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2017 (1) TMI 315 - AT - Income TaxRevision u/s 263 - directing the Assessing Officer to set off the brought forward losses, as per CBDT Circular dated 16/07/2013 and then worked out the deduction u/s 10A of the Act and reexamine the claim on admissibility of loss on disposal of investments - Held that:- Section 10A, as amended, is a provision for deduction, the 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. All the appeals shall stand disposed of accordingly. Thus, the Hon'ble Supreme Court held that no adjustment of brought forward losses/unabsorbed depreciation of the eligible unit shall be made before allowing deduction of profits of the eligible unit, which is to be allowed under chapter-IV of the Act without resorting to the adjustments as contemplated under chapter VI of the Act, thus, now, the issue of proceedings u/s 263 of the Act by the CIT on the first issue of adjustment of brought forward losses/unabsorbed depreciation of the eligible unit against the profits of the current year of the eligible unit is academic in nature in view of binding decision of Hon'ble Supreme Court in the case of CIT vs Yokogawa India Ltd. ( 2016 (12) TMI 881 - SUPREME COURT ) and hence the said proceedings u/s 263 of the Act have become in-fructuous. For adjustment of losses we are in agreement with the contentions of the ld. counsel for the assessee that So far as, loss on the investment of ₹ 22,36,163/- being writing off to the profit & loss account of the assessee and claimed as deduction from the profits of the eligible unit, which was stated to be incurred by the assessee in order to attract the Indian diaspora to its website, the assessee/STPI Unit has to spend aggressively on brand building and advertising outside India and for this purpose the assessee/STPI Unit has three hundred percent subsidy in three markets UK, U.S.A. & U.A,E and during impugned Assessment Year under appeal, the assessee has closed 100% subsidiary in UAE and incurred loss on investment of ₹ 22,36,163/- is charged to P & L Account of STPI. Thus, it was submitted before us that the profit of STPI Unit of ₹ 16,88,45,731/- is after such loss reduced from the profit of the company. We have observed that the Assessing Officer has duly considered the said facts which were submitted before the Assessing Officer during the course of hearing by letter dated 27/02/2014, which is placed on paper book at page no.39 and conscious decision was taken by the Assessing Officer before allowing the said loss. Even if the said loss is disallowed, the same will enhance profits of eligible undertaking by ₹ 22,36,163/-, which in any case is exempt u/s 10A of the Act keeping in view decision of Hon'ble Bombay High Court in the case of Black & Veatch Consulting Pvt. Ltd.(2012 (4) TMI 450 - BOMBAY HIGH COURT). Now the Revenue has also come out the Circular No.37/2016 dated 02/11/2016, wherein, it has been decided by the CBDT that any additions made on account of provisions u/s 32, 40(a)(ia), 40A(3), 43B, etc. to the income of the eligible unit shall not be contested by Revenue as it has the effect of increasing the profits of eligible unit, which in any case is deductible due to the exemption granted under the Act and hence it is decided to withdraw/not pressed such appeals. The sanctity and mandate of the aforesaid circular is to avoid unnecessary litigation in case where there is increase in profits of eligible units due to disallowance made by the Revenue, which in any case is entitled for exemption/deduction as contemplated for eligible unit. Hence, the whole exercise as contemplated by proceedings u/s 263 are academic in nature and cannot be allowed to proceed and is hereby quashed. - Decided in favour of assessee
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