2012 (7) TMI 64 - HC - Income Tax

Entitlement for deduction u/s 10A - receipt of foreign exchange after expiry of time stipulated u/s 10A(3)- Held that - the assessee to be entitled to the benefit of Section 10A, the sale proceeds would have to be brought into the country within a period of six months from the end of the previous year, however, the legislature has consciously in express words has vested the power to extend the time-limit for the said benefit, if the competent authority chooses to allow the said benefit. Therefore, the six months period prescribed is not mandatory. As the statute does not prescribe any time-limit within which the application is to be made for such an extension of time and the period within which the competent authority has to pass an order Tribunal was justified in setting aside the order of the Appellate Commissioner as well as the Assessing Officer and in extending the said benefit - in favour of assessee. Entitlement to claim expenses - revenue contested that when admittedly forfeiture took place on 18.04.2002, the assessee can claim loss only for the accounting year 2002-03 and not for 2001-02 - Held that - As the assessee was allotted a site by KIADS against a sum deposited, assessee further deposited a charge for delay in not utilizing the said land for the purpose for which it was allotted and subsequently decided to surrender the land to the KIADB as the project could not be commenced - Considering the terms of the contract once the assessee surrendered the land in terms of the contract between the parties, the amount paid towards allotment of site land and the penalty is liable to be forfeited by the KIADB that accrued in the financial year 2001-02 for the assessment year 2002-03 - Merely because the actual order of forfeiture was passed on 18th April 2002, that date has no relevance insofar as the date of accrual is to be considered - in favour of assessee. Brought forward business loss and unabsorbed depreciation - Revenue contested that it should be adjusted before computing deduction u/s 10A - Held that - The loss incurred by the assessee under the head profits and gains of business of profession has to be set off against the profits and gains if any, of any business or profession carried on by such assessee. Therefore, as the profits and gains under section 10-A is not be included in the income of the assessee at all, the question of setting off the loss of the assessee of any profits and gains of business against such profits and gains of the undertaking would not arise - in favour of assessee.

Issues Involved:
1. Entitlement to deduction under Section 10A for export proceeds brought into the country after the stipulated time.
2. Claim of expenses for forfeited amount by KIADB in the assessment year 2002-03.
3. Crystallization of liability related to forfeited amount by KIADB.
4. Adjustment of brought forward business loss and unabsorbed depreciation before computing deduction under Section 10A.

Detailed Analysis:

1. Entitlement to Deduction under Section 10A for Export Proceeds Brought into the Country After the Stipulated Time:
The primary issue was whether the assessee could claim deduction under Section 10A of the Act when export proceeds were brought into the country after the stipulated time. The Tribunal held that the assessee was entitled to the deduction due to subsequent ratification. The court noted that Section 10A(3) allows for an extension of time by the competent authority (Reserve Bank of India), and the statute does not prescribe a time limit for such an application. The Tribunal's decision was upheld, as the assessee had received the proceeds within the extended time granted by the authorized dealer, HSBC. Thus, the first substantial question of law was answered in favor of the assessee.

2. Claim of Expenses for Forfeited Amount by KIADB in the Assessment Year 2002-03:
The second issue concerned whether the assessee could claim expenses of Rs. 58,83,717/- forfeited by KIADB during April 2002 for the assessment year 2002-03. The Tribunal allowed the claim as the loss was booked in the financial year 2001-02 according to the Accounting Standards issued under Section 145(2) of the Act. The court upheld this decision, noting that the right to forfeit accrued in the financial year 2001-02 when the assessee surrendered the land, even though the actual forfeiture order was passed in April 2002.

3. Crystallization of Liability Related to Forfeited Amount by KIADB:
The third issue was whether the liability for the forfeited amount crystallized during the financial year relevant to assessment year 2003-04. The court reiterated that the right to forfeit accrued when the assessee surrendered the land, which was in the financial year 2001-02. Therefore, the Tribunal was justified in granting the benefit to the assessee for the assessment year 2002-03.

4. Adjustment of Brought Forward Business Loss and Unabsorbed Depreciation Before Computing Deduction under Section 10A:
The fourth issue involved whether brought forward business loss and unabsorbed depreciation should be adjusted before computing deduction under Section 10A. The court referred to its previous decision in CIT v. Yakogawa India Ltd., stating that the income of a Section 10A unit must be excluded at source before arriving at the gross total income. Consequently, the loss of a non-10A unit cannot be set off against the income of a 10A unit. This approach aligns with statutory provisions, and thus, the Tribunal's decision was upheld.

Conclusion:
The appeal was dismissed, and all substantial questions of law were answered in favor of the assessee and against the revenue. The court upheld the Tribunal's decisions on all issues, confirming the assessee's entitlement to the benefits claimed.

← Previous Next →