I-T - AO not permitted to accept revised computation to extent it is specifically beneficial to Revenue, by disallowing deduction u/s 10A, if Assessee's eligiblity is not disputed: ITAT
By TIOL News Service
NEW DELHI, DEC 18, 2017: THE ISSUE BEFORE THE TRIBUNAL IS - Whether when eligibility of assessee company to get deduction u/s 10A is not in dispute, then the ITO should not disallow such deduction by selectively accepting the revised computation of income, to the extent it is benefitial to I-T Department. YES IS THE ANSWER.
Facts of the case:
The assessee company is in the business of providing BPO services to the mortgage industry. During the relevant A.Y, the Assessee had debited foreign exchange loss of Rs.8,54,87,777/- in profit & loss account which had been disallowed by the AO by following the order passed by his predecessors qua AY 2008-09 and CBDT Instruction No.3 of 2010. The Assessee had also made disallowance of Rs.87,98,002/- as unpaid bonus inadmissible u/s 43B but vide revised computation, added an amount of Rs.2,14,50,610/- and reduced an amount of Rs.6,13,047/- from the income declared in return. However, AO disallowed the same on the ground that these disallowance result in the increase of assessee's claim of deduction u/s 10A. By filing revised computation, the assessee also claimed provision for doubtful debts to the tune of Rs.1,24,67,570/- and payment of employees contribution to PF after due date to the tune of Rs.1,85,038/- which have also been disallowed by AO on the same ground that it will increase assessee's claim of deduction u/s 10A of the Act.
Tribunal held that,
++ the assessment order apparently goes to prove that the AO has partly accepted revised computation of income filed by assessee company. Undisputedly, the assessee has earned net profit exchange fluctuation gain of Rs.8,54,87,777/- and credited the same to profit & loss account which has been considered as part of income while computing the taxable income. However, the assessee company has failed to claim the deduction of Rs.5,358/- as foreign exchange earned on capital amount and claimed the same vide revised return. When the assessee company is undisputedly eligible for deduction u/s 10A, it is entitled for consequential deduction u/s 10A also. So, the foreign exchange gain to the taxable income of the assessee company cannot be added which amounts to double taxation and as such, the CIT (A) has rightly deleted the same;
++ the Assessee made suo motu disallowance on account of unpaid inadmissible bonus u/s 43B to the tune of Rs.87,98,002/- and made claim of Rs.1,01,701/- on account of bonus in the revised computation of income. When the AO has accepted the suo motu disallowance made by the assessee company in the revised computation of income, the suo motu claim made by the assessee company on account of bonus cannot be disallowed. AO has selectively accepted the revised computation of income to the extent of the benefit to the revenue while completing the assessment;
++ it is seen that all the facts have been thrashed by CIT(AThe ) in granting deduction u/s 10A to the tune of Rs.87,98,002/-, Rs.1,24,67,570/- and Rs.1,85,038/- on account of unpaid bonus inadmissible u/s 43B, provision for doubtful debts and payment of employee's contribution to PF respectively claimed by the assessee company by filing revised computation of income during the assessment proceedings. When assessment proceedings were going on, filing of return was not necessary rather return filed by the assessee company has been duly explained by revised computation of income whose genuineness has otherwise been not disputed by the AO. AO has rather selectively used the revised computation of income to the extent of benefit in favour of the Revenue which is not sustainable in the eyes of law. So, when the eligibility of the assessee company to get deduction u/s 10A is not in dispute, the AO was not justified in disallowing the deduction u/s 10A of the Act.
(See 2017-TIOL-1753-ITAT-DEL)
