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TMI Blog2013 (12) TMI 893X X X X Extracts X X X X X X X X Extracts X X X X ..... amounting to Rs.43,88,484/- cannot be set off against other business of the assessee Each of the above grounds of appeal is without prejudice to each other. The appellant craves leave to add, omit or alter grounds of appeal before or during the hearing of the appeal". 2. Ground no. 2 pertains to non allowance of set off of loss incurred by unit eligible under section 10A against normal business profit. 3. The facts are that original assessment was framed under section 143(3) on 30.12.2008. 4. In the return filed originally, the assessee company had shown 9 eligible units for the claim of exemption under section 10A. Out of these eight units had shown profit of Rs.18,41,22,738/- and one unit declared a loss of Rs.43,88,484/-. In effect, the assessee declared income at Rs.17,97,34,255/-. The assessee, in its computation adjusted the loss of eligible unit against the profit of non eligible unit shown at Rs.53,31,913/-, thereby shown a net business profit / income at Rs.9,43,428/-. 5. In the assessment proceedings the correctness of the claim was sought for by the AO. The assessee gave a detailed reply on the correctness of the claim that it had rightly set off loss o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the purposes of determining the allowable deduction under section 10A. Unabsorbed business loss is to be set off under section 72 and the same is not mentioned under section 29. Hence, unabsorbed business losses will not be set off against the profits of the undertaking engaged in the export of computer software for the purposes of ascertaining the deduction admissible under section 10A. As unabsorbed business losses of other units cannot be set off and therefore unabsorbed depreciation which is to he set off after the unabsorbed business loss as per section 72(2,) also cannot be set off for ascertaining the deduction under section 10A". 6. The assessee also cited CBDT circular 308 dated 29.06.1981. These arguments did not find favour of the AO, who held that loss in eligible unit had to be adjusted against the profit of eligible units and, he therefore, recomputed the business profit at Rs. 53,31,913/-, i.e. profits pertaining to other/non eligible units. 7. The assessee approached the CIT(A), who after considering the detailed submissions of the assessee, modified the working of the AO and excluded the loss in eligible unit at Rs.43,88,484/-, and allowed the same to be ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits and gains of business are computed in the first instance. The Tribunal was right in holding that the deduction under section 10A in respect of the allowable unit under section 10A has to be allowed before setting off brought forwarded losses of a non-section 10A unit" 11. He also referred to the decision of Hindustan Unilever Ltd. vs DCIT reported in 325 ITR 102, wherein Hon'ble Bombay High Court held, "(iv) That the Assessing Officer was plainly in error in proceeding on the basis that because the income was exempted, the loss was not allowable. All the four units of the assessee were eligible under section 10B. Three units had returned a profit during the course of the assessment year, while the crab sick unit had returned a loss. The assessee was entitled to a deduction in respect of the profits of the three eligible units while the loss sustained by the fourth unit could be set off against the normal business income. In these circumstances, the basis on which the assessment is sought to be reopened was contrary to the plain language of section 10B. The reassessment proceedings were not valid and were liable to be quashed". 12. The AR submitted that the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. For computing total income the Gross Total Income is to be computed fist. For computing Gross Total income the income under each head is to be computed first. Then effect of section 70 & 71 is to be given for Intra head and inter head set off of losses before computing the total income. The assessee has claimed 9 units eligible for deduction under section. 10A. Out of these 9 units 8 units have made profit of Rs.18,41,22,738/- as per the provisions of I.T. Act while remaining 1 unit has incurred a loss of Rs.43,88,484/-. The assessee has not set off the loss of 1 unit against the profit of 9 units for working out of its claim of deduction under section 10A. Section 10A provides for deduction of profits an gains of eligible undertakings. Since the profit includes losses, the income of all eligible undertakings are to be aggregated to arrive at the eligible deduction. However, the assessee has set off the losses of units eligible for deduction under section. 10A against its other taxable profits rather than profit of 10A units, thereby claiming a benefit not intended or provided under the Act. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the income was exempted, the loss was not allowable. All the four units of the assessee were eligible under section 10B. Three units had returned a profit during the course of the assessment year, while the crab sick unit had returned a loss. The assessee was entitled to a deduction in respect of the profits of the three eligible units while the loss sustained by the fourth unit could be set off against the normal business income. In these circumstances, the basis on which the assessment is sought to be reopened was contrary to the plain language of section 10B. The reassessment proceedings were not valid and were liable to be quashed". 22. We, therefore, respectfully following the plethora of decisions as cited in the submissions before the CIT(A), which we have perused and taken into consideration, and following decision in the case of Hindustan Unilever Ltd., quash the initiation and reassessment proceedings. 23. Since the reassessment proceedings have been quashed, all subsequent and consequent proceedings are annulled. 24. Ground no. 1 is therefore, allowed. 25. In the result, the appeal as filed by the assessee is allowed. ITA 7739/Mum/2011 (Revenue's appeal, AY 2005- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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