2020 (2) TMI 659 - HC - Income Tax

Deduction u/s 10A / 10B - Aggregation of income - income computed under various heads of income in accordance with the provisions of Chapter IV of the IT Act shall be aggregated in accordance with the provisions of Chapter VI of the IT Act, 1961 - Deduction u/s 10(A) and 10(B) computation - vires of Circular dated 16.07.2013 as per the referring Circular No.7/DV/2013 (File No.279/Misc./M-116/2012-ITJ) challenged - HELD THAT - Circulars are neither binding on the assessee or on the Court. See M/S RATAN MELTING WIRE INDUSTRIES 2008 (10) TMI 5 - SUPREME COURT The clarification given in the impugned circular now stands diluted in the light of the decision of the Hon'ble Supreme Court in Commissioner of Income Tax Vs Yokogawa India Limited 2016 (12) TMI 881 - SUPREME COURT . wherein held hough 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 the total income under Chapter VI. The Hon'ble Supreme Court has clarified that its decision rendered in the context of Section 10(A) of the Income Tax Act, 1961 will equally apply to Section 10(B) of the Income Tax Act, 1961. Therefore above circular is no longer binding on the Assessing Officer also in the light of the decision of the Hon'ble Supreme Court in Commissioner of Income Tax Vs Yokogawa India Limited , 2017 2 SCC 1, as the Hon'ble Supreme Court has made it clear that the decision rendered by it in the above case in the context of section 10(A) would equally govern Section 10(B) of the Income Tax Act, 1961. Therefore, there is no necessity for the impugned circular to remain any longer. Accordingly, the impugned circular has to be declared as irrelevant.

Summary

Issues:
Challenge to vires of Circular dated 16.07.2013 regarding aggregation of income under different heads for tax computation.

Analysis:
The petitioner challenged the vires of Circular dated 16.07.2013, which clarified the aggregation of income under various heads for tax computation. The Circular stated that income from different sources should be aggregated according to the provisions of Chapter IV and VI of the Income Tax Act. It further explained the treatment of losses and deductions under Sections 70, 71, and 72 of the Act. However, Circulars are not binding on the assessee or the Court, as clarified by the Supreme Court in previous judgments.

The impugned circular's validity was questioned in light of the Supreme Court's decision in Commissioner of Income Tax Vs Yokogawa India Limited, 2017 2 SCC 1. The Supreme Court clarified that its decision on Section 10(A) also applies to Section 10(B) of the Income Tax Act. The Court emphasized that deductions under Section 10(A) should be made independently for eligible undertakings, without considering other units of the assessee. The circular's relevance was further diminished by the Supreme Court's ruling, making it no longer binding on the Assessing Officer.

Consequently, the Court declared the impugned circular as irrelevant and ultra vires Sections 10(A) and 10(B) of the Income Tax Act. Assessing Officers were directed to conduct assessments in accordance with the Supreme Court's decision in Commissioner of Income Tax Vs Yokogawa India Limited, 2017 2 SCC 1. The Writ Petition was allowed with observations, and no costs were awarded. The judgment highlighted the precedence of judicial decisions over circulars in interpreting and applying tax laws.