undertaking under Chapter IV of the Act and not at the stage of computing total income under Chapter VI . In other words , the Hon’ble Court has held that the deduction u/s 10A of the Act is to be allowed against the profit and only thereafter the brought forward losses and income from other hands and the provisions for set off and carry forward contained in Section s 70,72 & 74 would be allowed. Similar ratio have been laid down by Hon’ble Bombay High Court in the case of CIT vs. Black and Veatch Consulting Pvt. Ltd. reported in [2012] 348 ITR 72 (Bom) and by Hon’ble Delhi High Court in the case of CIT vs. TEI Technologies Pvt. Ltd. reported in [2014] 361 ITR 36. Therefore on merits , the case of the assessee is squarely covered by the above decisions of the Hon’ble Apex Court and various other High courts and therefore assessee cannot be denied the legitimate exemption as provided under the Statute citing the technicalities. Accordingly we direct the AO to allow the exemption of Rs. 6,45,41,233/- u/s 10AA of the Act from the business profits of Rs. 6,48,75,288/-. However, since the amount of exemption has not been verified by the AO, we are restoring the issue to the file of AO for the purpose of limited verification of the amount of exemption u/s 10AA of the Act. Needless to say that the deduction has to be allowed after verification.
M/s IFGL Refractories Ltd. 7. In the result, the appeal of the assessee is allowed for statistical purposes.
Order is pronounced in the open court on 11th March, 2022.