2014 (10) TMI 873 - AT - Income Tax

Computation of deduction under section 10B - as held by CIT(A) unabsorbed depreciation must not be set off against the income of undertaking before giving deduction under section 10B - Held that - The issue in appeal has been decided by the co-ordinate Bench of this Tribunal in the case of S.R.A.Systems Ltd 2014 (3) TMI 357 - ITAT CHENNAI following the decision of the Hon ble Supreme Court in the case of M/s. Himatsingka Seide Ltd. (2013 (10) TMI 823 - SUPREME COURT ) as held that the brought forward depreciation has to be adjusted against the profits of the EOU before computing the exemption allowable u/s.10B. The provisions of section 10A are pari materia with the provisions of section 10B of the Act. - Decided in favour of revenue

Summary

Issues:
1. Interpretation of the set off of unabsorbed depreciation against income of undertaking before deduction under section 10B of the Act.

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2008-09. The main issue was whether unabsorbed depreciation should be set off against the income of the undertaking before giving deduction under section 10B of the Act. The assessee had filed the return of income admitting Nil income after setting off unabsorbed depreciation under normal provisions. The Assessing Officer computed income for the purpose of deduction under section 10B after setting off unabsorbed depreciation for previous years. The Commissioner allowed the appeal of the assessee based on a previous Tribunal decision, holding that deduction under section 10B should be computed before setting off unabsorbed depreciation.

During the hearing, the Departmental Representative cited a decision by a co-ordinate Bench in favor of the Revenue, which followed a Supreme Court decision stating that unabsorbed depreciation must be set off before computing exemptions under section 10A. The assessee's counsel argued that the Supreme Court decision cited was not applicable as it pertained to different assessment years. After considering the arguments and previous decisions, the Tribunal found that the issue had been settled by a previous Tribunal decision and the Supreme Court ruling. The Tribunal noted that unabsorbed depreciation should be set off before computing exemptions, as per the Supreme Court decision. Therefore, the Tribunal allowed the grounds raised by the Revenue and ruled in favor of the Revenue.

In conclusion, the Tribunal upheld the decision that unabsorbed depreciation must be set off before computing exemptions under section 10B of the Act. The appeal of the Revenue was allowed, and the order was pronounced in open court on a specified date in Chennai.