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TMI Blog2019 (5) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... ashipur Division. Income from SEZ Division is exempt u/s 10A(1A) of the Act. Assessee incurred loss in Kashipur Division but while computing income assessee has first claimed exemption u/s 10A(1A) of the Act and remaining income was used to set off current and brought forward loss. This claim of the assessee allowed by the Ld. A.O on the basis of his understanding of provisions of Income Tax Act and CBDT circulars issued on this issue and documents filed before him. However, Ld. A.O made disallowance u/s 14A of the Act at Rs. 61,43,940/- and also made disallowance for interest paid on Income Tax at Rs. 15,82,154/- and assessed loss at Rs. 2,40,10,826/-. Subsequently Ld. Principle Commissioner of Income Tax assuming jurisdiction u/s 263 of the Act perused the records and observed that the order passed by Ld. A.O u/s 143(3) of the Act dated 30.3.2015 is erroneous and prejudicial to the interest of revenue because it was made without proper enquiry, non application of mind and based on insufficient material. 3. Now the assessee is in appeal challenging the order of Principle Commissioner of Income Tax u/s 263 of the Act for wrongly assuming the jurisdiction even when proper enquiry w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on account of the failure on the part of the Assessing Officer to make necessary enquiries and passed order under section 263 of the Income Tax Act without appreciating the submission of the assessee company. Sir, we are filing herewith the following submission, which shall go to show that the Assessing Officer did not err while allowing the exemption, because he had fully applied his mind to the facts of the case. Ld. Counsel for the assessee submitted that specific enquiry were made by the Ld. A.O relating to claim of exemption u/s 10A of the Act and the same was replied in detail along with supporting documents on 3.2.2015 in support of the claim that firstly the exemption is claimed u/s 10A of the Act and the provisions of Section 71 & 72 relating to brought forward and carry forward losses are followed thereafter." That the assessee company also filed auditor's report under section l0A of the Income Tax Act, 1961 in Form No.S6F in response to the query during the assessment proceedings in which detailed calculation of deduction under section 1OA was given. Copy of the same is enclosed at page no. 100 to 102 of the paper book. That in the reply the assessee has refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2016) 29 ITJ 76 (TRIB. - AGRA) l. Uttam Construction Company VS. Asstt. Commissioner of Income Tax (2016) 28 ITJ 121 (TRIB. - RAIPUR) m. Commissioner of Income Tax & Anr V/s. M/s. Yokogawa India Ltd. 2016- TIO-228-SC-IT 391 ITR 274 n. Decision Craft Analytics Ltd. vis. Deputy Commissioner of Income Tax 2019- TIOL-542-ITAT-AHM. o. M/s. Scintillating Jewellery v/s. Pr. Commissioner of Income Tax-19, Mumbai 2019- TIOL-S70-ITA T -MUM. p. M/s. Bharoomal and Company Vs. Pr. Commissioner of Income Tax-22, Mumbai. 2019- TIOL-602-ITAT -MUM. q. Sanspareils Greenlands Pvt Ltd V/s Commissioner of Income Tax, Meerut and others. 2019-TIOL-379-ITAT-DEL. r. Commissioner of Income Tax vs. IYCO Electronics Tools India (P)Ltd (2012)80 CCH 0275 Kar HC (2012) 205 Taxman 0403. 5. Per contra Departmental Representative vehemently argued and supporting the order of Ld. Principal Commissioner of Income Tax. 6. We have heard rival contentions and perused the records placed before us and carefully gone through the judgments referred and relied by the Ld. Counsel for the assessee. Through this appeal the assessee has challenged the action of Ld. Principal Commissioner of Income Tax assuming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lculation of carry forward of losses and exemption u/s 10A should be as under:- A.Yr. Gross income/loss Addition made (order u/s 153A/143(3) Actual brought forward losses Remaining income/loss Deduction u/s 10A Eligible amount for carry forward to next year 2009-10 (-)10,26,99,579/- 268,13,973/- - (-)758,85,606/- No profit available (-)758,85,606 2010-11 (-)668,72,457/- 18,80,552/- (-) 758,85,606 649,91,905/- -do- (-) 14,08,77,511 2011-12 17,21,02,447/- 470,000/- (-) 14,08,77,511 316,94,936/- 312,24,936 470,000/- other than 10A 2012-13 934,42,221/- 77,26,096/- - 10,11,68,315 934,42,221 Rs. 77,26,094 In view of the above, the exemption u/s 10A should be restricted/allowed at Rs. 934,42,221/- for A.Y. 2012-13 in place of Rs. 12,51,79,200/- which was actually allowable. B. It is further found that disallowance of Rs. 15,82,154/- made under the head interest paid on income tax which was debited by the assessee in P&L A/c as finance cost. In view of section 115JB of Income Tax Act, the interest on income tax should be added back in the book profit for calculation of MAT u/s 115JB. Hence, the omission resulted in undera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation 1.-For the removal of doubts, it is hereby declared that, for the purposes of this subsection,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is apparent that the power of suomoto revision exercisable by Pr.CIT/CIT is undoubtedly supervisory in nature. Section 263 empower Pr.CIT/CIT to call for and examine the record of any persons under the Act. Pr. CIT/CIT has to satisfy between the twin conditions namely (i) whether the order of the Assessing Officer sought to be revised is erroneous and(ii) whether it is prejudicial to the interest of revenue. As held by Hon'ble Apex Court in the case of Malabar Industrial Company Ltd 243 ITR83(SC), that if any one of the conditions is missing i.e. if the order of the Assessing Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the interest of revenue, recourse cannot be had to provisions of Section 263(1) of the Act. Further if the Assessing Officer acting in accordance with the law, makes a certain assessment, the same cannot be branded as erroneous by Pr.CIT/CIT merely because according to him the order should have been written differently or more elaborately. The provisions of Section 263 of Act do not visualise the substitution of the judgment of the Pr.CIT/CIT for that of the Assessing Officer unless his order is not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f total income there are DTA Division, SEZ Division and Kashipur Division and total income has been worked out for each division. In this regard it is required to file complete copy of balance sheet/ profit and loss account for the previous year 2011-12 relevant to assessment year 2012-13 for each division. It is noticed that you have not maintained head office account and it appears the related to head office/administration have not been allocated for each division it is therefore not possible to work out correct income for each division as such the claim made u/s 1OA is also not correct. To file your explanation on this issue. (c) As regard claim u/s 10A the same has not been worked out in accordance with provision u/s 1OA of IT Act. It is seen from Annexure A to form no. 56F that total turnover of the business is declared as Rs. 6210438228/-/ total turnover of the undertaking at Rs. 2376488789/- and total profit derived by the business declared at Rs. 93442281/-. Therefore/ the income from industrial undertaking would be at Rs. 35756660/- i.e. (Rs. 93442281/- X Rs. 2376488789/)/6210438228/- eligible amount u/s 1OA is Rs. 50 of Rs. 17878330/whereas you have made claim of Rs. 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see independently prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving on the total income of the assessee from the gross total income. Hon'ble Court further hold that though Section 10A of the Act as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. Relevant extract of the judgment of the Hon'ble Apex court is reproduced below; "9. The amendment of Section 1OA of the Act, by the Finance Act, 2000 with effect from 1.4.2001, specifically uses the words 'deduction of profits and gains derived by an eligible unit...from the total income of the assessee'. There are other provisions of Section 10A, as amended, which could be suggestive of the fact that by the amendment made by Finance Act, 2000, Section 1OA had changed its colour from being an exemption section to a provision providing for deduction. Yet, Section 1OA continued to remain in Chapter III of the Act which Chapter deals with incomes which do not form part of the total income. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they describe." 10. The Revenue further contends that by virtue of the amendment made by Finance Act, 2000, deductions under Section l0A are required to be made and allowed at the stage of computation of total income under Chapter VI of the Act notwithstanding the absence of any specific provision in Chapter VI to the said effect. In fact, the Revenue contends that in view of the clear language of Section l0A, as brought about by the amendment, a parallel or consequential amendment in Chapter VI of the Act was wholly unnecessary. 11. On the other hand, on behalf of the assessee, it is contended that though there may be some features of deduction brought in by amendment to Section 10A, as for example, disallowance of profits in regard to domestic sales, the legislative intent in retaining Section 10A in Chapter III of the Act would clearly demonstrate the true nature of the said provision of the Act even after amendment thereof by Finance Act of 2000. Deductions from the total income which is nowhere envisaged under the Act and the reference to the total income of the undertaking, referred to in Section 2(45) has no application to the computation under Section l0A and the refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trued from the language used and not merely from the fact that it has been retained in Chapter Ill. The introduction of the word 'deduction' in Section l0A by the amendment, in the absence of any contrary material, and in view of the scope of the deductions contemplated by Section l0A as already discussed, it has to be understood that the Section embodies a clear enunciation of the legislative decision to alter its nature from one providing for exemption to one providing for deductions. 14. The difference between the two expressions 'exemption' and 'deduction', though broadly may appear to be the same i.e. immunity from taxation, the practical effect of it in the light of the specific provisions contained in different parts of the Act would be wholly different. The above implications cannot be more obvious than from the case of Civil Appeal Nos. 8563/2013, 8564/2013 and civil appeal arising out of SLP(C) No. 18157/2015, which have been filed by loss making eligible units and/or by non-eligible assessees seeking the benefit of adjustment of losses against profits made by eligible units. 15. Sub-section 4 of Section l0A which provides for pro rata exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d zones or 100 Export Oriented Undertakings, as the case may be, and this shall not have any material relationship with the other business of the assessee outside these zones or units for the purposes of this provision". 17. If the specific provisions of the Act provide [first proviso to Sections 10A(1); l0A (lA) and l0A (4)that the unit that is contemplated for grant of benefit of deduction is the eligible undertaking and that is also how the contemporaneous Circular of the department (No.794 dated 09.08.2000) understood the situation, it is only logical and natural that the stage of deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be premature for application. The deductions under Section l0A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be premature for application. The deductions under Section lOA therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income," 16.1. From the above judgment of the Hon'ble supreme court there remains no ambiguity that the assessee shall work out the deduction under section l0A of the Act from its total income before allowing the brought forward losses. We hold accordingly. Hence the ground of appeal of the assessee is allowed". 18. From perusal of the above judgments it is well established that in the instant case the assessee made correct claim by firstly taking the benefit of Section 10A of the Act for the profits earned from SEZ units and remaining profits of other units including SEZ unit were utilised for setoff of current and brought forward losses. It remains an undisputed fact that the Assessing Officer had made adequate enquires as noted herein above adopting one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Pr. Commissioner of Income Tax is correct and the directions given to the Ld. A.O to examine these issues two afresh is valid. We, therefore hold that since the Ld. A.O has not applied his mind on these two issues of correctly computation of book profit u/s 115JB of the Act as well as claim of addition of depreciation of Rs. 38,98,361/- on the old and used machinery, the finding of Ld. Principal Commissioner of Income Tax's jurisdiction u/s 263 of the Act on these two issues is uphold. 20. We therefore uphold the order of Principal Commissioner of Income Tax assuming jurisdiction u/s 263 of the Act only to the extent of direction given for computation of book profit u/s 115JB after considering the interest paid on income tax and direction to verify claim of additional depreciation on old and used machineries but we set aside the finding of Principal Commissioner of Income Tax regarding claim of exemption/deduction u/s 10A of the Act as per our finding given herein above holding that Ld. A.O has rightly allowed the benefit of exemption u/s 10A of the Act at Rs. 12,51,79,200/- after conducting sufficient enquiry. 21. In the result appeal of the assessee is partly allowed. The o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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