TaxTMI 
TaxTMI 
2008 (5) TMI 457
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....egarding depreciation, preliminary expenses, deferred expenses and miscellaneous expenses, the total income was computed by the assessee at a loss of Rs. 2,69,822. In the course of assessment proceedings, it was noticed by the Assessing Officer that interest income of Rs. 57,31,948 was included in the Profit & Loss Account. It was also seen by the Assessing Officer from Form No. 56G that the aforesaid industrial unit at Pune had shown loss of Rs. 43,65,916 and, therefore, income exempt under section 10B was shown at nil. On the other hand, it was seen that the assessee had set off the above loss against the other incomes. The Assessing Officer was of the view that if the assessee wanted to have the benefit of set-off under section 70 against the other income not derived from the industrial undertaking then the assessee was required to file declaration in writing before due date of furnishing the return under section 139(1) to the effect that the provisions of section 10B shall not be applicable for the relevant assessment year. For this view he relied on the provisions of section 10B(8) of the Act. Accordingly, the assessee was asked to explain whether such declaration was filed by....
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....in the case of CIT v. Mahindra Mills [2000] 243 ITR 56, decisions of the Tribunal i.e., in the case of ITO v. Expo Packaging [1995] 51 TTJ (Ahd.) 174, Navin Bharat Industries Ltd. v. Dy. CIT [2004] 90 ITD 1 (Mum.) (TM); and (iv) even assuming that provisions of section 10B are applicable to the unit, the assessee was entitled to adjust the said loss against any other head of income as per the provisions of sections 70 and 71 of the Act. The only prohibition is that any loss which could not be set off cannot be carried forward to subsequent years as per the provisions of section 10B(6)(ii) of the Act. There is no specific provision prohibiting the operation of sections 70 and 71 of the Act. 4. The above contentions of the assessee did not find favour with the CIT(A). According to him, the profits and gains derived from the business eligible under section 10B did not form part of total income and since profits and gains include losses also, neither profits nor the loss from such business could be considered for the purpose of computing total income. Consequently, the losses arising from such unit could not be set off under the provisions of sections 70 and 71 of the Act. He also e....
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....ftware for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee :" [Emphasis supplied] The perusal of the above clearly reveals that a deduction is allowed to the assessee in respect of the profits derived from the undertaking eligible under this section from the total income of the assessee. That means the total income of the assessee would include the profits or losses derived from such unit and if there is any profit, then the eligible amount shall be deducted in computing the total income. Accordingly, it is held that the CIT(A) was not legally justified in holding that profits and gains of the business eligible under section 10B of the Act do not form part of the total income. The view taken by us is also fortified by the decision of the Tribunal in the case of Mindtree Consulting (P.) Ltd. v. Asstt. CIT [2006] 102 TTJ (Bang.) 691. 6. We also do not find merit in the contention of the learned counsel for the assessee that on the basis of Form N....
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....in other sections partially or totally in computing the income of such business. However, it is pertinent to note that provisions of section 70 or 71 have not been included in the non-obstante provisions and, therefore, it cannot be said that provisions of section 70 or 71 cannot be applied in computing the income of the assessee. Had the Legislature intended that the provisions of sections 70 and 71 should not be applied in respect of loss incurred in business eligible under section 10B, it could have specifically provided so as provided in respect of section 72 or section 74. The view taken by us is also fortified by the unreported decision of the Third Member in the case of Navin Bharat Industries Ltd. (supra), wherein it has been held that provisions of section 70 or 71 are applicable even in respect of loss incurred in the business eligible, under section 10B or 10A. 8. In view of the above discussion, it is held that the assessee is entitled to set off the loss incurred in the industrial unit at Pune which is eligible under section 10B of the Act against the other incomes earned by him. The order of the CIT(A) is, therefore, set aside on this issue and consequently, the As....
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....he Assessing Officer disallowed the claim under section 35D as such expenditure did not fall under the aforesaid provisions. He also rejected the alternate plea of the assessee that such expenditure should be considered under section 37(1) of the Act. According to him, such expenditure being capital in nature could not be allowed as deduction in view of the Hon'ble Supreme Court judgment in the case of Brooke Bond India Ltd. v. CIT [1997] 225 ITR 798 , which has been upheld by the CIT(A). 12. Both the parties have been heard. The learned counsel for the assessee has not been able to point out as to how such expenditure would fall within the ambit of section 35D. However, alternatively, it has been contended by him that the claim of the assessee under section 37 should be adjudicated. On the other hand, the learned DR has relied on the order of lower authorities. In our view, the alternate contention of the assessee requires fresh adjudication as the Assessing Officer had disallowed the same without ascertaining the nature of the expenditure. The Assessing Officer in a summarily manner held that the expenditure was capital in nature without giving any reasons. Accordingly, we set....