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2019 (8) TMI 1195 - AT - Income TaxComputation of deduction u/s 10A - non-allowance of carry forward losses - HELD THAT - Respectfully following the aforesaid decision of the Hon ble Apex Courts in the case of CIT Vs. Yokogawa India Ltd. 2016 (12) TMI 881 - SUPREME COURT wherein the settled position in law is laid out, we also hold that the losses and unabsorbed depreciation of the Non-STPI Units shall not be adjusted against the profits of the STPI Unit for the purposes of computation of the deduction u/s 10A to be allowed to the assessee. Deduction u/s 10A treatment of enhanced Assessed income - HELD THAT - additions / disallowances have led to enhancement of the taxable business income of the assessee and consequently the assessee is entitled for deduction u/s 10A on such enhanced income. Therefore, respectfully following the decision of the Hon ble Karnataka High Court in the case of CIT Vs. M. Pact Technology Services Pvt. Ltd., 2018 (8) TMI 202 - KARNATAKA HIGH COURT we hold that the deduction u/s 10A shall be allowed on the assessed income. The AO is accordingly directed. Deduction u/s 10A Expenses to be reduced from both Export Turnover and Total Turnover - HELD THAT - Respectfully following the decision of the Hon'ble Apex Court in the case of CIT Vs. HCL Technologies L td. 2018 (5) TMI 357 - SUPREME COURT , we direct the AO to allow assessee' s claim for deduction u/s 10A. Consequently, the grounds raised by revenue are dismissed.
Issues Involved:
1. Computation of deduction under section 10A of the Income Tax Act. 2. Non-allowance of carry forward losses. 3. Deduction under section 10A on assessed income. 4. Adjustment of expenses from both Export Turnover and Total Turnover. Issue-Wise Detailed Analysis: 1. Computation of Deduction under Section 10A of the Act: The primary issue was whether the deduction under section 10A should be computed before adjusting the losses of the Non-STPI unit. The assessee argued that the CIT(A) erred by not following the decision in CIT Vs. Yokogawa India Ltd., which states that losses of Non-STPI units cannot be set off against the profits of STPI units for computing deduction under section 10A. The CIT(A) relied on Himat Singke Seide Ltd., which involved unabsorbed depreciation and business loss of the same unit. The Tribunal held that the decision in Yokogawa India Ltd. applies, and thus, the losses of Non-STPI units should not be adjusted against the profits of STPI units for the purposes of section 10A deduction. 2. Non-Allowance of Carry Forward Losses: The assessee contended that the CIT(A) erred in not adjudicating the issue of wrong computation of deduction under section 10A and non-allowance of carried forward losses. The Tribunal found that the CIT(A) failed to appreciate that the deduction under section 10A should be granted without adjusting the loss of the Non-STPI unit. The Tribunal directed that the deduction under section 10A be computed without setting off the losses of the Non-STPI units. 3. Deduction under Section 10A on Assessed Income: The assessee argued that deduction under section 10A should be granted on the assessed income, including additions made to the returned income. The Tribunal agreed, citing the decisions of the Hon’ble Bombay High Court in CIT Vs. Gem Plus Jewellery India Ltd. and the Hon’ble Karnataka High Court in CIT Vs. M Pact Technology Services Ltd., which held that the deduction under section 10A should be computed on the enhanced assessed income. The Tribunal directed the AO to allow the deduction under section 10A on the assessed income. 4. Adjustment of Expenses from Both Export Turnover and Total Turnover: The Tribunal addressed the issue of whether expenses excluded from export turnover should also be excluded from total turnover. The Tribunal referred to the jurisdictional High Court of Karnataka in CIT v Tata Elxsi Ltd., which held that such expenses should be excluded from both export turnover and total turnover. This principle was affirmed by the Hon’ble Supreme Court in CIT V. HCL Technologies Ltd. The Tribunal directed the AO to allow the assessee's claim for deduction under section 10A by excluding the expenses from both export turnover and total turnover. Conclusion: The Tribunal allowed the assessee’s appeals for Assessment Years 2008-09 to 2010-11, directing that the deduction under section 10A be computed without setting off the losses of Non-STPI units against the profits of STPI units, and that the deduction be granted on the assessed income, including any additions made. Additionally, expenses excluded from export turnover should also be excluded from total turnover for the purposes of computing the deduction under section 10A.
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