Gujarat High Court
Commissioner Of Income Tax - Rajkot - I vs Ace Software Exports on 1 March, 2013
Author: Akil Kureshi
Bench: Akil Kureshi
COMMISSIONER OF INCOME TAX - RAJKOT - I....Appellant(s)V/SACE SOFTWARE EXPORTS LTD....Opponent(s) O/TAXAP/831/2012 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 831 of 2012 ================================================================ COMMISSIONER OF INCOME TAX - RAJKOT - I....Appellant(s) Versus ACE SOFTWARE EXPORTS LTD....Opponent(s) ================================================================ Appearance: MR PRANAV G DESAI, ADVOCATE for the Appellant(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS JUSTICE SONIA GOKANI Date : 01/03/2013 ORAL ORDER
(PER : HONOURABLE MS JUSTICE SONIA GOKANI)
1. Challenging the order of the Income Tax Appellate Tribunal (for short, hereinafter referred to as ITAT ) dated 26.07.2012, this Tax Appeal under Section 260A of the Income-tax Act, 1961 (For short, hereinafter referred to as the Act ) has been preferred. The brief facts of the instant case are as under.
1.1 The respondent-assessee is engaged in the business of export of computer software. It carries its business on two units i.e. STP Rajkot Unit and Rajkot Unit.
1.2 For the Assessment Year 2007-2008, the assessee filed its return of income declaring loss of Rs.47,57,672/-. The profit of Rs.35,64,021/- was shown in respect of STP Unit and loss of Rs.73,53,842/- from non-STP Unit. The Assessing Officer, on noticing that the assessee claimed deduction under Section 10A of the Act in respect of STP Rajkot Unit without setting off the unabsorbed depreciation and business loss, disallowed the deduction of the said amount. The Assessing Officer was of the opinion that the brought forward loss and loss of other units were more than the profit of STP Unit which was eligible for deduction under Section 10A and as total income of the respondent- assessee had become negative after setting off of such loss, he deemed it fit not to allow any benefit under Section 10 A. 1.3 Aggrieved by the same, the assessee approached the CIT(Appeals). The CIT (Appeals) allowed such appeal of the assessee and held it entitled to deduction under Section 10A in respect of STP Rajkot Unit without adjustment of loss of other units and without adjustment of brought forward loss which included unabsorbed depreciation of earlier period.
1.4 Revenue challenged the same by filing an appeal before the ITAT which came to be rejected relying on the decision of the Bombay High Court dated 09.04.2012 in case of CIT vs. Black & Veatch Consulting Pvt. Ltd. [Income Tax Appeal Lodging No.1237 of 2011].
2. Aggrieved by the same, the present Tax Appeal is preferred, raising following substantial questions of law for our consideration:
(A) Whether in the circumstances and the facts of the case and in law, the Appellate Tribunal is right in holding that deduction claimed by the assessee u/s 10A of the IT Act in respect of STP Rajkot Unit should be allowed without adjustment of losses of other units and without adjustment of brought forward losses/unabsorbed depreciation of earlier years?
(B) Whether in the circumstances and the facts of the case and in law, the Appellate Tribunal is right in upholding the CIT(A)'s order whereby direction is given to revise the reduction of brought forward unabsorbed depreciation and business loss of earlier years and reduce the long-term capital gain after giving appeal effect to the order of the assessment year in which the appellant's claim has been allowed?
3. We heard learned counsel Mr. Pranav Desai for the appellant-revenue extensively who has fervently argued that both CIT(Appeals) and the Tribunal have committed an error in holding that the assessee eligible for deduction under Section 10A of the Act in as much as the brought forward loss/unabsorbed loss of other units were much more than the total profit of STP Unit eligible for deduction under Section 10A and the total income being negative after setting off of loss, no deduction ought to have been permitted. It can be noted from the order of the CIT(Appeals) that it relied on the decision of Chennai Bench of Tribunal rendered in the case of Scientific Atlanta India Technology (P) Ltd. vs. ACIT reported in (2010) 129 TTJ (Chennai) (SB) 273, to conclude that deduction under Section 10A required to be worked out for STP Rajkot Unit separately without considering the loss of other units. It also further directed that after giving deduction under Section 10A for STP Unit Rajkot, income is required to be computed under the head Profit and Gains of Business or Profession clubbing all undertakings of the assessee and after considering the brought forward losses/unabsorbed depreciation and thereafter, gross total income and total income require to be worked out.
4. As far as the Tribunal is concerned, it concurred with the findings of the CIT(Appeals). The Tribunal relied on the assessee's own case for the Assessment Year 2006-2007 and relying on Bombay High Court's judgment, it confirmed the order of CIT(Appeals).
Such issue came up before us in case of this very assessee in Tax Appeal No.687/2012 where we have chosen not to take a different view than taken by the Bombay High Court, by noting thus:
4. We have perused the said decision of the Bombay High Court. In the case of Income Tax Vs. Black and Veatch Consulting Pvt. Ltd.
(supra) same issue came-up for consideration before the High Court which it was decided in the following manner:
4.
Section 10A is a provision which is in the nature of a deduction and not an exemption. This was emphasised in a judgement of a Division Bench of this court, while construing the provisions of section 10B, in Hindustran Unilever Ltd. vs. Deputy CIT [2010] 325 ITR 102 (Bom) at paragraph 24. The submission of the Revenue placed its reliance on the literal reading of section 10A under which a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years is to be allowed from the total income of the assessee. The deduction under section 10A, in our view, has to be given effect to at the stage of computing the profits and gains of business. This is anterior to the application of the provisions of section 72 which deals with the carry forward and set off of business losses. A distinction has been made by the Legislature while incorporating the provisions of Chapter VI-A. Section 80A(1) stipulates that in computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of the Chapter, the deductions specified in sections 80C to 80U. Section 80B(5) defines for the purposes of Chapter VI-A gross total income to mean the total income computed in accordance with the provisions of the Act, before making any deduction under the Chapter. What the Revenue in essence seeks to attain is to telescope the provisions of Chapter VI-A in the context of the deduction which is allowable under section 10A, which would not be permissible unless a specific statutory provision to that effect were to be made. In the absence thereof, such an approach cannot be accepted. In the circumstances, the decision of the Tribunal would have to be affirmed since it is plain and evident that the deduction under section 10A has to be given at the stage when the profits and gains of business are computed in the first instance. So construed, the appeal by the Revenue would not give rise to any substantial question of law and shall accordingly stand dismissed. There shall be no order as to costs.
5. We notice that this judgement is followed by the same High Court in case of Commissioner of Income Tax-7 vs. Schmetz India (P.) Ltd., [2012] 211 Taxman 59=[2012] 26 taxman.com 336 (Bom).
6. Having perused the statutory provision contained in Section 10A of the Act as well as Section 80A, we see no reason to take a view different from the Bombay High Court as in the present case. Resultantly, tax appeal is dismissed.
5. This Tax Appeal also in light of above discussion meets the same fact & is dismissed.
(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) Chandrashekhar* Page 4 of 4