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2017 (11) TMI 1269 - AT - Income TaxCarry forward of unabsorbed depreciation relating to non-exemption years - deduction u/s 10A - Held that - Restoring the assessee s appeal to the ITAT that the intent of the Legislature while making these amendments was certainly not to curtail relief to an assessee, who had not availed double benefit. It is not the Department s case that any double benefit has been availed by the assessee. Also, the question as to whether section 10A is an exemption provision or a deduction provision is also no longer res integra in view of the judgment of the Hon ble Delhi High Court in the case of CIT v. Tei Technologies Pvt. Ltd (2012 (9) TMI 47 - DELHI HIGH COURT) as well as CIT v. Yokogawa (2011 (8) TMI 845 - Karnataka High Court), which the Hon ble Delhi High Court has discussed in the case of CIT v. Tei Technologies Pvt. Ltd (supra). Therefore, respectfully following the ratio of the said judgment of the Hon ble Delhi High Court, we are of the considered opinion that the assessee will be eligible for set off of unabsorbed depreciation for the assessment years 1993 94 to 1995-96 against the income of the assessee for the assessment year under consideration. Therefore, we set aside the order of the Ld. CTT (Appeals) on this issue and direct the AO to allow set off of unabsorbed depreciation to the assessee as discussed hereinabove. - Decided in favour of assessee.
Issues Involved:
1. Eligibility for setoff of unabsorbed depreciation against income for the assessment year 2003-04. 2. Interpretation of Section 10A of the Income Tax Act, 1961, as an exemption or deduction provision. Issue-wise Detailed Analysis: 1. Eligibility for Setoff of Unabsorbed Depreciation Against Income for the Assessment Year 2003-04: The assessee, a company incorporated in 1991, claimed deduction under Section 10A for its unit in the Noida Export Processing Zone until the assessment year 2002-03. For the assessment year 2003-04, the assessee filed a revised return to set off unabsorbed depreciation from assessment years 1993-94, 1994-95, and 1995-96. The Assessing Officer (AO) disallowed this setoff, interpreting Section 10A(6) to mean that unabsorbed depreciation could not be carried forward post the tax holiday period, which ended before 01/04/2001. The Commissioner of Income Tax (Appeals) upheld the AO’s decision, and the ITAT also ruled in favor of the Department. However, the High Court of Allahabad restored the issue to the ITAT, emphasizing that the intent of the Legislature was not to curtail relief for an assessee who had not availed double benefit. 2. Interpretation of Section 10A of the Income Tax Act, 1961, as an Exemption or Deduction Provision: The assessee argued that Section 10A should be interpreted as an exemption provision, meaning the income exempted under this section should not enter the field of taxation. The Department contended that post the amendment effective from 01/04/2001, Section 10A was a deduction provision, implying that the income should be included in the total income and then deducted. The ITAT referred to the judgment of the Hon’ble Delhi High Court in the case of CIT v. Tei Technologies Pvt. Ltd., which discussed the difference between exemption and deduction. The High Court concluded that Section 10A is essentially an exemption provision, meaning the exempted income does not enter the field of taxation and is not subject to computation provisions of the Act. Judgment: The ITAT, following the High Court’s direction and the judgment in CIT v. Tei Technologies Pvt. Ltd., held that the assessee is eligible for the setoff of unabsorbed depreciation for the assessment years 1993-94 to 1995-96 against the income for the assessment year 2003-04. The ITAT set aside the order of the Commissioner of Income Tax (Appeals) and directed the AO to allow the setoff of unabsorbed depreciation. The appeal of the assessee was allowed, and the order was pronounced in the Open Court on 31st October 2017.
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