2007 (9) TMI 304 - AT - Income Tax

Summary

Issues Involved:
1. Exemption under s. 10A/10B.
2. Carry forward of unabsorbed depreciation and losses.
3. Withdrawal of exemption claim under s. 10A/10B.
4. Thrusting of exemption by AO.

Summary:

1. Exemption under s. 10A/10B:
The assessee claimed exemption u/s 10A/10B for the assessment year 2001-02. The AO allowed the exemption u/s 10B, stating that the assessee satisfied all conditions for exemption under this section. The CIT(A) confirmed the AO's decision.

2. Carry forward of unabsorbed depreciation and losses:
The AO denied the carry forward of unabsorbed depreciation and business losses amounting to Rs. 20,91,03,841, citing the non obstante clause in s. 10B(6), which excludes the operation and applicability of other provisions in the Act when exemption under s. 10B is allowed. The CIT(A) upheld this view.

3. Withdrawal of exemption claim under s. 10A/10B:
The assessee filed a letter during assessment proceedings requesting the withdrawal of the exemption claim under s. 10A/10B. The AO rejected this request, stating that the declaration for non-applicability of s. 10A/10B should have been filed before the due date for furnishing the return of income u/s 139(1). The Tribunal found that the requirement to file the declaration before the due date is procedural and not mandatory, allowing the assessee to withdraw the claim during assessment proceedings.

4. Thrusting of exemption by AO:
The Tribunal held that the AO cannot thrust the exemption provided under s. 10B upon the assessee. The Tribunal referenced the decision in Moser Baer India Ltd. vs. Jt. CIT, which stated that the requirement for filing the declaration as per s. 10B(7) is directory and not mandatory. Therefore, the AO's action of allowing the exemption despite the assessee's withdrawal request was not justified.

Conclusion:
The Tribunal set aside the orders of the lower authorities, allowing the assessee to withdraw the claim under s. 10A/10B and directed the AO to recompute the total income, allowing the carry forward and set off of depreciation/losses in accordance with law. The appeals were allowed for statistical purposes.