AI Drafter 
TaxTMI 
TaxTMI 
2019 (5) TMI 947
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....nits namely DTA Division, SEZ Division and Kashipur Division. Income from SEZ Division is exempt u/s 10A(1A) of the Act. Assessee incurred loss in Kashipur Division but while computing income assessee has first claimed exemption u/s 10A(1A) of the Act and remaining income was used to set off current and brought forward loss. This claim of the assessee allowed by the Ld. A.O on the basis of his understanding of provisions of Income Tax Act and CBDT circulars issued on this issue and documents filed before him. However, Ld. A.O made disallowance u/s 14A of the Act at Rs. 61,43,940/- and also made disallowance for interest paid on Income Tax at Rs. 15,82,154/- and assessed loss at Rs. 2,40,10,826/-. Subsequently Ld. Principle Commissioner of Income Tax assuming jurisdiction u/s 263 of the Act perused the records and observed that the order passed by Ld. A.O u/s 143(3) of the Act dated 30.3.2015 is erroneous and prejudicial to the interest of revenue because it was made without proper enquiry, non application of mind and based on insufficient material. 3. Now the assessee is in appeal challenging the order of Principle Commissioner of Income Tax u/s 263 of the Act for wrongly assumi....
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.... on the ground of the order passed by Assessing Officer to be erroneous as well as prejudicial to the interest of revenue on account of the failure on the part of the Assessing Officer to make necessary enquiries and passed order under section 263 of the Income Tax Act without appreciating the submission of the assessee company. Sir, we are filing herewith the following submission, which shall go to show that the Assessing Officer did not err while allowing the exemption, because he had fully applied his mind to the facts of the case. Ld. Counsel for the assessee submitted that specific enquiry were made by the Ld. A.O relating to claim of exemption u/s 10A of the Act and the same was replied in detail along with supporting documents on 3.2.2015 in support of the claim that firstly the exemption is claimed u/s 10A of the Act and the provisions of Section 71 & 72 relating to brought forward and carry forward losses are followed thereafter." That the assessee company also filed auditor's report under section l0A of the Income Tax Act, 1961 in Form No.S6F in response to the query during the assessment proceedings in which detailed calculation of deductio....
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....39;F Delhi ITA no/ 338/De1/2010 i. Anil Shah vs. Assistant Commissioner of Income Tax, Range 24(1), Mumbai j. Bhartia Industries Ltd VS. CIT (2011) 243 CTR (Ca)) 328 (High Court of Calcutta) k. Khajrho Builders & Construction Co.Ltd VS. CIT (2016) 29 ITJ 76 (TRIB. - AGRA) l. Uttam Construction Company VS. Asstt. Commissioner of Income Tax (2016) 28 ITJ 121 (TRIB. - RAIPUR) m. Commissioner of Income Tax & Anr V/s. M/s. Yokogawa India Ltd. 2016- TIO-228-SC-IT 391 ITR 274 n. Decision Craft Analytics Ltd. vis. Deputy Commissioner of Income Tax 2019- TIOL-542-ITAT-AHM. o. M/s. Scintillating Jewellery v/s. Pr. Commissioner of Income Tax-19, Mumbai 2019- TIOL-S70-ITA T -MUM. p. M/s. Bharoomal and Company Vs. Pr. Commissioner of Income Tax-22, Mumbai. 2019- TIOL-602-ITAT -MUM. q. Sanspareils Greenlands Pvt Ltd V/s Commissioner of Income Tax, Meerut and others. 2019-TIOL-379-ITAT-DEL. r. Commissioner of Income Tax vs. IYCO Electronics Tools India (P)Ltd (2012)80 CCH 0275 Kar HC (2012) 205 Taxman 0403. 5. Per contra Departmental Representative vehemently argued and supporting the order of Ld. Princip....
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....pleted u/s 148 assessment for A.Y. 2011-12 has also been completed u/s 263 and the claim of assessee for section 10A has been allowed after setting of brought forward losses. Hence, the assessee's claims of exemption u/s 10A for Rs. 12,51,79,200/- for the A.Y. 2012-13 should be allowed after setting off brought forward losses of earlier years. The correct calculation of carry forward of losses and exemption u/s 10A should be as under:- A.Yr. Gross income/loss Addition made (order u/s 153A/143(3) Actual brought forward losses Remaining income/loss Deduction u/s 10A Eligible amount for carry forward to next year 2009-10 (-)10,26,99,579/- 268,13,973/- - (-)758,85,606/- No profit available (-)758,85,606 2010-11 (-)668,72,457/- 18,80,552/- (-) 758,85,606 649,91,905/- -do- (-) 14,08,77,511 2011-12 17,21,02,447/- 470,000/- (-) 14,08,77,511 316,94,936/- 312,24,936 470,000/- other than 10A 2012-13 934,42,221/- 77,26,096/- - 10,11,68,315 934,42,221 Rs. 77,26,094 In view of the above, the exemption u/s 10A should be restricted/allowed at Rs. 934,42,221/- for A.Y. 2012-13 ....
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....r u/s 143(3) of the Act with regard to the three issues referred in the show cause notice issued u/s 263 of the Act. 9. The power of Ld. Pr. Commissioner or Income Tax Commissioner of Income Tax to call for and examine the record of any proceedings under this Act are provided u/s 263 of the Act, which reads as follows; 263. (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation 1.-For the removal of doubts, it is hereby declared that, for the purposes of this subsection,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessme....
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....r which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.-In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 10. From the aforesaid provision of Section 263) of the Act, it is apparent that the power of suomoto revision exercisable by Pr.CIT/CIT is undoubtedly supervisory in nature. Section 263 empower Pr.CIT/CIT to call for and examine the record of any persons under the Act. Pr. CIT/CIT has to satisfy between the twin conditions namely (i) whether the order of the Assessing Officer sought to be revised is erroneous and(ii) whether it is prejudicial to the interest of revenue. As held by Hon'ble Apex Court in the case of Malabar Industrial Company Ltd 243 ITR83(SC), that if any one of the conditions is missing i.e. if the order of the Assessing Officer is erroneous ....
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.... losses. 13. We observe that during the course of proceedings u/s 143(3) of the Act specific query was raised by Ld. A.O by way of questionnaire dated 9.2.2015 regarding the justification of deduction/ exemption claimed u/s 10A of the Act. The relevant extract of questionnaire is reproduced below; 2. (a) Please justify the deduction claimed u/s lOA to IT Act. Whether the company has fulfilled all the conditions laid down the Income Tax Act or not. Please mention the year in which production is started and mention the year from which you are taking deduction u/s 1OA. (b) As per statement of total income there are DTA Division, SEZ Division and Kashipur Division and total income has been worked out for each division. In this regard it is required to file complete copy of balance sheet/ profit and loss account for the previous year 2011-12 relevant to assessment year 2012-13 for each division. It is noticed that you have not maintained head office account and it appears the related to head office/administration have not been allocated for each division it is therefore not possible to work out correct income for each division as such the claim made u/s 1OA is also ....
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....nd specific reply dated 3.3.2015 clearly shows that this is not the case of 'NO ENQUIRY' rather the Ld. A.O has made a "PROPER AND DETAILED ENQUIRY" and accepted the claim of the assessee by interpreting the provisions of law, judicial pronouncements as well as the Circular issued by Central Board of Direct Taxes. 16. We find that the Hon'ble Apex Court in the case of CIT & ANR V/s M/s. Yokogawa India Ltd (supra) has settled the instant issue after discussing the provisions of Section 10A & 10B in detail and also made distinction between the exemption and deduction provisions. Hon'ble Apex Court has held that exemption u/s 10A of the Act should be allowed to the assessee independently prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving on the total income of the assessee from the gross total income. Hon'ble Court further hold that though Section 10A of the Act 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. Relevant extract of the judgment ....
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....ein at page 687, it is held that: 9. Chapter headings and the marginal notes are parts of the statute. They have also been enacted by Parliament. There cannot, thus, be any doubt that it can be used in aid of the construction. It is, however, well settled that if the wordings of the statutory provision are clear and unambiguous, construction of the statute with the aid of "chapter heading;" and "marginal note" may not arise. It may be that heading and marginal note, however, are of a very limited use in interpretation because of its necessarily brief and inaccurate nature. They are, however, not irrelevant. They certainly cannot be taken into consideration if they differ from the material they describe." 10. The Revenue further contends that by virtue of the amendment made by Finance Act, 2000, deductions under Section l0A are required to be made and allowed at the stage of computation of total income under Chapter VI of the Act notwithstanding the absence of any specific provision in Chapter VI to the said effect. In fact, the Revenue contends that in view of the clear language of Section l0A, as brought about by the amendment, a parallel or consequential amendme....
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....ing computed at the stage of application of provisions of Chapter VI of the Act. 12. We have considered the submissions advanced and the provisions of Section l0A as it stood prior to the amendment made by Finance Act, 2000 with effect from 1.4.2001; the amended Section l0A thereafter and also the amendment made by Finance Act, 2003 with retrospective effect from 1.4.2001. 13. The retention of Section l0A in Chapter III of the Act after the amendment made by the Finance Act, 2000 would be merely suggestive and not determinative of what is provided by the Section as amended, in contrast to what was provided by the un-amended Section. The true and correct purport and effect of the amended Section will have to be construed from the language used and not merely from the fact that it has been retained in Chapter Ill. The introduction of the word 'deduction' in Section l0A by the amendment, in the absence of any contrary material, and in view of the scope of the deductions contemplated by Section l0A as already discussed, it has to be understood that the Section embodies a clear enunciation of the legislative decision to alter its nature from one providing for e....
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....y different. This is the next aspect of the case which we would now like to turn to. 16. From a reading of the relevant provisions of Section l0A it is more than clear to us 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 which states in paragraph 15.6 that, "The export turnover and the total turnover for the purposes of sections 10A and 10B shall be of true undertaking located in specified zones or 100 Export Oriented Undertakings, as the case may be, and this shall not have any material relationship with the other business of the assessee outside these zones or units for the purposes of this provision". 17. If the specific provisions of the Act provide [first proviso to Sections 10A(1); l0A (lA) and l0A (4)that the unit that is contemplated for grant of benefit of deduction is the eligible und....
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....e note that the impugned issue is well settled now by the judgment of Hon'ble supreme Court in the case of CIT & ANR. vs. M/s Yokogawa India LTD. in Civil Appeal No. 8498 of 2013=2016TlOL-228-SC-IT.. The relevant extract of the case (supra) is as under: "17. If the specific provisions of the Act provide [first proviso to Sections 10A(1); l0A (lA) and l0A (4)] that the unit that is contemplated for grant of benefit of deduction is the eligible undertaking and that is also how the contemporary Circular of the department (No.794 dated 09.08.2000) 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 of the Act would be premature for application. The deductions under Section lOA therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of ....