2021 (12) TMI 1200 - AT - Income Tax

Disallowance of deduction claimed u/s 10AA after claiming deduction / exemption u/s 10A - SEZ unit - HELD THAT - The assessee company was incorporated in February 2000 in Tambaram MEPZ Chennai which was later converted into SEZ and commenced the production in December 2000. The company had claimed deduction of 100% for the assessment years 2001-02 to 2005- 06 (five years) u/s 10A of the Act as well as 50% from 2006-07 to 2010-11 (5 years). The Special Economic Zones Act 2005 inserted section 10AA of the Act effective from 01.04.2006 and as per proviso to section 10AA of the Act 50% deduction was claimed by the assessee from assessment year 2006-07 till 2010-11 (5 years) and 50% from assessment years 2011-2012 for five years. Explanation to section 10A of the Act states that for the removal of doubts it is hereby declared that an undertaking being the unit which had already availed before the commencement of the Special Economic Zones Act 2005 the deductions referred to in section 10A for ten consecutive years such unit shall not be eligible for deduction from income under this section. In view of the above provisions it was the submissions of the assessee that the period of ten consecutive assessment years needs to be seen only as before commencement of the Special Economic Zone Act 2005. As on the commencement of assessment year 2006-07 which is the effective date of operation of section 10AA the unit has just claimed deduction under section 10A only for five assessment years and therefore the assessee has submitted that the assessee company is entitled for deduction under section 10AA. Tribunal in assessee s own case for the assessment year 2011-12 2019 (12) TMI 536 - ITAT CHENNAI may be followed for the assessment year under consideration as while deciding the appellate order for the assessment years 2012-13 and 2013-14 the ld. CIT(A) followed the Tribunal s order for the assessment year 2011-12 and decided the appeals in favour of the assessee.

Summary

Issues Involved:
1. Confirmation of disallowance of deduction claimed under section 10AA of the Income Tax Act, 1961.

Detailed Analysis:

1. Confirmation of Disallowance of Deduction under Section 10AA:

Facts of the Case:
The assessee filed its return of income for the assessment year 2014-15, claiming a deduction of Rs. 52,61,428/- under section 10AA of the Income Tax Act, 1961. The Assessing Officer disallowed this deduction, and the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the disallowance. The assessee appealed to the Tribunal.

Assessee’s Argument:
The assessee argued that a similar issue was previously decided in its favor by the Tribunal for the assessment year 2011-12. The CIT(A) had allowed the deduction for the assessment years 2012-13 and 2013-14 based on the Tribunal's decision for 2011-12. The assessee contended that the same principle should apply for the assessment year 2014-15.

Tribunal’s Analysis:
The Tribunal reviewed the facts and previous decisions. The assessee's unit was initially registered in February 2000 and began production in December 2000. The unit claimed deductions under section 10A from assessment years 2001-02 to 2010-11. With the introduction of the Special Economic Zones Act, 2005, section 10AA was inserted, and the assessee claimed deductions under this section starting from the assessment year 2011-12.

The Tribunal noted that the unit had already availed deductions under section 10A for ten consecutive years. According to the explanation in section 10A, a unit that has availed deductions for ten consecutive years is not eligible for further deductions under this section. The Tribunal observed that the CIT(A) had allowed the deduction for the assessment years 2012-13 and 2013-14 based on its earlier decision for 2011-12.

Legal Provisions:
- Section 10A: Provides a deduction for units in Free Trade Zones, Export Processing Zones, and Special Economic Zones for a period of ten consecutive assessment years.
- Section 10AA: Provides a deduction for units in Special Economic Zones established on or after April 1, 2006, for a period of fifteen consecutive assessment years, with specific conditions for the first five, next five, and the last five years.

Tribunal’s Decision:
The Tribunal referred to its previous decision for the assessment year 2011-12, where it held that the assessee was entitled to deductions under section 10AA for the unexpired period of ten consecutive years and an additional five years as per the new provisions of section 10AA. The Tribunal reiterated that the unit, having already availed deductions under section 10A, is eligible for deductions under section 10AA for the subsequent period.

Conclusion:
The Tribunal set aside the appellate order and directed the Assessing Officer to allow the claim of deduction under section 10AA for the assessment year 2014-15. The appeal filed by the assessee was allowed.

Order Pronounced:
The order was pronounced on November 23, 2021, in Chennai.