1994 (11) TMI 155 - AT - Income Tax

Income Tax Tribunal rejects application of Section 10A for 1984-85 assessment year, upholds assessee's position.

INCOME TAX OFFICER. Versus EXPO PACKAGING.

The Tribunal held that the Income Tax Officer was not justified in applying section 10A to the assessee for the assessment year 1984-85 as the assessee's ... - Issues involved: The issue involves the interpretation of u/s 10A of the Income Tax Act, 1961 regarding the applicability of tax concessions to an assessee firm engaged in manufacturing activities in a free trade zone. The main contention is whether the assessee's declaration, filed after the return of income, should be considered valid for claiming the tax benefits under u/s 10A.Summary of Judgment:1. The assessee firm, engaged in manufacturing activities, filed a return of income showing a loss for the assessment year 1984-85. The firm later submitted a declaration, after more than 2 years, stating that u/s 10A of the Act should not be applied for the initial assessment year and the subsequent four years. The Income Tax Officer (ITO) applied u/s 10A to the assessment year 1984-85, leading to an appeal by the assessee.2. The CIT(A) allowed the appeal, stating that the ITO was not justified in applying u/s 10A to the assessee for the year 1984-85. The Revenue challenged this decision, arguing that the assessee failed to utilize the option u/s 10A(7) by not filing the declaration along with the return of income.3. The counsel for the assessee contended that the procedural requirement of filing the declaration should not deprive the assessee of the tax benefits under u/s 10A. Referring to relevant case laws, it was argued that the declaration filed during the assessment proceedings should be considered valid.4. The Tribunal observed that u/s 10A was introduced to encourage export-oriented industries in free trade zones, providing tax exemptions for initial assessment years. The option to make a declaration before the expiry of time allowed under the Act was considered procedural, not mandatory. Referring to precedents, the Tribunal concluded that the assessee's declaration during the assessment process should be accepted as utilizing the option u/s 10A(7).5. It was further noted that since the assessee did not claim any benefit under u/s 10A for the year under consideration, the question of entitlement to benefits in subsequent years would be determined when claimed. The Tribunal held that the ITO was not justified in applying u/s 10A to the assessment year 1984-85 without the assessee's initial claim or utilization of the option.6. The Tribunal dismissed the appeal of the Revenue, affirming the decision of the CIT(A) that u/s 10A should not apply to the assessee for the assessment year 1984-85.