Case summary, Income Tax

Can a deduction u/s 10 A of the Act be denied if the application for extension of time to receive export sales proceeds is neither rejected nor accepted?

Case: Tecnotree Convergence Ltd Bangalore vs Deputy Commissioner of Income Tax Circle-7(1)(1) Bangalore, Banglore ITAT

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  • The A/O denied deduction under Section 10A of the Income Tax Act to the assessee to extend the export sales proceeds which were not received within the stipulated time period of 6 months by reducing the same from the export turnover.
  • Denial of deduction was based on the fact that the assessee did not have an extension from the designated authority to bring export sales proceeds in foreign exchange beyond the prescribed time limit.

Revenue’s arguments: 

  • As per the Act and RBI circular, specific extension letter from the authorised banker is necessary to claim benefit u/s 10A.
  • The assessee did not file an extension granted by the authorised banker and hence it deduction u/s 10A would not be allowable.

Assessee’s arguments:

  • The assessee had filed a request for extension of time limit for receipt of export sales proceeds, but the same was neither accepted nor rejected.
  • The expenses incurred were business expenses and not for technical services thus, cannot be deducted from export turnover.

Tribunal holding:

Following the decision of the Karnataka HC in the case of Wipro vs. DCIT, as the RBI had not expressly accepted or rejected the request, and since the assessee received export sales proceeds through the proper channel, even after the expiry of a specific period, assessee’s claim for deduction u/s 10 A would be allowed. 

Also Read: If a trust (u/s 12 AA) offers hostel and transport facilities can it get tax exemption?

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