2016 (8) TMI 409 - AT - Income Tax

Tribunal confirms eligibility for Section 10A benefits for Assessment Year 2005-06

DCIT Circle-11 (1), New Delhi Versus Infrasoft Technologies Ltd. And Vice-Versa

The Tribunal upheld the CIT(A)'s decision, confirming the eligibility of the assessee for Section 10A benefits for the Assessment Year 2005-06. The ... Disallowance of deduction claimed u/s 10A - Held that:- As noticed that for the year under consideration, the assessee is not hit by section 10A (9) of I.T. Act, as it stood omitted by the Finance Act 2003 w.e.f. 1.4.2004. Respectfully following the decision of this Tribunal in assessee’s own case, for asstt. year 2001-02 and circular No. 1 of 2005, we hold that the assessee is eligible for claim u/s 10A of I.T. Act for asstt. year 2005-06. Loss relates to the STPI unit - treating the loss on sale of assets as business loss and to be considered for computation of deduction u/s 10A - Held that:- We find that Ld. CIT(A) has upheld the action of the AO in adding back the loss on sale of assets. Additionally, the Ld. CIT(A) directed the AO to verify claim that the loss related to STPI unit and if the claim was found verifiable, the claim u/s 10A be recomputed on enhanced profits. We have already held , while deciding ground No. 1 of appeal filed by the revenue, that the assessee is eligible for claim u/s 10A of I.T. Act. Therefore we find no infirmity in the direction of the Ld. CIT(A)’s direction to AO to recompute benefit u/s 10A of I.T. Act. Issues:1. Disallowance of claim under section 10A of the Income Tax Act.2. Eligibility for Section 10A benefits based on the establishment of a new independent undertaking.Analysis:Issue 1: Disallowance of claim under section 10A:The case involved cross-appeals by the Revenue and the assessee against an order pertaining to the Assessment Year 2005-06. The Revenue appealed against the deletion of an addition made on account of disallowance of the claim under section 10A of the Income Tax Act. The Assessing Officer disallowed the claim, stating that the switch over of deduction claimed under section 10A from the assessment year 2000-01 was not genuine. However, the CIT(A) allowed the deduction, relying on the conditions of Section 10A and a previous order for AY 2002-03. The Tribunal upheld the CIT(A)'s decision, emphasizing the eligibility of the assessee for the claim under section 10A for the relevant assessment year.Issue 2: Eligibility for Section 10A benefits:The second issue revolved around the eligibility of the assessee for Section 10A benefits based on the establishment of a new independent undertaking. The CIT(A) held that even though no new unit was set up, the assessee was eligible for deduction under Section 10A. The Tribunal, referring to Circular No. 1 of 2005, concluded that the assessee was eligible for the claim under Section 10A for the assessment year 2005-06. The Tribunal also noted that the assessee was not affected by Section 10A(9) of the Income Tax Act, as it was omitted by the Finance Act 2003. The Tribunal dismissed the Revenue's appeal and the assessee's cross objection, as the eligibility for the claim under Section 10A had been established.In conclusion, the Tribunal upheld the CIT(A)'s decision regarding the allowance of the claim under section 10A and confirmed the eligibility of the assessee for Section 10A benefits for the assessment year 2005-06, based on the conversion of the existing domestic unit to an STPI unit.