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TMI Blog2012 (3) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... ue in this appeal : "(A) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in deleting the addition made by the Assessing Officer towards royalty payment of Rs.2,06,77,545/even though the Assessing Officer has given a clear finding that the payment of royalty was only a self serving arrangement to pass on substantial financial benefits to the sister concern of the Assessee Company and further no benefit was derived by using the trade mark for which the alleged payment of royalty was made by the Assessee Company? (B) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in allowing deduction of Rs.5,65,77,087/claimed by the Assessee Company under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is entitled to a deduction under Section 10B. The previous year relevant to Assessment Year 200506 was the first year of production in the unit. During the year under consideration, the assessee disclosed a total profit of Rs.16.82 crores from business. From this profit, a loss of Rs.5.56 crores sustained by the hundred percent EOU was reduced. The loss in the EOU was principally on account of current depreciation which was set off against the profits of the EOU. After reducing the loss sustained by the EOU against the profits of other units, the assessee disclosed a net taxable income of Rs.10.76 crores. The Assessing Officer held that a deduction under Section 10B has to be given in respect of the profits of the undertaking independ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case, the assessee not having submitted such a declaration, it was submitted that it would be bound by the provisions of Section 10B which would preclude the setting off of a loss suffered by the eligible unit against the income of other units. 5. At the outset, while dealing with the submission which has been urged on behalf of the Revenue, it must be noted that Section 10B when it was originally introduced by the Finance Act, 1988, with effect from 1 April 1989, provided for an exemption of the profits and gains derived by the assessee from a hundred percent export oriented undertaking. The earlier provision specifically stipulated that profits and gains derived by an assessee from a hundred percent export oriented undertaking to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Finance Act of 2000 with effect from April 1,2001. Prior to the substitution of the provision, the earlier provision stipulated that any profits and gains derived by an assessee from a 100 per cent export oriented undertaking, to which the section applies "shall not be included in the total income of the assessee". The provision, therefore, as it earlier stood was in the nature of an exemption. After the substitution of Section 10B by the Finance Act of 2000, the provision as it now stands provides for a deduction of such profits and gains as are derived by a 100 per cent export oriented undertaking from the export of articles or things or computer software for ten consecutive assessment years beginning with the assessment year relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst income from any other source under the same head. Section 71 provides for the setting off of a loss sustained with reference to one head of income against income from another head (save and except for capital gains). Under Section 72, a provision has been made for carry forward and setting off of a loss sustained against the head of profits and gains of business or profession. Under Section 72, where a loss which has been sustained under the head of profits and gains of business or profession cannot be set off against income under any head of income under Section 71 so much of the loss as has not been set off or the entire loss where there is no income under any other head can be carried forward in the manner which is indicated in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y subsequent assessment year up to and including the assessment year for which the determination is to be made." A similar provision corresponding to subsection (5) of Section 80IA is to be found in subsection (6) of Section 80I. Under subsection (5) of Section 80IA which begins with overriding nonobtante provisions, profits and gains of an eligible business to which subsection (1) applies are for the purposes of determining the quantum of deduction to be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year. A provision akin to subsection (5) of Section 80IA or for that matter akin to subsection (6) of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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