9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (9) TMI 968 - HC - Income TaxNon setting off the losses from Export Oriented Unit (Section 10B unit) against the income earned in the Domestic Tariff Area Unit - return which was filed beyond the prescribed time limit - assessee has neither claimed any deduction under Section 10B of the Act in respect of any of the three units of the assessee nor has filed any audit report in Form 56G in accordance with Section 10B(5) of the Act read with Rule 16E for the Assessment year 2008-09, which is a mandatory requirement - HELD THAT - The business income can be computed only after set off of business loss against the business income in the year as per provisions of Section 70 of the Act. Section 10A of the Act is a code by itself and it is pertinent to note that Section 10A(6)(ii) does not preclude the operation of Sections 70 and 71 of the Act. Para 5.2 of the Circular issued by the Central Board of Direct Taxes dated 16.07.2013 clearly provides that income / loss from various sources i.e. eligible and ineligible units under the same head are aggregated in accordance with provisions of Section 70. Where the assessee does not want the benefit of deduction from the taxable income, the same cannot be thirst upon it. There is no provision which makes compulsory on the part of income tax officer to make deduction in all cases. Admittedly, in the instant case, the assessee has not filed any audit report in Form-56G which is a mandatory requirement for claiming deduction under Section 10B of the Act. Therefore, the deduction under Section 10B of the Act cannot be thirst upon the assessee. Admittedly, in the instant case, two units of the assessee namely unit No.II and unit No.III were export oriented units and were eligible for exemption. The assessee had sustained loss in respect of unit No.I and therefore, the assessee had claimed set off, as permissible under Section 70 of the Act and had offered the balance as income taxable under the head income from business which has been declared in the return. The provisions of Section 70 of the Act have to be given effect to. - See MINDTREE CONSULTING (P) LIMITED. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX. 2005 (11) TMI 176 - ITAT BANGALORE-B AND YOKOGAWA INDIA LTD. 2011 (8) TMI 845 - KARNATAKA HIGH COURT - Decided in favour of assessee.
Issues Involved:
1. Set off of losses from Export Oriented Unit (Section 10B unit) against income in Domestic Tariff Area Unit. 2. Application of the decision in CIT Vs. Yokogawa India Limited and Ors. 3. Non-adjudication of ground related to the appellant not claiming deduction under Section 10B. 4. Non-adjudication of grounds regarding levy of interest under sections 234B and 234D. Detailed Analysis: Issue 1: Set off of losses from Export Oriented Unit (Section 10B unit) against income in Domestic Tariff Area Unit The appellant, a private limited company engaged in the manufacture and export of readymade garments, filed a return for the Assessment year 2008-09, showing a total income of ?12,89,760/-. The company had three units, with profits and losses from Units I to III. The assessee set off the losses of export-oriented units against the profits of the profit-making unit, declaring the balance as taxable income. The Assessing Officer, however, disallowed this set-off, adding back the losses of the export-oriented unit amounting to ?6,65,23,391/-, resulting in a total income of ?6,78,13,151/- and a demand of ?2,99,27,080/-. The Tribunal upheld this decision, leading to the present appeal. The court noted that Section 10B, substituted by the Finance Act, 2000, provides for a deduction of profits from 100% export-oriented undertakings but does not prohibit setting off losses from one source against income from another source under the same head as per Section 70 of the Act. Section 10B(6)(ii) restricts the carry forward and set off of losses under Sections 72 and 74 but does not preclude intra-head set off under Section 70. Para 5.2 of the CBDT Circular dated 16.07.2013 supports this interpretation, allowing aggregation of income/loss from various sources under the same head. Issue 2: Application of the decision in CIT Vs. Yokogawa India Limited and Ors. The appellant argued that the Tribunal's decision contradicts the High Court's ruling in CIT Vs. Yokogawa India Limited, which supports the set-off of losses from export-oriented units against profits from other units. The court agreed, noting that similar issues were decided in favor of the assessee in MINDTREE CONSULTING P LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX, upheld by the High Court in COMMISSIONER OF INCOME TAX VS. YOKOGAWA INDIA LTD. The Supreme Court decision in YOKOGAWA does not preclude the application of Section 70 for set-off. Issue 3: Non-adjudication of ground related to the appellant not claiming deduction under Section 10B The appellant did not claim any deduction under Section 10B for the Assessment year 2008-09 and did not file the mandatory audit report in Form 56G. The court emphasized that a deduction under Section 10B cannot be forced upon an assessee who does not claim it, as supported by the Supreme Court in COMMISSIONER OF INCOME-TAX Vs. MAHINDRA MILLS. The return for 2008-09 clearly showed zero deduction under Section 10B, and the absence of the audit report further confirmed the non-claim. Issue 4: Non-adjudication of grounds regarding levy of interest under sections 234B and 234D The court did not specifically address this issue in the judgment, focusing instead on the primary issue of set-off and the related legal provisions. However, the favorable decision on the main issues implicitly resolves the interest levy concerns in favor of the appellant. Conclusion: The court concluded that the substantial questions of law were answered in favor of the assessee, quashing the Tribunal's order dated 12.10.2012. The appeal was allowed, affirming the assessee's right to set off losses from export-oriented units against profits from other units under Section 70 of the Act.
|
