2015 (9) TMI 120 - AT - Income Tax

Computation of amount of deduction u/s 10A - reducing the amount of brought forward loss for the A.Y. 2002-03 from the profits and gains of the undertaking for the current year - Held that - We are confronted with a situation in which the assessee suffered loss from the eligible unit for the assessment year 2002-03, when section 10A is a deduction provision as is the case for the A.Y. 2003-04 under consideration. Not only the assessee suffered a loss of ₹ 72.70 lac in such preceding year from the eligible unit, it claimed and the Revenue allowed its carry forward to the subsequent year(s) as per law. Now, when there has arisen positive income for the year under consideration, such brought forward loss from the eligible unit suffered during the immediately preceding year is required to be reduced from the amount of eligible profits for the current year before granting deduction u/s 10A. The assessee cannot be allowed to eat the cake and have it too, by claiming on one hand that there is a business loss from the eligible unit for the preceding year which should be allowed to be carried forward and, at the same time, claim that such brought forward business loss should not be set off against the income of the eligible unit for the succeeding year while allowing deduction u/s 10A. If the assessee s contention is accepted, it would make section 10A a deduction provision for the A.Y. 2002-03 and an exemption provision for the A.Y. 2003-04, which is manifestly impermissible because section 10A has been statutorily made a deduction provision from the A.Y. 2001-02. As the assessee rightly claimed the carry forward of loss from the eligible unit for the immediately preceding year, such loss is required to be set off against the income for the current year before allowing deduction u/s 10A. - Decided against assessee. Reopening of assessment - Held that - It is a matter of record that the AO, without separately disposing off such objections, proceeded to make an assessment u/s 147 of the Act. This course of action followed by the AO is in contravention of the law laid down by the Hon ble Supreme Court in GKN Driveshafts (I) Ltd. Vs. ITO (2002 (11) TMI 7 - SUPREME Court ). It has been held in this judgment that the AO is obliged to first dispose of the objections raised by the assessee by way of a separate order before proceeding to finalize the assessment. Since the AO has not disposed off the assessee s objections, we set aside the assessment order and the impugned order and remit the matter to the file of AO for first disposing the assessee s objections against the initiation of re-assessment proceedings by a separate order. It is only if he comes to a conclusion that the reasons are valid and the objections are not sustainable, that he will proceed to frame the assessment as per law. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Assessment Year 2003-04: Reduction of brought forward loss for computing deduction u/s 10A.
2. Assessment Year 2004-05: Non-disposal of objections before re-opening assessment.

Assessment Year 2003-04:
The primary issue in this appeal was the reduction of the brought forward loss of Rs. 72,70,234 for the A.Y. 2002-03 from the profits and gains of the undertaking for the current year to compute the deduction u/s 10A of the Income-tax Act, 1961. The key contention revolved around whether the brought forward loss from the eligible business in the preceding year should be deducted from the profits of the current year before allowing the deduction u/s 10A. The tribunal analyzed the provisions of section 10A, emphasizing the shift from an exemption provision to a deduction provision from the assessment year 2001-02 onwards. It was held that the brought forward loss from the eligible unit must be set off against the income for the current year before granting the deduction u/s 10A. The tribunal cited a judgment of the Hon'ble Supreme Court in support of this view and distinguished the applicability of certain decisions relied upon by the assessee's representative.

Assessment Year 2004-05:
The central issue in this appeal pertained to the non-disposal of objections raised by the assessee against the reasons recorded for re-opening the assessment. The tribunal noted that the Assessing Officer (AO) proceeded to finalize the assessment under section 147 without separately addressing the objections raised by the assessee, contrary to the legal precedent established by the Hon'ble Supreme Court in GKN Driveshafts (I) Ltd. vs. ITO. The tribunal held that the AO must first dispose of the objections raised by the assessee before proceeding to finalize the assessment. Consequently, the assessment order and the impugned order were set aside, and the matter was remitted to the AO for the proper disposal of the assessee's objections. The tribunal allowed the appeal for statistical purposes due to the legal infirmity in the assessment process.

In conclusion, the ITAT Delhi, in a consolidated order, addressed the issues raised for the assessment years 2003-04 and 2004-05. The judgment provided a detailed analysis of the legal provisions and relevant case law to determine the appropriate treatment of brought forward losses for calculating deductions under section 10A and the necessity of disposing of objections before finalizing re-assessment proceedings. The tribunal's decision was based on a meticulous examination of the law and established precedents, ensuring a fair and lawful resolution of the disputes presented in the appeals.