TaxTMI 
TaxTMI 
2017 (9) TMI 556
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....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 wherein the AO allowed deduction u/s 10A and 10AA of the Act without set off of loss of taxable unit. It can be seen from the afo....
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....ope 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 the eligible unit does not form part of the total income under the Act by virtue of provisions of Sec.10A or 10AA of the Act contained....
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....utation 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/- II Income from Capital Gain Short Term Capital Gain Rs. 45,692/- III Income from Other Sources Rs. 32,10,941/- Rs. 32,10,941/- Total Income (-) Rs. 7,57,84,993/- Rounded off (-) Rs. 7,57,84,900/- Computation of Book....
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...., 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 after exclusion of profits under section 10A.The Income Tax Return form also supports the proposition that though taxpayer may be having more than one undertaking, it is the export profits of the eligible undertaking which are to be considered for computing the relief and such profits are not to ....
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....re 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 details while allowing excess carry forward loss to the assessee as mentioned in para-4 there was wrong assumption of facts and incorrect application of law. The CIT accordingly set aside the order of AO passed u/s 143(3) of the Act and directed the AO to make a fresh verification and assessment. The f....
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....he 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 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 th....
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....e 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 10AA of the Act are deduction provisions or exemption provisions, is concerned, the first aspect which needs to be mentioned is that the issue was debatable and there are decisions of courts which have taken a view that the aforesaid provisions were exemption provision and will therefore not enter the computation of total income at all. These decisions have be....