Thomson Press's Disallowance of Export Income Deductions u/s 10B: ITAT directs AO to Reverify and Recompute Deductions [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal(ITAT) directed the Assessing Officer (AO) to reverify and recompute the disallowance of export income deductions under section 10B and 10AA of Income Tax Act,1961 for Thomson Press India Ltd. due to the non-inclusion of export-related income, such as miscellaneous income, compensation, and exchange gains, from the deductions.

Thomson Press India Ltd,appellant-assessee, engaged in the business of commercial printing and phototypresetting, filed its income tax return for the year on 30.09.2009, showing a loss of Rs. 24.85 crore. The case was scrutinized, and the assessment was completed on 26.12.2011, with an addition of Rs. 4.06 crore, reducing the loss to Rs. 20.78 crore. The assessee appealed the decision, and the Commissioner of Income Tax (Appeals)[CIT(A)] partly allowed the appeal in the order dated 31.01.2019.

The assessee aggrieved by the decision appealed before the tribunal.

The main issue was the disallowance of Rs. 87,71,616/- under section 10B and Rs. 1,96,985/- under section 10AA. This was due to the non-inclusion of other income, like miscellaneous income, compensation, and exchange gains, from export activities.

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Additionally, foreign exchange from export sales was included in the turnover for claiming exemptions, even though it wasn’t received by the required date. The AO reduced the deductions under section 10B for amounts received later.

The assessee's counsel argued that the issues were covered by the tribunal’s decision in the assessee's case for AY 2007-08, where the Revenue had accepted the miscellaneous income and compensation as part of eligible profits for the deduction under section 10B. However, the matter was sent back to the AO for verification of the income and to allow the claim.

The two member bench comprising Anubhav Sharma(Judicial Member) and Manish Agarwal(Accountant Member) followed this earlier ruling, directing the AO to verify the nature of the income and recompute the deduction under section 10B. It also noted that any reduction from export turnover should be applied to total turnover as well. Following this, the issue was set aside to the AO for verification and computation of the deduction in line with the previous year’s directions.

The AO reduced the amounts received in foreign currency from export turnover but did not reduce them from total turnover. The ITAT in its order for AY 2010-11 to 2012-13, had directed the AO to also reduce these amounts from total turnover, following the judgment in CIT Vs. Genpact India. As the facts in this case were the same, the tribunal directed the AO to follow the same approach.

In short,the appeal filed by the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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