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TMI Blog2015 (12) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... n the profits and gains of the business are computed in the first instance. In view thereof we reverse the order of Commissioner of Income Tax (Appeals) in this regard. The said deduction under section 10A of the Act is to be computed unit/undertaking wise and not for the assessee in totality. Reversing the order of the Commissioner of Income Tax (Appeals), we allow the grounds of appeal in favour of assessee. - ITA Nos. 1508 & 1509/PN/2011 - - - Dated:- 30-11-2015 - Ms. Sushma Chowla, JM And Shri Pradip Kumar Kedia, AM For the Appellant : Shri Kishore Phadke For the Respondent : Shri Rajesh Damor ORDER Per Sushma Chowla, JM Both the appeals filed by the assessee are against the consolidated order of CIT(A)-I, Pune, dated 28.02.2011 relating to assessment years 2005-06 and 2006-07 against respective orders passed under section 143(3) of the Income Tax Act, 1961 (in short the Act ). 2. Both the appeals filed by the assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. However, reference is being made to the facts and issues in ITA No.1508/PN/2011 to adjudicate the issues. 3. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year because of claim of depreciation, etc. The assessee claimed deduction u/s. 10A of the Act on account of export of software and IT enables services. In the return of income, the assessee computed the deduction u/s. 10A of the Act for each unit separately and independently. The Assessing Officer during the course of assessment proceedings noted that the assessee had claimed the deduction u/s. 10A of the Act against eligible profits of units showing profits and the losses in respect of three of the units were carried forward, totaling ₹ 3,87,04,852/-. The Assessing Officer was of the view that in view of provisions of section 70(1) the deduction u/s. 10A of the Act would be allowed only against the profits remaining after intra-head set off of losses and consequently the deduction claimed u/s. 10A of the Act was reduced to ₹ 20,68,49,064/- as against the assessee s claim at ₹ 24,55,53,914/-. The losses from eligible business were completely set off of and there was nil balance to be carried forward. In this regard a show cause notice was issued to the assessee to which the assessee replied and the copy of the show cause notice and reply of the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) vide para 4.3.2 at pages 26 and 27 of the appellate order observed that after the amendment brought w.e.f. assessment year 2001-02 the income computed u/s. 10A of the Act could not be considered as exempt from tax. The same would form part of the total income under section 5. Thereafter, reference was made to the various sections of the Income Tax Act and the Chapter VI dealing with aggregation of income and set off or carry forward of loss and Chapter VIA dealing with the deductions to be made in computing total income. The Commissioner of Income Tax (Appeals) thus observed :- 4.3.3 Therefore, even if it is accepted that the deduction available in sec. 10A is not part of Chapter VIA which deals with deductions and therefore, the restrictive provisions which are available in Chapter VIA will not apply, it cannot be stated that Chapter VI will also not apply which deals with set off and carry forward of losses more so when w.e.f. 1.4.2000 the losses are required to be carried forward as per sec. 10(6) of the I.T. Act. Section 70 applied by the Assessing Officer is part of Chapter VI and therefore, I do not find any reason as to why this will not apply in the facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. In view of the above, the .Ground No. 2 of the appellant is treated as dismissed. 10. The ld. AR for the assessee referred to the chart under which the deduction claimed under section 10A of the Act as per the assessee and as allowed by the Assessing Officer has been tabulated. It was further pointed out by the ld. AR for he assessee that the issue is covered in favour of the assessee by the ratio laid down by Hon'ble Bombay High Court in Hindustan Unilever Ltd. Vs. DCIT Anr. (2011) 325 ITR 102 (Bom.) and also in CIT Vs. Black Veatch Consulting Pvt. Ltd., ITA No. 1237 of 2011 (Bom.). 11. The ld. DR for the Revenue on the other hand referred to the decision of the Hon'ble Bombay High Court in Hindustan Unilever Ltd. Vs. DCIT Anr. (supra) and stated that once it is treated as deduction under section 10A of the Act then the decision of the Hon'ble Supreme Court in Synco Industries Ltd. Vs. Assessing Officer, Income Tax, Mumbai (supra) would be applied. The ld. AR for the assessee pointed out that Hon'ble Karnataka High Court in Commissioner of Income Tax ANR. Vs. Yokogawa India Ltd. Ors., (2012) 341 ITR 385 (Karn.) while considering the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the total income and was excluded at the entity level itself. The question which arises for adjudication is whether in view of the amended provisions of section 10A of the Act, under which deduction can be claimed by an enterprises, whether the intra head adjustment of losses of certain units is to be made against the profits of other units of the same assessee, before computing the deduction under section 10A of the Act. 14. The Hon'ble Bombay High Court in Hindustan Unilever Ltd. Vs. DCIT Anr. (supra) in an appeal relating to assessment year 2004-05 where reassessment proceedings were initiated under section 147/148 of the Act on several issues, considered the reason to believe recorded by the Assessing Officer with regard to set off of loss incurred by unit eligible for deduction u/s. 10B of the Act. The Assessing Officer had reopened the assessment on the surmise that since the income of the Crab Stick Unit was exempted from tax under section 10B, the loss of that unit was wrongly set off against the normal business income. The Hon'ble High Court noted that after the substitution of section 10B of the Act by the Finance Act of 2000, the provisions provided f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore Hon'ble Supreme Court the assessee had claimed deduction from the profits and gains of the business under section 80HH r.w.s. 80-I and 80B of the Act. The Hon'ble Supreme Court held that while working out gross total income of the assessee, losses suffered by it in earlier years have to be adjusted and if gross total income of assessee is nil then the assessee would not be entitled to deduction under Chapter VI-A. 17. The authorities below have further placed reliance on the provisions of section 70(1) for the proposition of set off of loss from one source against income from another source under the same head of income. The provisions of section 10A and 10B of the Act are para materia. In such a situation the ratio laid down by the jurisdictional High Court in Hindustan Unilever Ltd. Vs. DCIT Anr. (supra) are to be applied. The Hon'ble High Court had held that where three units of the assessee had returned profit during the course of assessment year and one unit had returned the loss, the assessee was entitled to deduction in respect of the profits of three eligible units, while the loss sustained by the fourth unit could be set off against normal business i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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