2022 (3) TMI 438 - HC - Income Tax

Court confirms deduction calculation under Income-tax Act Section 10A.

The Commissioner of Income Tax, Chennai Versus Amnet Systems Pvt Ltd.

The Commissioner of Income Tax, Chennai Versus Amnet Systems Pvt Ltd. - TMI Issues:1. Challenge to the order of the Income Tax Appellate Tribunal by the Revenue.2. Interpretation of deduction under section 10A of the Income-tax Act.3. Jurisdiction of the Commissioner of Income Tax (CIT) to revise assessment orders under Section 263.Issue 1: Challenge to the Tribunal's OrderThe tax case appeal was filed by the Revenue against the order of the Income Tax Appellate Tribunal, Chennai, related to the assessment year 2004-05. The substantial question of law admitted by the court was whether the Tribunal was correct in holding that the deduction under section 10A should be computed before setting off losses or depreciation.Issue 2: Interpretation of Deduction under Section 10AThe appellant initially filed a return claiming 'Nil' income after deduction under section 10A. The assessing officer allowed a deduction of a specific amount under section 10A before setting off losses and unabsorbed depreciation. The CIT set aside the assessment order to re-examine the deduction. The Revenue argued that the deduction under section 10A should be computed only after setting off losses, citing a Karnataka High Court decision. However, the High Court referred to a Supreme Court judgment in CIT v. Yokogawa India Ltd, which clarified that the deduction under section 10A should be calculated while computing the gross total income of the eligible undertaking under Chapter IV of the Act, not during the total income computation under Chapter VI. The court emphasized that the deduction is specific to the individual undertaking and should be determined independently.Issue 3: Jurisdiction of the CIT under Section 263The court noted that the Karnataka High Court's decision regarding the timing of deduction under Chapter VI A was specific to that case and not universally applicable. Referring to a previous decision in a similar case, the court ruled in favor of the assessee based on the Supreme Court's interpretation of section 10A. Consequently, the substantial question of law regarding the computation of deduction under section 10A was decided in favor of the assessee, while the issue of the CIT's jurisdiction to revise the assessment order under section 263 was left open.In conclusion, the court upheld the Tribunal's decision, following the Supreme Court's interpretation, and ruled in favor of the assessee regarding the computation of deduction under section 10A. The issue of the CIT's jurisdiction under section 263 was not conclusively decided in this judgment.