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2008 (1) TMI 480 - AT - Income TaxComputation of deduction u/s 10B - setting off of carried forward business loss - profits and gains derived by the undertaking - 100 per cent subsidiary - HELD THAT:- We do not agree with the contention of the learned counsel for the assessee that the second proviso to s. 10B of the Act has to be applied directly and immediately on the gross business profit before taking into consideration the brought forward unabsorbed business losses. If this procedure of computation is adopted, it will result in absurd results because 10 per cent of taxable income gets worked out even before considering the set off of brought forward losses against the business profits. If this procedure is applied and upheld by the Courts, this will result in the taxation of much higher income in the hands of various assessees for the asst. yr. 2003-04, if such assessees do not have any brought forward losses/depreciation. Such a situation is not contemplated under the provisions of s. 10B of the Act. We find that the provisions of s. 10B of the Act are very clear on this issue and if there is any doubt, the same gets clarified if this provision is understood in the light of the position of law applicable to the similar other provisions of the Act. The situation contemplated by the assessee could have been possible only in the period before 1st April, 2001 when there was controversy whether brought forward losses are allowable to be set off against eligible profits under s. 10A/10B or not. The aforesaid controversy is no more after 1st April, 2001, because these provisions have now been amended and brought them on par with the other exemptions/deductions allowed under Chapter VI-A of the Act. As per the settled law, all the brought forward losses and depreciations are first required to be set off against the business profits of the current year before computing any deduction/exemption under the Act. Thus, we are of the considered opinion that the CIT(A) was justified in confirming the finding of the AO. Accordingly, we uphold the impugned order. In the result, the appeal of the assessee is dismissed.
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