TaxTMI 
TaxTMI 
2019 (3) TMI 5
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....STPI unit. The Assessing Officer noted that while claiming deduction u/s. 10A, the assessee failed to take into consideration the brought forward losses/depreciation. From the perusal of tax audit report, the Assessing Officer noted that the assessee has business loss/depreciation of Rs. 5,90,31,797/- and amount claimed by the assessee as business losses/depreciation is Rs. 6,33,65,023/-. The deduction can be given only after getting the total income, i.e., after adjusting the losses available to the assessee. In this regard, the assessee furnished reply and relied on various decisions. After considering the detailed submissions of the assessee, the AO relied on the decision of Apex Court in the case of Himatsing ka Seide Ltd. vs. CIT (Civil appeal No. 1501 of 2008). Accordingly, before giving deduction u/s. 10A, the Assessing Officer adjusted the brought forward business losses and un-absorbed depreciation of Rs. 5,90,31,797/-. 3. The Assessing Officer further noted that the assessee has earned dividend of Rs. 4,59,656/-, which are not part of the total income of the assessee and the assessee did not disallow any expense in relation to exempt income while computing the total ta....
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....ing the entire materials available on record and the orders of the authorities below, we observe that the assessee has two units - one is STPI and other non-STPI unit. The ld. CIT(A) has rightly allowed the appeal of the assessee by holding that the brought forward business loss and unabsorbed depreciation of non-eligible business unit is not allowed to be adjusted while calculating the exemption u/s. 10A. The ld. AR has also placed reliance on the judgment of Delhi Tribunal in ITA No. 5622/Del/2010 for the assessment year 2005-06 wherein similar issue has been decided in favour of the assessee after following the decision of Hon'ble Supreme Court in the case of CIT vs. Yogokawa India Ltd. (supra) and CIT v. JP Morgan Service India Pvt. Ltd. 393 ITR 24 (SC). The relevant findings of the Tribunal read as under : 15. AO while computing the deduction u/s 10A of the Act concluded that the same is required to be computed after setting off brought forward losses of Rs. 34,99,523/- and unabsorbed depreciation of Rs. 2,05,013/-. However, this controversy has already been set at rest by Hon'ble Supreme Court in case cited as CIT vs. Yogokawa India Ltd. - 391 ITR 274 (SC) and CIT....
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....sales, is one instance off deduction provided by the amendment. Profits of an eligible unit pertaining to domestic sales would have to enter into the computation under the head "Profits and. gains from business" in Chapter IV and be denied the benefit of deduction. The provisions of sub-section (6) of section 10A, as amended by the Finance Act, 2003, granting the benefit of adjustment of losses and unabsorbed depreciation, etc., commencing from the year 2001-02 on completion of the period of tax holiday also virtually work as a deduction which has to be worked out at a future point of time, namely, after the expiry of the period of tax holiday. The absence of any reference in Chapter VI of the Act to deduction under section 10A can be understood by acknowledging that any such reference or mention would have been a repetition of what, has already been provided in section 10A. The provisions of sections 80HHC and 80HHE of the Act providing for somewhat similar deductions would be wholly irrelevant and redundant if deductions under section 10A were to be made at the stage of operation of Chapter VI of the Act. The retention of the provisions of the Act, i.e., sections 80HHC and 80HHE,....
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....the undertaking". Therefore, though section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. Decision of the Karnataka High Court in CIT vs. Yokogawa India Ltd. [2012] 341 ITR 385 (Karn) affirmed on this point." 16. So, following the law laid down by Hon'ble Supreme Court in CIT vs. Yogokawa India Ltd. (supra), deduction u/s 10A is required to be taken before setting off brought forward losses and unabsorbed depreciation. Accordingly, Grounds No.5, 5.1 & 5.2 are determined in favour of the assessee and the AO is directed to compute the deduction u/s 10A accordingly. Respectfully following the above decision, we dismiss the appeal of the Revenue on this score. 8. In respect of disallowance u/s. 14A, we find that the ld. CIT(A) has done a good reasoned order observing as under : "5.3 The reason given by AO and the submission of the appellant are considered. Since, the appellant had income which is not included in taxable income, applying the 'real....