AI Insights
The case revolves around an appeal by the Revenue against the order of the CIT(A) which allowed the deduction under section 10AA of the Income Tax Act to Croygas Equipments Pvt. Ltd. The Revenue contended that the assessee's failure to e-file Form 56F along with the return of income was a mandatory requirement under Rule 12(2) of the Income Tax Rules, and thus, the deduction should be denied. The CIT(A) had earlier allowed the deduction, citing that the filing of Form 56F was directory in nature and not a mandatory requirement for claiming the deduction under section 10AA. The Tribunal agreed with the CIT(A), emphasizing that the beneficial provisions of the law should be interpreted liberally and procedural lapses should not defeat the substantive rights conferred by the statute.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 131346 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 11 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
15-06-2023
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
07-06-2023
Assessment Year
2014-2015
Appeal Filed On
15-07-2020
Judgement Text
THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Ms. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Th e DCIT, Circle-1 (1 )(1), Vadodara (Appellant) Vs Cro ygas Equipments Pvt. Ltd., A-36, Ghanshyam Nagar Nr. S aras wath i Co mplex GIDC R oad, Man jalpur, Vadodara-3900 11 PAN: AAD CC648 9M (Resp ondent) Asses see b y : Shri Tushar Hema ni, Sr. A.R. & Shri Parimalsinh B. Pa rmar Revenue by : Shri M ukesh J ain, Sr. D. R. Date of hearing : 08-06 -2 023 Date of pronouncement : 16-06 -2 023 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals)-1, Vadodara , in proceeding u/s. 250 vide order dated 26/02/2020 passed for the assessment year 2014-15. 2. The Department has taken the following grounds of appeal:- ITA No. 415/Ahd/2020 Assessment Year 2014-15 I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 2 “1. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in allowing the deduction under section 10AA of the Act ignoring the facts that the assessee failed in filing Form 56F along with return of income. 2. On the facts and circumstances of the case and in law, the Ld. CIT (Appeals) erred in deleting the reduction in net profit of eligible business 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 motu cognizance of the situation arising out of the challenge faced by the country on account of COVID-19 Virus and resultant difficulties that could be faced by the litigants across the country. Consequently, it was directed vide order dated 23-3-2020 that the period of limitation in filing petitions/applications/suits/appeals/all other proceedings, irrespective of the I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 3 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 before the Assessing Officer that e-filing of form 56F had started from assessment year 2014-15 and this was the first year where the Income Tax Rules required the assessee to e-file from 56F. The assessee have got the audit report from the auditor under form 56F but had inadvertently omitted to submit the same under the mistaken belief that it could be filed during the course of assessment as and when requisitioned by the Assessing Officer. The assessee further submitted that none e-filing of form 56F is just a procedural lapse and deduction should not be disallowed on this ground alone. Further, the assessee also submitted physical copy of form 56F to the I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 4 Assessing Officer during the course of assessment proceedings. However, the Assessing Officer denied the claim of deduction u/s. 10AA of the Act to the assessee on the ground that procedural lapse under Rule 12 of the Income Tax Rules is not permissible since the assessee 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) mandatorily. The appellant during the appellate proceedings filed submissions in this regard And stated that filing of Form 56F was only a directory one and not a mandatory requirement to claim deduction. The appellant relied on certain decisions as can be seen from 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 I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 5 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 assessee. The Department submitted before us that language of Rule 12(2) of the Income Tax Rules is clearly unambiguous. The ld. Departmental Representative submitted as per the aforesaid Rule, the assessee was required to e-file form 56F along with the return of income and non-compliance of this mandatory requirement would lead to denial of deduction u/s. 10AA of the Act. The ld. Departmental Representative further placed reliance on the case of Summit India Water Treatment and Services Ltd. vs. PCIT 107 taxmann.com 444 (Ahmedabad Trib) which held that furnishing of form 3CEB report electronically is mandatory as per Rule 12(2) of the Income Tax Rules. In response, the counsel for the assessee submitted that it is a settled law that the requirement of filing form56F is directory in nature and failure to furnish form 56F along with return of income could not be basis to deny benefit u/s. 10AA of the Act 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. I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 6 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 (Supreme Court), it held that the Constitution bench has not made any distinction between exemption granted generally and exemption provisions that have a beneficial purpose, therefore, it cannot be said that for beneficial exemption liberal rule of construction has been done away with. In 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 I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 7 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 incentive to export houses and this section must receive liberal interpretation. In Bajaj Tempo Ltd. v. CIT [1992] 3 SCC 78, the Supreme Court while interpreting section 15C of the Income-tax Act, 1922 observed that the section, read as a whole, was a provision, directed towards encouraging industrialization by permitting an assessee setting up a new undertaking to claim benefit of not paying tax to certain extent on the capital employed. The Gujarat High Court in the case of Kishorbhai Harjibhai Patel v. ITO [2019] 107 taxmann.com 295 (Gujarat) held that section 54F is a beneficial provision and is applicable to an assessee when the old capital asset is replaced by a new capital asset in the form of a residential house. Once an assessee falls within the ambit of a beneficial provision, then the said provision should be liberally interpreted. In the case of State of Gujarat v. S.A. Himnani Distributors (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 I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 8 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 claim of deduction u/s 10B. The AO rejected the withdrawal of exemption under section 10B by holding that assessee did not furnish the necessary declaration in writing before due date of filing return of income, which was an essential requirement for not claiming the benefit of section 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 I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 9 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: (i) Firstly, in the case of Wipro Limited supra, the issue for consideration before the Hon'ble Supreme Court was that in the original return of income, the assessee had claimed deduction under section 10B of the Act, whereas in the revised return filed under section 139(5) of the Act, assessee did not claim deduction under section 10B of the Act, and instead claimed benefit of carry forward of losses. It was in light of these facts that the Hon'ble Supreme Court held that on a plain reading of section 10B(8) of the Act, it is clear that where assessee claimed benefit under section 10B(8) by furnishing declaration in revised return much after due date prescribed under section 139(1), same was to be denied as requirement of furnishing declaration before AO before due date of filing original return under section 139(1) was a mandatory condition not directory. However, notably, there is no such equivalent/similar provision I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 10 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 along- with 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 in the case of Wipro Limited held that section 10B of the Act is an “exemption provision” and hence, assessee claiming such exemption has to be “strictly” comply with the exemption provisions. However, notably, the Hon'ble Supreme Court in the case of CIT v. Yokogawa India Ltd 391 ITR 274 (Supreme Court), held that section 10A of the Act is a “deduction provision ” and not I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 11 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 with return of income had not been filed but same was filed before final order of assessment was made, assessee was entitled to claim deduction under section 80-IB of the Act as well. Therefore, in light of the decision of Yokogawa supra (which is held that section 10A of the Act is a “deduction provision ” not an “exemption provision”) and the decision of G. M. Knitting Industries case supra, which have been rendered on a similar I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 12 facts as that of the assessee i.e. claim of deduction was made in the original return of income itself, in our view, the ratio laid down in the Wipro Ltd case would not disentitle assessee to claim benefit of section 10AA of the Act, since it has been rendered on a different set of facts. Therefore in our considered view, once such claim has been made in the original return of income and assessee has also furnished Form 56F during the course of assessment proceedings itself, 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 for I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 13 claiming exemption u/s. 10AA of the Act. In the case of ITO v. Accentia Technologies 52 taxmann.com 89 (Mum), the Mumbai Tribunal held that deduction under section 10A cannot be denied merely because at time of filing of return, claim had mistakenly been made under section 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 assessee furnished 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. I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 14 7. In the result, the appeal ground no.1 of appeal of the Department is dismissed. Ground No. 2 ( Net profit comparison of sister concern) 8. The brief facts in relation to this ground of appeal are that during the course of assessment proceedings, the Assessing Officer observed that a group company of the assessee, M/s. IWI Crygenic Veporization Systems India Pvt. Ltd., having same registered office and having manufacturing unit in the vicinity of the manufacturing unit of the assessee and selling the same type of product. In addition to trading activity reported much lower net profit rate of 5.02% as compared to a much higher net profit reported by the assessee @ 29.28%. Accordingly, the Assessing Officer held that the reasonable 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 I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 15 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) vide his order passed in AY 2012-13 and AY 2013-14, Para 5.2 to 5.2.1 of the appellate order passed for the AY 2012-13 and Para 9 of the appellate order passed for AY 2013-14 confirms the Ld. AR's version. The prime contention of the Ld. AR was that there was no business 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 "Partly Allowed". 9. The Department is in appeal before us against the aforesaid relief allowed by the ld. CIT(A) on this issue. Before us, the ld. Departmental Representative placed reliance on the observations made by the Assessing Officer in the assessment order. Before us, the counsel for the assessee submitted that the ld. CIT(A) had correctly allowed this ground of appeal in favour of the assessee since the Assessing Officer had disallowed substantial amount of deduction claimed by the assessee u/s. 10AA of the Act on a purely notional basis. The ld. Assessing Officer has not brought any evidence to show that there was any transaction between the assessee and its I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 16 sister concern which could possibly lead to inflate the profits of the assessee company and claim deduction u/s. 10AA on such inflated profit. Since, there was no transaction at all between the assessee and its sister concern, there is no question of assessee company arranging its business in a manner so as to inflate the profits of the unit claiming deduction u/s. 10AA of the Act. Further, the counsel for the assessee submitted that the instant issue stand covered in favour of the assessee by order of Hon’ble ITAT in the assessee’s own case for assessment year 2012-13 & 2013-2014 in appeal being DCIT vs. Croygas Equipments Pvt. Ltd. ITA Nos. 1228 & 2025/Ahd/2017. Therefore, the counsel for the assessee submitted that ld. CIT(A) has correctly allowed the appeal of the assessee in the instant set of facts. 10. We have heard rival contentions and perused the material on record. 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 (a copy of the aforesaid order has been placed before us for our records). Further, we also observe that the ld. 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 of the Act 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. In view of the above, we are of the considered view that ld. CIT(A) has correctly allowed the appeal of the assessee in the instant set of facts and no interference is called for in the order of ld. CIT(A) on this ground of appeal. I.T.A No. 415/Ahd/2020 A.Y. 2014-15 Page No. DCIT vs. Croygas Equipments Pvt. Ltd. 17 11. In the result, ground no. 2 of the Department is dismissed. 12. In the result, the appeal of the Department is dismissed. Order pronounced in the open court on 16-06-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 16/06/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद
Other Referred Cases
Cognizance for Extension of Limitation, In re[2021] 127 taxmann.com 72 (SC), Summit India Water Treatment and Services Ltd. vs. PCIT 107 taxmann.com 444 (Ahmedabad Trib), DIC Fine Chemicals (P.) Ltd. (107 taxmann.com 213) (Kol), Gujarat Oil & Allied Industries (201 ITR 325)(Guj), XXavient Software Solutions (I) Ltd.(ITA No.l40/Del/2017), Mother Superior Adoration Convent [2021] 126 taxmann.com 68 (SC), IPCA Laboratory Ltd. v. Dy. CIT [2004] 12 SCC 7421, Bajaj Tempo Ltd. v. CIT [1992] 3 SCC 78, Kishorbhai Harjibhai Patel v. ITO [2019] 107 taxmann.com 295 (Guj), State of Gujarat v. S.A. Himnani Distributors (P.) Ltd. [2014] 43 taxmann.com 358 (Gujarat), Pr. CIT v. Wipro Ltd. [2022] 140 taxmann.com 223/288 Taxman 491/446 ITR 1, G. M. Knitting Industries (P.) Ltd., Yokogawa India Ltd 391 ITR 274 (Supreme Court), M/s. ACN Info-Tech vs. ACIT ITA No. 79/Viz/2017, Zenith Processing Mills v CIT 219 ITR 721 (Guj), DCIT vs. Croygas Equipments Pvt. Ltd. ITA Nos. 1228 & 2025/Ahd/2017
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