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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 ..... which total income had been determined at Rs. 3,09,59,600/- against the returned of income of Rs. 2,03,71,350/-. The assessee had 7 units eligible for deduction u/s.10A which were located at Hyderabad, Chennai, Mysore, Banglore, Pune, Powai and Vashi. The assessee in the return of income had computed the profit / loss in respect of each unit separately and since there were losses in Hyderabad, Pune and Vashi units, the assessee had not claimed deduction u/s.10A in respect of these units and the losses had thus been ignored and the deduction had been claimed only in respect of other four units in which there were 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the assessment was valid. 3.3 The assessee disputed the decision of the A.O. and reiterated the submissions made earlier before the A.O. that the assessee had given complete details regarding the computation of deduction u/s.10A. The assessee had opted for deduction u/s.10A only for four units as per declaration given u/s.10A. The assessee had also declared the interest income of Rs. 55,25,610/-. The reopening the assessment after expiry of four years from the end of the relevant assessment year was, therefore, not justified. The CIT(A) however did not accept the arguments advanced. It was observed by 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.10A had been claimed in respect of interest income which was not derived from the business of the undertaking. In so far as the first ground given by the A.O. for reopening of the assessment is concerned, we find that the assessee had given truly and fully all details regarding the computation of deduction u/s.10A in respect of each unit separately as per chart, the copy of which has been placed at page no. 60 of the paper book at the time of original assessment. In this chart, the profit / loss in respect of each unit had been shown separately and deduction u/s.10A had not been claimed in respect of units 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has to be held valid if it is found to be legal on any of the grounds on which the assessment has been reopened and once the assessment is legally reopened, the A.O. empowered to look into any other income escaping assessment during the reassessment proceedings. We, therefore, for the reasons given earlier confirm the order of the CIT(A) upholding the legal validity of reopening the assessment for A.Y. 2002-03. 4. We now take up the ground relating to the merit of claim of deduction u/s.10A in respect of interest and other income and the claim of allowability of set off of losses of units against profit 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 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the paper book. The assessee had filed a chart before the A.O. in which the computation of profit / loss from each unit had been given separately. The assessee had also filed the auditors report u/s.10A in the Form No.56F giving turnover and profit of each unit separately for the purpose of deduction u/s.10A. It was argued that the deduction u/s.10A is allowable in respect of each unit set up in the free trade zone 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deduction u/s.10A was undertaking specific. It was accordingly held that 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 deduction u/s.10A. The view taken by the Special Bench has been upheld by the Hon'ble Bombay High Court in the order dated 09.04.2012 in the case of Black & Veatch Consulting Pvt. Ltd. (supra). 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 tu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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