TaxTMI 
TaxTMI 
2018 (3) TMI 218
X X X X Extracts X X X X
X X X X Extracts X X X X
....x Act, 1961 on 29.11.2011, declaring NIL income after claiming the exemption u/s. 10A of the Act. However, the assessee company has paid tax under MAT provisions declaring book profits at Rs. 21,23,520/- on which tax amounting to Rs. 3,93,701/- and interest of Rs. 37,002/- has been paid. The case of the assessee was selected for scrutiny. Notice u/s.143(2) and 142(1) of the Act was issued on 25.9.2012 and the same were complied with on 03.10.2013. In response to further notices u/s. 143(2) and 142(1) of the Act, the ARs of the assessee appeared from time to time and filed the information. The assessee company was engaged in the business of providing IT enable services (BPO) (Medical billing). During the year under consideration, the assessee company has declared foreign receipts at Rs. 97.43 lacs and Foreign Exchange outgoings at Rs. 6.45. Books of accounts produced were test checked. Thereafter, the income of the assessee was assessed at NIL. However, income declared u/s. 115JB of the Act was assessed at Rs. 21,23,520/- and allowed credit for prepaid taxes vide order dated 27.2.2014 passed u/s. 143(3) of the Act. 4. Vide letter F.No. ITO-W26(4)/2015-16/1205 dated 17.2.2016 the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rted the various submissions and arguments advanced by the Ld. AR of the Assessee. He has strongly relied upon the impugned Order passed u/s. 263 by the Ld. Pr. CIT and has invited our attention to the finding recorded by the learned Pr. CIT in his impugned order. Accordingly, he stated that the order passed by the AO is erroneous as well as prejudicial to the interest of the Revenue. Accordingly, he requested that the impugned order passed u/s. 263 of the Act passed by the Ld. CIT may be upheld and appeal of the assessee may be dismissed. 8. We have carefully considered the rival submissions and perused the relevant records available with us, especially the impugned order passed by the Ld. CIT u/s. 263 of the Act alongwith the legal position on the relevant issues which emanates from the various decisions cited before us. We find that in this case the Assessing officer was directed by the Pr. CIT to compute the income of the assessee by first setting off the unabsorbed depreciation losses of Rs. 13,51,195/- against the income of Rs. 21,36,056/- of the eligible unit and thereafter allow the deduction u/s 10A on the remaining income of Rs. 7,84,861/-. Before adjudicating the issu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the period of benefit." 8.3 After perusing the aforesaid Circular, we note that in para 15.10 it is explicitly provided that the unabsorbed amounts cannot be carried forward or set off against profits of subsequent year. We also note that a combined reading of the above provisions of the law as well as Circular clearly show that deduction u/s 10A is to be allowed from total income as computed under chapter IV of the Income Tax Act, 1961 and not at the stage of computation of total income under chapter VI of the Income Tax Act, 1961. Therefore from this it is clear that while claiming deduction u/s 10A unabsorbed depreciation is not to be adjusted. 8.4 We further note that the above position of law has been accepted by various courts including the Hon'ble Supreme Court of India. Some of these decisions are briefly discussed here under: Commissioner of Income Tax and Another Vs Yokogawa India ltd. 2017- 3911TR 274 (SC), the Hon'ble Supreme Court held that the deduction under section 10A is to be given before adjusting unabsorbed depreciation or losses as per chapter VI of the income Tax Act, 1961. Their lordship while concluding the case observed in Para 17 and we quot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ide Ltd. (supra). The Karnataka High Court held that unabsorbed depreciation and investment allowance have to be set off against income of eligible units before the computation of exemption under section 10B. It was also held that the income eligible for exemption has to be computed as per the provision of the Income-tax Act and not on a commercial basis. The case before the Karnataka High Court pertained to assessment year 1994-95. Section 10B at the relevant time excluded certain incomes in the process of arriving at the total income. Section 10B at the relevant time operated as an exemption section. The terminology of section lOB has not been changed. The section currently provides for a deduction from total income. This change was brought about when section 10B was substituted. Thus, the decision of the Karnataka High Court having rendered in the context of old section 10B, cannot be made applicable to the present case. Also the various citations referred and relied by the Hon'ble Karnataka High Court pertain to deductions conferred under Chapter VI-A of the Income Tax Act 1961. Section 10A is placed in Chapter III - Incomes do not form part of total income and not in Chapt....