2013 (8) TMI 1007 - HC - Income Tax

Computation of deduction under Section 10B - whether deduction allowed before adjusting brought forward losses and unabsorbed depreciation? - Held that - the provision of Section 10B amongst others is not treated to be any head of income and it cannot be brought within the purview of computing income for the purpose of taxation. We therefore hold accordingly that the Department has to exclude this portion of the income first at the threshold and thereafter proceed to compute the income for the purpose of taxation and then usual deductions under the other provisions of law have to be given.

Summary

Issues:
1. Whether deduction under Section 10B of the Income Tax Act should be allowed before adjusting brought forward losses and unabsorbed depreciation.
2. Whether the entire proceedings are liable to be set aside as the notice for re-assessment is time-barred.

Analysis:
Issue 1:
The main question in this judgment revolves around whether the deduction under Section 10B of the Income Tax Act should be allowed before adjusting brought forward losses and unabsorbed depreciation. The petitioner argues that Section 10B should be excluded first before computing total income, as it falls under Chapter-III of the Act, which deals with incomes not forming part of total income. The petitioner relies on legal precedents, including decisions from the Karnataka High Court and Delhi High Court, to support their stance. On the other hand, the Revenue contends that all incomes mentioned in Section 14 of the Act constitute income for computation purposes, and Section 10B should be read subject to Section 14. They argue that export income is essentially business income and should not receive special treatment. The court, after hearing both sides, delves into the definitions of total income, heads of income under Section 14, and the specific provisions of Section 10B. The court concludes that Section 10B is a special provision falling under Chapter-III, and thus, the income under this section should be excluded before computing total income for taxation purposes.

Issue 2:
Regarding the second issue of whether the entire proceedings are liable to be set aside due to the time-barred notice for re-assessment, the court notes that this matter was not raised before the Tribunal for a decision. The Commissioner of Income Tax (Appeals) decided on the first issue, but the re-assessment time-bar issue was not brought up by either party before the Tribunal. As a result, the court holds that since no appeal was made on this point before the Tribunal, they cannot examine it now. Therefore, the court does not address this issue due to lack of presentation before the Tribunal.

In conclusion, the court allows the appeals based on the first issue discussed above, emphasizing the exclusion of Section 10B income before computing total income. The judgment does not address the second issue of the time-barred re-assessment notice due to lack of presentation before the Tribunal.