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TMI Blog2010 (8) TMI 1057X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 with a direction to the Assessing Officer to make a fresh assessment in accordance with law. ii) The Hon'ble CIT is not justified in deciding that the Assessing Officer had wrongly allowed the deduction claimed u/s 10A without proper application of mind to the matter with reference to the facts of the case and relevant provisions of the Act, ignoring the fact that the issue of allowance u/s 10A was subject matter of appeal before CIT on the issue of determination of quantum of relief and also in the appeal filed by the department before ITAT. iii) The Hon'ble CIT, overlooked the fact relief under section 10A is certified by a Chartered Accountant as required under sub-section (5) to section 10A in the prescribed form enclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee's claim of exemption u/s 10A of the Act and observed that the assessee has included expenses of ₹ 1,43,11,508/- incurred in foreign exchange in respect of link charges for its Systems Division. The Assessing Officer disallowed the same holding that freight, insurance and telecommunication charges in respect of articles or things exported from India were to be excluded from the purview of export turnover. He therefore disallowed the entire amount. 4. Aggrieved by the order of Assessing Officer, the assessee preferred an appeal before the CIT(A), who allowed the same and the revenue preferred an appeal before the Tribunal, which was dismissed by the Tribunal. 5. Thereafter, the CIT u/s 263 of the I T Act examined the reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject matter of appeal before the CIT or the Tribunal and the Assessing Officer has not examined the issue at all. He therefore held that there was no application of mind by the Assessing Officer and therefore, the order of the Assessing Officer is erroneous and prejudicial to the interest of the revenue. 5.1 As regards the merits of the deduction, he held that the deduction u/s 10A is to be given from the total income and the total income is to be computed only after the set off of the losses of the current year or the carried forward losses. Thus observing he set aside the assessment order and directed the Assessing Officer to make a fresh assessment and to compute the deduction allowable u/s 10A in accordance with law and in the light ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the revenue, unless the view taken by the Assessing Officer is unsustainable in law. Thus, according to the assessee, since the Assessing Officer has examined the details and has adopted one of the views that the undertaking is eligible for exemption u/s 10A and the set off of the losses of every unit is not necessary, the order is not erroneous and prejudicial to the interest of the revenue. 7.1 As regards the merits of the issue, i.e. whether the loss of the non-STPI unit is to be set off against the profits of eligible STPI unit is concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's argument on merger of the assessment order with the Tribunal's order, he submitted that as the issue involved herein was not the issue before the CIT and the Tribunal, doctrine of merger does not apply. 9. Having heard both the parties and having considered the rival contentions and the material on record, we find that the assessee's argument is on two grounds; (1) that the assessment order has finally merged with the order of the Tribunal and (2) that the deduction u/s 10A is undertaking specific and therefore, the loss of non-eligible unit cannot be set off against the profits of the eligible unit. As regards the first argument is concerned, we are unable to agree with the contention of the learned counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee and the items enumerated in Chapter III are not forming part of the total income of the assessee at all. Thus, according to the Special Bench of the Tribunal, under the scheme of the Act, the profits of the unit eligible for deduction u/s 10A of the Act would form part of the income computed under the head Profits and gains of business and profession but however, in order that the same will not suffer tax, deduction will have to be made in respect of such profits while computing the income under the head profits and gains of business and profession and not from the gross total income as envisaged under Chapter VIA. Thus holding, the Tribunal held that the losses of a non-eligible unit cannot be set off against the profits of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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