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TMI Blog2020 (3) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... , when the profits and gains of the business is computed in the first instance. The sum and substance of ratio laid down by the Hon ble Supreme Court and Hon ble Bombay High Court, is that the profit of eligible units claiming deduction u/s 10A/10AA of the Act, shall be allowed without setting off of losses of other units. Therefore, we are of the considered view that the AO, as well as the Ld.CIT(A) were erred in set off of loss of business from the profit of eligible units claiming deduction u/s 10AA before allowing deduction provided u/s 10AA of the Act, 1961. Hence, we direct the AO to allow deductions towards profit of eligible units u/s 10AA of the Act, without set off of loss of non eligible/other units. Appeal filed by the assessee is allowed. - ITA No.7574/Mum/2019 - - - Dated:- 4-3-2020 - Shri G. Manjunatha, Accountant Member And Shri Ravish Sood, Judicial Member For the Assessee : Shri V.Chandrasekhar And Shri Harshad Shah, AR s For the Revenue : Shri V.Vinod Kumar, DR ORDER PER G.MANJUNATHA (A.M): This appeal filed by the assessee is directed against, the order of the Ld. Commissioner of Income Tax (Appeals) 16, Mumbai, dated 30/10/2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case and in law, the Hon'ble CIT(A) erred in not allowing the set off of losses of non-eligible unit against the income of eligible unit before deduction u/s 10AA of the Act amounting to ₹ 1,68,97,503/- without considering the facts that the deduction u/s-10AA of the Act is to be claimed unit per se. 8. Without Prejudice to above, on the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in not allowing set off of losses of non-eligible unit against the income of eligible unit before deduction u/s- 10AA of the Act without considering the facts that in Appellants own case in earlier years, i.e. AY 2004-05 and AY 2005-06, the Hon'ble ITAT in ITA No.3333 3334/Mum/2010 dated 31.08.2012 held that it is plain and evident that the deduction u/s-10Ahas to be given at the stage when the profits and gains of business are computed in the first instance and the deduction is unit per se. 9. Without Prejudice to above, on the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in not allowing of set off of losses of non-eligible unit against the income of eligible unit before claiming deduction u/s- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequently reopened u/s 147 of the I.T.Act, 1961 and the assessment has been completed u/s 143(3) r.w.s. 147 of the I.T.Act, 1961, determining the total income at Rs. Nil , after set off of loss from business with profit of eligible units u/s 10AA of the I.T.Act, 1961. 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has challenged reopening of assessment, as well as contested the issues on merit, in light of the decision of Hon ble Supreme Court, in the case of CIT vs Yokogawa India Ltd (2017) 77 taxmann.com 41 and argued that profit of eligible unit claiming exemption u/s 10AA of the I.T.Act,1961, shall be allowed without set off of loss of other units. The Ld.CIT(A) after considering relevant submissions of the assessee, has rejected legal ground taken by the assessee challenging reopening of assessment, on the ground that if, a particular issue is brought to the notice of the Ld. AO by the audit party and the Ld. AO on his/her application of mind finds that the ground is valid, reopening of assessment cannot be quashed, merely because such ground was brought to the notice of the Ld. AO b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er VI of the Act. In other words, first the income/loss from various sources i.e. eligible and ineligible units, under the same head are aggregated in accordance with the provisions of section 70 of the Act. Subsequently, the income from one head is aggregated with the income or loss of the other head in accordance with the provisions of section 71 of the Act. Subsequent to giving effect to such mechanism deduction in accordance with the provisions of Chapter VI-A or sections I0A/10AA/10B of the Act shall be allowed in computing the total income of the taxpayer. 6.2.7 Also, it is important to be noted that the appellant has placed reliance on the decision rendered by the Hon'ble Supreme Court in the case of CIT vs, Yokogawa India Ltd [2017] 77 taxmann.com 41 (SC). In the decision Hon'ble Supreme Court has clearly pointed the computation of deduction taken u/s 10A of the Act. However, there is not a single point of view on the computation of deduction taken U/s 10AA of the Act. Therefore, that' case on which the appellant has placed its reliance on, does not fall within the Jour corners of the above said ca.se law as the facts of both the cases are different. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icted, Though the decision in Yokogawa was in the favor of the assesses the suggest amendment will take an overruling stride by making the deduction assessee wise ant] not eligible undertaking wise. Therefore as per die provision of sec 10AA of the act, the required eligibility to claim the deduction is; - First determine the profits and gains derived from SEZ unit Compute balance income and arrive at the gross total income Give effect to other deductions and arrive at total income as per the suggested amendment. Thereafter determine deduction under section 10 AA applying the formula provided, the profit from 10 AA is not exhausted by set off by losses from other units. 6.2.9 In view of the above facts and circumstances as discussed above and as the interpretation of the sec 10AA of the Act and the also the requirement of introduced the explanation on the set. 10AA of the Act. Also, no further evidences or arguments have been put forth by the appellant during the course of appellate proceedings, it is held that no interference is called for in the decision of assessing officer as the appellant has failed to discharge the onus required under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee from the gross total income. The Hon ble Supreme court, further held that though, section 10A, as amended is a provision for deduction, a 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 of the Act. The Hon ble Bombay High court in the case of Black and Veatch Consulting Pvt.Ltd.vs CIT(supra) has upheld similar position of law. The ITAT, Mumbai benches in assesee own case for earlier years has held that the deduction u/s 10A of the Act, has to be given at the stage, when the profits and gains of the business is computed in the first instance. The sum and substance of ratio laid down by the Hon ble Supreme Court and Hon ble Bombay High Court, is that the profit of eligible units claiming deduction u/s 10A/10AA of the Act, shall be allowed without setting off of losses of other units. Therefore, we are of the considered view that the Ld. AO, as well as the Ld.CIT(A) were erred in set off of loss of business from the profit of eligible units claiming deduction u/s 10AA of the Act, 1961, before allowing deduction provid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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