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2015 (12) TMI 126 - ITAT KOLKATA

2015 (12) TMI 126 - ITAT KOLKATA - TMI - Deduction u/s. 10B - whether unabsorbed depreciation cannot be set off against the profit for the relevant assessment year as the assessee being a 100% Export Oriented Unit (EOU) - Held that:- We have gone through the approval granted by Assistant Development Commissioner, Cochin Export Processing Zone dated 26.09.1997 in regard to M/s. Zenith Textiles, a unit of Zenith Exports Ltd. whereby it is declared as 100% EOU. It means that this concern was declar .....

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out unabsorbed depreciation for AY 1997-98, the AO has considered incorrect facts and figures. The fact is that M/s. Zenith Textiles was approved under Special Scheme of Govt. of India as a 100% EOU only on 26.09.1997 and accordingly, assessee claimed deduction u/s. 10B of the Act in respect this unit for and from AY 1998-99. According to us, there being no claim made for deduction u/s. 10B of the Act in AY 1997-98, the unabsorbed depreciation relatable to Zenith Textiles is not hit by the provi .....

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r Nag, JCIT, Sr. DR ORDER Per Mahavir Singh, JM Both these appeals by assessee are arising out of separate orders of CIT(A)-VI, Kolkata in Appeal No. 035/CIT(A)-VI/09-10/Cir-5/Kol & 1093/CIT(A)-VI/Cir-5/2009-10 both dated 29.10.2010. Separate assessments were framed by ACIT, Circle-5, Kolkata u/s. 147/143(3) & u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the "Act") for AY 2004-05, vide his orders dated 26.11.2009 and 29.12.2006 respectively. 2. The only i .....

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f Income Tax Act, 1961 does not mention that unabsorbed depreciation will not be carried forward only when deduction U/s 10B is claimed is opposed to his own observation wherein it is stated that "Here the criterion is not based on claim of deduction U/s 10B but based on the undertaking being 100 % EOU on which deduction u/s. 10B has been claimed in any years. 2. That on the facts and in the circumstances of the case, Ld. CIT(A) is wrong and unjustified in holding unabsorbed depreciation of .....

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dia. These activities are carried on through Main Divisions at Kolkata and Factory sites at Ahmedabad under the name of Zenith Spinners as well as 100% EOU at Karnataka in the name of Zenith Textiles. The assessee claimed adjustment of unabsorbed depreciation in respect of Zenith Textiles a 100% EOU and also filed supporting documents and the evidence before AO during the course of assessment proceedings. But the AO rejected the explanation and disallowed carried forward of unabsorbed depreciati .....

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ore, the AO observed as under: "……Therefore, unabsorbed depreciation pertaining to assessment year 2000-01 or earlier years cannot be allowed to be carried forward and set off. Therefore, the amount of unabsorbed depreciation to be allowed to be carried forward for assessment year 1997-98 would be ₹ 1,21,17,053/- (Unabsorbed depreciation determined of ₹ 8,88,18,072/- minus unabsorbed depreciation not allowed to be carried forward relating to Zenith Textiles of S .....

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eved, assessee preferred appeal before CIT(A), who after considering the submissions of the assessee confirmed the action of AO in relation to the claim of unabsorbed depreciation relating to AY 1997-98 as under: "7. On the merit of the action taken by the AO during the appellate proceedings also the AR of the assessee made the same submissions which were made during assessment proceedings. I have considered all the facts and circumstances of this issue and the submissions made by the AR of .....

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or assessments year 1997-98 Ld. AR claimed that the set-off of unabsorbed depreciation should be allowed because in that year the assessee did not claim deductionu/s.10B. For assessment year 1998-99 Ld. AR. has pointed out that the unabsorbed depreciation has already been reduced by the assessee itself in the revised computation of income and therefore, the question of not allowing set off of such unabsorbed depreciation does not arise. I would like to take up this issue for the two assessment y .....

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ovided in Clause (2) of section 32. From the language of this provision it is clear that for any 100% EOU undertaking belonging to the assessee depreciations related to previous years relevant to asstt. Years 2000-01 and before are not allowed to be carried forward. This provision does not mention that the unabsorbed depreciation will not be carried forward. This provision does not mention that the unabsorbed depreciation will not be carried forward only when the deduction u/s. 10B is claimed by .....

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circumstances of the case. Before us, Ld. Counsel for the assessee stated that the unit of Zenith Textiles run by the assessee company is a 100% EOU and it is subsidiary of the assessee company. Ld. Counsel also stated that there is no dispute that according to the provisions of section 10B(6) of the Act unabsorbed depreciation of EOU relating to AY upto 2001-02 is not admissible while computing income of subsequent assessment years. According to him, the AO failed to consider that Zenith Textil .....

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w our attention to approval order of Govt. of India dated 26.09.1997 filed in the paper book along with computation sheet and return of income. We have gone through the approval granted by Assistant Development Commissioner, Cochin Export Processing Zone dated 26.09.1997 in regard to M/s. Zenith Textiles, a unit of Zenith Exports Ltd. whereby it is declared as 100% EOU. It means that this concern was declared as 100% EOU w.e.f. 26.09.1997. As per the provisions of section 10B of the Act, which a .....

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res. The fact is that M/s. Zenith Textiles was approved under Special Scheme of Govt. of India as a 100% EOU only on 26.09.1997 and accordingly, assessee claimed deduction u/s. 10B of the Act in respect this unit for and from AY 1998-99. According to us, there being no claim made for deduction u/s. 10B of the Act in AY 1997-98, the unabsorbed depreciation relatable to Zenith Textiles is not hit by the provision of section 10B(6) of the Act factually. Accordingly, we are of the considered view th .....

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