9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (3) TMI 814 - HC - Income TaxDeduction u/s 10B - AO not allowed the deduction to be made under Section 10B of the Act before the setting off of the brought forward unabsorbed depreciation loss of the earlier years - whether the deduction or exemption claimed by the Assessee under Section 10B has to be given prior to the carry forward depreciation allowance of the previous years or not? - HELD THAT - Here in the case in hand, the Assessee is entitled to seek exemption by way of deduction under Section 10B, since it is a 100% EOU, which is an admitted fact. In that capacity, the Assessee claimed exemption / deduction of a sum of ₹ 29,26,65,024/- from out of the profit and gain of the business which amounts to ₹ 30,82,27,633/-. Also it claimed unabsorbed brought forward depreciation allowances relating to AY 2001-02 to the extent of ₹ 1,55,62,609/-, thereby shown the taxable income as Nil in the Return submitted for the AY 2004- 05. At the stage of the aggregate of the incomes under other heads, the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be a premature for application. The deduction 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. Ultimately, the issue has been settled with the following words of the Hon'ble Apex Court in the M/S YOKOGAWA INDIA LTD. 2016 (12) TMI 881 - SUPREME COURT 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 . Therefore the law has been settled by the said decision of the Hon'ble Apex Court, where in clear terms, it has been held that, the deductions either under Section 10A or 10B would be made while computing the gross total income of the eligible undertaking (like the Assessee) under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI of the Act. Here in the case in hand, the total income was first arrived at by the Revenue through the Assessing Officer in the Assessment Order by computing the total income by way of brought forward or carry forward the depreciation allowance of the earlier Assessment Years and set off the unabsorbed depreciation first and making the return Nil, thereby leaving the Assessee in a position where it could not claim any deduction under Section 10B as there was no income after set off of carry forward depreciation and unabsorbed depreciation from earlier years. This method of computing the income in the present case made by the Revenue is totally against the said law as has been declared by the Hon'ble Apex Court in the aforesaid decision in Commissioner of Income-tax v. Yokogawa India Ltd., ( cited supra ). No hesitation to hold that, the decision of the ITAT, which is impugned herein, would not stand in the legal scrutiny, in view of the law having been declared by the Hon'ble Apex Court. Therefore, we are of the view that, the Substantial Question of Law raised in this Appeal is covered by the said decision, therefore it can be answered accordingly. - Decided in favour of assessee
Issues Involved:
1. Whether the deduction under Section 10B of the Income Tax Act should be granted prior to the set-off of brought forward unabsorbed depreciation loss of earlier years. Detailed Analysis: Issue 1: Deduction under Section 10B before Set-off of Unabsorbed Depreciation Relevant Facts: - The Assessee, a 100% Export Oriented Undertaking (EOU), filed a return for AY 2004-05 claiming a deduction of ?29,26,65,024 under Section 10B of the Income Tax Act. - The Assessing Officer adjusted brought forward unabsorbed depreciation loss from AY 2001-02 and AY 2002-03 against business profits before allowing the deduction under Section 10B. - The Commissioner (Appeals) allowed the Assessee’s appeal, holding that the deduction under Section 10B should be granted prior to the set-off of the brought forward unabsorbed depreciation loss. - The ITAT reversed the Commissioner (Appeals)' decision, restoring the Assessing Officer’s order. - The Assessee appealed to the High Court. Arguments by Assessee: - The Assessee argued that under Section 10B, being a 100% EOU, the deduction should be granted before setting off the brought forward unabsorbed depreciation loss. - The Assessee relied on the Supreme Court decision in Commissioner of Income-tax v. Yokogawa India Ltd., which held that deductions under Section 10A or 10B should be given prior to the set-off of brought forward unabsorbed depreciation loss. Arguments by Revenue: - The Revenue contended that the deduction under Section 10B should be made only after setting off the brought forward unabsorbed depreciation loss, as per the total income computation under Section 2(45) of the Act. - The Revenue relied on the Karnataka High Court decision in Commissioner of Income Tax v. Himatasingike Seide Ltd., which was affirmed by the Supreme Court, holding that deductions under Chapter VI-A should be made after setting off brought forward depreciation. High Court's Analysis: - The Court examined Section 10B, which provides for a deduction of profits and gains derived by a 100% EOU from the total income. - The Court noted that the ITAT’s view was based on the definition of "total income" under Section 2(45), which includes computation under various provisions of the Act. - The Court referred to the Supreme Court’s decision in Commissioner of Income-tax v. Yokogawa India Ltd., which clarified that deductions under Section 10A (and by extension Section 10B) should be made before the set-off of brought forward unabsorbed depreciation loss. - The Supreme Court in Yokogawa India Ltd. emphasized that the deduction should be made while computing the gross total income of the eligible undertaking under Chapter IV, not at the stage of computing total income under Chapter VI. Conclusion: - The High Court held that the ITAT’s decision was contrary to the law declared by the Supreme Court in Yokogawa India Ltd. - The Court concluded that the deduction under Section 10B should be granted before setting off the brought forward unabsorbed depreciation loss. - The appeal was allowed, and the substantial question of law was answered in favor of the Assessee and against the Revenue. Judgment: - The High Court set aside the ITAT’s order and restored the Commissioner (Appeals)’s decision, allowing the deduction under Section 10B prior to the set-off of brought forward unabsorbed depreciation loss. - The appeal was allowed with no order as to costs.
|
