2019 (4) TMI 369 - AT - Income Tax

Tribunal rules in favor of assessee on deduction timing and income calculation

Techsignia Solutions Pvt. Ltd. Versus The Income Tax Officer, Ward – 7 (5), Pune

The Tribunal allowed the appeal of the assessee, ruling in favor of the assessee on both issues raised. The Tribunal held that the deduction under section ... Deduction u/s 10AA - assessee had claimed the dedction without setting off of unabsorbed depreciation - AO and DRP had restricted the same by first setting off of unabsorbed depreciation from business income and then allowing deduction u/s 10AA - HELD THAT:- Allowability of deduction under section 10AA of the Act before setting off of unabsorbed depreciation is settled by the ratio laid down by the Apex Court in the case of CIT & Anr. Vs. M/s. Yokogawa India Ltd. [2016 (12) TMI 881 - SUPREME COURT]. The assessee is entitled to claim deduction under section 10AA of the Act before setting off of unabsorbed depreciation from business income. Hence, the ground of appeal No.2 raised by assessee is allowed. Income from other source - interest on income tax refund which was then clubbed with income from business - HELD THAT:- Referring to the statement of total income filed for the year under consideration and the perusal of the same clearly reflects that income from other sources comprised of interest on income tax refund of ₹ 55,244/-, which was then clubbed with income from business at ₹ 4,51,295/- and the gross total income was declared at ₹ 5,06,539/-. This is a mistake at the end of Assessing Officer. Accordingly, we direct him to adopt the income from other sources at ₹ 55,244/-. The ground of appeal No.3 raised by assessee is thus, allowed. Issues involved:1. Validity of the order passed by the learned AO2. Computation of deduction claimed under section 10AA of the Act3. Consideration of income from other sourcesAnalysis:Issue 1: Validity of the orderThe appeal challenged the order of the ITO, Ward 7(5), Pune, dated 26.12.2016, pertaining to assessment year 2012-13 under section 143(3) r.w.s. 144C(1) of the Income-tax Act, 1961. The appellant contended that the order was ultra vires, bad in law, and contrary to the provisions of the Act. However, the Authorized Representative for the assessee pointed out that the issue raised in ground of appeal No.2 was previously addressed by the Tribunal for the assessment year 2011-12, rendering the first ground of appeal general and not needing adjudication.Issue 2: Computation of deduction under section 10AAThe main contention revolved around the computation of deduction claimed under section 10AA of the Act. The assessee, engaged in software development, had unabsorbed depreciation from previous years, which was not set off against business income before claiming the deduction under section 10AA. The Assessing Officer and the Dispute Resolution Panel (DRP) restricted the deduction by first setting off the unabsorbed depreciation from business income. However, referencing the Tribunal's decision in a previous year and the Supreme Court's ruling in CIT & Anr. Vs. M/s. Yokogawa India Ltd., it was established that deduction under section 10AA should be allowed before reducing the total income by unabsorbed depreciation.Issue 3: Consideration of income from other sourcesThe appellant contested the Assessing Officer's consideration of income from other sources at &8377; 5,06,539/- instead of the correct amount of &8377; 55,244/- as declared in the return of income. The Tribunal found that the Assessing Officer's calculation was erroneous, as the income from other sources included interest on income tax refund of &8377; 55,244/-, which was mistakenly added to income from business. Consequently, the Tribunal directed the Assessing Officer to adopt the correct income from other sources at &8377; 55,244/-, thereby allowing the ground of appeal raised by the assessee on this issue.In conclusion, the Tribunal allowed the appeal of the assessee, ruling in favor of the assessee on both issues raised, namely the computation of deduction under section 10AA and the consideration of income from other sources.