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2021 (2) TMI 856 - AT - Income TaxDeduction u/s. 10B - Deduction after set off of income/loss from other units/heads of income OR allowing the said deduction on standalone basis - whether the Revenue is right in law in holding that assessee is not entitled to the benefit of deduction given by the Act under S. 10A/10B as amended with retrospective effect by the Finance Act, 2003 with effect from 01.04.2001 qua individual eligible undertaking? - HELD THAT - We find that identical issue arose before Hon'ble Supreme Court in the case of Yokogawa India Ltd. 2016 (12) TMI 881 - SUPREME COURT as held though s. 10A/10B were amended by FA 2000 w.e.f. 01.04.2001 to change their tenor from exemption to deduction , the deduction contemplated is S. 10A/S. 10B qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking. The deduction of the profits and gains of the business of an eligible undertaking has to be made independently and before giving effect to the provisions for set off and carry forward contained in s. 70, 72 and 74. It was further held by the Hon'ble Supreme Court that the deductions u/s. 10A/10B are 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. While examining the issue, the Hon'ble Supreme Court has also considered the provisions of Section 10A of the Act (pari materia with S. 10B of the Act) as it stood prior to the amendment made by Finance Act, 2000 with effect from 01.04.2001 as well as the amended Section 10A thereafter and also the amendment made by Finance Act, 2003 with retrospective effect from 01.04.2001. Hence, the CBDT Circular being in conflict with the judgment of Hon'ble Supreme Court cannot be taken in reckoning. Governed by the judicial fiat, 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. All consequences under sections 70, 72 and 74 of the act would consequently flow unit wise. In view of the resounding conclusion drawn in favour of the assessee.
Issues Involved:
1. Legality of deduction u/s. 10B after set-off of income/loss from other units/heads of income. 2. Consideration of submissions and evidence by the CIT(A). 3. Confirmation of deduction u/s. 10B as per CBDT circular dated 16.07.2013. 4. Allowance of carry forward of balance deficit. Issue-Wise Detailed Analysis: 1. Legality of Deduction u/s. 10B After Set-Off of Income/Loss from Other Units/Heads of Income: The appellant contested the CIT(A)'s decision to uphold the deduction u/s. 10B at ?3,96,08,955/- after setting off income/loss from other units/heads of income, arguing that the deduction should be allowed on a standalone basis. The Tribunal referenced the Hon'ble Supreme Court's decision in CIT vs. Yokogawa India Ltd. (391 ITR 274) which clarified that the deduction u/s. 10A/10B is to be made independently and before giving effect to the provisions for set-off and carry forward contained in sections 70, 72, and 74 of the Act. The Tribunal concluded that the deduction of profits and gains of the business of an eligible undertaking must be made independently, thus supporting the appellant's claim. 2. Consideration of Submissions and Evidence by the CIT(A): The appellant argued that the CIT(A) did not fully consider the submissions and evidence provided regarding the impugned deduction. The Tribunal noted that the CIT(A) relied solely on the CBDT circular dated 16.07.2013 and did not adequately address the appellant's reliance on various judicial decisions, including the Hon'ble Gujarat High Court's judgment in CIT vs. Ace Software Ltd. The Tribunal found that the CIT(A) failed to properly consider the appellant's submissions and evidence. 3. Confirmation of Deduction u/s. 10B as per CBDT Circular Dated 16.07.2013: The CIT(A) confirmed the deduction u/s. 10B based on the CBDT circular dated 16.07.2013, which stated that the deduction should be allowed after consolidating the profit/loss of other units and income/loss from other heads. The Tribunal disagreed with this approach, citing the Hon'ble Supreme Court's ruling that the deduction u/s. 10A/10B should be made independently of other units' profits/losses. The Tribunal emphasized that the CBDT circular could not override the Supreme Court's judgment, thereby rejecting the CIT(A)'s reliance on the circular. 4. Allowance of Carry Forward of Balance Deficit: The appellant contended that the loss of non-eligible units amounting to ?79,24,927/- should be allowed to be carried forward instead of being set off against other income. The Tribunal, guided by the Hon'ble Supreme Court's decision, concluded that the deduction u/s. 10A/10B should be computed independently, allowing the carry forward of the balance deficit as claimed by the appellant. Conclusion: The Tribunal allowed the appeal, ruling in favor of the appellant on all grounds. The Tribunal held that the deduction u/s. 10B should be computed independently for each eligible undertaking without setting off profits/losses from other units or heads of income, as per the Hon'ble Supreme Court's decision in CIT vs. Yokogawa India Ltd. The Tribunal also found that the CBDT circular dated 16.07.2013 could not override the Supreme Court's judgment, and the appellant's submissions and evidence were not adequately considered by the CIT(A). Thus, the Tribunal allowed the carry forward of the balance deficit as claimed by the appellant.
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