2013 (12) TMI 824 - AT - Income Tax

Deduction u/s 10A - Held that - In earlier years - The assessee had not opted to claim the deduction because of loss - AO found that it had adjusted the loss derived from the 10A unit against the other income - Following The Commissioner of Income Tax10 Versus M/s. Galaxy Surfactants Ltd. 2012 (3) TMI 101 - BOMBAY HIGH COURT - There is no provision in Section 10B by which a prohibition has been introduced by the Legislature in setting off of a loss which is sustained from one source falling under the head of profits and gains of business against income from any other source under the same head - AO/FAA did not have the benefit of the judgment of the Hon ble jurisdictional High Court - The issue is restored for fresh adjudication.

Summary

Issues involved:
1. Proper consideration and appraisal of facts in passing order under section 143(3) of the Income Tax Act, 1961.
2. Additions to total income including disallowance under sections 14A and 10A.
3. Calculation error in deduction under section 10A.
4. Appeal for altering or amending grounds of appeal.

Issue 1: Proper consideration and appraisal of facts in passing order under section 143(3) of the Income Tax Act, 1961:
The assessee challenged the order passed by the CIT (Appeals) under section 143(3) of the Income Tax Act, 1961, alleging it was made without proper consideration and appraisal of the case's facts. The contention was that the order was capricious and intended to punish the appellant without genuine consideration of facts. However, during the hearing, the Authorised Representative did not press this ground, leading to its dismissal.

Issue 2: Additions to total income including disallowance under sections 14A and 10A:
The assessee contested the additions made by the ACIT to the total income, specifically challenging disallowances under sections 14A and 10A. The disallowances were detailed, with specific amounts mentioned for each disallowance. However, during the hearing, the AR did not press this ground, resulting in its dismissal.

Issue 3: Calculation error in deduction under section 10A:
The primary effective ground of appeal was related to the deduction claimed under section 10A of the Income Tax Act. The assessee had claimed a deduction of Rs. 46.90 lakhs under section 10A for the first time during the relevant year. The AO found that the deduction was not allowable as the profits of the eligible unit were affected by losses from other units. The AO recalculated the deductible amount under section 10A and determined it to be Rs. 99,592. The First Appellate Authority upheld the AO's decision, stating that no deduction was admissible as the assessee did not have any income under the relevant head. However, the AR argued that the issue was decided in favor of the assessee by the Bombay High Court in a similar case, and the matter was restored back to the AO for fresh consideration in light of the High Court's decision.

Issue 4: Appeal for altering or amending grounds of appeal:
The appellant sought leave to add, alter, or amend the grounds of appeal if necessary before the appeal's disposal. However, since the primary grounds were not pressed during the hearing, this aspect did not have a significant impact on the final decision.

In conclusion, the ITAT Mumbai partially allowed the appeal filed by the assessee-company, specifically regarding the deduction claimed under section 10A of the Income Tax Act, 1961. The matter was remanded back to the AO for fresh consideration in light of a favorable judgment from the Bombay High Court. The decision highlighted the importance of proper analysis and consideration of legal provisions in determining deductions under sections 10A and 10B of the Act.