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2021 (10) TMI 780 - AT - Income TaxDeduction u/s 10A - income eligible undertaking by ignoring the CBDT s Circular no.7/DV/2013, dated 16th July 2013 - CIT(A) directed the AO to allow the deduction claimed u/s 10A of the Act by the assessee to the extent of income of eligible undertaking - HELD THAT - On a careful perusal of the order of the learned CIT(A) we do not find any valid reason much less a cogent reason to reverse the findings of the learned CIT(A). The above direction is, in our view, just and proper hence does not call for any interference. We have also gone through the decision in Yokogawa India Ltd. 2011 (8) TMI 845 - KARNATAKA HIGH COURT relied upon by the learned CIT(A) and found that the issue for our adjudication is squarely covered by the aforesaid decision of the Hon'ble Supreme Court. Revenue has also not brought any material contrary to the stand taken by the learned CIT(A) which force us to take a decision other than the decision taken by the learned CIT(A). Consequently, we uphold the order of the learned CIT(A) by dismissing the ground raised by the Revenue.
Issues Involved:
1. Whether the learned CIT(A) was justified in directing the Assessing Officer to allow deduction under section 10A of the Income Tax Act, 1961, to the extent of income eligible undertaking by ignoring the CBDT’s Circular no.7/DV/2013, dated 16th July 2013. Issue-wise Detailed Analysis: Issue 1: Justification of CIT(A) in Allowing Deduction under Section 10A The Revenue challenged the order of the CIT(A) which directed the Assessing Officer to allow the deduction under section 10A of the Income Tax Act, 1961, to the extent of income of the eligible undertaking. The Revenue contended that this direction ignored the CBDT’s Circular no.7/DV/2013, dated 16th July 2013. Facts and Procedural History: - The assessee filed its return of income for the assessment year 2011-12, declaring a total loss of ?(2,49,80,244). - The return was processed under section 143(1) and later selected for scrutiny. - An assessment order under section 143(3) determined the total income under normal provisions at ?(1,50,64,429) and book profit under section 115JB at ?1,69,39,360. - The tax payable under section 115JB was higher, thus the income was determined at ?1,69,39,360. - The assessee claimed a deduction under section 10A of ?2,75,01,777, but was allowed ?1,85,61,272. - The Assessing Officer rectified the order under section 154, determining the total income at Nil, restricting the deduction under section 10A to ?34,96,843. Assessee's Submission: - The assessee argued that the deduction under section 10A should be allowed at the time of computing the total income of the undertaking, not after computing the overall total income. - The assessee cited the Karnataka High Court judgment in CIT vs. Yokogawa India Ltd., which clarified that the phrase "total income" in section 10A refers to the total income of the STP unit, not the total income of the assessee. - The Supreme Court in Yokogawa India Ltd. held that the stage of deduction under section 10A is while computing the gross total income of the eligible undertaking under Chapter IV, not at the stage of computing the total income under Chapter VI. - The Bombay High Court in CIT vs. Black and Veatch Consulting Pvt. Ltd. also held that the deduction under section 10A should be allowed before setting off brought forward depreciation and losses of a non-10A unit. CIT(A)'s Observations: - The CIT(A) agreed with the assessee's submissions and directed the Assessing Officer to allow the deduction under section 10A to the extent of income of the eligible undertaking. - The CIT(A) relied on the Supreme Court judgment in Yokogawa India Ltd., which clarified that the deduction under section 10A should be computed independently and immediately after determining the profits and gains of the eligible undertaking. Tribunal's Findings: - The Tribunal found no valid reason to reverse the findings of the CIT(A). - The Tribunal noted that the issue was covered by the Supreme Court decision in Yokogawa India Ltd., which supported the CIT(A)'s direction. - The Tribunal upheld the order of the CIT(A), dismissing the Revenue's appeal. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s direction to allow the deduction under section 10A to the extent of income of the eligible undertaking, in line with the Supreme Court's interpretation in Yokogawa India Ltd. The Tribunal found the CIT(A)'s order just and proper, and no contrary material was brought by the Revenue to warrant a different decision.
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