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TaxTMI 
TaxTMI 
TaxTMI 
2019 (6) TMI 780
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....s of Rs. 7,96,40,878/- and therefore in the computation of income and the return of income, deduction u/s 10AA was reported to be NIL. Such loss was arrived at after Rs. 24,50,70,020/-was charged to the P&L Account as revenue expenditure, on account of exchange fluctuation loss. In the course of assessment the appellant was called upon to furnish details of the exchange loss/gain. Vide letter dated 20.12.2017 the appellant however brought to the notice of the AO that exchange fluctuation loss to the extent of Rs. 24,50,70,020/- pertained to FCCBs utilized for acquisition of capital assets which may not be allowable as expenditure in arriving at current year's business income. The appellant accordingly furnished a revised computation of income disallowing the loss of Rs. 24,50,70,020/- and claimed consequential depreciation on the enhanced cost of the capital assets. As a result, the original returned loss of Rs. 7,96,40,878/- got revised to a positive business income of Rs. 12,55,84,483/- against which deduction u/s 10AA of Rs. 12,32,93,654/- was claimed by the appellant. Along with the revised computation of income, a report of the Chartered Accountant in Form 56F was furnished be....
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....that these are on the same lines as in the case of various other sections of the Act such as S. 80IA,80IB etc. which grant profit based deductions to the assessees. The Legislature has provided for grant of profit-based deductions subject to the condition that the assessees shall furnish audit reports in the forms prescribed in the IT Rules along with the returns of income. In that context the question arose as to whether the requirement of filing of the audit report along with the return of income was mandatory or directory being procedural requirement. In several decisions on which the reliance was placed by the Ld. AR before the lower authorities as also before us, it has been judicially held that filing of the audit report in support of the deduction claimed is mandatory but so however the same being procedural in nature it is sufficient for an assessee to file such audit report at any time till completion of assessment or even at the stage of appeal. There is a unanimity of view amongst various judicial authorities that even though filing of the audit report in support of the deduction is mandatory but filing such report along with the return of income is merely directory and ....
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...., do not cause it utter and complete failure from the very inception, even if those are not annexed with the return. A chance is always given to the assessee to put the matter right before the assessment. Sub-section (5) of section 32AB should not be interpreted in a manner even more stringent than the requirement of the filing of the return itself. Furthermore in the body of section 139, sub-section (1), the return of income an assessee has to 'furnish'; the same word 'furnish' is used in sub-section (5) of section 32AB. But, in Explanation ( b) to sub-section (9) of section 139 a requirement for a non-defective return is that the return is 'accompanied by' a statement showing the computation of tax. In sub-section (5) the same words 'accompanied by' are not used but only the words 'along with' are used. Thus, the phrase 'accompanied by' is more strongly indicative of a requirement of filing on the same day as the return itself than the words 'along with'. Therefore, the Tribunal was right in allowing the assessee's claim. As regards claim of deduction under section 80HHC, the language employed is similar to the language of sub-section (5) of section 32AB. The word 'shall' is us....
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.... claimed by the assessee. However, before the Assessing Officer though the assessee had filed its audit return in form No.3CB and 3CD as required under section 44AB of the Act, but had not filed audit report in Form No.56F as required under section 10A read with Section 16D of the Income Tax Rules. On such basis, the Assessing Officer disallowed the claim of deduction. CIT(Appeals) as well as the Tribunal reversed such decision and granted the claim. In particular, the Tribunal noted the statutory language contained in subsection ( 5) of section 10A of the Act with subsection (4) of section 80HHC of the Act which also insists on the assessee furnishing the report of the accountant for claim of deduction under section 80HHC of the Act. The Tribunal referred to the decisions of this Court, particularly in case of Zenith Processing Mills v. CIT reported in 219 ITR 721 to come to the conclusion that when the assessee had eventually filed such returns, though at the appellate stage, the same must be seen as sufficient compliance. In our opinion, the Tribunal committed no error. As noted, the Revenue does not have any grievance or objection regarding the validity of the claim of assessee....
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....ative rationale for amending Section 80A and the relevant Para 25 reads as follows: "25.1 The profit linked deductions in Chapter VI-A are prone to considerable misuse. Further, since the scope of the deductions under various provisions of Chapter VI-A overlap, the taxpayers, at times, claim multiple deductions for the same profits. 25.2 With a view to preventing such misuse, the provisions of section 80A of the Income-tax Act have been amended to provide the following, namely- (i) deduction in respect of profits and gains shall not be allowed under any provisions of section 10A or section 10AA or section 10B or section 10BA or under any provisions of Chapter VI-A under the heading "C.-Deductions in respect of certain incomes" in any assessment year, if a deduction in respect of same amount under any of the aforesaid has been allowed in the same assessment year; (ii) the aggregate of the deductions under the various provisions referred to in (i) above, shall not exceed the profits and gains of the undertaking or unit or enterprise or eligible business, as the case may be; (iii) no deductions under the various provisions referred to in (i) above, shall be allowed if the de....
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....scious decision on the part of the assessee not to seek or claim a deduction to which the assessee is prima facie eligible. In the present case admittedly at the time of filing of return the appellant could not have made a claim for profit linked deduction u/s 10AA of the Act for the simple reason that business income computed at the relevant time was a loss figure. In the circumstances the appellant was not in legal position to put forth any valid claim for deduction u/s 10AA and expecting the appellant to raise such claim in the return amounted to expecting the assessee to perform an impossible task. The Hon'ble Supreme Court in its judgment in the case of Gyani Chand Vs State of Andhra Pradesh (Civil Appeal No. 5728 of 2005) dated 20.09.2016 has observed that it would not be fair on the part of a Court to give a direction to do something which is impossible and if the persons has been asked to do something which is possible and if he failed to do so, he cannot be held guilty of contempt or contravening the directions of the Court. Applying the judicial principle to the present case we hold that since at the time of filing of return u/s 139(1), the appellant could not have possib....
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....that as per the position put forth by the assessee in the return of income filed, it could not have legally claimed such deduction but only as a consequence of the disallowance proposed in the assessment, the returned loss stood converted into positive income; consequent to which the appellant became eligible to avail deduction u/s 10AA of the Act. We therefore find merit in the submissions of the appellant that there was no "failure" on the part of the appellant to claim deduction u/s 10AA in the return of income so as to attract the rigors of Section 80A(5) of the Act. 14. We also find that Circular No. 37/2016 dated 02.11.2016 was issued by the CBDT subsequent to enactment of Section 80A(5) of the Act wherein the Board clarified that profit-based deductions permissible under the Act have to be granted with reference to business income, finally assessed. The CBDT clarified that if in arriving at the business income any disallowances are made by the AO relating to the eligible business, then the deduction under Chapter VI-A is admissible on the profits so enhanced by the disallowances. In the present case the appellant had incurred forex loss in respect of FCCB which was incurred....
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....wance of forex loss and therefore did not tantamount to "profit"derived from export of article or thing. In Ld. CIT(A)'s opinion the conditions prescribed for claiming deduction in Section 10AA did not stand fulfilled. We however find merit in the Ld. AR's submission that this finding of the Ld. CIT(A) is fundamentally flawed. As pointed out by the Ld AR, in the assessment order the AO per se never questioned eligibility of the appellant to claim deduction u/s 10AA on merits and he never questioned the fact that the appellant's only source of business income was it's manufacturing undertaking located in SEZ at Dahej, Gujarat. Admittedly the forex loss which the lower authorities disallowed did not pertain to the trading transactions but pertained to transactions in "capital" field. The business income assessed by the AO in the impugned order was therefore derived from the appellant's business of manufacture of goods at it's SEZ undertaking. We note that the Section 10AA grants deduction @ 100% of the profits derived from export of articles or goods' manufactured at SEZ undertaking. By AO's own admission in working out the operating profits of the eligible unit, he had excluded the ....