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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 ..... ) TMI 191 - ITAT AHMEDABAD] it is well established that in the instant case the assessee made correct claim by firstly taking the benefit of Section 10A 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 of permissible view for allowing the assessee s claim for exemption u/s 10A before the claim of set off of brought forward and current year loss. Pr. CIT took a different view of the matter. However that would not be sufficient to permit Ld. Pr. CIT to exercise the power u/s 263 of the Act because when two views are possible and Ld. Pr.CIT does not agree with the view taken by the Assessing Officer, assessment order cannot be treated as erroneous and prejudicial to the interest of the revenue unless the view taken by the Assessing Officer not unacceptable in law. We therefore set aside the finding of Pr. CIT on this issue as it was a mere change of opinion which would not enable Ld. Pr. CIT to exercise jurisdiction u/s 263 as the A.O had considered the det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions 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 ₹ 61,43,940/- and also made disallowance for interest paid on Income Tax at ₹ 15,82,154/- and assessed loss at ₹ 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 was made by Ld. A.O. Following grounds have been raised; 01. That on the facts and in the circumstance of the case the learned Pr. Commissioner of Income tax was wrong in invoking the power of revision u/s 263 of the Income tax Act. 02. That, the learned Pr. Commissioner of Income tax-I, Indore fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 referred to section 10A(IA) and had explained that the deduction has been claimed on the profit of the SEZ unit and not on the total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Ca)) 328 (High Court of Calcutta) k. Khajrho Builders Construction Co.Ltd VS. CIT (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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also been completed u/s 263 and the claim of assessee for section 10A has been allowed after setting of brought forward losses. Hence, the assessee s claims of exemption u/s 10A for ₹ 12,51,79,200/- for the A.Y. 2012-13 should be allowed after setting off brought forward losses of earlier years. The correct calculation 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/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13-01-2012 FIL XEZ DTA Unit 20,68,106/- 206,811/- 3 26-03-2012 Satguru Polyfab Pvt. Ltd DTA Unit 150,51,853/- 15,05,185/- Total 389,83,611/- 38,98,361/- Since, assessee has purchased old and used plant machinery and claimed additional depreciation for the same was not allowable in view of provision of section 32. Hence, the excess depreciation of ₹ 38,98,361/- requires to be added . 7. In the above show cause notices issued u/s 263 of the Act Ld. Principal Commissioner of Income Tax has made following three observations; (1) That the assessee should have first set off the aggregate of loss of current years and brought forward losses against the available profits from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf under section 120; ( b ) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner; ( c ) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or] Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.- For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- ( a ) the order is passed without making inquiries or verification which should have been made; ( b ) the order is passed allowing any relief without inquiring into the claim; ( c ) the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substitution of the judgment of the Pr.CIT/CIT for that of the Assessing Officer unless his order is not in accordance with the law. As held by Hon ble Bombay High Court in the case of CIT V/s Gabriel India Ltd (1993) 203 ITR 108 (Bombay) that there must be some prima facie material on record to show that the tax which was lawfully eligible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation, a lesser tax than what has just has been imposed. 11. Now let us examine as to whether Ld. Principal Commissioner of Income Tax was justified in invoking the power u/s 263 of the Act on the three issues mentioned in the show cause notice. 12. As far as the issue relating to exemption of claim u/s 10A of the Act is concerned, we find that the assessee is running three units of which one is eligible for exemption u/s 10A of the Act. Assessing while computing total income has first claimed exemption on the profits of the said unit u/s 10A of the Act and the losses of remaining units as well as brought forward losses have been set off against the remaining income. This claim of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore/ the income from industrial undertaking would be at ₹ 35756660/- i.e. (₹ 93442281/- X ₹ 2376488789/)/6210438228/- eligible amount u/s 1OA is ₹ 50 of ₹ 17878330/whereas you have made claim of ₹ 125179200/-. It is required to file your explanation on this issue. 14. Against above questionnaire letter dated 9.2.2015 assessee made submission on 6.3.2015 giving justification of the exemption claimed u/s 10A of the Act which reads as follows; (d) As per section 10A(IA) of the Income Tax Act 1961, an undertaking which begins to manufacture or produce article or things during the previous year relevant to the assessment year 2003-04 in any Special Economic Zone, shall be entitled to claim 100 of its profit while computing its total Income. The company has started its production during the financial year 2003-04 and claimed deduction under section l0A (lA) in the financial year 2005-06. (e) Copy of Balance Sheet, Profit Loss account for the previous year 2011- 12 for OTA, SEZ Kashipur unit is enclosed here with. (f) As per section 10A(IA) of the Income Tax Act 1961, the amount of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. There are several Circulars that have been placed before us by the contesting parties to explain the purpose and object of the amendment. Having looked at the aforesaid Circulars, issued from time to time, what we find is a fair amount of ambiguity therein as to the true nature and effect of the amendment. Specifically, we may refer to Circular No. 7 dated 16.07.2013 as well as Circular No. 01/2013 dated 17.01.2013 which appear to be conflicting and contradictory to each other; in the former Circular t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lel 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 reference therein is only to the total income of the eligible unit/undertaking. The provisions of Section 10A(6), as amended by Finance Act of 2003 retrospectively with effect from 1.4.2001, has also been stressed upon to contend that with effect from the assessment year 2001-02 losses and unabsorbed depreciation of eligible units would be allowable for set off immediately on the expiry of the period of tax holiday i.e. 10 years. The provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lative 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 exemption, necessarily involving deduction of the profits arising out of domestic sales, is one instance of deduction provided by the amendment. Profits of an eligible unit pertaining to domestic sales would have to enter into the computation under the head profits and gains from business in Chapter IV and denied the benefit of deduction. The provisions of Sub-section 6 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The somewhat discordant use of the expression total income of the assessee in Section l0A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section l0A the aforesaid discord can be reconciled by understanding the expression total income of the assessee in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A 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 of permissible view for allowing the assessee s claim for exemption u/s 10A of the Act before the claim of set off of brought forward and current year loss. The Ld. Pr. CIT took a different view of the matter. However ..... X X X X Extracts X X X X X X X X Extracts X X X X
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