TMI Blog2009 (2) TMI 846X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in reducing the amount of ₹ 23,65,209/- in computing the amount of the said deduction allowable u/s 10A of the Act. 3. Before us, learned counsel for assessee submitted that the learned CIT(A) is not justified in holding that the provisions of sec.10A(3) were not complied with despite the fact that the sale proceeds were received by the assessee in India. He further submitted that the learned CIT(A) has totally ignored that the export proceeds were subsequently realized and the letter granting extension of time was obtained from the authorized dealer to realize the export proceeds. He further contended that an application was made to the authorized dealer for extension of time for realization of the said amount in terms of sec.10A(3) of the Act. Therefore, the aforesaid amount cannot be reduced from the export turnover. The learned counsel for assessee, in the paper compilation, filed relevant letters which are found at pages 1 to 17. We have also had the benefit of going through the letters issued by the Reserve Bank of India dated 19-11-2002. The assessee approached the authorized dealer HSBC by letter dated 5-5-2006. The authorized dealer informed the assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... election and application of accounting policies are the following namely:- i. Prudence-Provisions should be made for all known liabilities and losses even though the amount cannot be determined with certainty and represents only a best estimate in the light of the available information; ii. Substance over form-The accounting treatment and presentation in financial statements of transactions and events should be governed by their substance and not merely the legal form; iii. Materiality-Financial statements should disclose all material items, the knowledge of which might influence the decisions of the user of the financial statements. It was further submitted that the assessee booked the loss in the financial year 2001-02 as required under the Accounting Standards issued u/s 145(2) of the Act. The same has to be allowed in the assessment year 2002-03. Therefore, the assessee is perfectly justified in claiming that the amount has to be considered in the assessment year 2002-03. It is ordered accordingly. 6. The other issue raised in ground No.5 need not be answered as we are allowing the ground No.4. 7. The next issue relates to disallowance of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income. It is true that an issue identical to the issue under reference has been decided by this Bench in the case of Yokogava India Ltd.(supra). In that case it was held that exemption u/s 10A is to be allowed without set off of loss of non 10A units. 10. The total income chargeable u/s 5 is not the same as the gross total income defined in section 80B(5) as has been held by the Jammu and Kashmir High Court in the case of CIT vs. Mohd. Amin Tyamboo (125 ITR 375). Learned Madhya Pradesh High Court in the case of CIT vs. Nanakram (1990) Tax 98(3)-437 has held that the total income defined in Section 2(5) includes both positive or negative profits. In the instant case, the assessee is having two units. In respect of one unit, the assessee is claiming exemption u/s 10A and the other unit is domestic unit. Unabsorbed depreciation and brought forward loss is in respect of domestic unit. Hence while computing total income from the 10A unit, the same is to be computed as per the provisions of the Act. The learned jurisdictional High Court in the case of Himatsingike Seide Ltd. (supra) interpreted the word 'total income' as appearing in section 10A. In the case before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e total income of the company.' 13. Learned Apex Court held that the object in enacting section 80E is properly served only by confining the application of the provisions of that section to the profits and gains of a single industry. The learned Apex Court observed that a distinction must be drawn between a case where the loss or unabsorbed depreciation relates to the same industry whose profits and gains are the subject of relief under section 80E and a case where the loss or unabsorbed depreciation relates to industries other than the one whose profits and gains constitute the subject of relief. The Apex Court confirmed the decision of the Karnataka High Court. 14. As per section 10A(1), the assessee is entitled to deduction of profit and gains from the undertaking which is entitled for deduction. It is mentioned that such deduction is subject to provisions of section 10A. It is nowhere mentioned in the section that such deduction should be restricted to the total income of the assessee computed under the provisions of the Act before allowing such deduction. Wherever the legislature wanted to restrict the deduction, the legislature has provided such restriction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er chapter VIA. Income of 10A unit has to be treated on the same footing as agricultural income. Reliance was placed on the decisions of Hon'ble Calcutta High Court reported in 132 ITR 822, Hon'ble Karnataka High Court reported in 102 ITR 320 and Hon'ble Supreme Court reported in 187 ITR 108. It was contended that loss suffered in 10A unit cannot be set off against the income of non 10A unit and such loss would be eligible to be carried, forward. After due consideration of rival submissions, the CIT(A) had opined that the word 'deduction' in the amended provisions of section 10A has to be considered as an exemption. Even if it is argued that section 10A provides for a deduction, deduction is required to be done at the source level from the total income and not after computing gross total income. The 'total income' in this context would mean global income of the assessee. Hence, income eligible for deduction u/s 10A would not enter gross total income as it is to be deducted at source level itself. In the circumstances the brought forward and current year losses of non 10A unit cannot be set off against the income of 10A unit and, accordingly, AO was direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption u/s 10A is to be allowed without set off of loss of non 10A units. ................................... ................................... Keeping in view the discussion as contained in earlier paragraphas, it is held that learned CIT(A) was justified in directing the Assessing Officer to allow deduction u/s 10A without setting off brought forward and current year losses of non 10A unit. 9. The decisions of Hon'ble Tribunal (referred supra(2) and 3) on which the assessee placed strong reliance, had occasion to deal with similar issues and decided in favour of the respective assessee. Respectfully following the decisions of the Hon'ble Tribunal cited supra, we decide the issues in ground Nos. 1 and 2 in favour of the assessee. The aforesaid decisions are squarely applicable to the facts of the case. We, therefore, applying the same, direct the AO to allow the assessee set off of unabsorbed depreciation and unabsorbed business loss before allowing deduction u/s 10A of the Act. It is ordered accordingly. 10. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 13.02.2009. ..... 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