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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 ..... out above. In view of the aforesaid decision of the Hon’ble Karnataka High Court, we are of the view that the claim as made by the Assessee for carry forward of loss of the non-eligible unit had to be allowed without set off of profits of the 10A/10B unit. - Decided against revenue. - ITA No.1265/Bang/2014, ITA No.1320/Bang/2014 - - - Dated:- 30-7-2015 - SHRI N.V. VASUDEVAN AND SHRI ABRAHAM P. GEORGE, JJ. For The Assessee : Shri Padamchand Khincha, CA For The Revenue : Dr. Shankar Prasad, K., Jt. CIT(DR) Per N.V. Vasudevan, Judicial Member ORDER These are cross appeals by the assessee and the Revenue directed against the order dated 23.6.2014 of the CIT(Appeals)-I, Bangalore relating to assessment year 2005-06. ITA 1320/B/2014 (Revenue s appeal) 2. First we shall take up the appeal of the Revenue for consideration. Ground No.1 is general in nature. 3. Ground Nos. 2 3 is with regard to action of the revenue authorities in excluding the telecommunication charges and expenses incurred in foreign currency from the export turnover and total turnover while computing deduction u/s. 10A of the Act. According to the Revenue, the aforesaid expenses should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act in respect of the aforesaid units totaling ₹ 157,22,33,066 which is the sum total of deduction u/s. 10B for the four units as follows:- (1) CMZ Unit : 6,87,70,229 (2) SAP Unit : 76,60,29,880 (3) RHI Unit : 52,42,56,278 (4) IFP Unit : 21,31,76,679 Total 157,22,33,066 58. The assessee had non-10B units as well. In those non-10B units, there was a loss of ₹ 105,92,19,172. In the return of income filed by the assessee, the assessee sought to carry forward the loss of non-10B units for set off against the profits of non-10B units in the subsequent assessment years. The AO firstly noticed that there was income from other sources to the extent of ₹ 4,71,15,896 and such had to be set off against the loss of the non-10B units. Accordingly, the AO held that the loss of the non-10B units that had to be considered for carry forward would be ₹ 101,21,03,280. 59. Thereafter, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held to be deduction provisions and not exemption provisions. 6. For all the above reasons, the CIT(Appeals) confirmed the order of the Assessing Officer. Against the order of the CIT(A), the Assessee was in appeal before the Tribunal. This Tribunal dealt with the issue in the following words : 63. We have given a careful consideration to the rival submissions. The issue as to whether the provisions of Sec.10B of the Act are deduction provisions or exemption provisions will assume great importance. The reason is that if the provisions are considered as exemption provisions then they will not enter the computation of total income and therefore the loss of the eligible unit cannot be set off against the profits of the non-eligible unit. This issue has already been settled by the Hon ble Karnataka High Court in the case of Yokogawa India Ltd. (supra). The Hon ble Karnataka High Court in the case of Yokogawa (supra) had to deal with two substantial question of law. The first substantial question of law was on the right of set off of loss of non-eligible unit against the profit of the eligible unit on which deduction u/s.10B was to be allowed. The Hon ble Court in para 10 to 20 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt s decision in the case of Himatasingike Seide (supra) has held that unabsorbed depreciation (and business loss) of same (s. 10A/10B) unit brought forward from earlier years have to be set off against the profits before computing exempt profits. The assessee in that case set up a 100% EOU in AY 1988-89. For want of profits it did not claim benefits u/s 10B in AYs 1988-89 to 1990-91. From AY 1992-93 it claimed the said benefits for a connective period of 5 years. In AY 1994-95, the assessee computed the profits of the EOU without adjusting the brought forward unabsorbed depreciation of AY 1988-89. It claimed that as s. 10B conferred exemption for the profits of the EOU, the said brought forward depreciation could not be set-off from the profits of the EOU but was available to be setoff against income from other sources. It was also claimed that the profits had to be computed on a commercial basis. The AO accepted the claim though the CIT revised his order u/s 263 and directed that the exemption be computed after set-off. On appeal by the assessee, the Tribunal reversed the order of the CIT. On appeal by the department, the High Court in CIT Vs. Himatasingike Seide Ltd. 286 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed. ITA 1265/B/2014 (Assessee s appeal) 9. The effective grounds raised by the assessee read as follows:- 1. The order passed by the learned Commissioner of Income tax (Appeals) to the extent prejudicial to the appellant is bad in law is liable to be quashed. 2. The learned CIT(A) at para 3.6 to 3.10 of his order has erred in concluding that losses of STPI unit cannot be set off against other income. The impugned conclusion of the learned CIT(A) is contrary to facts, not at all relevant for the year under consideration and consequently bad in law and liable to be quashed. 3. Even otherwise, as a matter of principle, losses of STPI unit are eligible for set off against other income in accordance with the provisions of the Act. 4. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that the order passed by the learned CIT(A) to the extent prejudicial to the appellant be quashed or at least the impugned conclusion of the learned CIT(A) at para 3.6 to 3.10 of his order be reversed / deleted. 10. The CIT(Appeals) in paras 3.6 to 3.10 has observed that if there is a loss in 10A unit, that cannot be set off against ..... X X X X Extracts X X X X X X X X Extracts X X X X
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