2022 (3) TMI 438 - HC - Income Tax

Revision u/s 263 by CIT - whether the deduction u/s 10A is to be computed after or before setting off of the losses / depreciation? - Scope of debatable issue - HELD THAT - This court is of the view that the issue involved herein qua deduction under section 10A, is now, settled by the Hon'ble Supreme Court in CIT and others v. Yokogawa India Ltd 2016 (12) TMI 881 - SUPREME COURT wherein, it was categorically held that though section 10A, 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 . Further, it is to be noted that though the decision of the Karnatake High Court 2006 (8) TMI 125 - KARNATAKA HIGH COURT referred to above on the side of the appellant / Revenue was appealed by the Assessee therein 2013 (10) TMI 823 - SC ORDER to the supreme court and the said appeal was dismissed by confirming the said view by order, dated 19.09.2013, this court is of the opinion that the view of the Karnataka High Court that the deduction under Chapter VI A has to be made only after or subsequent to the brought forward depreciation allowances, seems to have been taken depending on that particular case and hence, the same cannot be straight away applicable to all the cases. Following the decision of the Hon'ble Supreme Court in CIT v. Yokogawa India Ltd (supra), this court has already decided the similar issue relating to computation of deduction under section 10A in favour of the assessee in the case of CIT v. M/s.Comstar Automotive Technologies (P) Ltd. 2022 (2) TMI 710 - MADRAS HIGH COURT Thus the substantial question of law relating to computation of deduction under section 10A, will have to be answered in favour of the assessee and against the revenue. However, the issue pertaining to the jurisdiction of the CIT to revise the assessment order under section 263, is left open. Accordingly, the tax case appeal stands disposed of

Summary

Issues:
1. Challenge to the order of the Income Tax Appellate Tribunal by the Revenue.
2. Interpretation of deduction under section 10A of the Income-tax Act.
3. Jurisdiction of the Commissioner of Income Tax (CIT) to revise assessment orders under Section 263.

Issue 1: Challenge to the Tribunal's Order
The tax case appeal was filed by the Revenue against the order of the Income Tax Appellate Tribunal, Chennai, related to the assessment year 2004-05. The substantial question of law admitted by the court was whether the Tribunal was correct in holding that the deduction under section 10A should be computed before setting off losses or depreciation.

Issue 2: Interpretation of Deduction under Section 10A
The appellant initially filed a return claiming 'Nil' income after deduction under section 10A. The assessing officer allowed a deduction of a specific amount under section 10A before setting off losses and unabsorbed depreciation. The CIT set aside the assessment order to re-examine the deduction. The Revenue argued that the deduction under section 10A should be computed only after setting off losses, citing a Karnataka High Court decision. However, the High Court referred to a Supreme Court judgment in CIT v. Yokogawa India Ltd, which clarified that the deduction under section 10A should be calculated while computing the gross total income of the eligible undertaking under Chapter IV of the Act, not during the total income computation under Chapter VI. The court emphasized that the deduction is specific to the individual undertaking and should be determined independently.

Issue 3: Jurisdiction of the CIT under Section 263
The court noted that the Karnataka High Court's decision regarding the timing of deduction under Chapter VI A was specific to that case and not universally applicable. Referring to a previous decision in a similar case, the court ruled in favor of the assessee based on the Supreme Court's interpretation of section 10A. Consequently, the substantial question of law regarding the computation of deduction under section 10A was decided in favor of the assessee, while the issue of the CIT's jurisdiction to revise the assessment order under section 263 was left open.

In conclusion, the court upheld the Tribunal's decision, following the Supreme Court's interpretation, and ruled in favor of the assessee regarding the computation of deduction under section 10A. The issue of the CIT's jurisdiction under section 263 was not conclusively decided in this judgment.