2017 (1) TMI 939 - AT - Income Tax

Deduction u/s 10A before computing the brought forward business losses and unabsorbed depreciation - Held that - Grounds of appeal raised in the present appeal are covered in his favour by the decision of jurisdictional High Court in CIT vs. Techno Tarp and Polymers Pvt. Ltd. 2015 (12) TMI 909 - BOMBAY HIGH COURT the issue as raised stands concluded against the Revenue as Tribunal was right in holding that the brought forward unabsorbed depreciation and losses of the unit the income of which is not eligible for deduction u/s.10B of the Act cannot be set off against the current profit of the eligible unit for computing the deduction u/s.10B of the Act - Decided in favour of assesee

Summary

Issues:
1. Allowance of deduction u/s 10A before computing brought forward business losses and unabsorbed depreciation.
2. Interpretation of provisions of Sec 10A/10B and computation of income.
3. Application of CBDT Circular No. 7 of 2013.
4. Reliance on Bombay High Court decision regarding deduction u/s 10A.

Analysis:

Issue 1:
The appeal under section 253 of the Income-tax Act challenged the order of the Commissioner of Income-tax (Appeals) regarding the allowance of deduction u/s 10A before computing brought forward business losses and unabsorbed depreciation for Assessment Year 2010-11. The Revenue contended that deduction under Sec 10A should be computed as per the definition in Sec 2(45) of the Act, emphasizing that it has become a "Deduction" and not an "Exemption."

Issue 2:
The dispute revolved around whether deduction u/s 10A should be allowed before setting off brought forward business losses and unabsorbed depreciation. The assessee relied on a decision by the Hon'ble Karnataka High Court, which clarified the order of set off and deduction. However, the Tribunal upheld the appeal of the assessee, citing precedents such as the decision in CIT Vs. Black & Veatch Consulting P Ltd. The Tribunal's decision aligned with previous court rulings, emphasizing the correct computation of deduction under Sec 10A.

Issue 3:
The controversy involved the application of CBDT Circular No. 7 of 2013, which clarified the aggregation of income/loss from different sources before allowing deductions under Chapter VI-A or sections 10A, 10B, etc. The Circular outlined the process of computing total income, considering provisions of sections 70 and 71 of the Act. The Tribunal's decision to allow deduction u/s 10A before computing brought forward losses and unabsorbed depreciation was influenced by this circular.

Issue 4:
The Revenue challenged the allowance of deduction u/s 10A by the Commissioner of Income-tax (Appeals) based on a decision of the Bombay High Court in the case of CIT V/s Black & Veatch Consulting P Ltd. The Revenue argued that the department had not accepted the ratio laid down in that case. However, the Tribunal upheld the decision of the Commissioner, relying on precedents and established legal interpretations.

In conclusion, the Tribunal dismissed the appeal by the Revenue, citing the decision of the jurisdictional High Court and the alignment with previous court rulings on the computation and allowance of deductions under Sec 10A. The Tribunal's analysis considered legal precedents, interpretations of relevant provisions, and the application of circulars to arrive at a decision in favor of the assessee.