TMI Blog2007 (6) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CIT(A) that s. 10B is a secluded provision cannot be accepted. Had it been a case where total exclusion from income was provided for, then perhaps, the observation of the CIT(A) that such income cannot be taken into consideration for set off under s. 70, 71 or 72 would have been proper. In the light of these provisions, we are inclined to agree with the contentions of the learned counsel and accordingly we direct the AO to consider the set off of unabsorbed business losses and depreciation after availing deduction u/s 10B of the Act. We also agree with the contention that s. 10B(6) is applicable only for the last year of deduction and not for the earlier years of deduction. Accordingly, the claim of the assessee is allowed. Disallowance on loss - HELD THAT:- In case the expenditure cannot be linked to any assets, to the extent certain expenditure relates to development of a particular software, such expenditure should be taken as cost of development of that particular software and allowed to be set off against the income from that software. In case it is a general expenditure which cannot be apportioned to any asset or any particular software, such expenditure is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other undertaking cannot be set off against this profit. He also held that carry forward of loss or unabsorbed depreciation cannot also be allowed since this unit is secluded for all purposes. Thus he confirmed the action of the AO. 3. The submission of the learned counsel was that this was the first year for the claim of deduction under s. 10B for the assessee. The assessee had unabsorbed business loss and unabsorbed depreciation of earlier two years. The first argument of the learned counsel was to distinguish the present provision contained in s. 10B with the provision contained in the earlier s. 10B. It was pointed out that in the earlier provision the word "exemption" was used whereas in the present provision, the word "deduction" has been used. Thus the contention was that whatever balance is left after claiming deduction under s. 10B of the Act, the same should be available for set off of earlier years' losses and depreciation. Referring to sub-s. (6) of s. 10B, it was pointed out that the carry forward of loss and depreciation was not allowed only after availing the deduction under s. 10B in the last year of the several years in which the deduction was available. In othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the total income of a person. In other words, these incomes do not enter the computation part at all. Subsequently also when s. 10A was first introduced by the Finance Act, 1981 w.e.f. 1st April, 1981, the said provision provided for total exemption of the income described in s. 10A. Similarly, when s. 10B was introduced for the first time by the Finance Act, 1988 w.e.f. 1st April, 1989, sub-s. (1) thereof provided for a clear exclusion of the income referred to in the said section from the total income of an assessee. Since these provisions provided for total exclusion from the total income, they were grouped along with s. 10 in Chapter III of the Act. However, later on, the nature of relief provided by these sections underwent a sea change insofar as that total exclusion of the income was removed and only deduction was provided for. This is clear from the language used in s. 10A, s. 10AA, s. 10B and s. 10BA. Again, s. 10C provides for total exclusion of the income derived by assessee from an industrial undertaking in any Integrated Infrastructure Development Centre or Industrial Growth Centre located in the North-Eastern region. Thus, wherever the legislature has intended f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s India (FITSI)". This loss was disallowed by the AO on the ground that the assessee has not yet commenced its business. The CIT(A) agreed with the AO that the claim of the assessee is not allowable since the commercial production has not commenced in the relevant previous year. However, he went a step further to observe that it does not mean that deductions cannot be allowed against the profits even in the future years. While making this observation he gave detailed direction to the AO to the effect that to the extent the expenditure relates to capital assets, the assessee is to capitalize the same and claim benefit of depreciation in the following years. In case the expenditure cannot be linked to any assets, to the extent certain expenditure relates to development of a particular software, such expenditure should be taken as cost of development of that particular software and allowed to be set off against the income from that software. In case it is a general expenditure which cannot be apportioned to any asset or any particular software, such expenditure is to be capitalized and allowed over next four years @ 25 per cent. Thus, it can be seen that the CIT(A) did not stop at mer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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