TMI Blog2022 (5) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act in the instant case. Hence no adjustment is warranted in the instant case as proposed by the ld. CIT. Thus we hold that the ld. CIT grossly held in holding with the profits of the business for the year under consideration has to be reduced by the brought forward losses from earlier year for the purpose of computing profit eligible deduction u/s.80HHE of the Act. Accordingly, the ground No.2(a), 2(b) by the assessee are allowed. Allowing set off of losses and unit eligible for claiming deduction u/s.10A of the Act against non-Software Technology Park (STP) Unit - assessee earned profits in its Ashok Plaza Unit at Pune which was eligible for deduction u/s.10Aand assessee also had three other units which incurred losses during the year and such losses were set off against the income from non-STP Unit - CIT was of the opinion that the losses incurred in three other units should be set off with Pune unit and on the net amount, deduction u/s.10A of the Act should be allowed to the assessee - HELD THAT:- We find that this issue is no longer res integra in view of the decision of the Hon ble Supreme Court in the case of CIT vs. Yokogawa India Ltd.[ 2016 (12) TMI 881 - S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ues sought to be revised by the ld. CIT on merits. Hence, on merits, this deferred tax provision is required to be added back while computing book profit u/s.115JB of the Act as per Clause(h) of Explanation 1 to Section 115JB(2) of the Act which is retrospectively applicable from 01/04/2001. Provision for doubtful debts, Provision for diminution in value of Asset Provision for doubtful recovery - As in view of the retrospective amendment brought in the statute, these three items would have to be added back while computing book profits u/s.115JB of the Act. Hence, all the case laws relied upon by the ld. AR before us would not be applicable in the instant case, in view of the retrospective amendment. Accordingly, the ground 7 raised by the assessee is dismissed. - ITA No.4137/Mum/2007 - - - Dated:- 17-5-2022 - Shri M.Balaganesh, Accountant Member And Shri Kuldip Singh, Judicial Member For the Assessee : Shri Nitesh Joshi For the Revenue : Shri Sunil K. Jha ORDER PER M. BALAGANESH (A.M): This appeal in ITA No.4137/Mum/2007 for A.Y.2002-03 preferred by the order against the revision order of the ld. Commissioner of Income Tax-(C)-2, Mumbai u/s.263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O without indicating how excess deduction under section 10A had been allowed to the appellants by the AO. (b) The CIT erred in holding that deduction under section 10A has been claimed in excess by alleged allocation of disproportionate higher common expenses to the non-STP units, without giving the appellants an adequate opportunity of being heard in the matter. 5. The CIT erred in holding that the AO failed to take into account the finding of the Transfer Pricing Officer (TPO) while allowing the deduction under section 10A. The appellants submit that the salary of the software personnel deputed overseas on the basis of which the addition has been made by the TPO, are neither relatable nor debited to the 10A units. In view thereof no adjustment is required to be made with regard to the above issue. 6. The CIT erred in holding that the losses pertaining to section 10A units should be added back while computing book profits under section 115JB. 7. The CIT erred in setting aside the matter to the AO without indicating how the following provisions were towards meeting liability other than ascertained liabilities:- Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act on 29/12/2004 determining total income of Rs.Nil under normal provisions of the Act and book profit of Rs.2,38,97,632/- u/s.115JB of the Act. This assessment is sought to be revised by the ld. CIT-2, Mumbai by invoking revision jurisdiction u/s.263 of the Act on the ground that the order of the ld. AO is erroneous and prejudicial to the interest of the Revenue on various aspects which are enumerated in the grounds raised by the assessee as above. Hence, we deem it fit to adjudicate the issues raised by the ld. CIT-2, Mumbai on merits in the same seriatum of the grounds raised by the assessee hereinabove. 6. The ground Nos.2(a), 2(b) and ground No.8 are interconnected challenging the computation of deduction u/s.80HHE of the Act. 6.1. We find that in the assessment order dated 29/12/2004 u/s.143(3) of the Act, the ld. AO had computed the profits eligible for deduction u/s.80HHE of the Act at Rs.7,65,20,042/-. Since, the gross total income of the assessee was only Rs.2,05,57,787/-, the deduction u/s.80HHE of the Act was restricted to the said amount of gross total income. However, while computing the gross total income, the brought forward business loss of Rs.12,29,01,688/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As stated supra, profits of the business is to be computed as per Section 29 of the Act which in turn stipulates that business income shall be computed in accordance with the provisions contained in Section 30-43D of the Act. The second phase is the said deduction so computed above is to be restricted to the extent of gross total income as the same is to be allowed from gross total income. In the facts before the Hon ble Madhya Pradesh High Court, in the second stage of computation, the gross total income was nil and therefore, no deduction u/s.80HHE of the Act was allowed. In the facts before the Hon ble Supreme Court in Ipca Laboratories referred to supra, the loss from export of trading goods was higher than the profits of self-manufactured goods resulting into net negative income. The Hon ble Supreme Court was not concerned with brought forward business loss as the issue is arising in the present case. Hence, the deduction u/s.80HHE of the Act was denied. Hence, it could be safely concluded that the two case laws relied upon by the ld. DR does not advance the case of the Revenue as they are factually distinguishable from the present case. 6.4. We find that the issue in dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d net profit from the self-manufactured export and the trading export was the loss, then the deduction in respect of export incentives was to be allowed without setting off such net loss. We find that in this case also, the issue as arising in the present case of the assessee before us i.e. the computation of profit eligible for deduction by setting off brought forward business loss, did not arise for consideration and therefore, the decision rendered in Rohan Dyes and Intermediates Ltd., also becomes factually distinguishable with that of the assessee case. Accordingly, we hold that the ld. CIT grossly held in holding with the profits of the business for the year under consideration has to be reduced by the brought forward losses from earlier year for the purpose of computing profit eligible deduction u/s.80HHE of the Act. Accordingly, the ground No.2(a), 2(b) by the assessee are allowed. 6.7. The ground No.8 raised by the assessee was stated to be not pressed by the ld. AR, as no adjustment has been made by the ld. AO in the order giving effect to Section 263 proceedings. Hence, ground No. 8 is dismissed as not pressed. 7. The ground Nos. 3(a) to 3(c ) raised by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plated for grant of benefit of deduction is the eligible undertaking and that is also how the contemporaneous 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 premature for application. The deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression total income of the assessee in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression total income of the assessee in Section 10A as 'total income of the undertaking&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, the ld. AO had already carried out this adjustment as required by Clause-f of Explanation-1 to Section 115JB(2) of the Act. Hence, here also the ld. CIT had proceeded purely on incorrect assumption of facts. Hence, the ground No.6 raised by the assessee is allowed. 11. Issues raised in ground No.7 by the assessee are as to whether the following items are required to be added while computing book profit u/s.115JB of the Act. a) Deferred tax liability - Rs.440.42 Lakhs b) Provision for doubtful debts - Rs. 5.91 lakhs c) Provision for diminution in value of Asset - Rs. 0.05 lakhs d) Provision for doubtful recovery - Rs. 56.92 lakhs 11.1. We have heard rival submissions and perused the materials available on record. Let us address each of the aforesaid issues separately. Deferred Tax Liability Rs.440.42 lakhs:- We find that the order of ld. CIT u/s.263 of the Act was passed on 30/03 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
