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TMI Blog2013 (11) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... - - - - - Dated:- 14-11-2012 - Order The order of the Bench was delivered by Vikas Awasthy (Judicial Member).-The appeal has been preferred by the Revenue impugning the order of the Commissioner of Income-tax (Appeals)-VIII, Chennai, dated March 20, 2008. The brief facts of the case are that the assessee is engaged in the business of electronic printing and data processing. The assessee filed its return of income relevant to the assessment year 2005-06 on October 28, 2005 disclosing "nil" taxable income. The case of the assessee was selected for scrutiny. Notice under section 143(2) was issued to the assessee on October 16, 2006. The Assessing Officer, vide assessment order dated October 22, 2007, made certain additions/disallowances in the income returned by the assessee. The Assessing Officer, inter alia, made additions on account of : (i) 50 percent of internet charges amounting to Rs. 1,88,638 by including them in the "total turnover" but excluding it from the "export turnover" ; and (ii) set-off of brought forward losses of the assessment year 2001-02 while calculating deduction under section 10B. The Assessing Officer held that brought forward losses should be set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein the hon'ble apex court has held that where the assessee having failed to appeal against the intimation of the Income-tax Officer refusing to take cognizance of loss returns filed by the assessee, the assessee cannot claim in the assessment proceedings relating to the subsequent years that the loss in the earlier assessment years be determined, carried forward and set off against the profits of the subsequent year or years, as the case may be. The Departmental representative further submitted that profits and gains of business of the eligible unit is to be computed first and thereafter deduction under section 10B is to be given. The deduction is not to be given from gross total income envisaged under Chapter VI-A. He contended that though section 10B falls under Chapter III, it has been mentioned in the section itself that what is to be given is only a deduction and not exemption. He further submitted that the business loss of the assessee as well as unabsorbed depreciation brought forward by the assessee in respect of eligible undertaking got absorbed by the assessment year 200405, thereafter, nothing is left to be adjusted/set off for the assessment year 2005-06. But the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... percent export oriented undertaking has to be calculated as per the formula given in section 10B(4). The profits have to be deducted from the total income of the undertaking and thereafter the residue profits, if any shall be used for deducting carried forward loss and unabsorbed depreciation. In order to support his contentions, the authorised representative relied on the judgment of the hon'ble Karnataka High Court in the case of CIT v. Yokogawa India Ltd. reported as [2012] 341 ITR 385 (Karn) and the judgment of the hon'ble Bombay High Court in the case of Hindustan Unilever Ltd. v. Deputy CIT reported as [2010] 325 ITR 102 (Bom) and the order of the Tribunal in I. T. A. No. 2097/Mds/2006 in the case of Intimate Fashions India P. Ltd. decided on November 27, 2007. We have heard the submissions made by the rival parties and have also perused the judgments/orders referred to by both parties. The Assessing Officer while making the assessment has excluded 50 percent of the internet charges from the "export turnover" only. On appeal, the Commissioner of Income-tax (Appeals) has excluded the said 50 percent internet charges from the "total turnover" as well. We are of the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough termed as deduction and the said relief is in respect of commercial profits, such income is neither subject to charge of income tax nor includible in the total income. Therefore, the twin provisions of section 14 are not existing in the case of income of STP undertaking and accordingly such income is not liable to be computed under Chapter IV. Therefore, the correct view would be that the relief under section 10A will have to be given before Chapter IV. The deduction shall be given first and process of computation of 'profits and gains of business or profession' begins thereafter. This proposition is in line with the form of return. Allowing deduction at the earliest stage of business income computation almost blurs the difference between the commercial profits and tax profits." Similar view has been taken by the hon'ble Bombay High Court in the case of CIT v. Black and Veatch Consulting Pvt. Ltd. reported as [2012] 348 ITR 72 (Bom). The hon'ble Bombay High Court has held that (headnote):"section 10A is a provision which is in the nature of a deduction and not an exemption. The deduction under section 10A has to be given effect to at the stage of computing the profits and g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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