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2017 (9) TMI 556 - AT - Income TaxRevision u/s 263 - Calculation of deduction u/s 10A and 10AA - AO passed an order of assessment u/s 143(3) and did not set off the loss of taxable unit against the income of 10A and 10AA unit - order erroneous or prejudicial to the interest of the revenue - Held that:- AO while completing the assessment has called for complete details of calculation of deduction u/s 10A and 10AA of the Act. We have referred to the enquiries made by the AO in this regard in the earlier paragraphs of this order. In the light of the enquiries made by the AO in the course of assessment proceedings, we are of the view that the findings of CIT in para-4 of his order that the AO did not make necessary enquiries regarding the existence of a single account for various units or separate accounts of various units and about the nature of work of separate units, cannot be sustained. We also are of the view that the AO was fully conscious of the issue where provision of section 10A and 10AA of the Act were to be construed as deduction provision or exemption provisions and had in the course of assessment proceedings called for calculation of deduction u/s 10A and 10AA of the Act. In fact perusal of the order of assessment u/s 143(3) of the Act shows that the AO has disallowed the expenses claimed by the assessee by way of provision for leave encashment while arriving at the eligible provision of section 10A and 10AA units. It cannot therefore be said that there was any failure on the part of the AO for proper or adequate enquiries to claim deduction u/s 10A and 10AA before completing the assessment. Hon'ble Supreme Court in the case of CIT vs Yokogawa India Ltd. (2016 (12) TMI 881 - SUPREME COURT ) has taken the view that the provision of section 10A and 10AA of the Act are deduction provisions but the stage of deduction would be while computing gross total income of eligible undertaking under Chapter-IV of the Act and not at the stage of computation of total income under Chapter-VI of the Act. The effect of the aforesaid decision would be that the provision of set off and carry forward as contemplated under Chapter-VI of the Act would not be attracted and therefore intra head set off sought to be done by the CIT by seeking to rely on the provision of section 70(1) of the Act and seeking to restrict the deduction u/s 10A and 10AA of the Act to the extent of gross total income as contemplated u/s 80A(2) of the Act, cannot be sustained. - Decided in favour of assessee.
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