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Riviera Home Furnishings Pvt. Ltd. Versus ACIT, Range-15, New Delhi

2017 (12) TMI 350 - ITAT DELHI

Section 14A applicability on the investment made in the EOU covered by the provisions of section 10B - Held that:- Section 10A is a provision for deduction and not exemption. SEE CIT versus TEI Technologies Private Limited [2012 (9) TMI 47 - DELHI HIGH COURT] - As the provisions of section 10B are pari materia with section 10A of the Act, respectfully following the above decisions of the Hon’ble Supreme Court, we hold that section 10B is a provision dealing with deduction and not exemption. .....

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Original appeal of the assessee having ITA No. 3516/Del/2013 was heard and disposed off on 21/10/2016 alongwith appeal of the Revenue in ITA No. 4112/Del/2013, wherein the appeal of the assessee was partly allowed. Subsequently, the assessee filed Miscellaneous Application requesting for rectification in order passed in ITA No. 3516/Del/2013 on two grounds, which has been partly allowed and pronounced in the open court. On the issue whether the section 10B of the Income Tax Act, 1961 (in short t .....

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covered under the provisions of Section 10B of the Act. 2. Before us, the Ld. counsel of the assessee contended that ground No. 3 of the appeal of the assessee was decided by the Tribunal against the assessee following the decision of the jurisdictional High Court in the case of CIT Vs. TEI Technologies Private Limited (2014) 361 ITR 36(Del), which has been subsequently reversed by the Hon ble Supreme Court on 16/12/2016 holding that section 10B of the Income-tax Act, 1961 (in short the Act ) i .....

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investment made to EOU covered under the provisions of Section 10B of the Act. 5. The Tribunal has recalled its order dated 21/10/2016 on ground No. 3 only. The issue in dispute in ground No. 3 was decided by the Tribunal as under: 5.5 However, we find from the impugned order that the learned Commissioner of Income-tax (Appeals) has relied on the decision of the Jurisdictional High Court in the case of CIT Vs. TEI Technologies Private Limited (supra), wherein the Hon ble High Court has taken not .....

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uage used, as to whether the sub-section provides for an exemption or a deduction. We have earlier referred to the difficulty caused by the language which says that the deduction shall be made from the total income, when the Act contains no provision to allow any deductions from the total income. The section has been interpreted by the Karnataka High Court (supra) as an exemption provision whereas the Bombay High Court has understood the same as a deduction section, though the ultimate result di .....

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an income and a provision which provides for a deduction of the income or a part thereof in computing the total income of the assessee. We have attempted to outline the difference between the two kinds of provisions in the light of the authorities cited above. The matter is not altogether free from difficulty. However, as S. Ranganathan, J. (as he then was) has pointed out in CIT v. Dalmia Cement (Bharat) Ltd. (supra): - In the process of judicial assessment of such conflicting interpretations, .....

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1.04.2001. We are inclined, with respect, to agree with the view taken by the Karnataka High Court in the case of CIT v. Yokogava (supra). As noticed, the Bombay High Court reached in the case of CIT v. Yokogava (supra), in its judgments in Hindustan Unilever Ltd. (supra) and CIT v. Black & Veatch Consulting Pvt. Ltd. (supra), despite taking the view that the Section provides for a deduction and not an exemption. We have already seen that Section 10A, as it presently stands, though worded as .....

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the Hon'ble Delhi High Court has held that from the language of the heading of Chapter III, it is clear that income as contemplated under section 10B is outside the scope of total income and has no relevance with the gross total income. It is, therefore, a section which provides for exemption of income and not for deduction. It is further important to note that provisions of section 14A are applicable in relation to income which does not form part of total income . This very phrase is the h .....

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he decision of the Jurisdictional High Court, we uphold the finding of learned Commissioner of Income Tax (Appeals) on the issue in dispute. The ground No. 3 of the appeal of the assessee is accordingly, dismissed. 6. We find that the Hon ble Supreme Court in CIT versus TEI Technologies Private Limited (Civil Appeal No. 8923-8924 of 2013 decided on 16/12/2016) reported as CIT & Another versus M/s Yokogava India Ltd (2016) 391 ITR 274 (Civil Appeal No. 8498 dated 16/12/2016) has held that sec .....

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ge used and not merely from the fact that it has been retained in Chapter III. The introduction of the word deduction in Section 10A by the amendment, in the absence of any contrary material, and in view of the scope of the deductions contemplated by Section 10A as already discussed, it has to be understood that the Section embodies a clear enunciation of the legislative decision to alter its nature from one providing for exemption to one providing for deductions. 14. The difference between the .....

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the benefit of adjustment of losses against profits made by eligible units. 15. Sub-section 4 of Section 10A which provides for pro rata exemption, necessarily involving deduction of the profits arising out of domestic sales, is one instance of deduction provided by the amendment. Profits of an eligible unit pertaining to domestic sales would have to enter into the computation under the head profits and gains from business in Chapter IV and denied the benefit of deduction. The provisions of Sub .....

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ence or mention would have been a repetition of what has already been provided in Section 10A. The provisions of Sections 80HHC and 80HHE of the Act providing for somewhat similar deductions would be wholly irrelevant and redundant if deductions under Section 10A were to be made at the stage of operation of Chapter VI of the Act. The retention of the said provisions of the Act i.e. Section 80FIHC and 80HF1E, despite the amendment of Section 10A, in our view, indicates that some additional benefi .....

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herein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee. This is also more than clear from the contemporaneous Circular No. 794 dated 9.8.2000 which states in paragraph 15.6 that, The export turnover and the total turnover for the purposes of sections 10A and 10B shall .....

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aneous Circular of the department (No.794 dated 09.08.2000) understood the situation, it is only logical and natural that the stage of deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be prema .....

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