2014 (9) TMI 1037 - HC - Income Tax

Expenditure incurred in foreign currency excluded from export turnover - whether has to be excluded from total turnover when there is no provision in Section 10B to exclude from total turnover? - Held that -Substantial question of law is covered by the judgment of this Court in the case of Commissioner of Income Tax & Another vs- Tata Elxsi Ltd. & Ors. Reported in (2011 (8) TMI 782 - KARNATAKA HIGH COURT) wherein held There should be uniformity in the ingredients of both the numerator and the denominator of the formula, Section 10-A is a beneficial section. The components of the export turnover in the numerator and the denominator cannot be different. - Decided in favour of assessee Unabsorbed depreciation and the brought forward loss - whether cannot be set off from business profits before computing deduction u/s.10B when section 10B of the Act provides for deduction of benefit on the profits and gains? - Held that - Substantial question of law covered by the decision of this Court in the case of Commissioner of Income Tax & Another vs- Yokogawa India Ltd. & Ors. Reported in (2011(8) TMI 845 - Karnataka High Court ) wherein held as deduction under section 10A has to be excluded from the total income of the assessee the question of unabsorbed business loss being set off against such profit and gains of the undertaking would not arise. - Decided in favour of assessee As submitted by the Revenue that against the aforesaid two judgments in this Court, appeals are filed and are pending before the Apex Court. Hence, in the event of Revenue succeeding before the Apex Court, the Assessing Authority shall pass consequential orders under Section 260(1A) of the Income Tax Act, 1961, as per the orders to be passed by the Apex Court.

Summary

Issues:
1. Whether the expenditure incurred in foreign currency excluded from export turnover should be excluded from total turnover when there is no provision in Section 10B to exclude from total turnover?
2. Whether unabsorbed depreciation and brought forward loss can be set off from business profits before computing deduction u/s.10B of the Act when section 10B provides for deduction of benefit on the profits and gains?

Analysis:
1. The first issue revolves around the Tribunal's decision to exclude expenditure incurred in foreign currency from total turnover despite the absence of a specific provision in Section 10B for such exclusion. The High Court, citing the judgment in the case of Commissioner of Income Tax & Another vs. Tata Elxsi Ltd., held that the matter had already been settled in favor of the assessee in a previous ruling. Therefore, the Court found no merit in the appeal and dismissed it.

2. The second issue concerns the set off of unabsorbed depreciation and brought forward loss from business profits before computing deduction under section 10B of the Act. The High Court referred to the decision in the case of Commissioner of Income Tax & Another vs. Yokogawa India Ltd., where a similar issue had been addressed. The Court reiterated that the question had already been resolved in favor of the assessee in a previous ruling. Consequently, the Court dismissed the appeal. However, the Revenue pointed out that appeals against the aforementioned judgments were pending before the Apex Court. In case of a favorable outcome for the Revenue at the Apex Court, the Assessing Authority was directed to take consequential actions under Section 260(1A) of the Income Tax Act, 1961, based on the orders issued by the Apex Court.