INCOME TAX ACT, 1961

Section 10AA

Exemption under section 10AA - AO failed to establish that assessee had suppressed the purchase cost of semi-finished goods in order to claim higher deduction under section 10AA - Allowability -

Assessee filed their return of income claiming deduction under section 10AA. Assessment was selected for scrutiny by issuance of notice under section 143(2) and AO rejected the claim of the assessee under section 10AA on the ground that the raw material and the finished product are one and the same and there was no manufacturing activity having taken place in the SEZ unit of the assessee. Held: Semi finished material purchased by assessee was not marketable and usable in the industry, as what is purchased by assessee includes silicon, sand and waste, which cannot be marketed as such, unless the waste materials are removed. Tribunal found that there was a process of 'manufacture' as defined under the SEZ Act, which takes place in the SEZ unit and also pointed out that AO himself had accepted that assessee's unit, processed the raw materials by removing 10 to 20% impurities. AO could not establish that assessee had suppressed the purchase cost of semi-finished goods in order to claim higher deduction under section 10AA. Certificate issued by the Assistant Development Officer was accepted on the ground that revenue could not prove the same to be not genuine.

Followed:CIT v. Vetrivel Minerals 2020 TaxPub(DT) 3019 (Mad-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15

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