TaxTMI 
TaxTMI 
2006 (8) TMI 448
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....quired to be allowed from the total income of the assessee and as per section 2(45) of the Act, the 'total income' means the total amount of income referred to in section 5 computed in the manner laid down in the Act. (iii) The CIT(A) ought to have held that as the 'total income' has to be first computed before allowing the deduction under section 10A, the losses from the non-10A units have to be first set off against the income from the 10A unit in the process of computing the total income, form which the deduction under section 10A(1) is to be allowed." 3. Before the learned CIT(A), it was contended as under : (a) Income enumerated in Chapter III are not only to be excluded from the total income at the source itself but also cannot be considered as part of the taxable income. Section 10A is contained in Chapter-III. (b) Section 10A is not one of the deductions contained in Chapter VIA. The income of 10A unit is to be excluded before arriving at the gross total income. Section 80B(5) would not come into operation. (c) The change in nomenclature from exemption to deduction in the provisions of section 10A would not be a determining factor as t....
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....e. Hence deduction is to be restricted to the quantum of income included in the total income. It was therefore urged that learned CIT(A) erred in giving the direction that income as referred in section 10A is to be excluded without setting it off from loss of other business. 6. The learned AR has filed the written submissions, it was submitted that the company operates the following 3 divisions : (a) Software Service Division (b) Product Service Division (c) Systems Service Division 7. The software service division is registered as a Software Technology Park Unit with STPI. The software service division is making profits and such profit has been claimed as exemption under section 10A. The operation in the other 2 units has resulted in loss and losses and unabsorbed depreciation of these two units have been carried forward. 8. Section 10A was inserted w.e.f. 1st April, 1981. At the time of its inception, section 10A excluded certain incomes from being charged to tax. Section 10A was substituted by Finance Act, 2000 w.e.f. 1st April, 2001. In the substituted section, a deduction of the profits derived by the undertaking from the export of computer ....
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....ction 10A is not to be deducted from the total income as referred under section 80B(5). It was further argued that in the context of section 10A, the provision of sections 28 to 44D are however to be applied to each undertaking and not to each business. This is because section 10A is undertaking specific. Hence, there will be no occasion to invoke and apply section 32(2) of the Income-tax Act. Section 10A has not used the expression profits and gains under the head 'Profits and gains of business or profession' as used in section 80HHE. This Legislature created a fiction under sections 80-IA and 80-IB and according to which the eligible undertaking is to be considered as only source of income for the assessee. Due to such fiction unabsorbed depreciation and carry forward business are given effect to. In absence of similar fiction, the same would not hold good for section 10A. It was further submitted that brought forward depreciation is given effect to after setting off the brought forward business losses. As per section 32(2) brought forward depreciation is to be treated as current year depreciation but the effect is not given along with current year depreciation. The fiction under....
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....trade zone or export processing zone is subsequently located in a special economic zone by reason of conversion of such free trade zone or export processing zone into a special economic zone, the period of ten consecutive assessment years referred to in this sub-section shall be reckoned from the assessment year relevant to the previous year in which the [undertaking began to manufacture or produce such articles or things or computer software] in such free trade zone or export processing zone : [Provided also that for the assessment year beginning on the 1st day of April, 2003, the deduction under this sub-section shall be ninety per cent of the profits and gains derived by an undertaking from the export of such articles or things or computer software :] Provided also that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2010 and subsequent years." Section 2(45) "2. In this Act, unless the context otherwise requires,- (45) 'total income' means the total amount of income referred to in section 5, computed in the manner laid down in this Act;" [Emphasis supplied] Se....
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....ion 29 of the Income-tax Act. As per section 29, profit and gains of business or profession is to be computed in accordance with the provisions contained under sections 30 to 43D. Section 70 of the Income-tax Act governs the setting off a loss from one source against income from another source under the same head of income. Section 10A is not part of the section mentioned in section 29 of the Income-tax Act. Hence, business losses of the undertaking whose income is not exempt under section 10A cannot be set off to ascertain the profits and gains derived by an undertaking from the export of computer software. Hence, business losses of other units will not be set off against the profits of the undertaking engaged in export of computer software for the purposes of determining the allowable deduction under section 10A of the Income-tax Act. Unabsorbed business loss is to be set off under section 72 of the Income-tax Act and the same is not mentioned under section 29 of the Income-tax Act. Hence, unabsorbed business losses will not be set off against the profit of the undertaking engaged in the export of computer software for the purposes of ascertaining the deduction admissible under s....