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2013 (12) TMI 893 - AT - Income TaxValidity of reassessment - Held that - Following Hindustan Unilever Ltd. vs DCIT 2010 (4) TMI 206 - BOMBAY HIGH COURT - All the four units of the assessee were eligible under section 10B - Three units had returned a profit during the course of the assessment year, while the sick unit had returned a loss. The assessee was entitled to a deduction in respect of the profits of the three eligible units while the loss sustained by the fourth unit could be set off against the normal business income - The reassessment proceedings were not valid - Decided in favour of assessee. Eligibility of loss for deduction u/s 10A - Held that - Business losses of other units will not be set off against the profits of the undertaking engaged in export of computer software for the purposes of determining the allowable deduction under section 10A - Unabsorbed business loss is to be set off under section 72 and the same is not mentioned under section 29 - The deduction under section 10A in respect of the allowable unit under section 10A has to be allowed before setting off brought forwarded losses of a non-section 10A unit - Decided in favour of assessee.
Issues Involved:
1. Reopening of assessment under section 147 of the Income Tax Act. 2. Non-allowance of set-off of loss incurred by a unit eligible under section 10A against other business profits. Detailed Analysis: Issue 1: Reopening of Assessment under Section 147 The assessee contested the reopening of the assessment under section 147, arguing that it was bad in law and should be canceled. The original assessment was completed under section 143(3) on 30.12.2008, and the reassessment proceedings were initiated by a notice under section 148 on 29.03.2010. The Assessing Officer (AO) justified the reopening by stating that the assessee had not set off the loss of one eligible unit against the profits of other eligible units, thereby claiming a benefit not intended by the Act. The assessee argued that all material facts were already on record and that the AO's action was merely a change of opinion. The CIT(A) upheld the AO's decision, but the ITAT found that the AO's initiation of reassessment proceedings was unjustified as there was no failure on the part of the assessee to disclose material facts. The ITAT quashed the reassessment proceedings, citing the decision of the Bombay High Court in Hindustan Unilever Ltd., which held that the reassessment proceedings were invalid when based on a mere change of opinion. Issue 2: Set-Off of Loss Incurred by a Unit Eligible under Section 10A The assessee claimed that the loss of a unit eligible for deduction under section 10A should be set off against the profits of non-eligible units. The AO disagreed, stating that the loss should be adjusted against the profits of other eligible units, thereby reducing the overall deduction under section 10A. The CIT(A) modified the AO's computation, allowing the loss to be carried forward to the next year. The ITAT examined the issue, considering various judicial decisions, including those of the Bangalore ITAT in Tata Consultancy Services Ltd. and the Bombay High Court in Black and Veatch Controlling Pvt. Ltd. and Hindustan Unilever Ltd. These decisions clarified that section 10A is a provision for deduction and not exemption, and the loss of an eligible unit should not be set off against the profits of other eligible units. The ITAT concluded that the AO and CIT(A) erred in their interpretation and directed the AO to allow the claim under section 10A as computed by the assessee. Separate Judgments: There were no separate judgments delivered by different judges in this case. The entire judgment was delivered collectively. Conclusion: The ITAT allowed the assessee's appeal, quashing the reassessment proceedings and directing the AO to allow the deduction under section 10A as claimed by the assessee. The revenue's appeal was dismissed as it became infructuous following the quashing of the reassessment proceedings. Result: - Assessee's appeal in ITA 8032 of 2011: Allowed. - Revenue's appeal in ITA 7739 of 2011: Dismissed.
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