TaxTMI 
TaxTMI 
TaxTMI 
2008 (1) TMI 480
X X X X Extracts X X X X
X X X X Extracts X X X X
....er Haze Bath, Woolley Bath, BAI 8 AS, UK. The assessee-company has filed a return of income for the assessment year 2003-04 on November 20, 2003, admitting a loss of Rs. 28,54,452 and the same was processed under section 143(1) of the Income-tax Act, 1961, on February 27, 2004, accepting the loss returned. The assessee has claimed an exemption under section 10B of the Act of Rs. 2,66,83,098 in the original return and the case was selected for scrutiny to verify the exemption claimed. Notice under section 143(2) of the Act was issued to the assessee. In response to the same, the authorised representative of the assessee appeared before the Assessing Officer from time to time and files the details called for. While examining the details filed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g the exemption under section 10B, thereby, allowing the said 10B exemption on the adjusted profits. 2. He should have found that as per the proviso to section 10B of the Act for the assessment year 2003-04, the deduction under section 10B shall be ninety per cent. of the profits and gains derived by the undertaking and the brought forward loss should be set off against the 10 per cent. portion of the profits of the undertaking." 4. The assessee has filed two grounds of appeal. However, there is only one issue involved in this case which is pertaining to the setting off of carried forward business loss against the profits and gains derived by the undertaking under section 10B of the Act. 5. It is argued by learned counsel for the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ollows : Rs. Interest on tax free securities under section 8 of the 1922 Act 6,000 Property income under section 9 of the 1922 Act 13,000 Loss in business other than in speculative transaction under section 10 of the 1922 Act. - 5,000 Total 14,000 An Income-tax Officer proposes to set off the loss of Rs. 5,000 against tax free income of Rs. 6,000 and to tax Rs. 13,000 out of the total income of Rs. 14,000. On the other hand, the assessee contends that the loss of Rs. 5,000 shall be set off against the chargeable income of Rs. 13,000 and only Rs. 8,000 out of the total income of Rs. 14,000 be taxed in his hands. 2. There is nothing in section 24(1) to indicate that a particular mode of set off shall be followed. In the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r in consonance with the ratio of the decisions of the various High Courts. He further argued that from the assessment year 2001-02 onwards, the provisions of sections 10A and 10B of the Act have been brought at par with the other sections dealing with deductions allowed under Chapter VI-A of the Act. From April 1, 2001, onwards, the brought forward losses pertaining to the specified undertakings eligible for deduction under section 10B of the Act are allowed to be carried forward and set off against the income of such under- takings in the future assessment years. As per the settled position of law, all the brought forward losses and depreciation are first required to be set off against the business profits of the current year before compu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her provisions. It is only an exemption provision. The exemption cannot be fanciful and it has some rationale with other provisions of the Act. Therefore, a combined reading of the definition of exemption, total income-tax liability deductibility etc. one has to come to a conclusion that calculation as far as possible is to be in terms of the Income-tax Act. The computation made by the assessee in a particular manner has also to be scrutinised by the Department as otherwise there is every chance of exemption being misused by anyone. It may be true that even after taking into consideration, the unabsorbed loss, the assessee may get exemption but nonetheless, he cannot take a portion of the exemption just to suit his income for the purpose of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d for working out the proportion of the eligible amount. We do not agree with the contention of learned counsel for the assessee that the second proviso to section 10B of the Act has to be applied directly and immediately on the gross business profit before taking into consideration the brought forward unabsorbed business losses. If this procedure of computation is adopted, it will result in absurd results because 10 per cent. of taxable income gets worked out even before considering the set off of brought forward losses against the business profits. If this procedure is applied and upheld by the courts, this will result in the taxation of much higher income in the hands of various assessees for the assessment year 2003-04, if such assessee....