2018 (6) TMI 1395 - HC - Income Tax

Deduction of Section 10A - computation of claim - Held that - The issue involved in the present case is covered by the decision in the case of Commissioner of Income Tax And Another v. Yokogawa India Limited 2016 (12) TMI 881 - SUPREME COURT holding that deduction under Section 10A of the Act is to be computed at the stage of computing gross total income of the eligible undertaking under Chapter IV of the Act and at the stage of computation of total income under Chapter VI of the Act and deduction under Section 10A of the Act only qua the eligible under taking and without reference to other eligible or non eligible units or undertakings of same assessee. The deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income

Summary

Issues:
1. Interpretation of deduction under Section 10A of the Income Tax Act, 1961.
2. Impact of amendments on provisions of Section 10A/10B.
3. Application of judgment in Yokogawa India Ltd. case regarding deductions for eligible undertakings.

Analysis:
1. The primary issue in the case revolved around the interpretation of deduction under Section 10A of the Income Tax Act, 1961. The Hon'ble Supreme Court's decision in the case of 'Commissioner of Income Tax And Another v. Yokogawa India Limited' was cited, emphasizing that the deduction under Section 10A is to be computed at the stage of computing gross total income of the eligible undertaking under Chapter IV and at the stage of computation of total income under Chapter VI. The deduction is specific to the eligible undertaking without reference to other units or undertakings of the same assessee.

2. The impact of amendments on the provisions of Section 10A/10B was crucial in the judgment. The Tribunal noted a substantial change in the provisions post-amendment by the Finance Act, 2000, effective from 1.4.2001. The amendment transformed the provision from an exemption to a deduction. The Tribunal referred to the Hon'ble Jurisdictional High Court's decision in Yokogawa India Ltd. case, which favored the assessee post-amendment, highlighting the shift in the nature of the provision.

3. The judgment in Yokogawa's case by the Hon'ble Supreme Court clarified the application of deductions for eligible undertakings under Section 10A. The Court emphasized that the benefit of deduction is specific to the individual undertaking and does not consider other units or undertakings of the assessee. The deductions under Section 10A are to be made independently for the eligible undertaking, prior to computing the total income under Chapter VI. The expression "total income of the assessee" in Section 10A was interpreted as "total income of the undertaking," aligning with the deduction stage while computing the gross total income of the eligible undertaking under Chapter IV.

In conclusion, the judgment upheld the principles established in the Yokogawa India Ltd. case regarding the computation of deductions under Section 10A for eligible undertakings. The appeal was disposed of in line with the interpretations provided by the Hon'ble Supreme Court, emphasizing the specific nature of deductions for individual undertakings under the Income Tax Act.