INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Validity - Deduction under section 10A -

On examining the assessment records, PCIT noticed that assessee had filed return of income declaring loss and had claimed deduction under section 10A. He noted that AO had allowed the entire amount of deduction under section 10A and assessee had carried forward losses pertaining to earlier years and according to him, AO had accepted the return of income without giving effect to carry forward losses. Pr. CIT was therefore of the view that the order passed by AO to be erroneous and prejudicial to the interest of the Revenue. Held: Apex Court in the case of CIT v. Yokogawa India Ltd. [(2017) 391 ITR 274 (SC) : 2016 TaxPub(DT) 5139 (SC)] held that deduction under section 10A would be prior to commencement of the exercise to be taken under Chapter IV for arriving at the total income of the assessee from the gross total income. It further held that though section 10A as amended provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV and not at the stage of computation of the total income under Chapter VI. Therefore, PCIT was not justified in invoking the provisions of section 263 so as to term the order of AO to be erroneous and prejudicial to the interest of Revenue.

REFERRED : C.I.T. & Anr. v. Yokogawa India Ltd. (2017) 391 ITR 274 (SC) : 2016 TaxPub(DT) 5139 (SC) M/s. Gateway Internet Protocol Management Pvt. Ltd. v. Pr. CIT [MA No.31/PUN/2019 (Arising out of ITA No.1600/PUN/2016), dt. 26-7-2019]

FAVOUR : In assessee's favour

A.Y. :

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