2020 (6) TMI 724 - HC - Income Tax

High Court rules deductions under Income Tax Act should be made before computing total income

The High Court of Madras ruled in favor of the Assessee, holding that the Tribunal's decision to set off carry forward loss/depreciation of one eligible ... Carry forward loss / depreciation of one eligible unit set off against the profits of another eligible unit before deduction under Section 10A - HELD THAT:- As decided in M/s.Comstar Automotive Technologies Private Limited [2020 (3) TMI 814 - MADRAS HIGH COURT] it has been held that, the deductions either under Section 10A or 10B would be made while computing the gross total income of the eligible undertaking (like the Assessee) under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI of the Act. Accordingly, in terms of the aforesaid judgment rendered by this Court itself, the present appeal is disposed of in the same terms and the question of law framed above is answered in the same terms. Issues:- Whether the Tribunal was correct in holding that the carry forward loss/depreciation of one eligible unit should be set off against the profits of another eligible unit before deduction under Section 10A of the ActRs.Analysis:The High Court of Madras, comprising of Dr. Justice Vineet Kothari and Mr. Justice R. Suresh Kumar, addressed the issue of whether the Tribunal's decision regarding the set off of carry forward loss/depreciation against profits of eligible units before deduction under Section 10A of the Income Tax Act was correct. The Court referred to a previous judgment in the case of M/s. Comstar Automotive Technologies Private Limited, where it was established that deductions under Section 10A or 10B should be made while computing the gross total income of the eligible undertaking under Chapter IV of the Act, not during the computation of total income under Chapter VI. The Court emphasized that the method used by the Revenue to compute income, which resulted in the inability of the Assessee to claim deductions under Section 10B due to the set off of carry forward depreciation, was contrary to the law established by the Apex Court. The Court concluded that the Tribunal's decision was not legally sound in light of the precedent set by the Apex Court and ruled in favor of the Assessee, allowing the appeal and answering the substantial question of law in favor of the Assessee and against the Revenue. The judgment was based on the legal principles established in previous cases and aimed to ensure the correct application of tax laws in determining deductions for eligible units.