Exemption u/s 10A of IT Act Unavailable in case ITR Filed Belatedly

Shubhangi Jain

23 May, 2024

The ITAT Chennai passed a judgement in the case titled Redisolve Software P. Ltd. Vs DCIT dated 30th November 2022, holding that ITR  is required to be filed in accordance with 139 of the IT Act for claiming benefit under section 10A and such exemption won’t be available if the return is filed belatedly. The facys, issues, contentions of the parties and the final judgement of  the case shall be discussed in the present article.

Background

The appeal filed by the assessee for the assessment year 2010-11  was directed against the order of the ld.CIT –Chennai-5, Chennai, dated 12th March 2015, passed u/s 263 of the IT Act, 1961. The appeals filed by the assessee were directed against the common order of the ld. CIT (Appeals) – 3, Chennai, dated 29th September 2017, relevant to the AYs 2009-10, 2010-11, 2011¬12 and 2012-13.

There was a delay of 4 days in filing the appeals of 2018 before the Tribunal. Similarly, the appeal of 2016  was filed before the Tribunal with a delay of 274 days.

The assessee had filed petitions as affidavits to condone the delay. The tribunal opined that the assessee/ appellant was prevented by sufficient cause and the Ld. DR hadn’t made any serious objections; thereby, the delay in respect of filing the appeal by the assessee was condoned and admitted for adjudication.

Facts of the Case

• The assessee is a Pvt Ltd Company which provides Call Support Services to Foreign Companies.  The assessee company being an STPI regd. entity during the relevant financial, made the assessee eligible for claiming deduction u/s 10A of the Act.
• The company belatedly filed its ITR for the year under consideration, claiming a deduction u/s 10A of the IT Act. The Assessing Officer accepted the same in the assessment order delivered u/s 143(3) of the Act dated 25th March 2013.
• The CIT, by exercising power provided u/s 263 of the Act, found the order passed by the AO to be erroneous and prejudicial towards the interest of the Revenue on the ground of the assessee not filing the ITR u/s 139 of the Act in the prescribed time, therefore, disentitling the assessee for claim deduction u/s 10A of the Act.  
• The AO had completed the assessment allowing the claim of deduction u/s 10A of the Act without even examining the claim of the assessee, making the same to be prejudicial and erroneous to the interest of Revenue
• Accordingly, the Ld. CIT had set aside the assessment order delivered u/s 143(3) of the Act dated 25th March 2013, directing the AO to revise the assessment by disallowing the deduction claimed u/s 10A of the Act.
• As per the directions given by the ld, CIT, the AO had passed a consequential order that gave effect to the order of the Ld. Commissioner of Income Tax u/s 263 r.w.s. 143(3) of the Act dated 24.08.2015 disallowing the deduction claim u/s 10A of the Act. On appeal, the Ld. CIT (A) dismissed the assessee’s appeal 
• Aggrieved by the same, the assessee preferred the appeal before the Tribunal along with challenging the order passed by the Ld. CIT under section 263 of the Act.

Submissions of the Parties

The Ld. Counsel for the assessee made a submission regarding AY 2010-11 stating that CBDT has condoned the delay followed by passing an order u/s 119(2)(b) of the Act on 10th October 2022, directing the Assessing Officer for allowing the claim of deduction u/s 10A thereby making the appeal of 2016 infructuous consequent to the directions of the CBDT vide its order dated 10.10.2022

 On the contrary, the Ld. DR had submitted that at the time of condoning the delay, the CBDT had noted that such condonation does not automatically entitle the assessee to claim the deduction u/s 10A of the IT Act, and it has to be examined; therefore, the case shall be remitted back to the file of the AO.

 Replying to the same, the assessee’s counsel submitted that the AO had examined the eligibility of the assessee in respect of claiming deduction u/s 10A of the Act at the time of concluding the original assessment u/s 143(3) of the Act on 25th March 2013 and therefore, there isn’t any need for the AO to examine the order again.

Judgement

 The Tribunal opined that the AO is required to examine the claim  u/s 10A of the IT Act as per the law, thereby setting aside the order passed by the Ld. CIT(A) remitting the case back to the file of the AO for deciding the same. Therefore the tribunal allowed the appeal of the yr 2018 in respect of the AY for statistical purposes.

As per the tribunal, Appeal No 254 was a mere academic for a reason , the issue was remitted back to the AO file for adjudicating afresh; therefore, separate adjudication was needed and, accordingly, dismissed the appeal filed by the assessee.

With regard to the AY 2011-12 & 2012-13, the tribunal observed that there was a delay in filing the income tax return, and therefore, the AO has denied the claim of deduction u/s 10A. On appeal, the Ld. CIT (A) supported the order of the AO. The assessee filed appeals before the Tribunal wherein the assessee claimed that the belated filing of an ITR and claiming the deduction u/s 10A of the Act is discretionary in nature rather than mandatory and placed reliance on the decision of the Co-ordinate Benches of the Tribunal in ACIT v. Polyhose India Pvt. Ltd for the AY 2008-09 dated 30th June 2011, submitting that the assessee is eligible for the claim of such deduction 

 The Ld. DR has relied on the order of the Rajkot Special Bench of ITAT in Saffire Garments v. ITO, pleading that the same should be followed.

The tribunal heard the rival contentions and analysed the case referred by the DR wherein the Special Bench held that to claim a benefit u/s 10A of the Act, ITR has to be filed u/s 139 of the Act, and the same is mandatory and not a discretionary; hence, the tribunal rejected the arguments of the Ld. Counsel for the assessee dismissing the appeals filed by the assessee for the AY 2011¬12 and 2012-13

 In respect of the appeal of 2009-10, the tribunal observed that the assessee hadn’t filed a petition for condoning the delay before the CBDT. The assessee’s claim was not entertained as it was mandatory to file the ITR as per sec – 139 of the Act. Accordingly, the appeal of the assessee was dismissed.

Conclusion

The judgment clarified the confusion regarding the availability of Exemption u/s 10A, observing that such exemption cannot be available in cases of belated filing of the return of income which can be a significant judgment regarding this provision of the IT Act.

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