2014 (9) TMI 515 - AT - Income Tax

ITAT allows deduction under Section 10A, remits case for fresh consideration.

Egon Zehnder Information & Research Services Pvt. Ltd. Versus DCIT, Circle-11(1), New Delhi

The ITAT upheld the denial of the deduction claim under Section 10B but allowed the claim under Section 10A, stating that appellate authorities can ... Eligibility to claim deduction u/s 10B – STPI competent to grant registration or not - Held that:- Assessee had filed Form 56F in compliance with the requirement of Section 10A of the Act during the course of assessment proceedings, pursuant to the revision order of the CIT(A) - the benefit for which the assessee is eligible as per law cannot be denied - on being pointed out by the Assessing officer in the de-novo proceedings that deduction u/s 10B was not available to it, changed its claim to one u/s 10A of the Act, by way of filing a report of the Chartered Accountant in the prescribed Form No.56F before the AO - though there is a change of claim from section 10B to 10A, neither the returned income, nor the assessed income of the assessee has undergone any change whatsoever – the AO has not examined the claim, thus, the matter is to be remitted back to the AO for consideration – Decided in favour of assessee. Issues Involved:1. Eligibility to claim deduction under Section 10B of the Income Tax Act.2. Eligibility to claim deduction under Section 10A of the Income Tax Act.3. The power of the Assessing Officer (AO) and Commissioner of Income Tax (Appeals) [CIT(A)] to entertain fresh claims not made by way of revised return.4. Applicability of the Supreme Court judgment in Goetze (India) Ltd. v. CIT.Issue-wise Detailed Analysis:1. Eligibility to Claim Deduction under Section 10B of the Income Tax Act:The appellant, a 100% Export Oriented Unit (EOU) registered under the Software Technology Park of India (STPI), claimed a deduction under Section 10B based on STPI registration. However, the ITAT, Hyderabad, in Infotech Enterprises Ltd. vs. Joint CIT, ruled that STPI is not the Board referred to in Clause (iv) of Explanation 2 below Section 10B(8). Consequently, the CIT set aside the original assessment order, directing the AO to re-assess the claim. The AO disallowed the deduction, and the CIT(A) upheld this decision, referencing the Delhi High Court's judgment in CIT vs. Regency Creation Ltd. and CIT vs. Valiant Communication Ltd., which confirmed that approval by STPI is not equivalent to Board approval under Section 10B.2. Eligibility to Claim Deduction under Section 10A of the Income Tax Act:During de novo proceedings, the AO acknowledged that the appellant met all conditions for deduction under Section 10A but disallowed the claim because it was not made through a revised return. The CIT(A) upheld this decision, citing the Supreme Court's judgment in Goetze (India) Ltd. v. CIT, which restricts the AO from entertaining fresh claims without a revised return. However, the appellant argued that the CIT(A) and appellate authorities have the jurisdiction to entertain such claims, as supported by various case laws, including CIT vs. Pruthvi Brokers & Shareholders P. Ltd., CIT vs. Jai Parabolic Springs Ltd., and others, which allow appellate authorities to consider claims not made before the AO.3. The Power of AO and CIT(A) to Entertain Fresh Claims Not Made by Revised Return:The Supreme Court in Goetze (India) Ltd. v. CIT held that the AO cannot entertain a fresh claim without a revised return. However, this restriction does not apply to appellate authorities. The Bombay High Court in CIT vs. Pruthvi Brokers & Shareholders P. Ltd. clarified that appellate authorities could entertain claims not made before the AO. Similarly, the Delhi High Court in CIT vs. Jai Parabolic Springs Ltd. and other judgments reinforced that appellate authorities have the jurisdiction to entertain additional claims.4. Applicability of the Supreme Court Judgment in Goetze (India) Ltd. v. CIT:The Supreme Court's judgment in Goetze (India) Ltd. is limited to the AO's powers and does not affect the powers of appellate authorities. The ITAT noted that the appellant's claim under Section 10A did not alter the returned or assessed income, distinguishing it from Goetze (India) Ltd., where the fresh claim changed the returned income. The ITAT referenced multiple case laws, including CIT vs. Pruthvi Brokers & Shareholders P. Ltd., CIT vs. Jai Parabolic Springs Ltd., and others, to support the view that appellate authorities could consider the appellant's claim under Section 10A despite it not being made through a revised return.Conclusion:The ITAT concluded that the CIT(A) was correct in denying the claim under Section 10B. However, it allowed the appellant's claim under Section 10A, noting that the appellate authorities have the jurisdiction to entertain such claims. The matter was remitted back to the AO for fresh consideration, ensuring that the appellant's eligibility for deduction under Section 10A is examined on merits. The appeal was allowed for statistical purposes, and the AO was directed to grant adequate opportunity to the appellant during re-assessment.