2019 (5) TMI 1132 - HC - Income Tax

Rectification u/s 254 - Deduction u/s 10A - set off of unabsorbed depreciation - HELD THAT - This Court has been taken through the judgment of the Supreme Court in CIT v Yokogawa India Ltd. 2016 (12) TMI 881 - SUPREME COURT . The Court has held that though Section 10-A as amended is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter-IV of the Act and not at the stage of computation of total income under Chapter-VI . As far as the present case is concerned, no error appears to have been committed by the ITAT in the impugned order 2017 (8) TMI 273 - ITAT DELHI .

Summary

Issues:
1. Delay in re-filing the appeal
2. Set off of unabsorbed depreciation before computing deductions under Section 10-A of the Income Tax Act, 1961

Analysis:
1. The judgment addressed the issue of delay in re-filing the appeal, which was condoned and allowed. The application for delay was explained, leading to the decision to permit the re-filing of the appeal.

2. The main issue in the appeal was regarding the set off of unabsorbed depreciation before computing deductions under Section 10-A of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) had ruled that unabsorbed depreciation should be reduced from business income before calculating deductions under Section 10-A. The Assessee appealed this decision to the Income Tax Appellate Tribunal (ITAT). The ITAT relied on precedents such as CIT v TEI Technologies Pvt. Ltd. and CIT v Yokogawa India Ltd. to conclude that since profits and gains under Section 10-A are not included in the Assessee's income, there is no need to set off losses against such profits and gains.

3. Following the ITAT's initial order, the Revenue filed an application under Section 254(2) of the Act, citing challenges to the previous decisions before the Supreme Court. The Supreme Court's judgment in CIT v Yokogawa India Ltd. clarified that the deduction under Section 10-A should be computed while determining the gross total income of the eligible undertaking under Chapter-IV, not during the computation of total income under Chapter-VI. The ITAT, considering this clarification, declined to recall its order, leading to the Revenue's appeal against this decision.

4. The High Court reviewed the Supreme Court's judgment and affirmed that the deduction under Section 10-A is to be calculated while computing the gross total income of the eligible undertaking under Chapter-IV. Consequently, the Court found no error in the ITAT's decision and dismissed the appeal, stating that no substantial question of law arose for consideration. No costs were awarded in the case.