TaxTMI 
TaxTMI 
2015 (12) TMI 398
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....d by the learned DCIT, Circle 11(1), Pune of Rs. 8,59,046/- instead of income (i.e. loss) returned by the appellant amounting to Rs. 3,89,37,510/-. 2. The learned CIT(A)-I, Pune erred in law and on facts in upholding deduction u/s 10A of the ITA, 1961 as computed by the learned DCIT, Circle 11(1), Pune at Rs. 20,68,49,064/- instead of income Rs. 24,55,53,914/- as claimed by the appellant. 3. The learned CIT(A)-I, Pune erred in law in upholding the stand of the DCIT, Circle 11(1), Pune that the deduction u/s 10A should be computed at unit / undertaking level but should be allowed only after set-off of losses of other business units / undertakings. 4. The appellant craves leave to add / modify / delete / amend all / any of the grounds of appeal. 4. The ld. AR for the assessee at the outset pointed out that the issue raised in grounds of appeal Nos. 1 and 2 are general. Hence, the same are dismissed as general. The issue in grounds of appeal No. 3 raised by the assessee is against the computation of deduction u/s. 10A of the Act at the unit/undertaking level but should be allowed only after set-off of losses of other business units/undertakings. 5. The....
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....e Act i.e. from exemption it had become deduction. The Assessing Officer noted that the exempt income do not enter the stream of computation and do not form part of the total income and are excluded from the computation, whereas the tax free incomes do form part of the computation process and are tax free by virtue of the enabling provisions i.e. section 10A of the Act. As per the Assessing Officer this difference affected the set off provisions. The Assessing Officer was of the view that the losses and also income derived by the assessee from the eligible undertakings have to be intra-head set off against each other, before quantifying the deduction u/s. 10A of the Act. In this regard reliance was placed on the ratio laid down by the Delhi Bench of the Tribunal in Honeywell International (India) (P.) Ltd., (2007) 108 TTJ (Del.) 924. 7.1 The Assessing Officer further referred to the provisions of section 80B(5) and observed that the profits and gains of the eligible undertaking in proportion of export turnover to total turnover are allowed as deduction, while computing the taxable income of the assessee. Consequently, there would not be any deduction worked out in case of a loss....
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....his case where the appellant has eight eligible units, five of which have earned profit n the current year and three of them have incurred losses, the deduction has to be computed u/s 10A which w.e.f. 1.4.2000 has undergone change. The benefit available in sec. 10A has been changed from exemption to deduction. The profit has to be computed under Chapter V under the head 'business and profession'. However, the deduction u/s 10A is to be computed subject to the provision of sec. 10A. Section 10A(1) starts with "subject to the provision of this section, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive Assessment Years beginning with the assessment years relevant to the previous years in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee". Therefore, what is computed u/s 10A is deduction out of the income from business and profession computed u/s 29, With the change brought w.e.f. 1.4.2000 to make the benefit from exemption to deduction, the afores....
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.... losses and deprecation from earlier assessment year or current assessment year. 12. We have heard the rival contentions and perused the record. The assessee is engaged in export of software and IT enabled services. During the year under consideration the assessee was running eight units at different places and five of which units had declared positive profits and the balance three units declared losses for the captioned assessment year. The assessee was entitled to claim deduction u/s. 10A of the Act in respect of export of software. The assessee computed the deduction u/s. 10A of the Act by treating each of the unit as separate unit/undertaking and claimed the deduction at Rs. 24,55,53,914/-. The losses from three units aggregating Rs. 4,55,31,667/- was carried forward to be adjusted in the succeeding years. On the other hand the Revenue authorities were of the view that the losses earned by the assessee from separate unit have to be adjusted against the profits earned by the assessee in separate units and after making this intra-head set off, the deduction under section 10A of the Act were to be allowed to the assessee. In this exercise the deduction under section 10A of the ....
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.... reopened was belied by a plain reading of the provisions and the Assessing Officer was in error in proceeding on the basis that because the income was exempted, the loss was not allowable. The Hon'ble High Court further considered that all the four units of the assessee were eligible under section 10B, out of which three units had returned profits during the course of the assessment year, while the Crab stick Unit had returned a loss. The High Court further held that "The assessee was entitled to a deduction in respect of the profits of the three eligible units while the loss sustained by the fourth unit could be set off against the normal business income." In these circumstances, the Hon'ble High Court held that the basis on which the assessment was sought to be reopened was contrary to the plain language of section 10B. 15. The Hon'ble Bombay High Court in CIT Vs. Black & Veatch Consulting Pvt. Ltd. (supra) also observed that section 10A was a provision which was in the nature of a deduction and not an exemption. The Hon'ble High Court further held that the deduction under section 10A, in our view, was to be given effect to at the stage of computing the profit....
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....ming the deduction u/s. 10A of the Act in respect of each of its unit has to satisfy the conditions viz-a-viz each unit/undertaking. Even the quantification of amount of deduction has to be worked out independently in each unit. The assessee before us has furnished on record the audit report in Form No. 56F in respect of each of the unit against which it has claimed the deduction under section 10A of the Act. The quantification of the deduction under section 10A of the Act is to be worked out independently for each eligible unit and in case after the deduction so claimed under section 10A of the Act, there are profits in the hands of the assessee for such unit then the same can be set off against the losses, if any, incurred by the assessee in any other unit. There is no merit in first aggregating the profits of each of the eligible unit and setting of the losses of other units and on the net profits, if any, the deduction under section 10A of the Act to be computed. We find support from the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. Black & Veatch Consulting Pvt. Ltd. (supra) wherein it has been held that the deduction under section 10A of the Act has to be gi....