Income Tax Appellate Tribunal - Ahmedabad
Gulbrandsen Technologies (India) Pvt. ... vs Dcit, Circle-1(1)(1), Vadodara on 20 December, 2019
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'B' अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No. 2207/Ahd/2018 ( नधा रण वष / Assessment Year : 2011-12) Gulbrandsen बनाम/ Deputy Commissioner Technologies (India) of Income Tax Vs. Private Limited Circle 1(1)(1), 405, Synergy Square, Vadodara Krishna Industrial Estate, Gowra, Vadodara थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AABCG9006E (अपीलाथ /Appellant) .. ( यथ / Respondent) अपीलाथ ओर से /Appellant by Shri Maneesh Agarwal, :
A.R. यथ क ओर से/Respondent by : Shri Vidhyut Trivedi, CIT.D.R. सन ु वाई क तार ख / Date of 18/12/2019 Hearing घोषणा क तार ख /Date of 20/12/2019 Pronouncement आदे श/O R D E R PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals), Vadodara, ('CIT(A)' in short), dated 18.05.2016 arising in the assessment order dated 12.03.2015 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2011-12.
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2. The solitary objection involved in the present appeal is towards manner of computation of exemption under s.10B of the Act, that is, whether set off of unabsorbed depreciation/business loss of earlier years is required to be carried out first and deduction under s.10B of the Act is available thereafter on remaining profits after such set off or assessee is entitled to claim deduction under s.10B of the Act on higher amounts of eligible profits before such set off.
3. When the matter was called for hearing, the learned AR for the assessee submitted that the issue is covered in favour of the assessee in its own case concerning AY 2010-11 in IT(TP)A No. 702/Ahd/2015 order dated 23.03.2017.
4. We have carefully considered the rival submissions. The assessee has agitated the action of the AO towards the manner of computing the exemption under s.10B of the Act after setting off the unabsorbed depreciation/business loss of earlier years. It is claim of the assessee that the assessee is entitled to deduction under s.10B of the Act on the gross amount of eligible profit derived from 100% export oriented undertaking without taking into account brought forward business loss and unabsorbed depreciation. We find that the issue has been examined by the co-ordinate bench in AY 2010-11 in assessee's own case IT(TP)A No.702/Ahd/2015. The relevant operative para of the co-ordinate bench is reproduced hereunder for ready reference:
"6. We have duly considered rival contentions and gone through the record carefully. The Hon'ble Karnataka High Court in the case of CIT Vs. Yokogawa India Ltd.(supra) has considered an identical situation. Question considered by the Hon'ble Karnataka High Court was -
" (ii) Whether the Tribunal was correct in holding that the deduction under section 10A or 10B of the Act during the current assessment year has to be allowed without setting off brought forward unabsorbed losses and the depreciation from earlier assessment year or current assessment year either in I T A N o . 2 2 0 7 / Ah d / 1 8 [ Gu l b r a n d s e n T e c h n o l o g i e s ( I n d i a ) P . L t d . ] A. Y . 2 0 1 1 - 1 2 - 3 -
the case of non-STP units or in the case of the very same undertaking ?"
This question was answered in favour of the assessee.
7. The conclusions drawn by the Hon'ble High Court are worth to note, which reads as under:
"..... After making all such computations the assessee would be entitled to the benefit of set off or carry forward of loss as provided under Section 72 of the Act, that is the benefit which is given to the assessee under the Act irrespective of the nature of business which he is carrying on. The said benefit is available even to undertakings under Section 10 B of the Act. The expression "deduction of such profits and gains as derived by an undertaking shall be allowed from the total income of the assessee", has to be understood in. the context with which the said provision is inserted in Chapter-ill of the Act. Sub- Section (4) of Section 10-A clarifies this position. It. provides that the profits derived from export of articles or things from computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to die total turnover of the business carried on by the undertaking. Therefore, it is clear that though the assessee may be having more than one undertaking for the purpose of Section 10-A it is the profit derived from export of articles or things or computer software from the business of the undertaking alone that has to be taken into consideration and such profit is not to be included in the total income of the assessee. It is only alter the deduction of the said profits and gains, the income of the assessee has to be computed.
The provisions of this sub-section will apply even in the case where an assessee has opted out of Section 10-A by exercising his option under sub-Section (8). As discussed, it is permissible for an assessee to opt in arid opt out of Section 10-A. In the year when the assessee has opted out, the normal provisions of the Act would apply. The profits derived by him from the STP undertaking would suffer tax in the normal course subject to various provisions of the Act including those of Chapter VI-A. If in such a year, the assessee has suffered losses, such losses would be subject to inter source and inter head set off. The balance if any thereafter can be carried forward for being set off against profits of the subsequent assessment years in the normal course, Unabsorbed depreciation also merits a similar treatment.
As the income of Section 10-A unit has to be excluded at source itself before arriving at the gross total income, the loss of non Section 10-A unit cannot be set off against the income of 10-A unit under Section 72. The loss incurred by the I T A N o . 2 2 0 7 / Ah d / 1 8 [ Gu l b r a n d s e n T e c h n o l o g i e s ( I n d i a ) P . L t d . ] A. Y . 2 0 1 1 - 1 2 - 4 -
assessee under the head profits and gains of business or profession has to be set off against the profits and gains if any, of any business or profession carried on by such assessee. Therefore, as the profits and gains under Section 10-A is not. be included in the income of the assessee al all, the question of setting off the loss of the assessee of any profits and gains of business against such profits and gains of the undertaking would not arise. Similarly, as per Section 72(2). unabsorbed business loss is to be first set off and thereafter unabsorbed depreciation treated as current years depreciation under Section 32(2) is to be set off. As deduction under Section 10-A has to be excluded from the total income of the assessee. the question of unabsorbed business loss being set off against such profit and gains of the undertaking would not arise. In that view of the matter, the approach of the assessing authority was quite contrary to the aforesaid statutory provisions and the appellate Commissioner as well as the Tribunal were fully justified in setting aside the said assessment order and granting the benefit of Section 10-A to the assessee. Hence, the main substantial question of law is answered in favour of the assessees and against the Revenue."
8. Dispute travelled upto the Hon'ble Supreme Court, and the Hon'ble Supreme Court has formulated the following question:
"3. The broad question indicated above may be conveniently dissected into the following specific questions arising in the cases under consideration.
(i) Whether Section 10A of the Act is beyond the purview of the computation mechanism of total income as defined under the Act. Consequently, is the income of a Section 10A unit required to be excluded before arriving at the gross total income of the assessee?
(ii) Whether the phrase "total income" in Section 10A of the Act is akin and pari materia with the said expression as appearing in Section 2(45) of the Act?
(iii) Whether even after the amendment made with effect from 1.04.2001, Section 10A of the Act continues to remain an exemption section and not a deduction section?
(iv) Whether losses of other 10A Units or non 10A Units can be set off against the profits of 10A Units before deductions under Section 10A are effected?
(v) Whether brought forward business losses and unabsorbed depreciation of 10A Units or non 10A Units can be set off against the profits of another 10A Units of the assessee."
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9. These questions have been answered in favour of the assessee, and it was held that deduction under section 10A would be prior to the commencement of exercise to be taken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. In other words, Hon'ble Court has held that unabsorbed business loss would not be set off against the income. The relevant discussion made by the Hon'ble Supreme on this aspect deserves to be noted. It reads as under:
"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 9.8.2000 which states in paragraph 15.6 that, "The export turnover and the total turnover for the purposes of sections 10A and 10B shall be of the undertaking located in specified zones or 100% Export Oriented Undertakings, as the case may be, and this shall not have any material relationship with the other business of the assessee outside these zones or units for the purposes of this provision."
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'.
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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 computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly."
10. Respectfully following the judgment of the Hon'ble Supreme Court, we are of the view that the AO was not justified in set off of the unabsorbed business loss against profits of the eligible units and the assessee is entitled for exemption under section 10B of the Income Tax Act. This ground of appeal is allowed."
In consonance with the view taken by the Tribunal, we find merit in the appeal of the assessee. The assessee would be entitled to claim deduction under s.10B of the Act on eligible profits before set off of brought forward unabsorbed depreciation/business losses.
5. In the result, the appeal filed by the assessee is allowed.
This Order pronounced in Open Court on 20/12/2019 Sd/- Sd/-
(MADHUMITA ROY) (PRADIP KUMAR KEDIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad: Dated 20/12/2019
True Copy
S. K. SINHA
आदे श क त!ल"प अ#े"षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं*धत आयकर आयु,त / Concerned CIT
4. आयकर आयु,त- अपील / CIT (A)
5. 0वभागीय 3त3न*ध, आयकर अपील य अ*धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड9 फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपील य अ*धकरण, अहमदाबाद ।