TMI Blog2013 (11) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... ents in the case of Shirke Constructions Ltd.[2007 (5) TMI 194 - SUPREME Court], wherein it has been held that brought forward loss has to be adjusted before allowing deduction under section 80HHC. Treatment of expense regarding renovation of director’s office which being the rented premises, a capital expenditure of revenue expenditure – Held that:- In view of Explanation -1 to section 32(1) inserted from assessment year 1988-89, the capital expenditure incurred by way of renovation or extension or improvement even in rented premises has to be considered as owned by the assessee on which depreciation is allowable - Full details of expenditure has not been brought on record either in the order of AO or in the order of CIT(A). Further CIT(A) has also mentioned that copy of agreement with landlord had not been produced by the assessee which in our view is necessary in understanding the true nature of expenses - Matter requires fresh examination and hence restored this issue also, back to CIT(A) for passing a fresh order. - ITA No.3097/Mum/2007 ,ITA No.3631/Mum/2009 & ITA No.7275/Mum/2008 - - - Dated:- 20-3-2013 - H L Karwa and Rajendra Singh, JJ. For the Appellant : Shri D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income tax Act out of the profit from CRO activities and resultant business income was adjusted towards the brought forward business lossess. The assessee thus declared total income at nil after setting off losses from MT activities against normal business profit. The AO observed that deduction under section 10B was available to 100% export oriented undertakings in respect of profit from export of articles or things or computer software and deduction was available only to undertakings approved by the board appointed by the government. The AO noted that the assessee had filed application for approval as 100% EOU to the director STPI on 1.12.2003 and approval had been granted only by letter dated 5.12.2003. The AO, therefore, held that the assessee was not an approved undertaking for the purpose of deduction under section 10B in assessment year 2003-04. The AO also examined the activities and noted that in the CRO unit, assessee was only acting as co-ordinator and by no stretch of imagination, the activity could be considered as manufacturing /production of computer software for which deduction under section 10B was applicable. It was observed by him that any activity carried on wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 80HHE on technical grounds, he did not consider it necessary to decide the issue whether the assessee can be considered a manufacturer/producer of computer software as the same had become academic. Aggrieved by the decision of CIT(A), assessee is in appeal before the Tribunal. 5. Before us, the ld. AR submitted that for the purpose of deduction under section 10B, each unit has to be considered as separate undertaking and deduction has to be allowed before set off of brought forward losses of non eligible units as held by the Hon'ble High Court of Bombay in the case of CIT vs. Black Veatch Consulting (P) Ltd. (251 CTR 265). It was also submitted that in case there was loss in a unit eligible for deduction under section 10B, the same could be set off against profit of the non eligible business unit. For the said proposition, ld. AR placed reliance on the judgment of Hon'ble High Court of Bombay in the case of Hindustan Uniliver Ltd. vs. DCIT (325 ITR 102). It was pointed out that though the AO had considered the brought forward losses for the purpose of section 80HHE, CIT(A) had considered the same both in relation to deduction under section 10B and under section 80HHE. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Hon'ble High Court of Bombay in the case of CIT vs. Black Veatch Consulting (P) Ltd. (supra). The Hon'ble High Court of Bombay in case of Hindustan Uniliver Ltd. (supra), have also held that loss in eligible unit can be set off against profit of non eligible unit. However, in relation to section 80HHC, the Hon'ble Supreme Court in the case of Shirke Constructions Ltd. (292 ITR 380) have held that brought forward loss has to be adjusted before allowing deduction under section 80HHC. This judgment may be relevant in respect of claim of deduction under section 80HHE. In our view the matter requires fresh examination in the light of aforecited judgments at the level of CIT(A) who is also required to give finding on merit as to whether the activities of the assessee are eligible for deduction under section 10B and section 80HHE. Both parties had no objection if the matter was restored to CIT(A). We, therefore, set aside the order of CIT(A) and restore the issue of deduction under section 80HHE and under section 10B back to him for passing a fresh order after necessary examination and after allowing opportunity of hearing to the assessee. 7. The assessee has also raised dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te that the renovation has been done in the rented premises. However in view of Explanation -1 to section 32(1) inserted from assessment year 1988-89, the capital expenditure incurred by way of renovation or extension or improvement even in rented premises has to be considered as owned by the assessee on which depreciation is allowable. Therefore, it is required to be seen whether expenditure incurred was capital in nature. We find that full details of expenditure has not been brought on record either in the order of AO or in the order of CIT(A). Further CIT(A) has also mentioned that copy of agreement with landlord had not been produced by the assessee which in our view is necessary in understanding the true nature of expenses. In our view, the matter requires fresh examination and hence we restore this issue also back to CIT(A) for passing a fresh order after necessary examination in the light of observations made above and after allowing opportunity of hearing to the assessee. 12. ITA No.7275/Mum/08 (Assessment Year : 2003-04): The dispute raised by the assessee in this appeal relates to levy of penalty under section 271(1)(c) of the Income tax Act. The AO in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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