2015 (11) TMI 1522 - AT - Income Tax

Computation of deduction under section 10A - whether the deduction is to be computed before set off of brought forward losses and unabsorbed depreciation relating to earlier years? - Held that - Assessee is entitled to the claim of deduction under section 10A of the Act before setting up of brought forward losses and unabsorbed depreciation. The deduction under section 10A of the Act is first allowed against the eligible profits and in case there are certain left over profits for the year under appeal, then the same are to be adjusted against the brought forward losses and unabsorbed depreciation / loss as claimed by the assessee in return of income. Accordingly, we direct the Assessing Officer to re -compute the deduction under section 10A of the Act. - See M/s. Vishay Components India Pvt. Ltd., Vs. Addl.CIT (2015 (11) TMI 118 - ITAT PUNE ) and Precision Camshafts Limited Vs. ACIT (2015 (12) TMI 1501 - ITAT PUNE ) - Decided in favour of assessee

Summary

Issues involved:
- Computation of deduction under section 10A of the Income-tax Act, 1961 before setting off brought forward losses and unabsorbed depreciation.

Detailed Analysis:
1. The issue in the present appeal pertains to the computation of deduction under section 10A of the Income-tax Act, 1961, before setting off brought forward losses and unabsorbed depreciation. The appellant claimed 100% deduction under section 10A for the relevant year before setting off the aforementioned losses. However, the Assessing Officer contended that the deduction should be computed after applying all provisions of the Act, including set off of brought forward losses. The CIT(A) agreed with the Assessing Officer, stating that brought forward losses and unabsorbed depreciation must be set off before computing the deduction under section 10A.

2. The Tribunal referred to a similar issue regarding deduction under section 10B, where it was held that the deduction should be computed before adjusting brought forward losses/depreciation. This decision was based on the interpretation of the provisions of Chapter VI-A of the Act. The Tribunal relied on judgments by the Bombay High Court and other courts to support this interpretation. The Tribunal emphasized that the provisions of sections 10A and 10B are crucial in determining the sequence of computation for deductions.

3. The Tribunal further addressed the argument raised by the Revenue regarding a decision by the Karnataka High Court, which was dismissed by the Supreme Court. The Tribunal concluded that the appellant's claim for deduction under section 10A before setting off brought forward losses and unabsorbed depreciation was valid. Following the precedent set by previous judgments and the interpretation of relevant provisions, the Tribunal allowed the appeal partially, directing the Assessing Officer to re-compute the deduction under section 10A accordingly.

4. In summary, the Tribunal's decision in this case clarified the sequence for computing deductions under section 10A of the Act, emphasizing the importance of interpreting the provisions of Chapter VI-A and the specific requirements of sections 10A and 10B. The judgment highlighted the necessity of allowing deductions against eligible profits before adjusting brought forward losses and unabsorbed depreciation, in line with established legal principles and precedents.