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TMI Blog2006 (8) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... es division will be exempt u/s 10A without setting off the loss of other division or the setting off of carry forward losses of other division. In view of above discussion we hold that learned CIT(A) was justified in directing the Assessing Officer to allow exemption u/s 10A without setting off loss of non-10A unit and consequentially allowed carry forward of such losses and depreciation of non-10A unit. In the result, the appeal is dismissed. - HON'BLE GOPAL CHOWDHURY, J.M. AND N.L. KALRA, A.M. For the Appellant : B. Arulappa For the Respondent. : Padamchand Khincha ORDER N.L. Kalra, Accountant Member 1. The revenue has filed this appeal against the order of learned Commissioner of Income-tax (Appeals)-III, Bangalore dated 26-10-2005. 2. The effective ground of appeal raised by the revenue are as under : ( i ) The learned CIT(A) erred in directing the Assessing Officer to allow exemption under section 10A without setting off the losses of the non-10A unit and consequently allow the carry forward of losses and depreciation of the non-10A unit. ( ii ) The CIT(A) ought to have noted that under section 10(1) of the Income-tax Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this context means global income of the assessee. Hence, the income eligible for exemption under section 10A would not enter into gross total income as the same has to be deduction at source level. As the income of 10A unit has to be excluded at the source itself before arriving at the gross total income, loss of non-10A unit cannot be set off against the income of 10A unit. In the circumstances, the Assessing Officer is directed to allow exemption under section 10A without setting off the losses of non-10A unit and consequently allow the carry forward of losses and depreciation of non-10A unit. 5. During the course of proceedings before us, the learned DR submitted that section 10A refers to the deduction and it is not mentioned in that section that income derived from industrial undertaking as mentioned in section 10A is exempt. Such income is part of the total income and total income is defined in section 2(45) of the Income-tax Act. The total income is to be computed as per provisions of the Income-tax Act. For computation of total income, the first step is to compute the income under different heads. When income is to be computed under business head then loss from one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under un-amended as well as the present section indicates that there is no material change in the character of the section so far as the issue of exclusion of income of the nature of section 10A is concerned. It was submitted that operative portion of section 2 starts with an expression unless the context otherwise requires . In view of such operative portion, the learned AR argued that the total income referred under section 10A cannot have the same meaning as given in section 2(45). Section 11 is also part of Chapter III. The CBDT has stated that term income would refer to commercial profits. In Circular No. 5P dated 19-6-1968, the CBDT clarified; it would accordingly be incorrect to assign to the word income used in section 11(1)( a ), the same meaning as has been specifically assigned to the expression total income vide section 2(45) . 9. Gross total income is defined under section 80B(5) and it means that total income computed in accordance with the provisions of this Act before making any deduction under this Chapter. It means that other provisions of the Act are to be given effect to before any deduction is given in Chapter VI-A. Deduction under Chapter VI-A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e computation of profits and gains from non-eligible business, and without factoring unabsorbed depreciation. 10. We have heard both the parties. It will be relevant to reproduce the relevant sections. 10A. Special provision in respect of newly established undertakings in free trade zone, etc. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee : Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to deduction referred to in this sub-section only for the unexpired period of the aforesaid ten consecutive assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Royal Calcutta Turf Club v. CIT [1983] 144 ITR 709 observed at page 714 as under : In computing the total income, certain incomes are not included under section 10 of the Income-tax Act. It depends on the particular case where certain income, in respect of which the Act is made inapplicable to the scheme of the Act, and in such a case, the profit and loss resulting from such a source do not enter into the computation at all. But there are other sources which for certain economic reasons are not included or excluded by the will of the Legislature. In such a case we must look to the specific exclusion that has been made. 13. In view of the above referred judgment, we have to consider the exclusion or deduction as per section 10A. As pointed out earlier, section 10A specifically states that a deduction is to be given. The deduction is in respect of profits and gains and the word such mentioned before the profit and gains refers to the profits and gains of the undertaking, which is related in the export of articles or things or computer software. Before the word undertaking , it is qualified by the word an . It means that it refers to a single undertaking. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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