ITAT Delhi Reinstates Section 10A Benefit After Supreme Court Validation – Assessing Officer Cannot Deny Settled Claim in Remand

Introduction

The Delhi Bench of the Income Tax Appellate Tribunal delivered a significant ruling in the matter of RMSI Private Limited Vs ACIT, emphasizing the binding nature of judicial precedents confirmed by superior courts. The Tribunal unequivocally directed the Assessing Officer to grant deduction under Section 10A of the Income Tax Act, 1961, in compliance with earlier decisions that had been validated by the Delhi High Court and the Supreme Court of India. This case represents the second round of litigation on identical issues, highlighting the importance of respecting settled legal positions and the doctrine of res judicata in tax proceedings.

The controversy centered around the applicability of Section 10A(9) and whether the Assessing Officer possessed the authority to revisit and deny a claim that had already been conclusively adjudicated in the assessee's favor by multiple judicial forums. The Tribunal's decision serves as a stern reminder that once a legal issue has been decided by the highest courts, revenue authorities cannot repeatedly challenge the same matter by employing different computational methodologies or interpretations.

Background and Factual Matrix

Initial Assessment and Filing

RMSI Private Limited, a corporate entity engaged in eligible business activities, filed its return of income for Assessment Year 2003-04 declaring a total income of Rs. 14,61,81,868. The original assessment proceedings under Section 143(3) of the Income Tax Act, 1961 were completed on 17.3.2006, wherein the Assessing Officer determined the total income at Rs. 15,63,85,920, making certain additions and adjustments to the declared income.

First Appellate Round

Dissatisfied with the assessment order, the assessee challenged the additions before the Commissioner of Income Tax (Appeals), Delhi. The first appellate authority dismissed the assessee's contentions, thereby upholding the additions made by the Assessing Officer. Subsequently, RMSI Private Limited escalated the matter to the Income Tax Appellate Tribunal, which partially allowed the appeal for statistical purposes and remanded specific issues to the Assessing Officer for verification of submissions pertaining to the deduction claim under Section 10A of the Act.

Remand Proceedings – Non-Compliance Allegations

During the remand proceedings pursuant to Section 254 of the Income Tax Act, the Assessing Officer issued multiple notices to RMSI Private Limited requesting furnishing of documents, explanations, and submissions supporting the deduction claim. According to the observations of the Assessing Officer, the assessee company exhibited non-compliance throughout the remand assessment proceedings, failing to respond adequately to the notices issued.

Computational Discrepancy Identified

Upon examination of the financial statements, the Assessing Officer noticed a significant discrepancy in the computation of deduction under Section 80HHE of the Act. The assessee company had claimed a deduction of Rs. 11,34,91,766 by considering the total turnover at Rs. 54,02,02,016. However, upon scrutinizing the profit and loss account, the Assessing Officer determined that the actual total turnover amounted to Rs. 57,15,43,130.

The Assessing Officer concluded that the assessee had artificially reduced the total turnover figure by adjusting for the difference between opening and closing unbilled revenue. Consequently, the Assessing Officer recomputed the deduction under Section 80HHE at Rs. 10,82,45,940, considering the corrected turnover figure of Rs. 57,15,43,130, and disallowed the excess deduction claim amounting to Rs. 52,45,826.

Second Appellate Proceedings Before CIT(A)

Aggrieved by the reassessment order dated 15.12.2018, the assessee filed an appeal before the National Faceless Assessment Centre (NFAC), New Delhi. The appellate authority passed an order dated 15.4.2025 dismissing the appeal and confirming the disallowance made by the Assessing Officer. The appellate authority's reasoning primarily focused on the computational aspects and the assessee's alleged non-compliance during the remand proceedings.

Appeal Before the Income Tax Appellate Tribunal

Assessee's Contentions

The Authorized Representative appearing for RMSI Private Limited emphasized before the Tribunal that the current litigation represented the second round of proceedings on identical issues. The core submission was that the Tribunal had previously allowed the deduction under Section 10A of the Act, holding that the provisions of Section 10A(9) did not operate as a bar to grant the deduction.

Furthermore, the AR highlighted that the Revenue Department had challenged this finding before the Delhi High Court, which dismissed the Department's appeal. Not satisfied with the High Court's decision, the Revenue filed a Special Leave Petition before the Supreme Court of India, which was also dismissed, thereby conclusively settling the issue in favor of the assessee.

The AR contended that once the highest judicial forum had validated the assessee's entitlement to the deduction, the Assessing Officer lacked jurisdiction to deny the benefit again in remand proceedings, particularly when the legal position had attained finality.

Revenue's Position

The Departmental Representative relied upon the orders passed by the lower authorities, supporting the disallowance based on the computational adjustments made to the turnover figures. The Revenue's stand was that the Assessing Officer had merely rectified an erroneous computation and had not challenged the legal principle already settled by superior courts.

Tribunal's Analysis and Findings

Examination of Previous Tribunal Order

The Tribunal conducted a comprehensive review of its own earlier order in the assessee's case for Assessment Years 2003-04 and 2004-05 in ITA No. 225 & 226/Del/2009 dated 12.05.2017. In that decision, the Tribunal had specifically addressed the applicability of Section 10A(9) and Explanation 1 thereto, and had rendered the following conclusion:

"5.8 We thus, respectfully following the ratio laid down in the above cited decision of the Hon'ble Supreme Court hold that the provisions laid down under section 10A(9) and Explanation 1 thereto already omitted from 1.4.2004 in the absence of saving right provided under section 6 of General Clause Act, cannot be applied by the Assessing Officer to deny the claimed deduction under section 10A of the Act to the assessee. The Assessing Officer is accordingly directed to allow the claimed deduction as per law. The ground no. 1 is thus, allowed."