By TIOL News Service

NEW DELHI, JAN 21, 2019: THE ISSUE IS - Whether the ratio of SC decision in the case of Goetze India Ltd relating to making new claims also bars the revised computation of deductions already claimed. NO is the HC's verdict.

Facts of the case

The assessee was engaged in the business of providing 'Processing Outsourcing Services', during the assessment year. In its return it had claimed deduction of Rs 17.87 crores under Section 10A of the Act with NIL taxable income under the head of 'income from business and profession'. In order to claim deduction under Section 10A the assessee had filed Form 56F along with its return. In addition, assessee, had earned income of Rs.19.66 lakhs on fixed deposit receipts from banks, which it declared as income under the head 'Other Sources'. Accordingly, the net taxable income was Rs.19.68 lakhs.

During the assessment the assessee had filed a revised computation of income making suo motu disallowance of Rs.2,14,50,610/- and allowance of Rs.33,25,522/- from business income as declared which it claimed was inadvertently missed out. Exemption under Section 10A of the Act was accordingly revised with corresponding disallowance and allowance of Rs.2,14,50,610/- and Rs.33,25,522/- respectively. Revised Form 56F was filed.

The Assessing Officer reduced the amount of Rs.6,13,047/- i.e. the provision for leave encashment claimed on payment basis from the disallowance of Rs.2,14,50,610/- and treated the balance amount of Rs.2,08,37,563/- as income under the head income from 'Other Sources'. Assessing Officer did not allow allowance of Rs.1,01,701/- on account of provision of bonus under Section 43B of the Act, Rs.25,83,809/- as expenditure allowable under Section 40(a) (i) of the Act, as it was disallowed in the previous year; and Rs.21,607/- as profit on sale of fixed assets and Rs.5,358/- on account of foreign exchange gain on capital expenditure.

On appeal, the CIT(A) held that the findings of the Assessing Officer were contradictory for he had partly accepted the revised computation by allowing expenditure of Rs.6,13,047/- towards leave encashment, but had disallowed other allowances claimed by the assessee in the revised computation. Contradiction was there as the Assessing Officer had considered the revised computation only to the extent it was beneficial to the Revenue, but no deduction of allowances claimed in revised computation was made. He also made adverse comments on self-disallowance of Rs.2,14,50,610/- with adjustment/ deduction of Rs.6,13,047/- i.e. Rs.2,08,37,563/- being treated as income from other sources and not disallowance under the head business income. He allowed the appeal filed by the assessee, by accepting the revised computation of income furnished by it during the course of the assessment proceedings.

Revenue's appeal was dismissed and the Tribunal held that the assessee was indisputably eligible for deduction under Section 10A and the revised computation was filed when the assessment proceedings were in progress.

On appeal, the HC held that,

++ the Revenue does not dispute the correctness of the revised computation made by the assessee. Revenue also does not dispute and has not challenged that the disallowance made by the assessee in the revised computation of Rs.2,14,50,610/- cannot be adjusted and treated as income taxable under the head 'Income from Other Sources'. This disallowance has to be under the head 'profit and gains from business', which was entitled to deduction /exemption under Section 10A of the Act. The disallowance made would result in enhancement of the business income which was exempted under Section 10A of the Act. It would not be taxable. This would be the position even if the assessee had not filed the revised computation and an enhancement or disallowance had been made by the Assessing Officer in the course of the assessment proceedings. Thus, the disallowance made was revenue neutral;

++ for what reason the Assessing Officer had set off Rs.6,13,047/-, i.e. suo motu allowance made by the assessee for leave encashment claimed on payment basis in the revised computation from Rs.2,14,50,610/- and had treated the figure of Rs.2,08,37,563/-, as income disallowed under the head as income from other sources. The said position just cannot be accepted and justified;

++ decision in Goetze (India) Ltd. barring an assessee from making a claim for deduction by filing revised computation has to be examined. A distinction was drawn between a new claim, which is barred and not permissible and a request or prayer made by the assessee for re-computation of the deduction already claimed. Latter was permissible and not barred in terms of the decision in the case of Goetze (India) Ltd;

++ the Bench does not think Sub-section 5 to Section 80A would be attracted and should be applied in this case. Revised computation made by the assessee had resulted in disallowance of more than Rs.2.14 crores, which could have been made by the Assessing Officer while computing the claim for deduction under Section 10A of the Act. Nevertheless, the enhanced income would not have been taxable. The assessing officer had also accepted that Rs.6,13,047/- i.e. the provision for leave encashment claimed on payment basis should be allowed. He however, did not allow the other suo motu allowances made by the assessee. Disallowances and allowances in the revised computation were made in relation to bonus with reference to provision of Section 43B of the Act. Further, allowance of Rs.25,83,809/- was on account of disallowance made in the previous year which had to be allowed as expenditure in the present year in view of Section 40 (a) (i) of the Act;

++ sub-section 5 to Section 80A states that if assessee has failed to make its claim on return under 10AA or 10B or any other provisions of Chapter VIA, no deduction shall be allowed to him thereunder. In this case the assessee had claimed deduction under Section 10A of the Act in the return of income filed within the limitation period. It was, therefore, not a new claim;

++ reference to the expression 'multiple claims of deduction' would be with reference to the stipulation that deduction should be claimed under a particular provision and it cannot be shifted and treated as deduction claimed under the other provision. Language of Sub-section 5 to Section 80 A does not state that the deduction once claimed under a particular section cannot be corrected and modified before the Assessing Officer. Indeed, the Assessing Officer can examine the claim for deduction and can make adjustment/ disallowance. We would not read in the amended provision, a stipulation barring and restricting the assessee from revising the computation/ claim for deduction made in accordance with Section 80A (5) of the Act.

(See 2019-TIOL-171-HC-DEL-IT)