31 Deduction u/s. 10A – Free trade zone – Effect of sales return – Sales return would result into reduction in profit qualifying for deduction u/s. 10A – AO has to allow corresponding reduction in total income also

CIT
vs. L.C.C. Infotech Ltd.; [2018] 94 taxmann.com 117 (Cal): Date of Order: 11^th
May, 2018:

A.
Y.: 2001-02:

Sections
10A and 147 of ITA 1961

The assessee was a
corporate body engaged in computer training and software development. During
the relevant previous year the assessee made project exports to certain
parties. The assessee filed return of its income claiming exemption u/s. 10A of
the Income-tax Act, 1961 for profit from said project export. The said claim
was supported by Auditor’s certificate and was duly accepted as per intimation
issued u/s. 143(1). Based on statement made by the Auditor, that till date of
signing of Report certain amount against projects exports remained unrealised,
the Assessing Officer issued notice u/s. 148. During the course of proceeding
u/s. 147, the assessee filed supplementary Auditors report claiming profit from
software export at the reduced figure due to sales return against project
export. The Assessing Officer without accepting the claim of sales return took
the net profit at the original figure but reduced exemption u/s. 10A by the
amount in question.

The Commissioner (Appeals)
rejected the order of the Assessing Officer and directed for computation of net
profit by the Assessing Officer to be reconsidered. The Tribunal confirmed the
order of the Commissioner (Appeals).

On appeal by the Revenue,
the Calcutta High Court upheld the decision of the Tribunal and held as under:

“i) The higher total income
of Rs. 2.50 crore found by the Assessing Officer was assessed on the basis of
reduced profit resulting from sales return. Sales return was the cause, as per
the assessee, the effect of which was reduction in the profit figure qualifying
for deduction under the provisions of section 10A. The exercise that resulted
in the intimation, done on the basis of material and evidence then available,
cannot be said to have been done in a manner which allowed some income of the
assessee to have escaped assessment to tax. As such there is nothing wrong with
the directions given by the said appellate authority.

ii) In the premises no
substantial question of law is involved in the case. The appeal and application
are accordingly dismissed.”