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2015 (4) TMI 410 - BOMBAY HIGH COURT

2015 (4) TMI 410 - BOMBAY HIGH COURT - [2015] 374 ITR 520 (Bom) - Set off of unabsorbed business loss brought forward against the profits of the erstwhile 10A unit - claim for set off disallowed by AO as such claim of set off or brought forward business loss against the profits of the erstwhile 10A unit in the year under consideration, being the first assessment year, after the expiry of the tax holiday period, cannot be allowed - Tribunal allowed the claim - Held that:- Subject to the provision .....

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bsections, save and except subsection (6).

The Tribunal has understood that this subsection contains non obstante clause and therefore, notwithstanding anything contained in any other provision of the Act, in computing the total income of the Assesee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year relevant to any subsequent assessment year, as per clause (ii) thereof, no loss referred to in .....

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anding of the Revenue as reflected in the Circulars would bind it. That understanding apart, independently, the Tribunal has analysed this provision and found that by virtue of the nonobstante clause and by virtue of wording of sub clause (ii) that the Revenue could not have disallowed this claim of set off. We therefore do not find that in allowing the Appeal of the Assessee, the Tribunal has committed any error of law apparent on the face of the record or acted perversely. - Decided in favour .....

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. 3) Insofar as Appeal No. 1336 of 2013 is concerned, there, the relevant assessment year is 200506. The Assessee is engaged in the business of manufacturing and export of gems jewellery. The return of income for this assessment year was filed on 27th October, 2005, declaring income of ₹ 24,44,945/after claiming deduction under section 10A of the Income Tax Act, 1961 (for short the IT Act ) at ₹ 1,06,81,302/. This return of income was revised by the Assessee on 20th February, 2006, d .....

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₹ 3,26,08,931/against the profits of the erstwhile 10A unit in the year under consideration, being the first assessment year, after the expiry of the tax holiday period, cannot be allowed. Since the unabsorbed loss of assessment year 200203 had been set off against the business profit of the 10A unit in the assessment year 200304 and 200405, there remains no loss for set off in the subject assessment year 200506. The Assessee, therefore, was aggrieved by such a finding and challenged the .....

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and core question is, whether the Tribunal was justified in upholding the Assessee's claim for set off? He submits that the Tribunal failed to appreciate that these unabsorbed business losses have been already set off against the profits of the said 10A unit in the assessment years referred above. It is in these circumstances that the Tribunal erred in law. Mr. Pinto also referred to a Judgment delivered by this Court in the case of Commissioner of Income Tax, Mumbai vs. Galaxy Surfactants L .....

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vt. Ltd. (ITA No. 1237 of 2011). That has applied to the facts of the present case. In the circumstances, the findings recorded do not raise any substantial question of law. It is submitted that the impugned order of the Tribunal need not be interfered with and this Appeal should be dismissed. 6) In the assessment year 200506, return of income was filed and all that the Tribunal, in allowing the claim of the Assessee, did was to refer to section 10A and subsection (6) thereof. The Tribunal held .....

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income under section 10A of the IT Act. There is a explanatory note of the Finance Bill of 2003 as well. 7) Section 10A of the IT Act, to the extent relevant, reads as under: 10A. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking beg .....

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the unexpired period of the aforesaid ten consecutive assessment years : Provided further that where an undertaking initially located in any free trade zone or export processing zone is subsequently located in a special economic zone by reason of conversion of such free trade zone or export processing zone into a special economic zone, the period of ten consecutive assessment years referred to in this subsection shall be reckoned from the assessment year relevant to the previous year in which th .....

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sessment year beginning on the 1st day of April, 2012 and subsequent years. (1A) Notwithstanding anything contained in subsection (1), the deduction, in computing the total income of an undertaking, which begins to manufacture or produce articles or things or computer software during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2003, in any special economic zone, shall be,- (i) hundred per cent of profits and gains derived from the export of such .....

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ent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the Special Economic Zone Reinvestment Allowance Reserve Account ) to be created and utilised for the purposes of the business of the assessee in the manner laid down in subsection (1B): [Provided that no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or b .....

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; and (ii) until the acquisition of new machinery or plant as aforesaid, for the purposes of the business of the undertaking other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India; (b)the particulars, as may be prescribed in this behalf, have been furnished by the assessee in respect of new machinery or plant along with the return of income for the assessment year relevant to the previous year in which .....

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red to in clause (a) in the year in which the amount was so utilised; or (ii) in a case referred to in clause (b), in the year immediately following the period of three years specified in subclause (i) of clause (a) of subsection (1B), and shall be charged to tax accordingly. (2) This section applies to any undertaking which fulfils all the following conditions, namely :- (i) it has begun or begins to manufacture or produce articles or things or computer software during the previous year relevan .....

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of any undertaking which is formed as a result of the reestablishment, reconstruction or revival by the assessee of the business of any such undertakings as is referred to in section 33B, in the circumstances and within the period specified in that section; (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Explanation.- The provisions of Explanation 1 and Explanation 2 to subsection (2) of section 80I shall apply for the purposes of c .....

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this subsection, the expression competent authority means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange. Explanation 2. -The sale proceeds referred to in this subsection shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve .....

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r after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form, alongwith the return of income, the report of an accountant, as defined in the Explanation below subsection (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section. (6) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of the previous year relevant to the assessment year .....

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he business of the undertaking in the previous year relevant to such assessment year or any expenditure incurred for the purposes of such business in such previous year had been given full effect to for that assessment year itself and accordingly subsection( 2) of section 32, clause (ii) of subsection (3) of section 32A, clause (ii) of subsection (2) of section 33, subsection (4) of section 35 or the second proviso to clause (ix) of subsection (1) of section 36, as the case may be, shall not app .....

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o the profits and gains of the undertaking; and (iv) in computing the depreciation allowance under section 32, the written down value of any asset used for the purposes of the business of the undertaking shall be computed as if the assessee had claimed and been actually allowed the deduction in respect of depreciation for each of the relevant assessment year. (7) The provisions of subsection (8) and subsection (10) of section 80IA shall, so far as may be, apply in relation to the undertaking ref .....

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the demerger takes place; and (b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place. (7B) The provisions of this section shall not apply to any undertaking, being a Unit referred to in clause (zc) of section 2 of the Special Economic Zones Act, 2005, which has begun or begins to manufacture or produce articles or things .....

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s of this section shall not apply to him for any of the relevant assessment years. (9) Omitted by the Finance Act, 2003, w.e.f. 142004. (9A) Omitted by the Finance Act, 2003, w.e.f. 142004. Explanation 1.- Omitted by the Finance Act, 2003, w.e.f. 142004. Explanation 2.- For the purposes of this section,-(i) computer software means- (a) any computer programme recorded on any disc, tape, perforated media or other information storage device; or (b) any customized electronic data or any product or s .....

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park means any park set up in accordance with the Electronic Hardware Technology Park (EHTP) Scheme notified by the Government of India in the Ministry of Commerce and Industry; (iv) export turnover means the consideration in respect of export by the undertaking of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with subsection (3), but does not include freight, telecommunication charges or insurance attri .....

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ear falling within a period of ten consecutive assessment years referred to in this section; (vii) software technology park means any park set up in accordance with the Software Technology Park Scheme notified by the Government of India in the Ministry of Commerce and Industry; (viii) special economic zone means a zone which the Central Government may, by notification in the Official Gazette, specify as a special economic zone for the purposes of this section. Explanation 3.- For the removal of .....

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newly established undertakings in free trade zone etc. Therefore, subject to the provisions of section 10A, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed from t .....

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subsequent assessment year, as per clause (ii) thereof, no loss referred to in section (1) of section 72 or subsection (1) or subsection (3) of section 74 insofar as such loss relates to the business of the undertaking, shall be carried forward or set off where such loss relates to any of the relevant assessment years. In clause (ii) w.e.f. 1st April, 2004, the words ending before the 1st day of April, 2001 were inserted. It is this insertion which has enabled the Tribunal to hold that if the l .....

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