TaxTMI 
TaxTMI 
2021 (2) TMI 856
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.... or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned deduction. 2.1 The Ld. CIT(A) has grievously erred in law and on facts in confirming the deduction u/s. 10B as per CBDT circular dated 16.07.2013 instead of the amount worked on standalone basis and thereby allowing C/F of the balance Rs. 75,41,412/-. (correct figure claimed at the time of hearing Rs. 79,24,927/-) 2.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought not to have upheld the deduction u/s. 10B at Rs. 4,71,50,367/- instead of the amount on standalone basis without considering income/loss of different units/heads. The deficit of Rs. 75,41,412/- ought to have been allowed to be C/F instead of setting off against other income. 3. Briefly stated, the assessee is a closely held company and engaged in the business of manufacturers, formulators and processors of all types of chemicals, chemical compound, PVC, HDPE etc. It filed its return of income for A.Y. 2011-12 on 29.09.2011 declaring loss of Rs. 87,18,981/-. The return so filed was selected for scrutiny. During the course of assessment proceed....
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....0B at Rs. 4,71,50,367/- as against Rs. 4,77,14,761/- as computed by the appellant. The AO restricted the deduction u/s. 10B of the Act to the income available of Rs. 3,96,08,955/-, The appellant is in appeal against this action of the AO. During the appeal proceeding the main contention of the appellant was that the provision contained in section 10A/10B of the Act is not an exemption but a deduction under Chapter III of the Act, unlike provision for deduction provided in Chapter VI-A. Therefore it could not be permissible to apply contained in Chapter VIA of the Act but it will applied in the context of provisions contained in Chapter VIA of the Act. The appellant submitted that for the purpose of Section 10A/10B of the Act, the losses suffered in the non eligible units need not be set: off against the profit/income of the eligible unit for computing the deduction u/s. 10A/10B of the Act, The appellant further submitted that deduction u/s. 10A/10B of the Act is to be allowed from the total income of the undertaking and not from total income of the assessee, The appellant in support of its contention relied on the judgment of hon'ble Gujarat High Court in CIT, Rajkot vs. Ace S....
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....IT(A). The learned DR further submitted that the issue is squarely governed by the CBDT Circular No. 7/DV/2013 [FILE No. 279/MIS./M-116/2012-ITJ], DATED 16-7-2013. 9. The circular relied upon by the learned DR for the Revenue is reproduced hereunder: "SECTION 10A, READ WITH SECTIONS 10AA & 10B OF THE INCOME-TAX ACT, 1961 - FREE TRADE ZONE - CLARIFICATION ON ISSUES RELATING TO APPLICABILITY OF CHAPTER IV OF THE ACT AND SET OFF AND CARRY FORWARD OF BUSINESS LOSSES CIRCULAR No. 7/DV/2013 [FILE No. 279/MISC./M-116/2012-ITJ], DATED 16-7-2013 It has been brought to the notice of the Board that the provisions of 10A/10AA/10B/10BA of the Income-tax Act, with regard to applicability of Chapter IV of the Act and set off and carry forward of losses, are being interpreted differently by the Officers of the Department as well as by different High Courts. 2. The two sections 10A and 10B of the Act were initially placed on statute in 1981 and 1988 respectively, and continued with some modifications and amendments till 31.03.2001. Section 10A as inserted by Finance Act, 1981 read as under: "10A. Special provision in respect of newly established industrial undertakings in the free trade zo....
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.... by Finance Act, 2003. The relevant paragraph is reproduced below: "20. Providing for carry forward of business losses and unabsorbed depreciation to units in Special Economic Zones and 100% Export Oriented Units. 20.1 Under the existing provisions of sections 10A and 10B, the undertakings operating in a Special Economic Zone (under section 10A) and 100% Export Oriented Units (EOU's) (under section 10B) are not permitted to carry forward their business losses and unabsorbed depreciation. 20.2 With a view to rationalize the existing tax incentives in respect of such units, sub-section (6) in sections 10A and 10B has been amended to do away with the restrictions on the carry forward of business losses and unabsorbed depreciation. 20.3 The amendments have been brought into effect retrospectively from 1-4-2001 and have been made applicable to business losses or unabsorbed depreciation arising in the assessment year 2001-02 and subsequent years." 5. From the above it is evident that irrespective of their continued placement in Chapter III, sections 10A and 10B as substituted by Finance Act, 2000 provide for deduction of the profits and gains derived from the export of arti....
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....sions of Chapter IV and Chapter VI shall also apply in computing the income for the purpose of deduction under sections 10AA and 10BA of the Act subject to the conditions specified in the said sections." 10. We have carefully considered the rival submissions. The pivotal question in controversy is whether the Revenue is right in law in holding that assessee is not entitled to the benefit of deduction given by the Act under S. 10A/10B as amended with retrospective effect by the Finance Act, 2003 with effect from 01.04.2001 qua individual eligible undertaking. 11. It is the case of the Revenue that in the light of circular dated 16.07.2013 expounding the law, the assessee is not entitled to deduction of profits and gains of the business of eligible undertaking independently without taking into account and without giving effect to the provisions of set off and carry forward contained in Sections 70, 72 and 74 of the Act. We however disagree with the proposition canvassed on behalf of Revenue. We find that identical issue arose before Hon'ble Supreme Court in the case of Yokogawa India Ltd. (supra). Hon'ble Supreme Court ordains that though s. 10A/10B were amended by FA 2000 ....