2013 (3) TMI 509

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....learned CIT(A), failed to appreciate the fact that the provisions of Sec.10B are unit specific both the units i.e. The Pune and Nasik unit are independent units, separately eligible to the exemption u/s.10B. The mere fact that both the units are manufacturing socks, does not make them one 'undertaking'.   1.2 The learned CIT(A), failed to appreciate the fact that section 10B is covered under chapter III and therefore it is an exemption and therefore does not form a part of the total income". 2. This appeal came up for hearing on 23-01-2012. On that date, the ld. counsel of the assessee, Shri K. Gopal, appeared and submitted that the issue was covered in favour of the assessee by the decision of the Special Bench of the Tribunal in th....

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..../-. In Nasik unit, the assessee has shown net loss of 1,01,65,515/- against which it has adjusted the balance of income from Pune unit leading to net loss of Rs.99,87,729/- which was claimed to be carried forward. According to the AO, the assessee ought to have claimed deduction u/s. 10B on total income of both the units and, therefore, the same should have been set off against each other, whereas the assessee has claimed deduction in respect of Pune unit only. Accordingly, the assessee was asked to explain. The assessee, vide letter dated 07-12-2006, submitted as under : "Regarding your question as to why profit from Pune Unit has been taken as exempted u/s. 10B and not adjusted against the loss from Nasik unit, we give below our clarifi....

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..... The ld. CIT(A) confirmed the order of AO. 6. The Special Bench of the Tribunal in the case of the Tribunal in the case of M/s. Scientific Atlanta India Technology P. Ltd. vs. ACIT in ITA No.352/Mds/2008 vide order dated 05-02-2010 (supra) has taken the view that deduction u/s.10A does not fall in Chapter VIA. Therefore, sec. 80AB could not be applied which mandates the deduction to be out of 'gross total income'. On this basis, deduction of profitable unit was held to be allowable without adjusting the same against the loss of other units. However, the Hon'ble Kerala High Court has taken a contrary view. In that case also, the assessee had two industrial units and both of them were qualifying u/s.10B. The Hon'ble Court referred to the pr....

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....ssessee. This observation of the Tribunal also cannot be accepted because section 10B(6) does not deal with computation of business profit during the period the assessee enjoys exemption under section 10B(4). On the other hand, this sub-section is only an embargo against the assessee claiming any carried forward benefit under the sections referred to therein in the assessment for the assessment year following the end of the tax holiday enjoyed by the assessee under section 10B(4). So much so, contrary to the finding of the Tribunal, sub-section (6) only supports revenue's case that carried forward depreciation should be set off in the computation of business profit even during the period assessee enjoys exemption under section 10B(4). In vi....