2020 (6) TMI 165 - AT - Income Tax

Deduction u/s 10B computation - Adjusting the brought forward depreciation loss prior to working out the eligible profit of section 10B - HELD THAT - Referring toYokogawa India Ltd. case 2011 (8) TMI 845 - KARNATAKA HIGH COURT as confirmed by Supreme court 2016 (12) TMI 881 - SUPREME COURT CIT(A) has observed that the profit of the undertaking should be computed independently before adjusting any carried forward business. The profit thus arrived should be given benefit under eligible sections 10A/10B of the Act even though the assessee has had unabsorbed business loss of previous years besides not commenting on the unabsorbed depreciation. The ld. CIT(A) further observed that nonetheless, considering the fact that brought forward business loses have precedence over brought forward depreciation, the question of giving effect to brought forward depreciation does not arise at all. CIT(A) has held that the assessee is eligible for deduction under section 10B of the Act prior to giving effect to the brought forward depreciation of earlier years and thus, the assessee is eligible to claim deduction under section 10B on profits of business - We find no infirmity in the order passed by the ld. CIT(A) - Decided against revenue.

Summary

Issues:
- Adjustment of brought forward depreciation loss before computing deduction under section 10B of the Income Tax Act, 1961.

Analysis:
1. The appeal by the Revenue challenged the order of the ld. Commissioner of Income Tax (Appeals) regarding the adjustment of the brought forward depreciation loss before calculating the eligible profit of section 10B of the Income Tax Act. The main contention was that the ld. CIT(A) erred in allowing the assessee's claim based on a Supreme Court decision in the case of CIT v. Yokogawa India Ltd.

2. The case involved the assessment year 2010-11 where the assessee initially filed a return with NIL income, later revised it, and the assessment was completed under section 143(3) of the Act. Subsequently, the assessment was reopened under section 147 to set off the brought forward loss against business income before claiming exemptions under section 10B. The Assessing Officer adjusted the depreciation loss before computing the eligible profit, citing a different Supreme Court decision.

3. The ld. CIT(A) allowed the deduction under section 10B before adjusting the brought forward depreciation loss, following the decision in the case of CIT v. Yokogawa India Ltd. The Revenue, aggrieved by this decision, approached the Tribunal for appeal.

4. The Tribunal, after considering the arguments and orders of the authorities below, referred to the decision of the Hon'ble Supreme Court regarding deductions under section 10A. The Tribunal highlighted that the profit of the undertaking should be computed independently before adjusting any carried forward business losses. It was emphasized that the profit arrived should be given benefit under eligible sections 10A/10B of the Act, irrespective of unabsorbed business losses or depreciation.

5. Ultimately, the Tribunal found no fault in the order of the ld. CIT(A) and dismissed the appeal filed by the Revenue. The Tribunal upheld the decision that the assessee is eligible for deduction under section 10B of the Act before considering the effect of brought forward depreciation of earlier years.

This comprehensive analysis of the judgment highlights the key issues, arguments presented, legal interpretations, and the final decision rendered by the Tribunal.