ITAT allows separate deduction for eligible units, regardless of business losses set off.

The ITAT ruled in favor of the assessee, holding that deduction under section 10A should be allowed independently for the eligible undertaking, irrespective of setting off unabsorbed business losses. The decision aligned with the principle that eligible units' profits should be assessed on a standalone basis for claiming the deduction, settling the dispute on the timing of the deduction provision.

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Issues:
- Whether the Assessing Officer erred in setting off unabsorbed business losses before allowing deduction u/s.10A of the Income Tax ActRs.
- Interpretation of relevant provisions and judicial pronouncements regarding the stage at which deduction u/s.10A should be allowed.

Analysis:
1. The appeal questioned the decision of the Ld. CIT(Appeals) regarding the sequence of setting off unabsorbed business losses before allowing deduction u/s.10A of the Act for the assessment year 2011-12.
2. The assessee claimed deduction u/s.10A and set off brought forward losses against residual income, following which the Assessing Officer cited the Himatsingka Seide Ltd. case, emphasizing setting off losses before claiming deduction u/s.10A.
3. The assessee argued that post-amendment, deduction under section 10A was from total income, not exemption, and the Karnataka High Court's decision in Himatsingka Seide Ltd. was not applicable to amended provisions.
4. The Ld. CIT(Appeals) upheld the Assessing Officer's decision based on a CBDT Circular, noting conflicting judgments of the Hon'ble Supreme Court and Bombay High Court.
5. During the hearing, the assessee's representative referenced relevant case laws supporting the allowance of deduction u/s.10A before setting off losses.
6. The ITAT analyzed the issue, considering the legislative intent behind Chapter VI-A deductions and the specific provisions of section 10A, emphasizing the deduction's application to the eligible undertaking independently.
7. Citing the Hon'ble Bombay High Court and Supreme Court judgments, the ITAT concluded that deduction u/s.10A should be allowed independently for the eligible undertaking, irrespective of other units' profitability, thereby directing the Assessing Officer to allow the deduction before setting off unabsorbed business losses.
8. The ITAT's decision aligned with the principle that the profits of eligible units should be assessed on a standalone basis for claiming deduction u/s.10A, ultimately allowing the assessee's appeal and settling the dispute on the timing of deduction provision.

This detailed analysis of the judgment clarifies the interpretation of legal provisions and judicial precedents regarding the sequence of setting off losses and allowing deductions under section 10A of the Income Tax Act.

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