TaxTMI 
TaxTMI 
2017 (5) TMI 1049
X X X X Extracts X X X X
X X X X Extracts X X X X
....is a company engaged in the business of rendering ITES. For A.Y.2006-07 the assessee filed return of income on 28.11.2006 showing nil income. The Assesee had claimed deduction u/s 10A of the Act of Rs. 3,28,62,391/-. The said sum was arrived at by the assessee in the following manner : " Calculation of Deduction u/s 10A Total Turnover 199,962,276 Less : Other Income 3,63,314 Sales Proceeds of the Undertaking 199,598,962 Less : Sales in INR 90,66,866 Total Export Turnover 190,532,096 Less: Foreign Currency not received During prescribed period 70,63,986 Export Turnover 183,468,110 Amount of Deduction u/s 10A Profit of the Business Under X Turnover Total Turnover 35816789 X 183468110 199962276 = Rs. 32,862,391" 4. The AO completed the assessment u/s 143(3) of the Act by order dated 23.12.2008 and he determined the deduction u/s 10A of the Act by adopting the profits of business of 10A at Rs. 3,51,14,628/- as against Rs. 3,58,16,789/- considered by the assessee in its computation of deduction u/s 10A of the Act. 5. The AO issued a notice u/s 148 of the Act dated 03.11.2010 for making an ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....- Less: Interest income to be considered separately Rs. 26,442/- Balance carried over Rs.3,51,14,628/- Add: Disallowance u/s 40(a) as per item 12(f) of the Return of income submitted Rs. 6,75,719/- Add: Disallowance as per the original assessment Order On accounts of :- (i) u/ s 36(1)(v)(a) for delay in deposits of contributions to PF/ESI Rs. 5,830/- (ii)u/s 40(a)(ia) for non deduction of TDS u/s 194C 194J Rs.5,45,692/- (ii) u/s 37(1) on account of inadmissible donation Rs. 15,000/- Rs. 5,66,522/- Total Income from Business Rs.3,63,56,869/- Less: Brought forward business loss set off Rs.43,91,870/- Less: Brought forward unabsorbed depreciation Set off Rs.2,47,02,614/- Less: Brought forward depreciation set off To the tune of remaining income from Business Rs.72,62,385/- Rs. 3,63,56,869/- Income from business after set off of Business loss and depreciation nil Income from other sources Rs. 26,442/- Total income Rs. 26,440/- Less: Depreciation set off out of remaining amount of (Rs.2,20,25,827/- less Rs. 72,62,385/-) Rs.1,47,63,442/- thus allowed to carry forward." ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0A has to be given effect at the stage of computing the profits and gains of business before applying the provisions of Sec 72. In the case of CIT Vs Yokogawa India Ltd (Karnataka High Court) rules as follows: "S. 10A/B continue to "exempt" profits & so loss of other units (eligible & non-eligible, including B/f loss) not liable for set-off against s. 10A/B profits "The High Court had to consider two issues for A Y 2001-02 & onwards: whether (i) the loss incurred by a non-eligible unit & (ii) the brought forward unabsorbed loss &' unabsorbed depreciation of the eligible unit has to be setoff against the profits of the eligible unit before allowing deduction u/s 10A/10B. HELD answering both questions in favour of the assessee: (a) On issue (i), s. 10A was amended by the FA 2000 w.e.f. 1.4,2001 to convert it from an "exemption" provision to a "deduction" provision. S, 10A allows deduction "from the total income". The phrase "total income" in s. 10A means "the total income of the STP unit" and not "total income of the assessee", Consequently, s. 10A deduction has to be given before computing the "profits & gains of business" under Chapter IV. This proposition is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....initiation of reassessment proceedings are concerned, we have heard the rival submissions. In the present case, it is noticed that the case of the assesse is that there was no fresh tangible material in the possession of AO at the time of recording of reasons for initiating proceedings u/s.147 of the Act. A perusal of the 'Reasons' recorded by the AO in this case reveals that at the time of recording of these 'Reasons' the AO had examined original assessment records only and no fresh material had come in the possession of the AO. In response to our specific query also, Ld DR could not point out any fresh material available with the AO at the time of reopening of the case of the assessee. Thus, assertion of the assessee that there was no fresh material with AO for reopening of this case, remained uncontroverted. 11. In the light of the above facts with regard to recording of reasons, let us examine settled position of law on this issue. The Hon'ble Supreme Court in the case of CIT vs. Kelvinator India Ltd. 320 ITR 561 (SC), has held that for reopening of the assessment, the AO should have in its possession 'tangible material'. The term 'tangible material' has been understood and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and without reference to the other eligible or noneligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee. This is also more than clear from the contemporaneous Circular No. 794, dated 9- 8-2000. If the specific provisions of the Act provide [first proviso to sections 10A(1); 10A(1A) and 10A(4)] that the unit that is contemplated for grant of benefit of deduction is the eligible undertaking and that is also how the contemporaneous Circular of the department (No.794 dated 9-8-2000) understood the situation, it is only logical and natural that the stage of deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, "immediately after the stage of determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in sections 70, 72 and 74 would be premature for application. The deductions under section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI f....