Alternative deduction claims can be examined on appeal when section 10B relief is denied, subject to merits review.

An alternative deduction claim may be examined at the appellate stage on the basis of material already on record, even if raised for the first time before the appellate authority. Where a deduction claim under section 10B is rejected, the assessee's alternative claim under section 10A is not barred merely because it was not made before the Assessing Officer. The appellate authority may admit the additional ground and direct examination of the claim on merits in accordance with law, including consideration of the supporting audit report. The Revenue's challenge to that course therefore fails.

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Issues: Whether the assessee's alternative claim for deduction under section 10A of the Income-tax Act, 1961, raised for the first time before the appellate authority, could be entertained and directed to be examined on merits after the original claim under section 10B had been disallowed.

Analysis: The claim under section 10B had been rejected by the Assessing Officer, and the assessee then raised an alternative claim under section 10A before the appellate authority along with the auditor's report in Form 56F. The appellate authority admitted the additional ground and directed the Assessing Officer to examine the alternative claim in accordance with law. The Tribunal noted that the issue was covered by its earlier decisions holding that, where deduction under section 10B is denied, the assessee's alternative claim under section 10A should be considered on merits. Following that approach, the Tribunal upheld the direction to examine the claim.

Conclusion: The alternative claim under section 10A was rightly directed to be considered on merits, and the Revenue's challenge failed.

Ratio Decidendi: An assessee's alternative claim for deduction can be examined at the appellate stage on the basis of material on record, and where the original claim under section 10B is denied, the claim under section 10A is not barred merely because it was raised for the first time before the appellate authority.

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