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TMI Blog2013 (1) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case and in law, the learned CIT(A) erred in not appreciating that the Assessing Officer has failed to issue statutory notice within the specified time as required by proviso to section 143(2) and as such the entire assessment made by the Assessing Officer has been rendered barred by limitation." 2. The facts in brief, apropos ground no.1, is that the assessee is a Private Limited company engaged in the business of providing high quality and time bound medical transcription services to non-resident entities. The assessee's unit is registered under the Software Technology Part Scheme of India as 100% export oriented unit. Accordingly, in the return of income, the assessee, after claming deduction under section 10B, for sums amounting to Rs. 32,59,506, declared income at Rs. nil. 3. The Assessing Officer noted that the assessee is not eligible for claiming deduction under section 10B, but is eligible to claim deduction under section 10A. In response to the show cause notice, as to why deduction under section 10B, should not be allowed as Director, STPI, is not the authority prescribed under the Income Tax Act, 1961, for granting approval for 100% EOU to be eligib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that even though section 10A and 10B are part of Chapter-III, then also, deduction of profit and computation of total income can only be computed only after allowing intra head set-off under section 70 and inter head under section 71. In short, the Assessing Officer had compared the deductions allowable under Chapter-VIA, and held that it is similar to Chapter-III and, therefore, the decision laid down by the Hon'ble Supreme Court in CIT v/s Shirke Construction Equipment Ltd. [2007] 291 ITR 380 (SC), though rendered in respect of section 80HHC, will also be applicable to sections 10A & 10B. Thereafter, he analysed the provisions of section 80B(5) and section 70 and held that the assessee has to set-off the losses of the business first, while determining the total income before claiming any deduction under section 10. 6. Before the Commissioner (Appeals), after explaining the various provisions of law relating to deduction under section 10A, the assessee relied upon the decision of ITAT, Special Bench, Chennai, in Scientific Atlanta Technology, [2010] 120 TTJ (Chh.) (SB), and the Hon'ble Supreme Court's judgment in CIT v/s Venkatachalam (V.) (SC), [1993] 201 ITR 737 (SC) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals) or before the Tribunal is applicable to the facts of the present case. 9. We have carefully considered the rival contentions of the parties, perused the orders of the authorities below and the judgment relied upon. The main issue before us is while computing the deduction under section 10A, whether carry forward losses and unabsorbed depreciation of the earlier assessment years or the current year has to be set-off first against the current business income and then deduction should be allowed or the same should be allowed at the stage of computing the profit itself without setting-off of any loss / depreciation. The Assessing Officer has drawn a parallel between Chapter-VIA and sections 10A / 10B and held that these provisions are similar and, therefore, while computing the income, set-off of business losses and unabsorbed depreciation has to be taken into account first and then only the deduction has to be allowed on the resultant profit. He has referred to the judgment of Hon'ble Supreme Court in Shirke Construction Equipment Ltd. (supra) which was rendered in the context of section 80HHC and Liberty India v/s CIT, 317 ITR 218 (SC). Such an analogy, in our opinion, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant observation of Their Lordships, while interpreting the definition of total income as used in the Act, are as under:- "13. Sec. 2(45) defines "total income" to mean the total amount of income referred to in s. 5 and computed in the manner laid down in the IT Act. Sec. 5 defines the scope of total income and it is subject to the provisions of IT Act. Sec. 14 provides that "save as otherwise provided by the IT Act, all income shall for the purpose of charge of income-tax and the computation of total income, classified under the following heads of income". Therefore, the total income in its strict sense requires computation for the purpose of levy of tax. The computation of total income begins only with Chapter IV and as s. 10A is covered in Chapter III, the phrase "total income" used in s. 10A cannot be understood in the same sense as in s. 2(45). 14. The phrase "total income" has been used in the IT Act in several places with different connotations and shades. The phrase total income used in s. 10A is one such variant. The phrase need not necessarily mean the total income as computed in accordance with the provisions of the Act. The relief under this section is with refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f return. Allowing deduction at the earliest stage of business income computation almost blurs the difference between the commercial profits and tax profits." 10. While drawing a distinction between Chapter-III and VIA, Their Lordships observed and held as under:- "16. The substituted s. 10A continues to remain in Chapter III. It is titled as "Incomes which do not form part of the total income". It may be noted that when s. 10A was recast by the Finance Act, 2001 (sic-2000), the Parliament was aware of the character of relief given in Chapter III. Chapter III deals with incomes which do not form part of total income. If the Parliament intended that the relief under s. 10A should be by way of deduction in the normal course of computation of total income, it could have placed the same in Chapter VI-A which houses the sections like 80HHC, 80-IA, etc. The Parliament was aware of the various restricting and limiting provisions like s. 80A and s. 80AB which were in Chapter VI-A which do not appear in Chapter III. The fact that even after its recast, the relief has been retained in Chapter III indicates the intention of Parliament that it is to be regarded as an exemption and not a ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot enter into computation as the same has to be deducted at source level." 11. This principle has been reiterated by the Jurisdictional High Court in CIT v/s Black & Veatch Consultant Pvt. Ltd. (supra), wherein it has been observed and held as under:- "Section 10A of the Income-tax Act, 1961, 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 gains of business. This is anterior to the application of the provisions of section 72 which deals with the carry forward and set off of business losses. A distinction has been made by the Legislature while incorporating the provisions of Chapter VI-A. Section 80A(1) stipulates that in computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of the Chapter, the deductions specified in sections 80C to 80U. Section 80B(5) defines for the purposes of Chapter VI-A "gross total income" to mean the total income computed in accordance with the provisions of the Act, before making any deduction under the Chapter. Therefore, the deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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