TMI Blog2015 (11) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... unabsorbed depreciation treated as current year depreciation u/s 32(2) is to be first set off; that since deduction u/s 10A has to be excluded from the total income of the assessee, the question of unabsorbed business loss being set off against such profits & gains of the undertaking does not arise. The case at hand is squarely covered by the judgement (supra) and as such, the A.O. and Ld. CIT(A) have erred in holding that the deduction u/s 10A of the Act in respect of the profits by the eligible undertaking would be computed after set off of brought forward unabsorbed depreciation from prior year. - Decided against revenue. Interest earned from mere parking the funds in the fixed deposits - eligibility of deduction u/s 10A - Held that:- For claiming the benefit of deduction available u/s 10A of the Act, there must be direct nexus between deposits and business activities. Since, this is a benefit given to the industrial activities only, interest earned from mere parking the funds in the fixed deposits is not eligible for exemption u/s 10A of the Act. So, the judgements relied upon by the Ld. A.R., are inapplicable to the facts and circumstances of the case. Even the Ld. A.R. ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law in levying interest under section 234B of the Act amounting to ₹ 1,15,146/-. 2. Briefly stated, the facts of this case are that during the processing of income tax return filed by the assessee for the Assessment Year 2006-07, the same was subjected to scrutiny u/s 143(1) of the Act. Pursuant to the notices issued to the assessee, Shri Puneet Gupta, CA/AR of the assessee attended the proceedings, filed details and documents from time to time and the case was also discussed with him. The assessee company is into the business of I. T. enabled services who has declared its income at ₹ 3,56,74,005/-. 4. Appendix III to Form 3CD transpires that assessee has unabsorbed depreciation of ₹ 36,70,496/- available for carry forward. As per Section 32(2), the assessee was to carry forward this unabsorbed depreciation and added it to the current year depreciation for the correct computation of its income from business and profession, so the income from the business of the assessee is computed at ₹ 3,17,58,030/- (this includes the amount of interest income earned from bank deposits) and the exemption u/s 10A of the Acts is available to the assessee at this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 and ITO Vs M/s. Greytrix (India) Pvt. Ltd. I.T.A. No. 5787/Mum/2009 dated 07.10.2011. 7. On the other hand, Ld. D.R. reiterated the arguments addressed before Ld. CIT(A), relied upon the impugned order and contended that since interest income has not been derived from export activities, the same is not liable to be deducted u/s 10A of the Act and relied upon the judgements cited in 262 ITR 278 Pandian Chemicals Ltd. Vs CIT (S.C.) and 259 ITR 403 CIT Vs Menon Impex Pvt. Ltd. (Mad.) and prayed for dismissal of the appeal. 8. We have heard Ld. authorized representatives of both the parties and gone through the documents relied upon in the light of the facts and circumstances of the case. 8.1 Grounds No.1.1 and 1.2 read as under: 1.1 That on the facts and circumstances of the case and in law, the learned Commissioner or Income Tax (Appeals) ('CIT-A') has erred in upholding the order of the order of the Income Tax Officer, Ward (I), New Delhi ('the assessing officer ), wherein the assessing officer held that deduction under section l0A of the Income-tax Act, 1961 ('Act') in respect or profits derived by the eligible undertaking would be computed after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The provisions of this sub-section will apply even in the case where an assessee has opted out of section 10A by exercising his option under sub-section (8). It is permissible for an assessee to opt in and opt out of section 10A. In the year when the assessee has opted out, the normal provisions of the Act would apply. The profits derived by him from the undertaking would suffer tax in the normal course subject to various provisions of the Act including those of Chapter VI-A. If in such a year, the assessee has suffered losses, such losses would be subject to inter source and inter head set off. The balance if any thereafter can be carried forward for being set off against profits of the subsequent assessment years in the normal course. Unabsorbed depreciation also merits a similar treatment. Held that as the profits and gains under section 10A is not be included in the income of the assessee at all, the question of setting off the loss of the assessee of any profits and gains of business against such profits and gains of the undertaking would not arise. Similarly, as per section 72(2), unabsorbed business loss is to be first set off and thereafter unabsorbed depreciation tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinguishable facts and in the face of law laid down by Hon'ble Apex Court in the judgements cited as Pandian Chemicals Ltd. Vs CIT (supra) and CIT Vs Menon Impex Pvt. Ltd. (supra). 10.1 The Hon'ble Apex Court in Pandian Chemicals Ltd. (supra) also held that in the case of industrial undertaking the interest derived by the industrial undertaking of the assessee on deposits made with the Electricity Board for the supply of electricity for running the industrial undertaking could not be said to flow directly from the industrial undertaking itself and was not profits or gains derived by the undertaking for the purpose of the special deduction under section 80HH. 10.2 Similarly, Hon'ble Madras High Court in the case cited as Menon Impex Pvt. Ltd. (supra) in identical issue, held as under: The assessee had set up a new industrial undertaking in the Kandla Free Trade Zone for the manufacture of light engineering goods. In the course of the business of the undertaking, the assessee was required to open letters of credit with banks which had, as a condition for issuing such letters of credit, required the assessee to make deposits. On these deposits, the assessee ea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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