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Gujarat High Court

Pr. Commissioner Of Incomet Tax ... vs Gulbrandsen Technologies (India) Pvt ... on 18 April, 2018

Author: Akil Kureshi

Bench: Akil Kureshi, B.N. Karia

       C/TAXAP/278/2018                                     ORDER




        IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                     R/TAX APPEAL NO. 278 of 2018

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        PR. COMMISSIONER OF INCOMET TAX VADODARA 1
                          Versus
         GULBRANDSEN TECHNOLOGIES (INDIA) PVT LTD
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Appearance:
MR.VARUN K.PATEL(3802) for the PETITIONER(s) No. 1
MR TUSHAR HEMANI WITH MS VAIBHAVI K PARIKH(3238) for the
RESPONDENT(s) No. 1
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 CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
        and
        HONOURABLE MR.JUSTICE B.N. KARIA

                       Date : 18/04/2018
                        ORAL ORDER

(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

1. Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal dated 23.03.2017 raising following questions for our consideration:

"Whether on the facts and in the circumstances of the case, the ITAT was right in law in allowing deduction u/s. 10B on export profit of EOU before setting off carried forward unabsorbed depreciation of earlier years as provided u/s. 32(2) of the Act?"

2. The respondent-assessee is a company registered under the Companies Act and is engaged in providing business auxiliary and consulting engineering services. The assessee has units which are eligible for deduction under section 10B of the Income Tax Act, 1961 as export oriented units as well as non-

C/TAXAP/278/2018 ORDER eligible units. For the assessment year 2010-11, the assessee filed the return of income in which, the assessee had claimed exemption of its eligible unit without setting off its business from eligible units or may be also ineligible units. The case of the assessee put forth before us is that no part of the unabsorbed depreciation was required to be set off. Be that as it may, the Assessing Officer objected to the assessee's method of computation of income. He was of the opinion that for the deduction under section 10B, first there has to be the set off of the carry forward losses. The issue eventually reached the Tribunal. The Tribunal, by the impugned judgement, ruled in favour of the assessee by referring to the judgement of Karnataka High Court in case of Commissioner of Income Tax and anr vs. Yokogawa India Ltd reported in 341 ITR 385 as well as the judgement of Supreme Court in case of Commissioner of Income Tax and anr vs. Yokogawa India Ltd reported in 391 ITR 274. Thereupon, the Revenue has filed this appeal.

3. At the outset, we record the statement of counsel for the assessee that there was no question of set off of unabsorbed depreciation during the year under consideration and all that the assessee had proposed before the Assessing Officer was that the deduction under section 10B has to be granted without setting off of the carry forward losses.

C/TAXAP/278/2018 ORDER

4. We notice that the Karnataka High Court in case of Yokogawa India Ltd (supra) had examined the provisions of section 10A of the Act (in which, similar exemption provisions have been made) before and after the amendments. The Court was of the opinion that the said provision provided for an exemption and it was not a deduction provision since section 10A is continued in Chapter III of the Act which carries the title "incomes which do not form part of total income". The Court was of the opinion that if the Parliament intended to grant the relief under section 10A by way of a deduction, it would have placed such a provision in Chapter VI-A which contains deduction sections 80HHC and 80-IA etc. The fact that, even after its recast, relief was retained in Chapter III indicates that the intention of the Parliament is to grant exemption and not a deduction.

5. Somewhat similar issue reached the Supreme Court in case of Yokogawa India Ltd (supra). One of the questions considered by the Supreme Court was whether losses of other section 10A units or none section 10A units before deductions under section 10A are effected? The Supreme Court observed that the provisions contained in section 80HHC and 80HHE etc. providing for somewhat similar deduction would be wholly irrelevant if deduction under section 10A were to be made at the stage of operation of Chapter VI of the Act. It was observed that the retention of the said provisions under sections 80HHC and 80HHE despite the amendment of section 10A indicated that some additional benefits to eligible section Page 3 of 5 Downloaded on : Thu Oct 03 23:58:39 IST 2019 C/TAXAP/278/2018 ORDER 10A units, not contemplated by the sections 80HHC and 80HHE were intended by the Legislature and, such a benefit can only be understood that the stage for working out a deductions under sections 10A and 80HHC and 80HHE are substantially different. The Court eventually therefore held and concluded as under:

"17. If the specific provisions of the Act provide [first proviso to Sections 10A(1); 10A (1A) and 10A (4)] that the unit that is contemplated for grant of benefit of deduction is the eligible undertaking and that is also how the contemporaneous 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 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 undertaking'.

18. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that 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 Page 4 of 5 Downloaded on : Thu Oct 03 23:58:39 IST 2019 C/TAXAP/278/2018 ORDER computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly."

6. It can thus be seen that the limited question with which we are engaged in the present appeal is squarely covered by the Supreme Court in case of Commissioner of Income Tax and anr vs. Yokogawa India Ltd (supra).

7. In the result, Tax Appeal is dismissed.

(AKIL KURESHI, J) (B.N. KARIA, J) JYOTI V. JANI Page 5 of 5 Downloaded on : Thu Oct 03 23:58:39 IST 2019