The Tax Publishers2020 TaxPub(DT) 3908 (Mad-HC)

INCOME TAX ACT, 1961

Section 10AA

Where AO denied benefit of deduction under section 10AA on allegation that penalty was imposed by Development Commissioner, under provisions of Foreign Trade (Development and Regulations) Act, 1992, for violation of conditions in letter of approval, considering subsequently, writ court quashed order of penalty therefore, the basis on which deduction was denied to assessee, did not survive.

Deduction under section 10AA - Denial of deduction on allegation that penalty was imposed by Development Commissioner, under provisions of Foreign Trade (Development and Regulations) Act, 1992 - Penalty in question quashed in subsequent loyal proceedings -

Assessee was granted letter of approval and therefore, assessee fell within definition of an entrepreneur as defined under section 2(j) of Special Economic Zones Act, 2005. Assessee claimed deduction under section 10AA. AO denied benefit on allegation that assessee has violated terms in letter of approval, granted by the Development Commissioner, for manufacture of bangles and pendants. AO based his allegation on fact that Development Commissioner initiated proceedings under provisions of Foreign Trade (Development and Regulations) Act, 1992, for violation of conditions in letter of approval, which culminated in issuing order of penalty.Held: It was found that Writ Court quashed order of penalty imposed by Development Commissioner under provisions of Foreign Trade (Development and Regulations) Act 1992. Thus, basis or the substratum, based on which assessment was completed denying benefit to assessee, no longer survived. What was required to be seen for extending the benefit under section 10AA of the Act is, to see whether assessee was an entrepreneur as referred to, defined under section 2(j) of the Special Economic Zone Act. No doubt, assessee fell within said definition, as it was granted a letter of approval by the Development Commissioner under section 15(9) of the Special Economic Zones Act.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12 & 2012-13



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