TaxTMI 
TaxTMI 
2017 (9) TMI 556
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....he Act, and (iv) Non SSL unit whose income is also chargeable to tax. The computation of total income as given by the assessee is given as Annexure to this order. The computation of Income under the head Income from Business & Profession, as furnished by the Assessee along with the return of income was as under : Income under the head Business & Profession For eligible units before allowing deduction u/s 10A is Rs.58,65,95,555 Less: Deduction allowed u/s 10A (Rs.58,31,79,442) Taxable Business Income of STPI Unit...[A] Rs. 34,16,113 Income under the head Business & Profession For eligible units before allowing deduction u/s 10AA is Rs.5,58,26,092 Less: Deduction allowed u/s 10AA (Rs.5,45,20,053) Taxable Business Income of SEZ Unit...[B] Rs. 13,06,039 -Loss under the head Business & Profession for other unit is..(C) (Rs.8,37,63,777) Income under the head Business & Profession[A]+[B]+[C] (Rs.7,90,41,626) Short Term Capital Gains Rs. 45,692 Income from other sources Rs. 32,10,941 Taxable Income/(Loss)......Carry Forward (Rs. 7,57,84,993) 3. The AO completed the assessment u/s 143(3) of the Act wherei....
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....Chapter VII only thus leaving out by implication incomes which do not form part of total income at all as per Chapter III from the scope of s. 66. Under Sec.70(2) of the Act, where the net result for any assessment year in respect of any source falling under any head of income, other than "capital gains", is a loss, the Assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head. 5. From the charging provisions of the Act, it is clear that both profit as well as loss which is negative profit must enter into computation, wherever it becomes material. The charge is on total income of the Assessee. Sec. 2 (45) defines total income to mean total amount of income referred to in Sec.5, computed in the manner laid down in this Act. An income in order to come within the purview of that definition must satisfy two conditions. Firstly, it must comprise the "total amount of income, profits and gains. Secondly, it must be "computed in the manner laid down in the Act". If either of these conditions fails, the income will not be a part of the total income that can be brought to charge. If income includes loss and if income of....
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....495/- though the income under the head income from business arrived at by the AO was only at Rs. 55,86,57,869/-. The following was the computation of total income made by the AO :- " 9. Subject to the above discussion and materials on record, the total income of the assesee is determined and assessed as under : I Income from Business as per computation Add : As discussed (-) Rs.48,15,89,249/- As Per para 3.1 Rs. 2,65,493/- As Per Para 4 Rs. 2,16,680/- As Per Para 5 Rs. 5,085/- As Per Para 6.8. Rs.6,52,00,000/- As Per Para 7 Rs. 97,99,448/- As per Para 8 Rs. 15,81,914/- Rs.7,70,68,620/- Rs.55,86,57,869/- Less: Deduction u/s 10A Rs.57,54,93,579/- Add: As discussed in para7 Rs. 76,85,863 Rs.58,31,79,442/- Less: Deduction u/s 10AA Rs. 5,24,06,468/- Add: As discussed in para 7 Rs. 21,13,585/- Rs. 5,45,20,053/- Rs.63,76,99,495/- (-) Rs. 7,90,41,626/- ....
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....the next step would be computation of tax and there would be no further deductions. The phrase 'total income' as used in Section l0A is to be understood in commercial sense. In the context of section l0A, total income is of the undertaking and not the total income of the Taxpayer. Further, the relief under Section l0A is with respect to an undertaking and not the business of the Taxpayer as a whole. The relief under Section 10A is in the nature of exemption, although termed as deduction. The relief is in respect of commercial profits, which are neither subject to charge under the ITA nor includible in the total income. Relief under section 10A would have to be given effect before Chapter-IV of ITA which deals with the computation of total income. In other words, deduction shall be given before process of computation of profits or gains of business or profession begins. As the income of 10A unit was to be excluded at source itself before arriving at gross total income, the question of setting off losses of non- eligible units or unabsorbed business loss and depreciation of preceding years of the same unit does not arise. Computation of total income is to be carried out only ....
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....ted above. 11. The CIT however observed in para-4 and 5 of his order that the AO failed to make necessary inquiry with regard to the existence of separate units and as to how the assessee has maintained its accounts viz., whether one account was maintained for all the units or separate accounts were maintained for separate units. The CIT in para-4 of his order concluded that failure to make such enquiry rendered the order of AO erroneous and prejudicial to the interest of the revenue. The CIT has also observed that in exercise of his powers u/s 263 of the Act he can even go into a debatable issue and he has wide powers. Thereafter in para-6 of his order the CIT has also expressed his view that provisions of section 10A and 10AA of the Act were deduction provisions and therefore loss of the units which were not entitled to tax exemption ought to be set off against the profits of 10A and 10AA unit and only on the reminder deduction u/s 10A and 10AA of the Act ought to have been allowed by the AO. The CIT in this regard made a reference to the CBDT Circular No.07/DV/2013 dated 16.07.2013. Thereafter he has referred to the fact that since the AO had not examined all the facts and de....
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.... 263 of the Act. Therefore order of AO in not setting off of the loss of the taxable units against the income of 10A and 10AA units cannot be termed as erroneous. It was further submitted by him that when the show cause notice u/s 263 of the Act dated 08.01.2015 was issued by CIT and as on 18.03.2015 when the CIT passed the impugned order, the issue was debatable. The issue was ultimately considered by the Hon'ble Supreme Court in the case of CIT vs Yokogawa India Ltd. (2017) 77 Taxman.,com 41 (SC) by its order dated 16.12.2016 and in the aforesaid decision the Hon'ble Supreme Court took the following view :- That from a reading of the relevant provisions of section 10A it is more than clear that the deductions contemplated therein is qua the eligible undertaking of an assessee standing on its own 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....
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.... regard in the earlier paragraphs of this order. In the light of the enquiries made by the AO in the course of assessment proceedings, we are of the view that the findings of CIT in para-4 of his order that the AO did not make necessary enquiries regarding the existence of a single account for various units or separate accounts of various units and about the nature of work of separate units, cannot be sustained. We also are of the view that the AO was fully conscious of the issue where provision of section 10A and 10AA of the Act were to be construed as deduction provision or exemption provisions and had in the course of assessment proceedings called for calculation of deduction u/s 10A and 10AA of the Act. In fact perusal of the order of assessment u/s 143(3) of the Act shows that the AO has disallowed the expenses claimed by the assessee by way of provision for leave encashment while arriving at the eligible provision of section 10A and 10AA units. It cannot therefore be said that there was any failure on the part of the AO for proper or adequate enquiries to claim deduction u/s 10A and 10AA before completing the assessment. 16. As far as the question whether section 10A and 1....