2015 (1) TMI 1309 - HC - Income Tax

Deduction u/s 10A - benefit of carry forward of unabsorbed depreciation or loss - Held that - assessee is entitled to the benefit of carry forward of unabsorbed depreciation or loss relating to the assessment years when the appellant had opted out of section 10A - Decided in favour of the assessee

Summary

Issues:
Appeal arising from Tribunal's order denying carry forward of losses and depreciation due to opting out of section 10A for certain assessment years.

Analysis:
The case involves two appeals arising from a Tribunal order regarding the eligibility of an assessee to carry forward unabsorbed loss and depreciation after opting out of section 10A for specific assessment years. The Tribunal upheld the lower authorities' decision that the assessee cannot carry forward losses and depreciation from the years when they opted out of section 10A. The primary issues revolve around the interpretation of the law concerning the set-off of losses and depreciation in such circumstances.

The assessee, engaged in medical transcription, had its case selected for scrutiny. The assessing authority treated the relief under section 10A as a deduction rather than an exemption, impacting the computation of book profits under section 115JB. Furthermore, various deductions were not considered, restricting the benefit of carry forward business loss and depreciation. Subsequently, the assessee appealed to the Commissioner of Income-tax (Appeals), who partially allowed the appeal.

Upon further appeal to the Tribunal, the assessee's appeal was dismissed. The crux of the matter lies in the assessee's claims for business losses and depreciation for the relevant assessment years when they opted out of section 10A, invoking the provisions of the respective sections. The provisions allowed the assessee to opt out of section 10A for specific assessment years, thereby affecting the application of section 10A for those years.

The legal interpretation of the provisions under section 10A, both erstwhile and newly recast, played a crucial role in determining the assessee's entitlement to carry forward losses and depreciation. The court referred to relevant circulars and past judgments to support the assessee's position. The court highlighted that opting out of section 10A for certain years does not preclude the assessee from availing benefits under normal provisions of the Income Tax Act for losses and depreciation incurred during those years.

In light of the legal precedents and the clear provisions allowing opting out of section 10A for specific assessment years, the court ruled in favor of the assessee. The substantial questions of law were answered in favor of the assessee, leading to the allowance of the appeals, setting aside of the impugned orders, and granting the appellants the benefit of depreciation and business loss in accordance with the law.