TaxTMI 
TaxTMI 
2019 (8) TMI 1195
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...., the assessee filed its return of income on 01.10.2008 declaring loss of Rs.(-) 2,02,01,133/- under normal provisions, after claiming deduction under section 10A of the Income Tax Act, 1961 (in short 'the Act') and 'book profits' under section 115JB of the Act amounting to Rs. 4,98,44,075/-. The assessee subsequently filed a revised return on 19.01.2009 to claim credit for TDS. The return was processed under section 143(1) of the Act on 11.03.2010 and the case was selected for scrutiny for this Assessment Year. The assessment was concluded under section 143(3) of the Act vide order dated 25.03.2010, wherein the assessee's income was determined at Rs. 34,13,815/- on account of various additions / disallowances and after allowing deduction of Rs. 6,17,15,259/- under section 10A of the Act, as claimed in the return of income filed. 2.2 Aggrieved by the order of assessment dated 25.03.2010 for Assessment Year 2008-09, the assessee carried the matter in appeal before the CIT(A), Bangalore; who disposed off the appeal vide order dated 27.07.2016 allowing the assessee partial relief. Thereupon, the Assessing Officer (AO) passed order dated 28.09.2016 giving effect to the CIT(A) order;....
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....ure, no adjudication is called for thereon. 5. Ground Nos.2 to 5 - Computation of deduction under section 10A of the Act 5.1 In these grounds (supra) raised in respect to the computation of deduction under section 10A of the Act and non-allowance of carry forward losses, it is contended that the CIT(A) erred in not adjudicating the issue in appeal and in not following that the decision of the Hon'ble Apex Court in the case of CIT Vs. Yokogawa India Ltd., which is squarely applicable to the facts of the case on hand. 5.2.1 Before us, the learned AR of the assessee submitted that the CIT(A) erred both on law and facts on the issue of computation of deduction under section 10A of the Act. The learned AR submits that the assessee in the case on hand had both STPI unit and Non-STPI unit. While there was a profit in the STPI Unit, there was a loss in the Non-STPI Unit. In the order of assessment, the AO made various additions / disallowances whereby the total income of the assessee was higher figure than the returned income; but, however, allowed the assessee deduction under section 10A of the Act only to the extent of Rs. 6,17,15,259/-, as was claimed in the return of income. O....
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....Appeal No.8498 of 2013 dated 16.12.2016. In support of his contentions, the learned AR submitted the computation of deduction under section 10A of the Act, wherein the profit / loss of the STPI and Non-STPI Units have been separately computed. 5.3 Per contra, the learned DR for Revenue submitted that there are some contradictions in the impugned order of the CIT(A) causing confusion and therefore the matter may be remanded to the file of the CIT(A) for proper examination and verification of facts. 5.4.1 We have considered the rival contentions / submissions and perused the material on record; including the judicial pronouncements cited / relied on. The Undisputed facts, as borne out from the record, are that the assessee has both STPI and Non-STPI Units; which has been noted by the CIT(A) in his order. The issue of whether or not the losses of the non-STPI Units can be set-off against the profits of STPI Unit has been decided by the Hon'ble Karnataka High Court in the case of Yokogawa India Ltd., in its judgment in 341 ITR 385) (Kar) wherein it was held that the losses of Non-STPI Unit cannot be set off against the profits of STPI Units for the computation of deduction under ....
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....nataka High Court in the case of CIT Vs. M Pact Technology Services Ltd., in ITA No.228/2013 dated 11.07.2018. 6.2 Per contra, the learned DR for Revenue supported the orders of the authorities below. 6.3.1 We have considered the rival contentions and perused the material on record; including the judicial pronouncements cited. We find from the impugned order of assessment that the AO has made certain additions / disallowances, thereby increasing the business profits of the assessee. It is however seen that the AO has allowed the deduction under section 10A of the Act only to the extent claimed by the assessee in the return of income. On appeal, the CIT(A) rejected the contentions of the assessee. 6.3.2 We find that Courts and Tribunals have consistently held that the plain consequence of the disallowance / add back that is made by the AO, is an increase in the business profits of the assessee. The view of the CIT(A), that in computing the deduction under section 10A of the Act the addition made resulting in an increase of business profits ought to be ignored, is not tenable. No statutory provision to that effect having been made, the plain consequence of the disallowance m....
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....expenditure incurred by assessee for the purpose of developing a housing project was not allowable on account of non-deduction of TDS under law, such disallowance would ultimately increase assessee's profits from business of developing housing project. The ultimate profits of assessee after adjusting disallowance under section 4orallia] of the Act would qualify for deduction under section 8oIB of the Act. This view was taken by the courts in the following cases: [a] Income-tax Officer-Ward 5[1] 1Keval Construction, Tax Appeal No.443 of Date of Judgment 11-07-2018 I.T.A.No.228/2013 Commissioner of Income Tax & Anr. Vs. M/s. M PACT Technology Services Pvt. Ltd. 2012, December 10 2012, Gujarat High Court [b] Commissioner of Income-tax-IV, Nagpur vs. Sunil Vishwambharnath Tiwari, 2015, Bombay High Court [ii] If deduction under section 40A[3] of the Act is not allowed, the same would have to be added to the profits of the undertaking on which the assessee would be entitled for deduction under section 8o-IB of the Act." 7. Applying the same analogy, it can be held that if deduction u/s. 4o[a][ia] of the Act is not allowed, the same would h....
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.... disallowance and the add back that has been made by the Assessing Officer is an increase in the business profits of the assessee. The contention of the Revenue that in computing the deduction under Section 10A the addition made on account of the disallowance of the Provident Fund / ESIC payments ought to be ignored cannot be accepted. No statutory provision to that effect having been made, the plain consequence of the disallowance made by the Assessing Officer must follow. The second question shall accordingly stand answered against the Revenue and in favour of the assessee." 6.3.3 The facts of the assessee's case in the present appeal are similar to that of the cited case. In the case on hand also, the additions / disallowances have led to enhancement of the taxable business income of the assessee and consequently the assessee is entitled for deduction under section 10A of the Act on such enhanced income. Therefore, respectfully following the decision of the Hon'ble Karnataka High Court in the case of CIT Vs. M. Pact Technology Services Pvt. Ltd., (supra), we hold that the deduction under section 10A of the Act shall be allowed on the assessed income. The AO is accordingly dir....
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....e Learned CIT(A) erred in not adjudicating on the issue that the Learned A.0 ought not to have revised the deduction u/s 10A of the Act and revised the income, by invoking the provisions of Section 154 of the Act, as the issue was not a mistake apparent from record. 2. The Learned CIT(A) erred in dismissing the issues appealed against by placing reliance on the decision of the Hon'ble Supreme Court in the case of CIT Vs Vs. Himat singike, 286 1TR 255. 3. The Learned CIT(A) erred in not appreciating that the facts of the case of CIT Vs Vs. Himat singike (supra) are distinguishable from the facts of the appellant in that there was only one STPI unit in that case whereas the appellant had both STPI and Non-STPI units 4. The Learned CIT(A) erred in not appreciating that the decision of the Hon'ble Karnataka High Court in the case of CIT Vs Yokogawa, 341 ITR 385 is squarely applicable to the facts of the appellant's case, which has been since confirmed by the Hon'ble Supreme Court 5. The Learned CIT(A) erred in not appreciating that the settled legal position is that the deduction u/s 10A for the STPI unit has to be granted without adj....
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....de the order under section 154 of the Act dated 30.07.2013, the assessee's income was revised to Rs. 14,76,34,880/-. Another rectification order passed by the AO under section 154 of the Act dated 30.12.2013 wherein the assessee's income was determined at Rs. 2,13,29,399/- as per normal provisions. 13.2 Aggrieved by the order under section 154 of the Act dated 30.07.2013 for Assessment Year 2010-11, the assessee preferred an appeal before the CIT(A)-4, Bangalore, who disposed off the appeal vide order dated 31.08.2016 granting relief to the assessee. Thereafter, the AO passed an order dated 07.11.2016 for giving effect to the CIT(A)'s order, wherein he restricted the grant of deduction under section 10A of the Act to Rs. 5,15,20,800/-. Aggrieved by this order dated 07.11.2016, the assessee filed an appeal before the CIT(A); which was dismissed vide order dated 22.11.2018 and whereby the CIT(A) upheld the order of the AO in restricting the deduction under section 10A of the Act to Rs. 5,15,20,800/-. 14. Aggrieved by the order of the CIT(A)-4, Bengaluru, dated 22.11.2018 for Assessment Year 2010-11, the assessee has filed this appeal before the Tribunal, wherein it has raise....
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....sed income 17.1 In this ground (supra), the assessee assails the order of the CIT(A) in not appreciating that it is settled position of law that deduction under section 10A of the Act has to be granted on the assessed income; which includes the additions made to the returned income. 17.2 In this regard, the learned AR of the assessee submitted that in the return of income filed for Assessment Year 2010-11, the assessee had claimed deduction under section 10A of the Act amounting to Rs. 14,64,17,262/-. In the order of assessment for Assessment Year 2010-11 dated 28.03.2013, the AO had made additions to the returned income, but had not allowed deduction under section 10A of the Act on such enhanced assessed income. In the order giving effect to CIT(A)'s order, the AO had computed the deduction under section 10A of the Act after adjusting the losses of non-STPI units with the profits of the STPI unit. According to the learned AR, it is settled principle that the deduction under section 10A of the Act has to be computed on the assessed income; resultant after the additions made to the returned income. In support of this proposition; reliance was placed on the judgments of the Hon....
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....in its order in the case of DCIT v Motor Industries Co. Ltd., (ITA No. 776/2006, 744/2007 and 1155/2006 dated 13.06.2014), holding that if any expenditure is sought to be removed from export turnover, then it should also be reduced from total turnover for the purposes of computing the eligible deduction u/s. 10A of the Act. This issue is no longer res integra, and has been decided in favour of the assessee and against revenue by the decision of the Hon'ble Apex Court in the case of CIT V. HCL Technologies Ltd. (2018) 93 taxmann.com 33 (SC); wherein at paras 19 to 21, it has been held as under :- "19. In the instant case, if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under Section10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the Respondent which could have never been the intention of the legislature. 20. Even in common parlance, when the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have....
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....deduction is the eligible undertaking and that is also how the contemporaneous Circular of the department (No.794 dated 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. 10A 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 the assessee from the gross total income. The somewhat discordant use of the expression "total income of the assessee" in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression "total income of the assessee" in Section 10A as 'total income of the ....