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2009 (2) TMI 858 - ITAT BANGALORE

2009 (2) TMI 858 - ITAT BANGALORE - TMI - ITA No. 101/Bang/2008 - Dated:- 13-2-2009 - P. Mohanarajan, Judicial Member, And A. Mohan Alankamony, Accountant Member For the Appellant : Parthasarathi and D. Vinay For the Respondent : Swati S. Patil ORDER P. Mohanarajan:- 1. This appeal is by the assessee directed against the order of the learned CIT, Bangalore-1, dated 13-12-2007. 2. The assessee has raised the following grounds in their appeal: "1. That the order of the learned Commissioner of .....

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roceedings and order passed pursuant thereto are invalid in law. 3. That the learned CIT erred in holding in his order under section 263 that the assessment order under section 143(3) of the Act dated March 20, 2006 is erroneous and prejudicial to the interest of the revenue within the meaning of section 263 of the Act. 4. That the learned CIT erred in holding that the brought forward business losses and unabsorbed depreciation for the assessment years from 1998-99 to 2002-03 should be set off b .....

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eciation, the learned CIT erred in not specifically directing the Assessing Officer to adjust such brought forward business loss and unabsorbed depreciation as per provisions of section 70, 71, 72 and 32(2) of the Act in determining the total income of the appellant for the year under appeal." 3. It is seen from the assessment order that the assessee is operating two units of STPI. In one of the units, there is no revenue but only certain expenses have been accounted for. In the Note to the .....

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e total profits of the assessee to determine deduction u/s 10A of the IT Act,1961. On this issue, the learned CIT issued show cause notice to the assessee. 4. The assessee-company filed return of income on 28-11-2003 declaring total income of ₹ 51,18,411/-. The case was selected for scrutiny by issue of notice u/s 143(2) of the Act. By order dated 20-3-2006 the AO determined the total income at ₹ 1,16,44,810/- allowing deduction u/s 10A of the Act amounting to ₹ 7,02,17,974/-. .....

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) ITA 387/Bang/2006 dated 26-6-2007 in the case of ACIT vs. M/s.Webspectrum Software (P) Ltd., and (2) in ITA 724/Bang/08 dated 30-1-2009 in the case of GE India Exports Pvt. Ltd. 5. In the case law first cited, the Tribunal held as under: "8. We have heard both the parties. Relevant portion of section 10A(1) is reproduced for ready reference: "10A(1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export of art .....

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he assessee. Such deduction is subjected to the provisions of section 10A. Total income is defined in section 2(45) of the IT Act and it means the total amount of income referred in section 5 computed in the manner laid down in this Act. "Section 5 of the IT Act defines the scope of total income. Scope of total income includes income received or deemed to be received, accrued or arise or deepned to accrue or arise. Section 4 is the charging section and tax is to be charged in respect of the .....

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uld not be included in the total income. It is true that an issue identical to the issue under reference has been decided by this Bench in the case of Yokogava India Ltd.(supra). In that case it was held that exemption u/s 10A is to be allowed without set off of loss of non 10A units. 10. The total income chargeable u/s 5 is not the same as the gross total income defined in section 80B(5) as has been held by the Jammu and Kashmir High Court in the case of CIT vs. Mohd. Amin Tyamboo (125 ITR 375) .....

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e computed as per the provisions of the Act. The learned jurisdictional High Court in the case of Himatsingike Seide Ltd. (supra) interpreted the word 'total income' as appearing in section 10A. In the case before the learned jurisdictional High Court, the assessee was having only one unit and claimed exemption in respect of profits of that year without setting off unabsorbed depreciation of the earlier year in respect of the unit for which depreciation u/s 10A was claimed. That decision .....

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ved by an undertaking. The assessee may have more than one undertaking and in that case one has to consider the profits and gains of that undertaking which qualifies for deduction u/s 10A. Similarly, in section 10A(4), the deduction is to be computed in the same proportion which bears to the profits of the undertaking, the same proportion as the export turnover bears to total turnover. Here again the words used are 'profits and gains of the business o the undertaking'. This is not to the .....

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cified industries in the case of certain companies:- (1) in the case of a company to which this section applies, where the total income (as computed in accordance with the other provisions of this Act) includes and profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule, there shall be allowed a deduc .....

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nd gains are the subject of relief under section 80E and a case where the loss or unabsorbed depreciation relates to industries other than the one whose profits and gains constitute the subject of relief. The Apex Court confirmed the decision of the Karnataka High Court. 14. As per section 10A(1), the assessee is entitled to deduction of profit and gains from the undertaking which is entitled for deduction. It is mentioned that such deduction is subject to provisions of section 10A. It is nowher .....

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lows deduction for the purposes of computing income from other sources. It is nowhere provided that such deduction should not exceed the quantum of receipt. Hence u/s 57, deduction is to be allowed in respect of the amounts referred in section 57. Similarly, the deduction u/s 10A is not to be restricted to the total income of the assessee computed before allowing deduction u/s 10A. The only interpretation which is possible in respect of 10A is that deduction of the unit qualifying for exemption .....

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s to be no bar for doing so. In view of that, it was held that loss of 10A unit can be adjusted against non 10A unit as the assessee is not claiming benefit u/s 10A. This decision is not applicable in the instant case. 16. Keeping in view the discussion as contained in earlier paragraphas, it is held that learned CIT(A) was justified in directing the Assessing Officer to allow deduction u/s 10A without setting off brought forward and current year losses of non 10A unit." 6. In the second ca .....

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ter III which has a title 'Income which do not form part of total income' and as such deduction u/s 10A from total income cannot be. equated with deduction under chapter VIA. Income of 10A unit has to be treated on the same footing as agricultural income. Reliance was placed on the decisions of Hon'ble Calcutta High Court reported in 132 ITR 822, Hon'ble Karnataka High Court reported in 102 ITR 320 and Hon'ble Supreme Court reported in 187 ITR 108. It was contended that loss .....

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9;total income' in this context would mean global income of the assessee. Hence, income eligible for deduction u/s 10A would not enter gross total income as it is to be deducted at source level itself. In the circumstances the brought forward and current year losses of non 10A unit cannot be set off against the income of 10A unit and, accordingly, AO was directed to allow deduction u/s 10A without setting off or brought forward and current year losses of non 10A unit and to allow carry forwa .....

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e derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or Computer software as the case may be, shall be allowed from the total income of the assessee." As per the above section, deduction of such profit and gains as derived by an undertaking from the export of artic .....

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