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TMI Blog2012 (9) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... of deduction u/s.10A in respect of interest income is concerned, thus reopening of assessment is warranted - against assessee. Computation of deduction u/s.10A(4) - whether each units should be treated as independent unit or all the units should be taken as single unit for set-off - Held that:- As regards the set off of losses from some units against the profit of other units while computing the deduction u/s.10A is concerned, the assessee has maintained separate accounts in respect of each unit and profit and loss has been computed separately. The assessee has also filed the copies of separate P & L A/c. of each unit in the paper book and has also filed an auditors certificate in Form No.56F giving separate computation in respect of each unit. In our view, profit from each unit is eligible for deduction u/s.10A independently provided the profit could be computed separately, thus as there is no dispute that the assessee has maintained separate accounts in respect of each unit and profit has been computed separately. The losses from non eligible units cannot be set off against the profit of the undertaking eligible for deduction u/s.10A for the purpose of computation of deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits. The A.O. in the original assessment order dated 18.11.2004 had accepted the claim made by the assessee in relation to the deduction u/s.10A. 3.1 Subsequently, the A.O. noted that the losses from three units had not been reduced from the profit from other four units and, therefore, deduction had been allowed incorrectly. The A.O. also noted that the deduction had also been allowed in respect of interest income of Rs. 55,25,610/- which was not correct. The A.O., therefore, reopened the assessment u/s.147 of the I.T. Act after recording reasons to the above effect while serving notice u/s.148 on 27.03.2008. The assessee objected to the notice issued by the A.O. and submitted that the original assessment had already been completed u/s.143(3) and, therefore, under the provisions of section 147, assessment could be reopened after the expiry of four years from the end of assessment year only if there wasfailure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. In this case, the assessee had disclosed all the material facts and, therefore, the assessment could not be reopened u/s.147. It was also submitted that the deduction u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him that the assessee had made a claim u/s.10A. It was observed that there was no disclosure of the income on the part of the assessee. It was also observed by him that merely because the A.O. committed a mistake in applying the provisions of law in the original assessment, it would not be correct to say that he will not be empowered to reopen the assessment. The CIT(A) accordingly upheld the legal validity of reopening of assessment aggrieved by which the assessee is in appeal before the Tribunal. 3.4 Before us, the learned AR for the assessee argued that the assessment had been reopened after a lapse of four years from the end of the relevant assessment year which could be done only if there was failure on the part of the assessee to disclose truly and fully all material facts necessary for the assessment year as original assessment had been made u/s.143(3). In this case, the assessee had filed truly and fully all material facts. The assessee had given full details of profit / loss in respect of each undertaking in response to the letter dated 13.09.2004 of the A.O. in which he had specially asked for P L A/c. of all the units. A copy of the said letter was placed at page 41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in which there were losses and these losses had been ignored. This chart was before the A.O. and infact he had allowed the claim of deduction u/s.10A based on this chart. Therefore, it cannot be said that full facts relating to the computation of deduction u/s10A in respect of each unit was not placed before the A.O. The reopening of the assessment on this ground is, therefore, not justified. 3.6 As regards the other reason for reopening the assessment i.e. allowance of deduction u/s.10A in respect of interest income, we find from the perusal of the records that the assessee had not given the details of such interest income either in the return of income or during the assessment proceedings. We find from the perusal of the profit / losses placed at page no. 2 of the paper book that the assessee had shown other income of Rs. 1,85,05,435/- the detail sof which had been given in Schedule K placed at page no. 6 of the paper book but this schedule did not show any interest income. Further we also note from the submissions made by the assessee before the A.O. as reproduced at page nos. 4 5 of the assessment order that the assessee in the P L A/c. had claimed deduction on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of other units. As mentioned earlier, the assessee had 7 units in free trade zones. In the A.Y. 2002-03, the assessee had incurred losses of Rs. 3.58 crores from the units at Hyderabad, Pune and Vashi and the profit of Rs. 37.31 crores from the other 4 units. The assessee had not claimed any deduction in respect of the loss earning units and the losses had been totally ignored. Similary in the A.Y. 2005-06, the assessee had incurred loss from Hyderabad unit which had been ignored and no deduction u/s.10A had been claimed in respect of Hyderabad unit. The A.O. in the assessment order has treated all the units as part of the same business and, therefore, he has set off the losses of the units against the profit of the other units while computing the deduction u/s.10A. 4.1 In appeal, the CIT(A) observed that the deduction u/s.10A(4) has to be computed in the ratio of export turnover to the total turnover of the business carried on by the assessee and, therefore, the business of all the units has to be taken as part of the same business and accordingly he confirmed the approach adopted by the A.O. to consider the profit / losses of all the units together while computing the deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treating it as a separate undertaking. The assessee had maintained separate accounts and, therefore, deduction has to be allowed separately and in case of units incurring losses, the same had been rightly ignored by the assessee and no deduction claimed. In this context, the learned AR for the assessee referred to the decision of the Special Bench of the Tribunal in the case of M/s. Scientific Atlanta India Technology Pvt. Ltd. in ITA No.229/Mds/2007 ITA No.352/Mds/2008 in which it has been held that loss of non eligible unit cannot be set off against the profits of undertaking eligible for deduction u/s.10A. The view taken by the Special Bench has been upheld by the Hon'ble High Court of Bombay in the case of CIT vs. Black Veatch Consulting Pvt. Ltd. in ITA No.1237 of 2011 dated 09.04.2011 , in which it has been held that the brought forward losses and unabsorbed depreciation of non eligible units cannot be set off against the eligible units. It was thus argued that the losses from eligible units cannot be set off against the profit of other units. As regards the allowability of deduction u/s.10A in respect of interest and other income is concerned, it was submitted that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra). Following these judgments, we hold that the deduction u/s.10A in respect of each unit has to be computed separately and losses from some units cannot be adjusted against the profit from other units. We accordingly set aside the order of the CIT(A) on this point and allow the claim of the assessee. 4.5. As regards the claim of deduction u/s. 10A in relation to other income, we find that section 10A(1) allows deduction only in respect of profits and gains derived by an undertaking from the export of articles or things or computer software. The profit derived from the export of articles or things or computer software has been defied u/s.10A(4) to mean the profit of business of undertaking in the proportion of export turnover of such articles or things to the total turnover of the business of undertaking. The phrase profit of the business of the undertaking has not been defined u/s.10A unlike u/s.80HHC in which profit of business has been defined as profit or loss computed under the head profit and gains of business or profession . While computing the profit under the head profit and loss from business or profession , any item of income which is of the nature of the business ..... X X X X Extracts X X X X X X X X Extracts X X X X
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