2009 (2) TMI 846 - AT - Income Tax

Summary

Issues Involved:
1. Reduction of amount from export turnover for deduction u/s 10A.
2. Disallowance of expenses incurred on payments to Karnataka Industrial Area Development Board (KIADB).
3. Disallowance of deduction u/s 10A before set off of unabsorbed depreciation and business loss.

Summary:

1. Reduction of Amount from Export Turnover for Deduction u/s 10A:
The first issue pertains to the reduction of Rs. 23,65,207/- from the export turnover for the purpose of computing the deduction u/s 10A of the Income-tax Act, 1961. The Assessing Officer (AO) and the learned CIT(A) justified the reduction on the grounds that the authorized dealer ratified the time taken by the assessee beyond the prescribed period for realization of export proceeds. However, the Tribunal found that the assessee had obtained the necessary extension from the authorized dealer and had realized the export proceeds within the extended time. Therefore, the amount of Rs. 23,65,207/- cannot be reduced from the export turnover, and the assessee is eligible for the relief.

2. Disallowance of Expenses Incurred on Payments to KIADB:
The second issue concerns the disallowance of expenses incurred by the assessee on payments made to KIADB for acquiring plots. The AO and CIT(A) disallowed the claim on the basis that the forfeiture of the amount occurred in April 2002, and thus, it could not be claimed in the financial year 2001-02 for the assessment year 2002-03. The Tribunal, however, accepted the assessee's argument that the loss was booked in the financial year 2001-02 as per the Accounting Standards issued u/s 145(2) of the Act. Therefore, the claim is justified for the assessment year 2002-03.

3. Disallowance of Deduction u/s 10A Before Set Off of Unabsorbed Depreciation and Business Loss:
The third issue involves the disallowance of deduction u/s 10A before setting off unabsorbed depreciation and business loss. The AO disallowed the assessee's contention based on the provisions of sec.80AB. The Tribunal referred to its earlier decisions in similar cases, holding that the deduction u/s 10A should be allowed without setting off brought forward and current year losses of non-10A units. The Tribunal directed the AO to allow the assessee set off of unabsorbed depreciation and unabsorbed business loss before allowing deduction u/s 10A of the Act.

Conclusion:
The appeal filed by the assessee is allowed, and the Tribunal directed the AO to make the necessary adjustments as per the findings on each issue. The order was pronounced in the open court on 13.02.2009.