2013 (11) TMI 1367 - AT - Income Tax

Deduction u/s 10A to be allowed before or after setting off brought forward losses and unabsorbed deprecition Held that - Relying upon the decision of Hon ble Karnataka High Court in the case of CIT & Anr. Vs Yokogawa India Ltd. and Others 2011 (8) TMI 845 - Karnataka High Court and the decision of Hon ble Tribunal in the case of RR Donnelley India Outsorce Pvt. Ltd vs DCIT 2013 (9) TMI 396 - ITAT CHENNAI , it has been held that deduction u/s 10A is allowable to the assessee without setting off of brought forward losses and depreciation. Adjustment of book profit - MAT - Section 115Jb - Book profit should be computed after or before allowing deduction of unabsorbed book loss or unabsorbed book depreciation whichever is less as claimed by the assessee Held that - Provision under clause (iii) of Explanation to section 115JA(2) of the Income tax act shows that brought forward losses or un absorbed depreciation has to be reduced as per the books of account - The Assessing Officer has correctly worked out the carry forward business loss or unabsorbed depreciation at Nil, because he has found that depreciation already stood reduced Rs. 248,007,447/- was allowed as set off to the assessee in computing the book profit of the assessment year 2004-05 was of unabsorbed depreciation only and as the entire unabsorbed depreciation was allowed as deduction in assessment year 2004-05, the carried forward unabsorbed depreciation was NIL in the instant case and consequently, the deduction allowable under clause (iii) of Explanation to section 115JB(2) in the year under consideration comes to NIL Decided in favor of Revenue.

Summary

Issues Involved:
1. Deduction under Section 10A without reducing unabsorbed depreciation and brought forward losses.
2. Computation of book profit under Section 115JB after allowing deduction of unabsorbed book loss or unabsorbed book depreciation.

Issue-wise Detailed Analysis:

1. Deduction under Section 10A without reducing unabsorbed depreciation and brought forward losses:

The Revenue filed an appeal against the CIT(A)'s order which allowed the assessee to claim deduction under Section 10A without setting off brought forward losses and unabsorbed depreciation of non-10A units. The Assessing Officer had reduced brought forward losses from the eligible unit's income, resulting in NIL income and disallowance of the Section 10A deduction. The CIT(A) referenced the Special Bench decision in Scientific Atlanta India Technologies Pvt. Ltd vs ACIT, which held that losses from non-eligible units should not be set off against profits of eligible units for Section 10A purposes. The Revenue relied on the Kerala High Court decision in CIT vs Patspin India Ltd., supporting the set-off of carried forward depreciation in computing business profits even during exemption periods. The Tribunal, referencing its own decision in RR Donnelley India Outsource Pvt. Ltd vs DCIT, upheld the CIT(A)'s order, confirming that Section 10A deduction is allowable without setting off brought forward losses and depreciation from non-eligible units. Thus, the Revenue's appeal on this ground was dismissed.

2. Computation of book profit under Section 115JB after allowing deduction of unabsorbed book loss or unabsorbed book depreciation:

The Assessing Officer disallowed the assessee's claim of unabsorbed book loss or depreciation for computing book profit under Section 115JB, stating that the unabsorbed depreciation had been fully set off in the previous assessment year (2004-05). The CIT(A) allowed the assessee's appeal, supporting the computation based on figures from audited accounts and referencing the decision in Rashtriya Ispat Nigam Limited, which emphasized consistency in computing MAT liability. The Revenue argued that the entire unabsorbed depreciation had been set off in the previous year, leaving NIL unabsorbed depreciation for the current year. The Tribunal, referencing its decision in Hindustan Powerplus Ltd. vs DCIT, held that the entire unabsorbed depreciation had been set off in the previous year, resulting in NIL carried forward unabsorbed depreciation. Consequently, the deduction under clause (iii) of Explanation to Section 115JB(2) for the current year was NIL. The Tribunal set aside the CIT(A)'s order and restored the Assessing Officer's decision, allowing the Revenue's appeal on this ground.

Conclusion:

The Tribunal upheld the CIT(A)'s decision regarding the Section 10A deduction without setting off brought forward losses and depreciation but reversed the CIT(A)'s decision on the computation of book profit under Section 115JB, restoring the Assessing Officer's computation. The Revenue's appeal was partly allowed.