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2019 (6) TMI 780 - AT - Income TaxDeduction u/s 10AA - AO disallowed the exchange fluctuation loss while assessing the appellant’s business income but relying on the decision of Goetze India Ltd [2006 (3) TMI 75 - SUPREME COURT] denied the benefit of corresponding deduction claimed u/s 10AA observing that such claim was not made in the return of income or in the revised return - AO also denied the benefit of the capitalization of exchange fluctuation loss and consequent higher claim of depreciation on the same ground - HELD THAT:- In the light of the identically worded provisions of Section 32AB(5) and Section 10A(5), we are of the considered view that the ratio laid down in the judgment of the Hon’ble Calcutta High Court in BERGER PAINTS (INDIA) LTD. (NO. 2). [2002 (2) TMI 97 - CALCUTTA HIGH COURT] is applicable with equal force in considering allowability of claim u/s 10A(5) read with Section 10AA(8). In the present case it is an admitted position that in the course of assessment the appellant had filed audit report in Form 56F when the revised computation of total income was furnished before the AO. Once this fact is not in dispute then following the ratio laid down in the foregoing judicial precedents, it is to be held that the deduction u/s 10AA could not be denied for non-filing of the audit report in Form 56F along with the return of income.The first material objection of the lower authorities denying the claim of deduction u/s 10AA therefore fails. Applicability of provisions of Section 80A(5) - We find that the disallowance, made in the appellant’s case, was in terms of Section 37(1) and therefore as per the Circular No. 37/2016, the amount disallowed was required to be taken into consideration for determining the profits qualifying for deduction u/s 10AA. For the reasons set out in the foregoing therefore, we are of the considered view that there was no contravention of Section 80A(5) because there was no “failure” on the assessee’s part to claim deduction permissible u/s 10AA while filing it’s return. On the contrary we are of the view that having regard to the peculiar facts of the appellant’s case, the assessee could not have legally claimed any deduction u/s 10AA in the return of income filed electronically. It is only account of disallowance of the forex loss under Section 37(1) that the returned loss stood converted into positive business income for the relevant year and as a consequence, the assessee became eligible to claim deduction. We also note that the AO per se did not dispute or object to the assessee’s claim on merits but it was rejected only on technical grounds. We are of the considered view that there is no estoppel in law and an assessee cannot be denied a rightful deduction to which it is eligible unless there is specific bar in law from claiming such deduction. Statutory bar provided in Section 80A(5) did not operate as there was no “failure” on the assessee’s part to claim deduction u/s 10AA but it was a case where the deduction became claimable only as a result of disallowance proposed in the assessment. Deduction u/s 10AA was not admissible because profit assessed by the AO was consequent to the disallowance of forex loss and therefore did not tantamount to “profit”derived from export of article or thing - the current year’s operating business income assessed by the AO had nothing to do with the forex loss incurred in the capital transactions and the profits assessed by the AO in the impugned assessment solely represented profits derived from ‘export of articles or goods’ manufactured at SEZ undertaking. In view of this factual position, merely because in the original return, deduction for forex loss was claimed, did not lead to conclusion that the consequent to the disallowance of forex loss, basic character or nature of the resultant profit was any thing other than profit of the eligible business. We therefore do not find any merit in the CIT(A)’s finding denying the benefit of deduction u/s 10AA on merits. We direct the AO to grant deduction u/s 10AA with reference to the business income assessed by him in respect of the profits derived by the appellant from its undertaking located at SEZ in Dahej, Gujarat. - Decided in favour of assessee.
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