2013 (3) TMI 663 - HC - Income Tax

Summary

Issues Involved:
The issues involved in this case are related to the deduction claimed by the assessee u/s 10A of the Income-tax Act, 1961 in respect of STP Rajkot Unit without adjustment of losses of other units and without adjustment of brought forward losses/unabsorbed depreciation of earlier years. The substantial questions of law raised for consideration are whether the Appellate Tribunal was right in allowing the deduction claimed by the assessee u/s 10A without such adjustments and whether the Tribunal was correct in upholding the CIT(A)'s order directing revision of the reduction of brought forward unabsorbed depreciation and business loss of earlier years.

Judgment Details:

Issue 1: Deduction u/s 10A without adjustment of losses:
The respondent-assessee, engaged in the business of export of computer software, filed its return of income for the Assessment Year 2007-2008 declaring a loss. The Assessing Officer disallowed the deduction claimed under Section 10A for the STP Rajkot Unit due to not setting off unabsorbed depreciation and business loss of other units. The CIT(Appeals) allowed the appeal of the assessee, holding it entitled to the deduction under Section 10A without such adjustments. The Tribunal also upheld this decision, relying on previous judgments. The High Court concurred with the findings, emphasizing that the deduction under Section 10A is to be given effect at the stage of computing profits and gains of business, distinct from the provisions of Chapter VI-A regarding carry forward and set off of losses.

Issue 2: Revision of reduction of brought forward losses:
The Tribunal also upheld the CIT(A)'s order directing the revision of the reduction of brought forward unabsorbed depreciation and business loss of earlier years. The High Court affirmed this decision, stating that the deduction under Section 10A must be given at the stage of computing profits and gains of business, as per the statutory provisions. The Court dismissed the appeal by the Revenue, following the precedent set by the Bombay High Court in similar cases.

In conclusion, the High Court dismissed the Tax Appeal, aligning with the decisions of the lower authorities and emphasizing the correct application of the provisions of Section 10A and Chapter VI-A of the Income-tax Act, 1961.