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2019 (9) TMI 1546 - AT - Income TaxRevision u/s 263 - claim of deduction u/s 10A of the Act before setting off brought forward losses - HELD THAT - Hon ble Jurisdictional High Court in INDUSA INFOTECH SERVICES (P.) LTD. 2013 (9) TMI 1150 - GUJARAT HIGH COURT held that the deduction u/s 10A has to be allowed before set off of unabsorbed loss and depreciation of non-eligible business unit of assessee. We find no justification in such order passed by the Learned PCIT who has not taken into consideration this particular aspect of the matter though the same was brought to his notice by the assessee by and under reply dated 21.03.2016 hence relying upon the ratio laid down above we find no justification in the order impugned before us which has re-opened the issue u/s 263 of the Act whereas we find that the order passed by the Learned AO is just and proper and in terms of the ratio laid down by the Jurisdictional High Court. There is nothing erroneous found in the order of the Learned AO neither it is prejudicial to the instant of the Revenue. None of the conditions is being fulfilled by the order passed by the Learned PCIT in order to invoke the provision of section 263 of the Act in order to reopen the assessment of the appellant company. Hence the order impugned is being devoid of any merit and thus quashed. Assessee s appeal is allowed.
Issues Involved:
1. Initiation of revision proceedings under Section 263 of the Income Tax Act. 2. Claim of deduction under Section 10A of the Income Tax Act before setting off brought forward losses. Issue-wise Detailed Analysis: 1. Initiation of Revision Proceedings under Section 263 of the Income Tax Act: The appeal filed by the Assessee challenges the initiation of revision proceedings under Section 263 of the Income Tax Act, 1961 by the Pr. Commissioner of Income Tax (PCIT). The Assessee contended that the revision proceedings were not justified as the original assessment order dated 27.05.2013 passed by the Deputy Commissioner of Income Tax was in accordance with the prevailing law and judicial pronouncements at that time. The Tribunal found that the PCIT did not consider the relevant judicial precedents and the specific aspects brought to his notice by the Assessee. It was held that the order passed by the Assessing Officer (AO) was neither erroneous nor prejudicial to the interest of the Revenue, and thus, the conditions for invoking Section 263 were not fulfilled. Consequently, the revision order passed by the PCIT was quashed. 2. Claim of Deduction under Section 10A of the Income Tax Act Before Setting Off Brought Forward Losses: The core issue was whether the Assessee could claim deduction under Section 10A of the Income Tax Act before setting off brought forward losses. The Assessee argued that the deduction under Section 10A should be allowed before setting off any brought forward losses or losses from ineligible units. The Tribunal referred to the jurisdictional High Court's decision in the case of CIT vs. Indusa Infotech Services (P.) Ltd., which supported the Assessee's stance. The Tribunal noted that the relevant law at the time of the original assessment allowed for the deduction under Section 10A before setting off brought forward losses. The Tribunal also considered the CBDT Circular No. 7 dated 16.07.2013, which clarified that losses of ineligible units should be set off against the profits of eligible units before allowing deduction under Section 10A. However, this Circular was not applicable to the Assessee's case as the return of income for AY 2009-10 was filed on 27.09.2009, and the assessment was finalized on 27.05.2013, prior to the issuance of the Circular. The Tribunal further analyzed the decisions of various High Courts, including the Bombay High Court in the cases of CIT v. Black & Veatch Consulting (P.) Ltd. and CIT v. Schmetz India (P.) Ltd., which consistently held that deduction under Section 10A should be allowed before setting off brought forward losses. The Tribunal concluded that the order passed by the AO was in line with these judicial precedents and thus, there was no justification for the PCIT to invoke Section 263 to revise the assessment. Conclusion: The Tribunal allowed the Assessee's appeal, holding that the revision proceedings initiated under Section 263 were not justified, and the deduction under Section 10A should be allowed before setting off brought forward losses. The original assessment order was upheld as it was in accordance with the prevailing legal position and judicial pronouncements. The order pronounced in Open Court on 04/09/2019.
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