2020 (7) TMI 730 - HC - Income Tax

Deduction u/s 10B - set off of brought forward unabsorbed depreciation - deduction u/s 10B is to be allowed without considering the depreciation loss, when it was held in the case of Yokogawa India Ltd 2016 (12) TMI 881 - SUPREME COURT that the deduction u/s 10B is to be allowed while computing the gross total income of the eligible undertaking under Chapter -IV of the Income Tax Act? - unabsorbed depreciation loss of Section 10B unit cannot be set off against other incomes - HELD THAT - Issue involved in this appeal is covered by the decision in the assessee's own case in 2020 (3) TMI 814 - MADRAS HIGH COURT by which, the assessee's appeal was allowed and the substantial questions of law were answered in favour of the assessee.

Summary

Issues:
1. Set off of brought forward unabsorbed depreciation before deduction under Section 10B for the assessment year 2003-04.
2. Correctness of allowing deduction under Section 10B without considering depreciation loss.
3. Applicability of the decision in the case of Himatsingke Seide regarding set off of unabsorbed depreciation loss against other incomes.

Issue 1: Set off of Brought Forward Unabsorbed Depreciation
The appeal raised the question of whether the set off of brought forward unabsorbed depreciation of the Assessment year 2001-02 and 2002-03 should be considered before allowing the deduction under Section 10B for the assessment year 2003-04. The Tribunal was tasked with determining the priority of set off in this scenario.

Issue 2: Deduction under Section 10B and Depreciation Loss
Another substantial question of law was whether the Tribunal was correct in allowing the deduction under Section 10B without taking into account the depreciation loss. Reference was made to a previous case, Yokogawa India Ltd, which discussed the allowance of Section 10B deduction while computing the gross total income of the eligible undertaking under Chapter -IV of the Income Tax Act.

Issue 3: Applicability of Himatsingke Seide Decision
The third issue revolved around whether the Tribunal should have applied the decision of the Apex Court in the case of Himatsingke Seide, which held that the unabsorbed depreciation loss of a Section 10B unit cannot be set off against other incomes. This decision was not overruled or discussed in the Yokogawa India Ltd case, raising a question of its relevance and applicability.

The judgment highlighted that the issue in the appeal was previously addressed in the assessee's own case, where the appeal was allowed, and the substantial questions of law were answered in favor of the assessee. Consequently, following the precedent set in the assessee's case, the tax case appeal filed by the Revenue was dismissed. The substantial questions of law were resolved in favor of the assessee and against the Revenue, with no costs being awarded in the matter.