TMI Blog2010 (3) TMI 944X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction is that an order passed by the assessing authority cannot be held to be erroneous, if the officer has followed one of the possible views on the subject. But this principle by and large applies to questions of fact. When it comes to questions of law, the law laid down by the competent constitutional courts has to be invariably followed. It is a settled law that when the hon'ble Supreme Court or a High Court declares the law on a subject, the declaration goes back to the date of enactment of that particular law so as to state that the law, from the date of its enactment itself was in the manner decided by the court subsequently. When that universal rule of interpretation is accepted, we have to hold that unabsorbed depreciation and brought forward losses have to be set off against the profits while computing the deduction u/s 10A and this position of law has to be reckoned from the date of the enactment of the law itself. Therefore, the necessary finding is that even when the AO was passing the assessment order, the law on the subject of exemption available u/s 10A was always the law as explained by the hon'ble High Court in the case of CIT v. Himatasingike ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier assessment years. After hearing the assessee in detail and examining the materials available on record, the Commissioner of Income-tax came to the conclusion that the assessment order passed by the assessing authority was erroneous and prejudicial to the interests of the Revenue. He, accordingly, set aside the computation of deduction under section 10A and directed the Assessing Officer to revise the deduction after setting off the business loss/unabsorbed depreciation relating to the earlier assessment years. The assessee is aggrieved and, therefore, this appeal before us. The grounds raised by the assessee in this appeal read as below: (i) There was no error in the order passed under section 143(3) of the Income-tax Act, 1961, dated December 18, 2006 and therefore the condition for applicability of the provisions of section 263 of the Income-tax Act, 1961, being absent, the order appealed against being bad in law and liable to be quashed. (ii) In any case and without prejudice, the issue now considered in the order under section 263 of the Income-tax Act having been considered by the learned Commissioner of Income-tax (Appeals) vide order passed on March 19, 2009, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther 10A units : (i) I Gate Global Solutions Ltd. v. Asst. CIT I. T. A. No. 248 and 249/ Bang/2007, dated November 27, 2007 [2007] 112 TTJ (Bangalore) 1002. (ii) Tata Consultancy Services Ltd. v. Asst. CIT I. T. A. No. 590/Bang/ 2008, dated November 14, 2008 [2009] TIOL-41-ITAT-Bang. He further pinpointed his arguments on the basis of the following decisions where it has been held that deduction under section 10A should be allowed in respect of the profits of 10A unit without reducing the brought forward losses and unabsorbed depreciation of the same unit : (i) KPIT Cummins Infosystems (Bangalore) P. Ltd. v. Asst. CIT [2008] 26 SOT 529 order dated August 29, 2008, ITAT, Bangalore Bench ; (ii) ITO v. Crimson Logic India P. Ltd. I. T. A. 1130/Bang/2008, dated May 1, 2009, ITAT, Bangalore Bench ; (iii) ITO v. Infotech Global (India) Ltd., I. T. A. No. 279/Bang/2009, dated July 17, 2009, ITAT, Bangalore Bench ; (iv) 24/7 Customer Pvt. Ltd. v. CIT I. T. A. No. 295/Bang/2009, dated August 7, 2009, ITAT, Bangalore Bench ; (v) Changepond Technologies P. Ltd. v. Asst. CIT [2008] 22 SOT 220 (Chennai) ; (vi) Lason India P. Ltd. v. ITO [2008] 301 ITR (AT) 306 (Chennai) ; (vii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the assessing authority has adopted one of the possible views on a subject, then the view taken by the assessing authority cannot be held to be erroneous. If that ratio is applied in the present case, it is the case of the learned chartered accountant that the order passed by the assessing authority cannot be held as erroneous. If the order of the Commissioner of Income-tax under section 263 is to be justified, it is necessary that the order passed by the assessing authority must be erroneous and prejudicial to the interests of the Revenue. If any of the above limbs is absent, then action under section 263 is not sustainable in law. In the present case, the learned chartered accountant pointed out that the order passed by the Assessing Officer not being an erroneous order, cannot be, therefore, held to be amenable to the jurisdiction of the Commissioner of Income-tax under section 263. In this regard, the learned chartered accountant has further referred to a circular issued by the Central Board of Direct Taxes where it has been suggested that the computation of deduction under section 10A should be made without setting off brought forward losses and unabsorbed depreciation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter setting off brought forward business losses/unabsorbed depreciation relating to the assessment years and the deduction under section 10A has to be worked out after setting off brought forward losses/unabsorbed depreciation. The learned Commissioner submitted that the above view has been upheld by the hon'ble jurisdictional High Court in the case of CIT v. Himatasingike Seide Ltd. [2006] 286 ITR 255, where the court has held that unabsorbed depreciation and unabsorbed investment allowance have to be adjusted against the current year's profit of the export oriented undertaking for the purpose of computing deduction under section 10B. The learned Commissioner further relied on the decision of the ITAT, Delhi "C" Bench in the case of Global Vantedge Pvt. Ltd. v. Deputy CIT [2010] 2 ITR (Trib) 326 (Delhi) where the Tribunal has held that the unabsorbed depreciation or unabsorbed business losses in respect of eligible 10A unit has to be set off against the profits for determining the amount of deduction available under section 10A. He stated that the Delhi Bench has considered the binding decision of the Karnataka High Court in the case of CIT v. Himatasingike Seide Ltd. [2006] 286 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee under section 10B has to be allowed before setting off unabsorbed depreciation and unabsorbed investment allowance. After examining the framework of law dealing with exemption under section 10B, their Lordships held that section 10B cannot be read in isolation of other provisions. This is only an exemption provision. The court went on to explain that after taking into consideration the unabsorbed depreciation, an assessee may get exemption but to a lesser extent and none the less it could not take only a portion of the depreciation just to suit its income for the purpose of nil liability and adjust the balance of unabsorbed depreciation against other business income. The ratio laid down by the hon'ble High Court of the Karnataka is equally applicable to the provisions of law contained in section 10A as well. The intent and purpose of the scheme of exemption provided in sections 10A and 10B are analogous and obviously the judgment of the hon'ble Karnataka High Court rendered in the context of section 10B is equally applicable to section 10A. The Income-tax Appellate Tribunal, Delhi "C" Bench has followed the said judgment of the Karnataka High Court in deciding the matter aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smuch as the error has contributed in granting excessive relief to the assessee. We also accept the arguments of the learned Commissioner of Incometax on the question whether the issue was sub judice before the Commissioner of Income-tax (Appeals) at the time of passing the revision order and reject the contention of the assessee. It is not out of context here, to refer to the decision of the Income-tax Appellate Tribunal, Bangalore Bench rendered in the case of KPIT Cummins Infosystems (Bangalore) P. Ltd. v. Asst. CIT [2008] 26 SOT 529. In the said decision, the Tribunal has held in favour of the assessee, accepting the argument that brought forward loss/unabsorbed depreciation need not be set off against profits eligible for deduction under section 10A. In fact, one of us was a party to that order. But, in the course of arguments, we found that the said order might not be reflecting the correct position of law. We have no hesitation to state so, as we do not believe that perpetuating a mistake is heroism. Therefore, in the facts and circumstances of the case, we hold that by virtue of the supervening intervention on the declaration of law, made by the hon'ble Karnataka High ..... X X X X Extracts X X X X X X X X Extracts X X X X
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