TaxTMI 
TaxTMI 
2023 (7) TMI 166
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....usiness made by the AO, without correctly appreciating the fact that while calculating the exemption u/s 10AA the reasonableness of the profits from the eligible business is also to be ascertained as per the provisions of section 10AA(9) rws 80IA(10) of the I.T. Act, which the AO has taken as that which was reasonably deemed to have been derived there from after comparison with that of a sister concern, manufacturing same product at the same locality. 3. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary Relief claimed in appeal It is prayed that the order of the CIT (Appeals) be set aside and that of the Assessing Officer be restored." 3. At the outset, we observe that the there is a delay of 76 days in filing of appeal. However, the ld. Departmental Representative informed us that the date of service/communication of the order passed by ld. CIT(A) was 02- 03-2020 and the appeal of the Department was time barred owing to Covid period. However, in view of the nation-wide lockdown from 24th March 020, the Apex Court in Cognizance for Extension of Limitation, In re[2021] 127 taxmann.com 72 (SC), took suo mot....
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....e failed to e-file form 56F despite the directions as per Rule 12(2) deduction u/s. 10AA of the Act is not allowable to the assessee. The Assessing Officer further held that date of audit report in form 56F cannot be relied upon since the assessee did not intentionally file form 56F with the return of income. Further, the Assessing Officer held that filing of form 56F is mandatory and the contention of the assessee that e-filing of form 56F is directory cannot be accepted. Accordingly, the Assessing Officer disallowed the deduction claimed by the assessee u/s. 10AA of the Act amounting to Rs. 2,14,03,816/-. In appeal, the ld. CIT(A) allowed the claim of the assessee on the basis of various decisions relied upon by the assessee which held that the filing of form 56F is directory in nature and failure to furnish form 56F along the return of income should not lead to denial of deduction u/s. 10AA of the Act. While allowing the appeal of the assessee, ld. CIT(A) observed as under:- "Ground No. 1 relates to denial of deduction u/s 10AA of the Act on account of failure to file Form 56F electronically along with the ITR. According to the AO, the appellant was to follow Rule 12(2)....
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....t specially when Form 56F has been filed at the assessment stage when such claim was being considered by the Assessing Officer. The counsel for the assessee placed reliance on several decisions on this issue. 6. We have heard the rival contentions and perused the material on record. 6.1 In our view, it is a well accepted principle of law that beneficial provisions should be given a liberal construction and once the assessee has satisfied the conditions laid down for claiming deduction/exemption under the relevant beneficial provision, the same should not be denied. We are of the view that exemption benefits u/s 10AA cannot be denied to the assessee on account of a procedural lapse committed by the Chartered Accountant of the assessee. We must always keep the object of the Act in view while interpreting the section. The legislative intention must be the foundation of the court's interpretation. In a recent judgment of Mother Superior Adoration Convent [2021] 126 taxmann.com 68 (SC), the Supreme Court held that beneficial exemptions having their purpose as encouragement or promotion of certain activities should be liberally interpreted. In reference to Dilip Kumar's case (S....
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....s (P.) Ltd. [2014] 43 taxmann.com 358 (Gujarat), the Gujarat High Court held that when State is inclined to give some tax benefit to tax payers, terms or provisions of policy should be interpreted in a liberal manner and with an intention to see that purpose for which policy is framed is fulfilled and beneficiaries is helped and the interpretation must not be such which would frustrate objective of policy. Section 10AA of the Act is a beneficial provision aimed at encouraging exports of goods and services by setting up of industrial units in special economic zones. In our view, benefit of section 10AA should not be denied on account of a procedural/technical default by the assessee or his chartered accountant, if otherwise the assessee is eligible to claim deduction under the said exemption provision. 6.3 Another notable issue for consideration is that recently the Hon'ble Supreme Court was confronted with the claim of benefit u/s 10B in Pr. CIT v. Wipro Ltd. [2022] 140 taxmann.com 223/288 Taxman 491/446 ITR 1. The assessee furnished original return taking the benefit of section 10B and did not carry forward the loss. Thereafter, a revised return was filed foregoing the clai....
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....equivalent/similar provision in section 10AA of the Act, which gives an option to the assessee to file a declaration before the due date of return of income under section 139(1) of the Act, to the effect that the provisions of this section may not be made applicable to him, for the impugned assessment year. Therefore, going by the strict language of section, the relevant statutory provisions on which the decision of Wipro was based, were on a different footing. Further, the issue for consideration in the Wipro case is also distinguishable, since in the assessee's case, it had claimed benefit of deduction u/s. 10AA in the original return of income (and only Form 56F was omitted to be e-filed alongwith return of income), whereas the issue for consideration in Wipro case supra was that once the assessee had claimed benefit of section 10B in the original return of income, whether such benefit could be foregone/withdrawn by filing declaration u/s. 10B(8) of the Act in the revised return of income filed u/s 139 (5) of the Act (and the assessee could, in turn, avail the benefit of carry forward losses in the revised return of income). (ii) Secondly, the Hon'ble Supreme Court ....
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...., before the assessment was finalized. The assessee should not be denied the benefit of s. 10AA of the Act. It is a well settled principle of law that if there is any ambiguity regarding interpretation of a Statutory provision, an interpretation favourable to the assessee may be taken, especially when we are dealing with Statutory provisions aimed at giving some incentive to the assessee. 6.4 Another aspect for consideration is that whether there is sufficient compliance once assessee has filed the revised Form 56F during the course of assessment proceedings. In the case of M/s. ACN Info-Tech vs. ACIT ITA No. 79/Viz/2017, instead of claiming deduction u/s. 10AA of the Act, the assessee claimed deduction u/s. 10B of the Act in the income tax return. The A.O. rejected the claim on the ground that assessee did not file form 56F along with return of income and had filed form 56G instead. The ld. A.R argued that the AO ought to have allowed the deduction u/s. 10AA since the assessee had filed form 56F during assessment proceeding which was a pure technical mistake. The Tribunal held that benefit of deduction should not be disallowed as the assessee had duly fulfilled the conditions f....
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....easonable profit for the assessee should be restricted to 7.5% of the purpose of calculation of deduction u/s. 10AA of the Act. Accordingly, the Assessing Officer held that since the assessee had claimed total deduction u/s. 10AA of the Act of Rs. 2,14,04,945/- and allowable u/s. 10AA of the Act is calculated only at Rs. 45,40,892/-, the remaining excess deduction claimed by the assessee of Rs. 1,68,64,053/- was disallowed and added to the total income of the assessee. The ld. Assessing Officer only allowed an amount of Rs. 45,40,892/- as deduction u/s. 10AA of the Act. In appeal before ld. CIT(A), the ld. CIT(A) allowed the appeal of the assessee on the ground that there was no business transaction between the assessee and its sister concern and since the ld. Assessing Officer has not given any evidence to show that the assessee attended its affairs in a manner to inflate profit from eligible business, deduction u/s. 10AA of the Act cannot be denied on this basis. Accordingly, the ld. CIT(A) allowed the appeal of the assessee with the following observations:- "During the appellate proceedings, the Ld. AR brought to my notice that this issue is covered by the Ld, CIT(A) vi....