ACIT v. Vishnu Export (2023) 201 ITD 184(Ahd)(Trib)

S. 10AA : Special Economic Zones – Revised return – Audit report was filed during assessment proceedings-Convertible foreign currency-Goods were sold by assessee to parties were exported by merchant exporters and foreign exchange was received by the said exporters and assessee did not receive any convertible foreign exchange on such sales-Eligible for deduction .[S. 139(1) Form No 56, SEZ rules 2006]

The assessee is  a partnership firm engaged in manufacturing business and the factory of the assessee was located at the SEZ. The assessee filed a revised ROI and claimed deduction u/s 10AA. The AO denied the said claim on grounds that ROI was not filed within the due date and deduction was claimed in the revised return without filing form no. 56F and other relevant documents. The assessee was initially installed as a proprietorship concern and later converted into a partnership concern. Furthermore, the assessee executed sales transactions with local parties and neither exported goods nor received converted foreign currency. The AO thus, held that the assessee had not followed basic required conditions for eligibility of deduction u/s 10AA.The ITAT  held that an ROI can be revised only in situations where there is an omission or any wrong statement in the ROI filed u/s 139(1). But there is no allegation in the AO’s order that there was no omission or any wrong statement in the ROI of the assessee. Thus, without going into the question of whether there was any omission or any wrong statement in the ROI filed u/s 139(1), the ITAT held that the AO was duty-bound to take note of the revised ROI while framing the assessment. CIT v. Mitesh Impex [2014] 46 taxmann.com 30/225 Taxman 168 (Mag.)/367 ITR 85 (Guj) relied upon.

With respect to time limit to file the ROI where the assessee has claimed the exemption u/s 10AA, it was held that there is no mandate to file the ROI within the time specified u/s 139(1) for claiming the deduction unlike the proviso u/s 10A (IA) requiring the assessee to file the ROI within the time specified u/s 139(1) for claiming the deduction. Thus, in the absence of any specific provision u/s 10AA to file the ROI within the provisions of S. 139(1), the assessee cannot be deprived of the benefit of S. 10AA in the given circumstances.With respect to filing audit report in form 56F at the time of assessment proceedings and not with ROI, it was held that benefit of S. 10AA cannot be denied merely for this reason.With respect to whether the assessee is not eligible for deduction u/s 10AA account of having been converted from proprietorship to partnership firm, it was held that the said conversion was duly approved by the SEZ authorities and there is no prohibition u/s 10AA for denial of deduction on account of change of status of the assessee as long as assessee is not formed after splitting up or reconstruction of the existing business. With respect to earning income in INR and no convertible foreign currency was brought in India, it was observed that, the goods sold by the assessee to the parties were eventually exported by the merchant exporters and the foreign exchange was received by these merchant exporters and not by the assessee. As per SEZ rules 2006, the assessee cannot make local sales but is allowed to make sales to the merchant exporters which will be treated as deemed export. Therefore, the assessee is eligible for deduction u/s 10AA. (AY.2015-16).