INCOME TAX ACT, 1961

Section 10AA

Exemption under section 10AA - Allowability - Assessee not brought foreign exchange within period of six months from date of export -

When the AO sought to the justification to claim such exemption, the assessee furnished the audit report in Form No. 56F where in column No. 13 the assessee had shown the total export turnover of Rs. 1,05,76,018.48 and claimed as profit Rs. 57,02,774 under section 10AA of the Act. AO found that the assessee had not fulfil the conditions for claiming the exemption under section 10AA of the Act and has not furnished any evidence of the fulfilled consideration in convertible foreign exchange being the brought to India within a period of 6 months from the end of the previous year and the particulars furnished under column 16 of the report in Form No. 56F were said to have been not applicable. AO, therefore, recorded a finding that the assessee had not fulfilled the conditions required to be eligible for assumption under section 10AA of the Act and accordingly disallowed the said claim of exemption. Assessee also contended that nowhere in the section 10AA of the Act it is prescribed that for availing the benefit of deduction under section 10AA of the Act, the process of the export activity should be brought to in India in convertible foreign exchange within 6 months from the end of the previous year; that they Form No. 56F was initially introduced for claiming exemption under section 10A of the Act and thereafter was made applicable to the provisions of section 10AA of the Act when such provision was inserted in the statute; and that there is a specific requirement under section 10A of the Act to bring the full process of the export activity in convertible foreign exchange to India within 6 months from the end of the relevant year, there is no such requirement under section 10AA of the Act. Held: No doubt section 10A(3) of the Act stipulate is that in order to make the section 10A of the Act applicable, the sale proceeds of articles or things or computer software exported out of India are received in, are brought into, India by the assessee in convertible foreign exchange, within a period of 6 months from the end of the previous year or, within such further period as the competent authority may allow in this behalf. At the same time, sub-section (5) thereof says that the deduction under section 10A of the act shall not be admissible for any assessment year beginning on or after the 1-4-2001, unless the assessee furnishes the prescribed form, along with the return of income, the report of an accountant, as defined in explanation below sub-section (2) of section 288 of the Act. While inserting section 10AA of the Act it is specifically provided by way of sub-section (80 thereof that the provisions of sub-section is (5) and (6) of section 10A shall apply to the articles or things or services referred to in sub-section (1), reference to sub-section (3) of section 10A is conspicuously absent. When the legislature thought it fit to make certain conditions of section 10A of the Act applicable to the provisions in section 10AA of the Act, by specifically omitting certain other sub-sections, then the legislative intent is clear that the conditions prescribed under the sub-sections which are specifically omitted, shall not be made applicable to section 10AA of the Act. It is therefore clear that in the absence of reference to sub-section (3) of section 10A of the Act, in section 10AA of the Act, it is not open for the AO to say that all the conditions prescribed under section 10A of the Act to avail the benefit thereunder should invariably be complied with to avail the benefit under section 10AA of the Act. The provisions of section 10A(3) of the Act cannot be made applicable to the case of the assessee, if the assessee is covered by the provisions of section 10AA of the Act and even otherwise, the AO is free to verify whether the full consideration of the export activity is brought to India in convertible foreign exchange within 6 months or not. With these observations, impugned order set aside and issue remanded to the file of the AO to verify whether the assessee is otherwise entitled to claim the exemption under section 10AA of the Act, and if the AO feels it necessary, he may call for any information required for that purpose.

SUBSCRIBE FOR FULL CONTENT