TMI Blog2016 (5) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... ted:- 5-5-2016 - Ms. Sushma Chowla, JM And Shri Pradip Kumar Kedia, AM For the Appellant : Shri Kishore Phadke For the Respondent : Shri S.K. Rastogi, CIT ORDER Per Sushma Chowla, JM This appeal filed by the assessee is against the order of CIT(A)-I, Pune, dated 03.02.2014 relating to assessment year 2007-08 against order passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. The assessee has raised the following grounds of appeal:- 1. The learned CIT(A)-I, Pune erred in law and on facts in confirming the action of the learned AO in setting off income from STPI unit (10A unit) against loss of non STPI unit. 2. The learned CIT(A)-I, Pune erred in law and on facts in confirming the view of the learned AO of application of provisions of sec.32(2), 70, 71, 72 of the ITA, 1961 prior to application of provisions of sec.10A of the ITA, 1961. 3. The learned CIT(A)-I, Pune erred in law and on facts in relying on the decision of Hon'ble Karnataka High Court in the case of Himatsingike Seide Ltd. - 286 ITR 255, which was based on the erstwhile exemption section, whereas the appellant had claimed deduction based on the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income by not adjusting the loss from manufacturing activity against the income from STPI unit and was of the view that the deduction under section 10A of the Act is to be allowed on the so called adjusted profits of STPI unit. The Assessing Officer after considering the explanation of assessee in this regard, rejected the same and re-computed the deduction allowable under section 10A of the Act at ₹ 49,33,122/- as against the claim of assessee at ₹ 1,71,39,375/-. The Assessing Officer did not allow carry forward of losses. 6. The CIT(A) upheld the order of Assessing Officer holding that the deduction under section 10A of the Act was to be allowed after adjusting losses of other units against income from profits gains of business of eligible undertaking. The CIT(A) further held that the Assessing Officer was justified in not allowing carry forward of the current year s loss of non-10A unit for set off in subsequent years. 7. The assessee is in appeal against the order of CIT(A). 8. We find that similar issue of claim of deduction under section 10A of the Act by eligible unit arose before the Tribunal in M/s. KPIT Cummins Infosystems Ltd. Vs. DCIT (supra). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer and Commissioner of Income Tax (Appeals) was on the surmise that the amendment brought to section 10A of the Act w.e.f. 1 st April, 2001 under which deduction from income was to be allowed to the assessee and not any exemption. Further, the Assessing Officer referred to the provisions of section 70(1) and observed that the intra-head adjustment had to be made before claiming the deduction u/s. 10A of the Act. The assessee is in appeal against the said order of Assessing Officer, which has been upheld by the Commissioner of Income Tax (Appeals). 13. Undoubtedly, after the amendment w.e.f. 1 st April, 2001 under the provisions of section 10A of the Act, the assessee is now entitled to deduction. Prior to the amendment the assessee was entitled to exemption of the said income. In other words the said income did not form part of the total income and was excluded at the entity level itself. The question which arises for adjudication is whether in view of the amended provisions of section 10A of the Act, under which deduction can be claimed by an enterprises, whether the intra head adjustment of losses of certain units is to be made against the profits of other units ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f business losses. The Hon'ble High Court held that the deduction under section 10A has to be given at the stage when the profits and gains of business are computed in the first instance. The issue before the Hon'ble High Court was with regard to the adjustment of brought forward unabsorbed depreciation and loss of the unit, which were not eligible for deduction under section 10A of the Act and it was held that the same could not be set off against the current profit of the eligible units while computing the deduction under section 10A of the Act. 16. The case of the Revenue before us on the other hand is that ratio laid down by the Hon'ble Supreme Court in Synco Industries Ltd. Vs. Assessing Officer, Income Tax, Mumbai (supra) is to be applied while computing the deduction under section 10A of the Act. In the facts of the case before Hon'ble Supreme Court the assessee had claimed deduction from the profits and gains of the business under section 80HH r.w.s. 80-I and 80B of the Act. The Hon'ble Supreme Court held that while working out gross total income of the assessee, losses suffered by it in earlier years have to be adjusted and if gross total income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax (Appeals) in this regard. 18. Now coming to the reliance placed by the ld. DR for the Revenue of the Hon'ble Supreme Court in Synco Industries Ltd. Vs. Assessing Officer, Income Tax, Mumbai (supra) wherein the Hon'ble Supreme Court had considered the provisions of section 80HH r.w.s. 80-I and 80B of the Act. In view of the specific provisions of 80B(5) provided under Chapter VIA then the deduction under section 80HH has to be computed in line thereof. However in the absence of any such provision being provided in section 10A of the Act, we find no merit in the said reliance placed upon by the ld. DR for the Revenue. Section 10A of the Act entitled the undertakings for deduction from its profits in case the conditions are fulfilled. We reiterate that the said deduction under section 10A of the Act is to be computed unit/undertaking wise and not for the assessee in totality. Reversing the order of the Commissioner of Income Tax (Appeals), we allow the grounds of appeal No. 3 raised by the assessee in both the assessment years 2005-06 and 2006-07. 9. The issue arising before us is identical to the issue before the Tribunal in M/s. KPIT C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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