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TMI Blog2015 (8) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble High Court of Karnataka in Tata Elxsi Ltd., 349 ITR 98 in which it was held that whatever is excluded from the export turnover, should also be excluded from the total turnover, has not been accepted by the Revenue and a SLP has been filed before the Hon'ble Supreme Court and therefore the order of the CIT(Appeals) should be reversed. 4. The only grievance of the Revenue is that the decision of Hon'ble High Court of Karnataka in Tata Elxsi (supra) has not attained finality and a SLP by the department is pending before the Hon'ble Supreme Court. We are of the view that as of today, law declared by the Hon'ble High Court of Karnataka which is the jurisdictional High Court is binding on us. We therefore hold that the order of CIT(A) does not call for any interference and accordingly the same is confirmed. 5. Ground Nos. 4 & 5 is with regard to grievance of the Revenue that the brought forward unabsorbed losses of earlier years should be set off against the profits of the 10A unit and deduction u/s. 10A should be allowed only after such set off. This issue has also been settled by the judgment of the Hon'ble High Court of Karnataka in the case of Yokogawa India Ltd., 341 ITR 38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of profits of the 10B unit. Accordingly, the claim of the assessee for carry forward of loss of non-10B unit was not allowed by the AO. 60. On appeal by the assessee, it was contended that the provisions of section 10A and section 10B are exemption provisions and therefore the profit of 10A and 10B units will not enter the computation of total income at all and therefore the profits of these units need not be set off against the loss of non-10B unit by invoking the provisions of section 72 of the Act. 61. The CIT(Appeals) did not agree with the contention of the assessee and in doing so, he placed reliance on the decision of the Hon'ble Karnataka High Court in the case of CIT v. Himatsingike Seide Ltd., 286 ITR 255 (Kar). In the aforesaid decision, the Hon'ble High Court has taken the view that deduction u/s. 10B has to be allowed after set off of unabsorbed depreciation and unabsorbed investment allowance. The Hon'ble Court took the view that the aforesaid provision was only an exemption provision. The CIT(Appeals) noticed that the aforesaid decision was followed by the ITAT Bangalore Bench in the case of Intelnet Technologies India Pvt. Ltd. v. ITO, ITA No.1021/Bang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the Previousyear in which the under-taking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee :" (emphasis supplied) 64. The expression "Deduction" and "shall be allowed from the total income of the Assessee" used in the aforesaid provisions was considered by the Hon'ble High Court and it held in para 13 to 15 of its judgment that the expression " shall be allowed from the total income of the Assessee" does not mean total income as defined u/s.2(45) of the Act but that expression means "profits and gains of the STP undertaking as understood in its commercial sense or the total income of the STP unit. Thus the view expressed is that income of the STP undertaking gets quarantined and will not be allowed to be set off against loss of either another STP undertaking or a non STP undertaking. The Hon'ble Court thereafter held that though the expression used in Sec.10A was "Deduction" but in effect it was only an exemption section. These conclusions clearly emanate from par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in view of the facts and circumstances of the case, we are of opinion that the civil appeal being devoid of any merit deserves to be dismissed and is dismissed accordingly." 67. Thus the ratio has to be confined to the facts and circumstances of the case. The aforesaid observations have to be confined to the facts of that case and as applicable to a case where brought forward losses and depreciation of the very same STP undertaking are not adjusted while arriving at the profits of the 10B unit for allowing deduction u/s.10A/10B of the Act and not in respect of brought forward losses and depreciation of other undertakings/non-10A/10B units. S. 10A/10B(6) as amended by the FA 2003 w.r.e.f. 1.4.2001 provides that depreciation and business loss of the eligible unit relating to the AY 2001-02 & onwards is eligible for setoff & carry forward for set-off against income post tax holiday which means that they need not be so set off as mandated in the decision of the Hon'ble Karnataka High Court in the case of Himatasingike Seide Ltd. (supra). As we have already seen, in Yokogawa India Ltd. 341 ITR 385 (Kar), it was held that even after s. 10A/10B were converted into a "deduction" prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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