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2016 (10) TMI 535 - ITAT CHENNAI

2016 (10) TMI 535 - ITAT CHENNAI - TM - Set off of business loss / depreciation of the other units for computing deduction under Section 10A - Held that:- Eligibility of exemption under Section 10A of the Act has to be considered independently and the losses of other units cannot be set off. In fact, the order of this Tribunal in Amnet Systems was brought to the notice of the Assessing Officer. The Assessing Officer found that the Department had preferred appeal before the High Court, therefore, .....

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eduction is to be allowed. When the assessee has not claimed any deduction for earlier assessment years and selected the assessment year 2006-07, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly allowed the claim of the assessee. For the assessment year 2005-06, XIUS India Ltd. suffered a loss. The loss suffered in the assessment year 2005-06 was carried over to set off against the income of the assessment year 2006-07. When the assessee selected the initial assessmen .....

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plicable. The debt payable by the assessee was reflected in the asset side in the balance sheet which is not in dispute before the authorities below. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. - Transfer pricing adjustment on corporate guarantee - Held that:- Corporate guarantee given by the assessee does not have bearing on profits, income or assets of the assessee. Therefore, there is no any arm' .....

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assessment years 2007-08, 2006-07, 2008-09, 2010-11 and 2011-12. Since common issue arises for consideration in all these appeals, we heard these appeals together and disposing of the same by this common order. 2. Dr. Milind Madhukar Bhusari, the Ld. Departmental Representative, submitted that the assessee-company is engaged in the business of software development and claimed deduction under Section 10A of the Income-tax Act, 1961 (in short 'the Act'). Referring to the order of the Asses .....

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ra), directed the Assessing Officer to delete Rs. 87,18,036/-. According to the Ld. D.R., since the matter is pending before the High Court, the CIT(Appeals) ought not have followed the order of this Tribunal. 3. On the contrary, Dr. C.P. Ramaswami, the Ld.counsel for the assessee, submitted that Section 10A of the Act is a provision for exemption and not a deduction. The losses suffered by other eligible unit cannot be set off against the profit of Section 10A unit before giving exemption. Acco .....

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with an intention to keep the matter alive. According to the Ld. counsel, the Assessing Officer is bound to follow the order of this Tribunal. 4. We have considered the rival submissions on either side and perused the relevant material available on record. The issue arises for consideration is set off of business loss / depreciation of the other units for computing deduction under Section 10A of the Act. This Tribunal in Amnet Systems (supra) examined the issue and found that the eligibility of .....

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nnot be a ground for not following the order of this Tribunal. It is not the case of the Revenue that the Madras High Court has stayed the order of this Tribunal in Amnet Systems (court). When the order of this Tribunal in Amnet Systems (supra) is not stayed, the Assessing Officer ought to have followed the order of this Tribunal. Since the Assessing Officer failed to follow the order of this Tribunal, the CIT(Appeals) has rightly directed the Assessing Officer to follow the order of this Tribun .....

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not opted for deduction under Section 10A of the Act in the initial assessment year. The first year of the operation of the assessee-company was 2002-03. XIUS India Ltd. suffered a loss of Rs. 1,07,41,343/-. However, the book profit to the extent of Rs. 41,00,700/- was brought to taxation under Section 115JB of the Act. For the assessment year 2004-05, the income of the assessee as per regular computation was Rs. 79,82,112/-. However, the same was set off against the carry forward losses for ass .....

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is contrary to the information available on record for the assessment year 2002-03. The assessee claimed before the Assessing Officer that even though STPI unit was registered on 30.03.2001, the assessee had chosen to avail exemption under Section 10A of the Act from the assessment year 2006-07. 7. Referring to Section 10A(1) of the Act, the Ld. Departmental Representative submitted that deduction under Section 10A(1) of the Act is available in respect of profits and gains derived by an underta .....

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ative option by returning the book profits for taxation under Section 115JB of the Act for assessment years 2003-04 and 2004-05. In the assessment year 2005-06, XIUS India Ltd. was classified as non- STPI unit. Therefore, according to the Ld. D.R., the assessee is not eligible for deduction under Section 10A of the Act. However, on appeal by the assessee, the CIT(Appeals) found that when there was loss in a particular year, the question of opting out of the scheme under Section 10A of the Act do .....

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resumed that the assessee had exercised negative option. Therefore, according to the Ld. D.R., the CIT(Appeals) is not justified in allowing the claim of the assessee. 8. On the contrary, Dr. C.P. Ramaswami, the Ld.counsel for the assessee, submitted that the Assessing Officer denied the claim of the assessee under Section 10A of the Act on the ground that the assessee has not furnished the declaration upto assessment year 2005-06 for opting out the scheme. According to the Ld. counsel, the Asse .....

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pting out of the scheme. Section 10A(8) of the Act begins with non-obstante clause which indicates that a right was conferred on the assessee to declare that the provisions of the Act would not be applicable to the assessee. Therefore, according to the Ld. counsel, it is obvious that the assessee can exercise the option for opting out the scheme under Section 10A of the Act. Section 10A of the Act also provides an option to the assessee to select first year of the ten years and once this option .....

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ssee, in fact, opted the assessment year 2006-07 as first year and therefore, it will continue to have the benefit for the next consecutive ten years. 9. Dr. C.P. Ramaswami, the Ld.counsel for the assessee, further submitted that the declaration is required to be filed in the case the assessee intends to opt out of the scheme. The scheme is spread over for a period of fifteen years. The assessee was given the option of selecting the initial year. Even assuming for argument sake, according to the .....

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the assessee suffered a loss in a particular year, the question of opting out of the scheme does not arise at all since Section 10A of the Act may not be applicable. According to the Ld. counsel, Section 10A of the Act would come into opportunity when there is a positive income. 10. The Ld.counsel for the assessee further submitted that since the assessee has opted the benefit from the assessment year 2006- 07, the CIT(Appeals) has rightly found that the assessee is eligible for exemption under .....

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red the rival submissions on either side and perused the relevant material available on record. The assessee claimed exemption under Section 10A of the Act in respect of XIUS India Ltd., Hyderabad, the claim of the Revenue appears to be that XIUS India Ltd., Hyderabad was classified as non-STPI unit in the assessment year 2005-06. The Revenue has also contended that the assessee has not filed any declaration upto assessment year 2005-06 opting out of the scheme as provided in Section 10A(8) of t .....

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r 2006-07, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly allowed the claim of the assessee. For the assessment year 2005-06, XIUS India Ltd. suffered a loss. The loss suffered in the assessment year 2005-06 was carried over to set off against the income of the assessment year 2006-07. When the assessee selected the initial assessment year 2006-07, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly allowed the claim of the assessee. This Tr .....

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ct, the Assessing Officer disallowed a provision for doubtful debt to the extent of ₹ 1.30 Crores. According to the Ld. counsel, the Assessing Officer failed to consider Explanation 1 to Section 115JB of the Act. Referring to the judgment of Supreme Court in CIT v. HCL Comnet Systems & Services Ltd. (305 ITR 409), the Ld.counsel submitted that the debt payable by the assessee is different from the debt receivable by the assessee. In this case, the debt is not payable by the assessee bu .....

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