TaxTMI 
TaxTMI 
2022 (5) TMI 1060
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....illegal. The appellants submit that the original order dated 29.12.2004 passed by the Assessing Officer (AO) was not erroneous and was not prejudicial to the interest of the revenue within the meaning of section 263 of the Act. The appellants therefore pray that the order of the CIT passed under section 263 of the Act be quashed. 2.(a) The CIT erred in holding that the appellants were not entitled to deduction under section 80HHE after setting off brought forward losses from the earlier years for the purpose of computing business profits under the said section. The appellants submit that deduction under section 80HHE is permissible from the Gross Total Income. Once the Gross Total Income is determined the character of the income is lost. It is also submitted that deduction under section 80HHE has to be computed on the business income by taking into account, the provisions of section 28 to 43D and before setting off the brought forward losses, 2.(b) Without prejudice, the CIT ought to have held that deduction under section 80HHE has to be computed by considering the book profits under section 115JB. 3.(a) The CIT erred i....
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....ld that deduction under section 80HHE has to be computed by considering the book profits. Your appellants crave leave to add to, alter, amend, vary, omit or substitute the aforesaid grounds of appeal or add a new ground or grounds of appeal at any time before or at the time of hearing of the appeal as they may be advised. 3. The ground No.1 raised by the assessee is general in nature and does not require any specific adjudication. 4. We find that the ld. AR had not challenged jurisdiction of the ld. Administrative Commissioner in invoking revision jurisdiction u/s.263 of the Act in the instant case. Hence, we proceed to adjudicate the entire issue on merits of the various issues raised by the ld. CIT in the order passed u/s.263 of the Act. 5. We find that the assessee company is engaged in the business of development and marketing of software having unit at SEEPZ, Noida, Ashok Plaza and Mohali, Chandigarh. It provides technical services outside India in connection with the development and production of computer software in respect thereto. The return of income for the A.Y.2002-03 was filed by the assessee company on 24/10/2002 declaring book profit of Rs.23,65,362....
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....to the total turnover. We find from the perusal of the provisions of Section 80HHE of the Act, as per Clause(d) of the explanation below the said Section, the starting point for computation of profits of the business is the profits of the business as computed under the head 'profits and gains of business or profession.' It is pertinent to note that Section 29 of the Act mandate that the business income shall be computed in accordance with the provisions contained in Section 30-43D of the Act. Hence, the profit qualifying for deduction u/s.80HHE of the Act is the profit of the current year. The set off of brought forward business loss is governed by the provisions of Section 72 of the Act and it has no relevance for this purpose. Hence, in our considered opinion, the eligible profits u/s.80HHE cannot be reduced by the brought forward business loss. 6.2. We find that the ld. CIT had held that the profits of the business for the year under consideration has to be reduced by the brought forward losses from earlier year for the purpose of computing profits eligible for deduction u/s.80HHE of the Act. The ld. DR before us placed reliance on the decision of the Hon'ble Madhya Pradesh H....
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....13 thereon that the profit eligible for deduction would be net profit made by the assessee from the eligible business and such deduction is to be allowed from gross total income. We find that similar view has been taken by the Hon'ble Jurisdictional High Court in the following cases:- a) CIT vs. Tridoss Laboratories reported in 328 ITR 448 b) V.M.Salgaocar & Brothers (P) Ltd., vs. ACIT reported in 81 taxmann.com 357. c) CIT vs. Eskay Knit (India) Pvt. Ltd., in Income Tax Appeal No.184 of 2007 dated 25/03/2010. d) CIT vs. J.B.Boda & Co., Pvt. Ltd., in Income Tax Appeal No.3224 of 2009 dated 18/10/2010. 6.5. In the instant case, we find that if the set off of brought forward business loss was not taken into account, the assessee would have been entitled to deduction of the entire amount of profit eligible for deduction u/s.80HHE of the Act of Rs.7,65,2,042/-. But since the deduction under 80HHE of the Act is restricted to gross total income and such gross total income is to be computed after setting off the brought forward business losses, the assessee's claim of deduction got reduced. Hence, there cannot be any error in the ld. AO allowing dedu....
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.... three other units should be set off with Pune unit and on the net amount, deduction u/s.10A of the Act should be allowed to the assessee. This was challenged by the assessee before us. We find that this issue is no longer res integra in view of the decision of the Hon'ble Supreme Court in the case of CIT vs. Yokogawa India Ltd., reported in 77 taxmann.com 41 wherein it has been held that Section 10A of the Act provides that the deduction contemplated therein is qua profits of eligible undertaking on a stand alone basis and without set off of losses of eligible or non-eligible unit or undertaking of the assessee. The relevant operative portion of the said judgment is reproduced hereunder:- "16. From a reading of the relevant provisions of Section 10A 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 non-eligible 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.....
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....ssed at the time of hearing. No adjustment was made by the ld. AO while passing the order giving effect to Section 263 proceedings. Hence, the issue has become academic in nature. Accordingly, ground No.4 is dismissed. 9. The ground No.5 raised by the assessee is challenging the action of the ld. CIT in holding that the ld. AO had failed to take into account the transfer pricing adjustment while allowing deduction u/s.10A of the Act. 9.1. We have heard rival submissions and perused the materials available on record. In the instant case, we find that assessee has claimed deduction u/s.10A of the Act in the sum of Rs.1,34,13,648/- in the return of income. Only this sum was allowed as deduction by the ld. AO while computing the income of the assessee. We find from the computation of income enclosed in the attached assessment order, no deduction u/s.10A has been allowed in respect of transfer pricing adjustment by the ld. AO. We find that the ld. CIT has proceeded on the basis that deduction u/s.10A of the Act has been allowed by the ld. AO in the present case on higher profit after adding the transfer pricing adjustment in the eligible unit. We find that the ld. CIT has purely p....