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2015 (11) TMI 1522 - ITAT PUNE

2015 (11) TMI 1522 - ITAT PUNE - TMI - Computation of deduction under section 10A - whether the deduction is to be computed before set off of brought forward losses and unabsorbed depreciation relating to earlier years? - Held that:- Assessee is entitled to the claim of deduction under section 10A of the Act before setting up of brought forward losses and unabsorbed depreciation. The deduction under section 10A of the Act is first allowed against the eligible profits and in case there are certai .....

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- ITA No.1736/PN/2012 - Dated:- 30-11-2015 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For the Appellant : Shri Kishore Phadke For the Respondent : Shri Hitendra Ninawe ORDER PER SUSHMA CHOWLA, JM: This appeal filed by the assessee is against the order of CIT(A)-I, Pune, dated 18.01.2012 relating to assessment year 2007-08 against order passed under section 143(3) of the Act of the Income-tax Act, 1961 (in short the Act ). 2. The learned Authorized Representative for the assessee at .....

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assessment year 2007-08, order dated 10.11.2015. The learned Authorized Representative for the assessee pointed out that the issue raised in the present appeal is covered by grounds of appeal No.1 and 7 and rest of the grounds of appeal raised are argumentative in nature. The grounds of appeal No.1 and 7 read as under:- 1. The Learned CIT (A) has erred in artificially restricting the deduction of ₹ 7,09,04,587/- U/s10A to ₹ 4,50,57,831/-. The deduction U/s 10A had been claimed from t .....

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that the issue is covered by the ratio laid down by the Hon ble Karnataka High Court in CIT Vs. Himatsingka Seida Ltd. (2006) 286 ITR 255 (Kar), appeal against which, has been dismissed by the Hon ble Supreme Court. It was the contention of both the Authorized Representatives that provisions of section 10A and 10B of the Act were paramatria. 4. We have heard the rival contentions and perused the record. The issue arising in the present appeal is in relation to the computation of deduction under .....

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s and against balance income of ₹ 26,40,767/-, brought forward losses were adjusted and the income was declared at Rs.Nil. The Assessing Officer was of the view that the deduction under section 10A of the Act was permissible out of total income which could be computed only after applying all the provisions of the Act, including set off of brought forward losses. In view thereof, the deduction claimed by the assessee only out of profits and gains of the business without first setting off of .....

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Act, brought forward losses and unabsorbed depreciation had to be set off and only on the balance income, if any, the deduction under section 10A of the Act was to be computed. 5. We find that identical issue of sequences of allowing the benefit of deduction under section 10B of the Act and the adjustment of brought forward losses / unabsorbed depreciation, arose before Pune Bench of Tribunal in M/s. Vishay Components India Pvt. Ltd. Vs. Addl.CIT & Anr. (supra). The Tribunal after considerin .....

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under the said section was exempt from the total income. The issue arising before us is whether while computing deduction under section 10B of the Act, in cases where the assessee has unabsorbed losses or depreciation, brought forward from earlier years, then whether the said unabsorbed business losses / depreciation are to be adjusted from the gross total income before allowing the deduction under section 10B of the Act or the said losses or the deduction under section 10B of the Act is to be a .....

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. the years where the benefit under section 10B of the Act was for being exempt from total income. However, the year under appeal before us is assessment year 2005-06, wherein the said section has been amended and the deduction now is allowable to the assessee as against the said income being exempt in the earlier years. The issue is settled by the Hon ble Bombay High Court in CIT Vs. Black & Veatch Consulting Pvt. Ltd. (2012) 348 ITR 72 (Bom), wherein it was held as under:- The deduction un .....

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ions of the Chapter, the deductions specified in ss.80C to 80U. S.80B(5) defines for the purpose of Chapter VI-A gross total income to mean the total income computed in accordance with the provisions of the Act, before making any deduction under the Chapter. What the Revenue in essence seeks to attain is to telescope the provisions of Chapter VI-A in the content of the deduction which is allowable under s.10A, which would not be permissible unless a specific statutory provision to that effect we .....

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n Income Tax Appeal No.2083 of 2012, order dated 25.02.2013 and in CIT Vs. Schmetz India Pvt. Ltd. (2012) 79 DTR (Bom) 356 and also by the Hon ble High Court of Gujarat in CIT Vs. Ace Software Exports Ltd. in Tax Appeal No.687 of 2012, order dated 18.02.2013. The Mumbai Bench of Tribunal has also applied the said proposition in various cases. 29. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the ratio laid down by the Hon ble Supreme Court in Synco .....

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er provided under the Act, which presupposes that gross total income shall be arrived at after adjusting losses of other division against profits derived from an industrial undertaking. The issue before the Hon ble Supreme Court is at variance with the issue before us and the said ratio is not applicable to the facts of the present case. The issue in the present appeal is squarely covered by the ratio laid down by the Hon ble Bombay High Court in CIT Vs. Black & Veatch Consulting Pvt. Ltd. ( .....

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sting brought forward unabsorbed losses / depreciation. The ground of appeal No.3 raised by the assessee is thus, allowed. 6. The said ratio laid down by the Tribunal was later applied while deciding similar issue in Precision Camshafts Limited Vs. ACIT (supra). The Tribunal vide order dated 10.11.2015 after considering the ratio laid down by the Tribunal in M/s. Vishay Components India Pvt. Ltd. Vs. Addl.CIT & Anr. (supra), observed as under:- 17. The Tribunal relying on the ratio laid down .....

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hold that the deduction under section 10B of the Act would be allowed to the assessee in the first instance before allowing the adjustment on account of brought forward depreciation losses, the deduction under section 10B of the Act is to be first allowed against the eligible profits and in case there are any leftover profits, then the same are to be adjusted against brought forward unabsorbed depreciation / loss as claimed by the assessee in its return of income. Accordingly, we direct the Ass .....

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ACIT (supra), is squarely applicable. 8. Another aspect to be considered in the present case is the arguments of the learned Departmental Representative for the Revenue that the ratio is covered by the decision of Hon ble Karnataka High Court in CIT Vs. Himatsingka Seida Ltd. (supra), appeal against which, has been dismissed by the Hon ble Supreme Court. Before the Hon ble Karnataka High Court, the years involved were assessment years 1988-89 to 1990-91 i.e. the year, where the benefit under sec .....

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