The Ahmadabad bench of Income Tax Appellate Tribunal (ITAT) held that the Section 10AA Income Tax Act, 1961 deduction could not be denied merely on the reason of the audit report in form 56F filed during the assessment proceedings.
Section 10AA is a special provision enacted for newly established units or businesses for enjoying income tax exemptions in special economic zones.
Assessee Vishnu Exportis a partnership firm and engaged in the manufacturing business of Pan Masala with and without Gutka.
The factory of the assessee is located at Kandla Special Economic Zone, Gandhidham Kutch.The assessee in the revised return of income, claimed the deduction of Rs. 1,49,72,275/- under the provisions of section 10AA of the Income Tax Act.
But the same was disallowed by the AO .Aggrieved, assessee preferred an appeal before the CIT(A) who allowed the appeal of the assessee. Against the order revenue filed an appeal before tribunal.
The issue raised by the revenue that “whether the assessee can be denied the benefit of deduction under Section 10AA of the Income Tax Act on account of furnishing the audit report in form 56F during the assessment proceedings”.
Tushar Hemani counsel for the assessee submitted that assessee’s factory was set up in Special Kandla Economic Zone by the proprietor but the deduction has been claimed by the firm.
Moreover, the Audit Report in form 56F was filed during the assessment proceedings which are the sufficient compliance for claiming deduction under Section 10AA of the Income Tax Act.
Further, there is no prohibition for claiming the deduction under Section 10AA of the Income Tax Act, upon conversion of its status that is conversion of a proprietorship firm into partnership firm.
Ravindra, counsel for the revenue submitted that the assessee has not fulfilled basic terms and conditions as required for claiming deduction under Section 10AA of the Income tax Act.
Waseem Ahmed, (Accountant Member) and Madhumita Roy, (Judicial Member) members of the tribunal observed that the assessee could not be deprived of the benefit provided under Section 10AA of the Income Tax Act, merely on the reasoning that the audit report in form 56F was filed during the assessment proceedings.
Therefore the bench dismissed the appeal of the revenue and confirmed the decision of CIT (A).
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