TMI Blog2010 (1) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... port of articles or things or computer Software. The set off of loss as mentioned in section 72 says that carry forward of the loss is to be set off against the profits and gains of any business or profession carried on by the assessee and assessable for the subsequent asst, year. Thus, 90% of the deduction as computed u/s 10B is admissible as per second proviso for the asst. year 2003-04 and 10% of such deduction becomes assessable for the asst. year 2003-04. Once such income becomes assessable for the asst. year 2003-04, then loss of earlier year can be set off in view of section 72(1)(i). Hence, the loss of asst. year 2001-02 is required to be set off as claimed by the assessee. - Decided in favor of assessee. - ITA No. 2319/Del/2008, - - - Dated:- 29-1-2010 - N.L. Kalra, George George K., JJ. B.K. Manjunath for the Appellant Jason P. Boaz for the Respondent ORDER N.L. Kalra:- 1. The assessee has filed an appeal against the order of learned CIT(A)-XXI, New Delhi. The assessee made a request for transfer of appeal from Delhi to Bangalore and accordingly, President, ITAT vide order dated 13th April, 2009 transferred the appeal from Delhi to Bangalor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs.6,36,91,180/- in respect of different heads. The details are available in Annexure-22 of the balance sheet. Except for traveling, the AO has allowed all the expenses included in the provision for expenses. Before the learned CIT(A) the assessee has filed the details of traveling expenses for which provision was made for the financial year 2002-03. As per the details filed before the learned CIT(A), the expenses were to the extent of Rs.72,15,722/-. Before us, the learned AR submitted that the details were filed to show that the provision was made for the expenses which have been incurred during the year and for which no details were received till the end of the financial year. 2.4 The Hon'ble Apex Court in the case of Bharat Earth Movers v CIT 245 ITR 428 have referred to the principle laid down by the Hon'ble Apex Court in the case of Metal Box Company of India Ltd. 73 ITR 53. Such principles have been reproduced as under as contained in the decision of Bharat Earth Movers (supra):- (i) For an assessee maintaining his accounts on the mercantile system, a liability already accrued, though to be discharged at a future date, would be a proper deduction while working o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred for the purposes of business. We had gone through the details. The details contained the description of process description. It also contained the details of places visited. It also contained the date of travel. It also contained the details of ticket expenses, boarding and lodging and other expenses. It also contained the details of employees who have claimed the expenditure. In case the assessee was not in a position to produce the voucher then ledger account of subsequent year would have helped the AO to estimate the disallowance, which was required to be made. It is not the case of the revenue that all the payments were made through cash. The bank account would have definitely showed the parties to whom such payments have been made. In case vouchers are not produced, then the alternative was to estimate the disallowance to be made and it was not justified to disallow the entire provision. 2.7 The Hon'ble Mumbai Bench in the case of ACIT v Shri Shekar Suman disallowed 20% of business promotional expenses on the ground that the assessee has failed to provide vouchers. 2.8 The Hon'ble Delhi Bench in the case of M/s Biotech International Ltd. v DCIT upheld the disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned AR has filed a paper book containing 15 pages. Page numbers 10 to 12 contains the copy of the assessment order for the asst. year 2001-02. The learned AR drew our attention to page no.2 of the assessment order for the asst. year 2001-02. The assessee filed a revised return and in the revised return, it was mentioned that he is withdrawing the claim of exemption u/s 10B of the Act. The learned AR therefore submitted that the assessee has not claimed exemption u/s 10B in respect of the unit for the asst. year 2001-02. Hence, the loss for the asst. year 2001-02 was in respect of the unit, which was not considered as a unit for which exemption u/s 10B was available. Thereafter, the learned AR drew our attention to the computation of taxable income for the asst. year 2002-03. In the computation of income, it is mentioned that the assessee has decided to avail the option of not claiming deduction u/s 10B of the IT Act. It was therefore mentioned that the losses for the asst. years 2001-02 and 2002-03 should be carried forward to set off against profits of the assessee in accordance with the provision of section 10B/section 32 and section 72 of the I.T. Act. The learned AR th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h includes 'any asst. year' within the period of 10 consecutive asst. years referred to in section 10B. The first issue is as to whether the declaration which the assessee has filed with the revised return for the asst. year 2001-02 can be termed to have complied in accordance with section 10B(8) of the IT Act. Subsection 7 of section 80IA also mentions that deduction is not admissible unless report in the prescribed form is furnished along with the return of income. The Hon'ble Delhi High Court in the case of CIT v Moser Bear India Ltd. and also in the case of CIT v Web Commerce (India) P. Ltd. 318 ITR 135 held that filing of declaration is mandatory and the time limit is directory. The Hyderabad Bench in the case of Techtran Polylenses Ltd. v. ITO 113 TTJ 1007 held that the provision is procedural and declaration can be filed after filing of return. The Hon'ble Apex Court in the case of CIT v SPEL Semi Conductors Ltd. 320 ITR 21 (St.) dismissed the SLP of the revenue against the judgement of the High Court in which the Hon'ble High Court held that audit report can be filed before framing the assessment. Hence we hold that the requirement of section 10B(8) is satisfied in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is also excluded from the total income. Hence, for the asst. year before the asst. year 2001-02, the Income Tax Act provide that profits and gains as referred to in sub-section 10B(1) were not to be included in the total income of the assessee. Hence, the decision of the Hon'ble jurisdictional High Court in the case of Himatasingike Seide Ltd. (Supra) will be applicable as per the provisions of the Act, which were effective upto the asst. year 2000-01. In view of exemption made in section 10B by the Finance Act 2000 w.e.f. 1/4/2001 one has to consider the allowability of deduction u/s 108 and one has not to consider exemption u/s 10B. 3.10 Exemption u/s 10B was allowable to 100% export oriented undertaking. An amendment was made by the Finance Act, 1994 in which it was made clear that in case the export oriented undertaking exports atleast 75% of the turnover then exemption u/s 10B will be allowable. By Finance Act, 2001, proviso to sub section 1 was omitted vide which the assessee was allowable of exemption u/s 10B in case 75% of the turnover is exported. After omitting the proviso to section 10B(1), another sub-section 4 of section 10B was substituted according to which, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sider the implication of declaration u/s 10B(8) read with section 72(1)(i) and therefore loss of the undertaking cannot be set off against profit and gains of subsequent year because such loss of earlier year has to become part of total income of subsequent year. 3.12 By the Finance Act, 2003, it was provided u/s 10B(6)(ii) that carry forward and set off of loss has been restricted to unabsorbed depreciation and losses relating to any of the asst. years up to asst. year 2000-01. The Board Circular vide Circular No.7 of 2003 dated 5th September, 2003 mentioned in para 20.2 that restriction on the carry forward of business loss and unabsorbed depreciation has been done away with effect from April 1, 2001. It means that unabsorbed depreciation and loss of asst. year up to 2000-01 is to be set off. 3.13 The Bangalore Bench in the case of Mind Tree Consulting P. Ltd. v ACIT 102 TTJ has held that income of unit eligible for deduction u/s 10B is merely a deduction from income and not exemption and accordingly, the assessee is eligible to set off of loss of such unit u/s 70 and 71 of the I.T. Act. We had already pointed out that as per section 10B(8) provisions of section 10B are. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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