2013 (2) TMI 711 - HC - Income Tax

Whether deduction claimed by the assessee under Section 10A of the Income Tax Act 1961 should be allowed without adjustment of losses of other units and without adjustment of brought forward losses and/or its depreciation of earlier years - Decided in favour of assessee. See Commissioner of Income Tax Vs. Black and Veatch Consulting Pvt. Ltd. 2012 (4) TMI 450 - BOMBAY HIGH COURT as held Section 10A is a provision which is in the nature of a deduction and not an exemption - the deduction under Section 10A has to be given effect to at the stage of computing the profits and gains of business - Section 80B(5) defines for the purposes of Chapter VI-A gross total income to mean the total income computed in accordance with the provisions of the Act before making any deduction under the Chapter Decided against revenue.

Summary

Issues:
1. Whether deduction claimed under Section 10A of the Income Tax Act should be allowed without adjusting losses of other units or brought forward losses/depreciation.

Analysis:
1. The main issue in this case is whether the deduction claimed by the assessee under Section 10A of the Income Tax Act should be allowed without adjusting losses of other units and without adjusting brought forward losses or depreciation from earlier years. The Tribunal had decided in favor of the assessee, which was challenged by the Revenue.

2. The Tribunal considered the issue in light of a decision of the Bombay High Court in the case of Commissioner of Income Tax Vs. Black and Veatch Consulting Pvt. Ltd. The High Court had emphasized that Section 10A provides for a deduction and not an exemption, and this deduction should be given effect at the stage of computing profits and gains of business, before the application of provisions related to carry forward and set off of losses.

3. The decision of the Bombay High Court highlighted that the deduction under Section 10A should be allowed when computing profits and gains of business, and it cannot be telescoped with the provisions of Chapter VI-A related to deductions. The High Court emphasized that the deduction under Section 10A is distinct and separate, and any attempt to adjust it with other provisions would require a specific statutory provision, which is absent in this case.

4. The High Court affirmed the decision of the Tribunal, stating that the deduction under Section 10A should be given effect at the stage of computing profits and gains of business, and hence, the appeal by the Revenue was dismissed. The judgment in this case was followed in another case by the same High Court, further supporting the interpretation that the deduction under Section 10A should not be adjusted with other losses or provisions.

5. After perusing the statutory provisions in Section 10A of the Act and Section 80A, the Court found no reason to deviate from the interpretation given by the Bombay High Court. Consequently, the tax appeal was dismissed, upholding the decision that the deduction claimed under Section 10A should be allowed without adjusting losses of other units or brought forward losses/depreciation from earlier years.