TMI Blog2023 (7) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... ed form 56F to the ld. Assessing Officer during the assessment proceedings when the claim of deduction u/s. 10AA of the Act was being examined by the ld. Assessing Officer. Net profit comparison of sister concern - AO held that the reasonable profit for the assessee should be restricted to 7.5% of the purpose of calculation of deduction u/s. 10AA - CIT(A) allowed the appeal of the assessee on the ground that there was no business transaction between the assessee and its sister concern - HELD THAT:- We observe that firstly the assessee s case is directly covered by order of Hon ble ITAT for assessee s own for assessment year 2012-13 2013-14 [ 2019 (7) TMI 126 - ITAT AHMEDABAD] . CIT(A) has correctly observed that the assessee has not arranged its affairs in a manner so as to artificially inflate its profit with a view to claim higher deduction u/s. 10AA and further, the Department has not been able to place any material on record to show that there was any transaction between the assessee and its sister concern. We are of the considered view that ld. CIT(A) has correctly allowed the appeal of the assessee - ITA No. 415/Ahd/2020 - - - Dated:- 16-6-2023 - Ms. Annapurna G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitation in filing petitions/applications/suits/appeals/all other proceedings, irrespective of the period of limitation prescribed under the general or special laws, shall stand extended with effect from 15-3-2020 till further orders. The suo motu proceedings were, disposed of issuing the directions as to in computing the period of limitation for any suit, appeal, application or proceeding, the period from 15-3-2020 till 14-3-2021 shall stand excluded. Consequently, the balance period of limitation remaining as on 15-3-2020, if any, shall become available with effect from 15-3-2021. In view of the above, since the delay of 76 days in filing appeal is falling within the Covid pandemic period, the delay is hereby being condoned. Ground No. 1 (Allowing deduction u/s. 10AA of the Act ignoring the fact that the assessee failed in filing form 56F along with return of income) 4. The brief facts in relation to this ground of appeal are that during the course of assessment proceedings, the Assessing Officer observed that the assessee did not e-file its form 56F claiming deduction u/s. 10AA of the Act as required under Rule 12(2) of the Income Tax Rules. The assessee submitted befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submissions supra. I have carefully considered the material facts and also the submissions of the appellant along with the decisions relied upon. The appellant not filed Form 56F electronically along with the return but, the same was submitted during the assessment proceedings. The case laws relied upon by the appellant squarely applicable to the facts of the case and the action of the AO in denying the direction u/s 10AA of the Act on this count appears to be incorrect. Filing of Form 56F is held to be directory in nature and failure to furnish along with return should not lead to denial of deduction u/s 10AA of the Act. Reliance is placed on the following decisions for the above proposition. i) DIC Fine Chemicals (P.) Ltd. (107 taxmann.com 213) (Kol) ii) Gujarat Oil Allied Industries (201 ITR 325)(Guj) Hi) XXavient Software Solutions (I) Ltd.(ITA No.l40/Del/2017) Considering the above discussion and also relying on the decisions, it is held that the AO is incorrect in denying the deduction, hence, this ground of appeal is allowed. 5. The Department is in appeal before us against the aforesaid order passed by ld. CIT(A) granting relief to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other words, for construction of beneficial exemption strict rule of interpretation may not be required to be applied. The Supreme Court in this case observed as under: This being the case, it is obvious that the beneficial purpose of the exemption contained in Section 3(1)(b) must be given full effect to, the line of authority being applicable to the facts of these cases being the line of authority which deals with beneficial exemptions as opposed to exemptions generally in tax statutes. This being the case, a literal formalistic interpretation of the statute at hand is to be eschewed. We must first ask ourselves what is the object sought to be achieved by the provision, and construe the statute in accord with such object. And on the assumption that any ambiguity arises in such construction, such ambiguity must be in favour of that which is exempted. Consequently, for the reasons given by us, we agree with the conclusions reached by the impugned judgments of the Division Bench and the Full Bench. 6.2 In IPCA Laboratory Ltd. v. Dy. CIT [2004] 12 SCC 7421 the Supreme Court in the said judgment observed that section 80HHC has been incorporated with a view to provide inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 10B. The Hon'ble High Court decided the issue in favour of the assessee by holding that the requirement of filing the declaration was mandatory but filing it along with the return of income u/s 139(1) was a directory requirement. The matter was brought by the Revenue before the Hon'ble Supreme Court. The assessee, inter alia, relied on the judgment of the Apex Court in G.M. Knitting Industries (P.) Ltd. (supra). Their Lordships held that the requirement of filing the report in support of deduction u/s 10B was not a directory but a mandatory requirement . It further held that both the conditions of - filing the declaration and filing it before the time limit u/s 139(1) - were mandatory and had to be cumulatively satisfied. Rejecting the reliance on G.M. Knitting Industries (P.) Ltd. (supra), the Hon'ble Supreme Court held that that decision was relevant in the context of deduction provisions and not the exemption provisions as given under Chapter III of the Act. 6.3.1. In our view, the aforesaid decision would not apply to assessee s set of facts and would not preclude / prohibit the assessee from claiming deduction u/s 10AA of the Act, for the following reasons: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 274 (Supreme Court), held that section 10A of the Act is a deduction provision and not an exemption provision . Therefore, apparently there seems to be a difference of opinion to whether section 10A/B provisions qualify as Exemption or Deduction provisions. Therefore, since it is well-settled principle of law that deduction provisions, which have been introduced in the Statute to provide incentive to the assessee, should be construed liberally , in our considered view, once it is not disputed that the instant set of facts, the assessee claimed the benefit of provisions under section 10AA in the return of income (which in our view is a mandatory/directory requirement), the benefit of section 10AA cannot be denied only on the ground that the assessee could not file Form 56F along with the return of income (being a procedural requirement), especially when Form 56F has been filed by the assessee at the assessment stage when such claim was being considered by the Assessing Officer. (iii) Besides the above, in the case of G. M. Knitting Industries (P.) Ltd. case supra , the Hon'ble Supreme Court further held that even though necessary certificate in Form 10CCB along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 10B of the Act. The Gujarat High Court in the case of Zenith Processing Mills v CIT 219 ITR 721 (Guj) held that provision of section 80J(6A) to extent it requires furnishing of auditor's report in prescribed form along with return, is directory in nature and not mandatory. Further, assessee can be permitted to produce such report at later stage when question of disallowance arises during course of assessment proceedings. In the instant case, the A.O. has denied s. 10AA benefit on account of an inadvertent error on the part of the assessee in not e-filing Form 56F along-with return of income. We are therefore of the view that there is sufficient compliance if the Form 56F has been filed during the course of assessment proceeding, since there is no material objective to be achieved by the assessee in not e-filing the same, once the same was already available with the assessee. 6.5 In view of the above, we are of the considered view that CIT(A) has not erred in facts and in law in allowing the claim of the assessee that deduction u/s. 10AA of the Act cannot be denied simply on the ground that the assessee did not e-file form 56F along with the return of income, when the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction between the appellant and its sister concern and neither there was any evidences to show that it has arranged its affairs in a manner to inflate its profits from, eligible business. Since, primary condition was absent, my predecessor found it incorrect to invoke Section 10AA(9) rws 80IA(10). Since, the facts are identical and also the Hon'ble ITAT in case of M/s. Pramukh International has decided the similar issue in favour of another assessee, following the judicial pronouncement, NP arising out of export turnover should not be reduced invoking Sec. 10AA(9) rws 80IA(10) H the Act. The AO is directed to re-compute deduction u/s 10AA as has been done in this case for AY 2012-13 and AY 2013-14 while giving appeal effect to the order of my predecessor. The Hon'ble ITAT in the appellant's own case for the AY 2012-13 and AY 2013-14 (73 ITR (Trib.) (SN) 42 (Ahmedabad)) the identical issue considered and held in favour of the appellant dismissing the appeal filed by the Revenue. Hence, the action of the AO is hereby held as incorrect and the adjustment made is hereby deleted. The appellant succeed on this count. This ground is allowed. In effect, the appeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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