Elico Ltd., Hyd, Hyderabad V. ACIT, Circle-2(2), Hyd, Hyderabad

ITA 1120/HYD/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3055 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 12-11-2020
• Assessment Year: 2010-2011
• Appeal Filed On: 22-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S RAMA RAO
• Keywords: Rejection of books of accounts; Depreciation; Revenue expenditure; Set aside
• Section: 43B; 139(1); 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER I.T.A. NO. 1120/HYD/2016 ASSESSMENT YEAR: 2010-11 ELICO LIMITED, HYDERABAD [PAN: AAACE5140L] VS ASST. COMMISSIONER OF INCOME TAX, CIRCLE-2(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S.RAMA RAO, AR FOR REVENUE : SHRI SUNIL KUMAR PANDEY, DR DATE OF HEARING : 12-11-2020 DATE OF PRONOUNCEMENT : 18-11-2020 O R D E R PER D.S. SUNDER SINGH, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-5, HYDERABAD, DATED 31-05-2016. 2. GROUND NOS.1 AND 6 ARE GENERAL IN NATURE, HENCE D OES NOT REQUIRE SPECIFIC ADJUDICATION. 3. GROUND NO.2 IS RELATED TO SUSTAINING OF ADDITION MAD E BY THE AO OF RS.41,18,429/- AND RS.3,80,215/- BEING THE AMOUNT OF PF AND ESI RESPECTIVELY BY APPLYING THE PROVISIONS OF SECTION 36(1)(VA) OF THE INCOME TAX ACT [ACT]. ITA NO. 1120/HYD/2016 :- 2 -: 3.1. IN THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS REMITTED THE SUM OF RS.41,18,429/- EMPLOY EES CONTRIBUTION TOWARDS PF BEYOND THE DUE DATE SPECIFIED UN DER THE EMPLOYEES PROVIDENT FUND ACT, HOWEVER, REMITTED THE SAME BEFORE THE DUE DATE OF FILING OF RETURN OF INCOM E. SIMILARLY, THE ASSESSEE HAS REMITTED THE CONTRIBUTION TO WARDS ESI AMOUNTING TO RS.3,80,215/- BELATEDLY. HOWEVER, BO TH THE CONTRIBUTIONS I.E., EMPLOYEES CONTRIBUTION OF PF AS WEL L AS THE ESI WERE REMITTED TO THE CONCERNED ACCOUNTS BEFORE THE DU E DATE OF FILING OF RETURNS OF INCOME U/S 139(1) OF THE ACT. THE AO VIEWED THAT AS THE AMOUNTS WERE PAID INTO THE RESPE CTIVE ACCOUNTS BELATEDLY BEYOND THE DUE DATE SPECIFIED UNDER THE PROVISIONS OF THE RESPECTIVE STATUTES, THE AO MADE THE AD DITION TO THE RETURNED INCOME OF THE ASSESSEE. 3.2. AGAINST THE ORDER OF AO, THE ASSESSEE PREFERRED A N APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) IN HIS DETAILED OR DER, CONFIRMED THE ADDITION MADE BY THE AO, HOLDING THAT THE ASSESSEE HAVING NOT REMITTED THE CONTRIBUTION TO THE RES PECTIVE ACCOUNTS BEFORE THE DUE DATES SPECIFIED UNDER THE ACT, TH E SAME ARE NOT ALLOWABLE DEDUCTIONS U/S.43B OF THE ACT. HENE, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL, AG AINST THE ORDER OF LD.CIT(A). 3.3. DURING THE APPEAL HEARING, LD.AR ARGUED THAT THE ASSESSEE HAS REMITTED THE CONTRIBUTIONS TO THE RESPECTIVE ACCOUNTS BEFORE THE DUE DATE OF FILING THE RETURN, THERE FORE REQUESTED TO SET ASIDE THE ORDER OF THE LOWER AUTHORITI ES AND DELETE THE ADDITION MADE BY THE AO. ITA NO. 1120/HYD/2016 :- 3 -: 3.4. ON THE OTHER HAND, THE LD.DR SUBMITTED THAT THE EPF IS IN RESPECT OF EMPLOYEES CONTRIBUTION, BOTH THE PF AND ES I ARE REQUIRED TO BE ALLOWED AS DEDUCTIONS, IF THE SAME AR E REMITTED TO THE RESPECTIVE ACCOUNTS BEFORE THE DUE DATES, SPECIFI ED IN THE RESPECTIVE ACT. SINCE THE ASSESSEE FAILED TO REMIT THE SAME BEFORE THE DUE DATE OF THE RESPECTIVE ACCOUNTS, AS PER THE PROVISIONS OF SECTION 36(1)(VA) OF THE ACT, THE AO MA DE THE ADDITION AND THE LD.CIT(A) RIGHTLY SUSTAINED, HENCE, N O INTERFERENCE IS CALLED-FOR IN THE ORDER OF LD.CIT(A) , HENCE ARGUED THAT THE APPEAL OF THE ASSESSEE DESERVED TO BE DISMISSED. 3.5. WE HAVE HEARD BOTH THE PARTIES THROUGH VIDEO CONFE RENCE AND GONE THROUGH THE MATERIAL PLACED ON RECORD. IN THE INSTANT CASE, THERE IS NO DISPUTE THAT THE AMOUNTS-IN-QUESTION W ITH REGARD TO EPF AND ESI WERE REMITTED TO THE CONCERNED ACCOUNTS BEFORE THE DUE DATE OF FILING THE RETURN OF I NCOME U/SN139(1). THIS, THE TRIBUNAL HAS CONSISTENTLY TAKEN A VIEW THAT IF THE PF AND ESI ARE REMITTED TO THE RESPECTIVE ACCOU NTS, THE SAME ARE REQUIRED TO BE ALLOWED AS DEDUCTION. IN THE CASE OF KLR INDUSTRIES LTD., VS. DCIT (2017) [83 TAXMANN.CO M 322] (HYD), THE TRIBUNAL HELD AS UNDER: 34. THE A.O. DISALLOWED THE EXPENDITURE CLAIMED BY OBSERVING THAT THE ASSESSEE HAS NOT REMITTED THE EMPLOYEES CO NTRIBUTION TO PF AND ESI WITHIN THE PRESCRIBED DATE AS MENTIONED IN SECTION 36(1)(VA). THOUGH, THE ASSESSEE DID NOT CHALLENGE THE DISALLOW ANCE BEFORE LEARNED CIT(A) BUT HE RAISED AN ADDITIONAL GROUND B EFORE US CHALLENGING THE SAID DISALLOWANCE. IT IS THE CONTEN TION OF THE ASSESSEE THAT THE EMPLOYEES CONTRIBUTION TO ESI AND PF THOUG H, WAS NOT PAID WITHIN THE DUE DATE AS PRESCRIBED UNDER SECTION 36( 1)(VA) BUT SUCH DUES HAVING BEEN PAID BEFORE THE DUE DATE OF FILING OF RETURN OF THE INCOME AS PRESCRIBED UNDER SECTION 139(1), THE AMOU NT IS ALLOWABLE ITA NO. 1120/HYD/2016 :- 4 -: AS A DEDUCTION AS PER THE PROVISIONS OF SECTION 43B . WE FIND MERIT IN THE AFORESAID SUBMISSIONS OF THE ASSESSEE. THERE AR E A NUMBER OF JUDICIAL PRECEDENTS ON THIS ISSUE WHEREIN IT IS HEL D THAT IF THE EMPLOYEES CONTRIBUTION TO PF AND ESI IS PAID WITHIN THE DUE DATE OF FILING OF RETURN OF INCOME UNDER SECTION 139(1), TH EN, THE AMOUNT IS ALLOWABLE AS A DEDUCTION IN VIEW OF THE PROVISION O F SECTION 43B. IN VIEW OF THE AFORE SAID, WE DELETE THE ADDITION OF R S.2,07,209. 3.5.1. SIMILARLY, HON'BLE PUNJAB & HARYANA HIGH COU RT IN THE CASE OF PR.CIT VS. RAJASTAN BEVERAGES CORPORATION LTD., (2017) [84 TAXMANN.COM 173] HELD THAT NO DISALLOWANCE CAN BE MADE IN RESPECT OF PF AND ESI U/S.36(1)(VA) OF THE AC T, IF THE SAME ARE DEPOSITED ON OR BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. FOR THE SAKE CLARITY AND CONVENIENC E WE EXTRACT RELEVANT PART OF THE ORDER OF THE HONBLE RAJASTH AN HIGH AS UNDER: 5. SO FAR AS THE QUESTION RELATING TO PRIVILEGE FE ES AMOUNTING TO RS.26.00 CRORES IN THE INSTANT YEAR AS WELL AS THE DEDUCTION OF CLAIM OF RS.17,80,765/- ON ACCOUNT OF PROVIDENT FUND (PF) AND ESI IS CONCERNED, THIS COURT HAS EXTENSIVELY CONSIDERED TH E AFORESAID TWO QUESTIONS IN ASSESSEE'S OWN CASE VIDE JUDGMENT AND ORDER DT.26.05.2016 REFERRED TO (SUPRA) AND HAS HELD THAT THE PRIVILEGE FEES BEING A REVENUE EXPENDITURE, IS REQUIRED TO BE ALLO WED AS A REVENUE EXPENDITURE. THIS COURT IN THE AFORESAID CASE HAS A LSO ALLOWED THE CLAIM OF THE ASSESSEE, IN SO FAR AS PAYMENT OF PF & ESI ETC. IS CONCERNED, ON THE FINDING OF FACT THAT THE AMOUNTS IN QUESTION WERE DEPOSITED ON OR BEFORE THE DUE DATE OF FURNISHING O F THE RETURN OF INCOME AND TAKING IN CONSIDERATION JUDGMENT OF THIS COURT IN CIT V. STATE BANK OF BIKANER & JAIPUR [2014] 363 ITR 70/43 TAXMANN.COM 411/225 TAXMAN 6 (MAG.) (RAJ.) AND CIT V. JAIPUR VIDHUT VITARAN NIGAM LTD. [2014] 363 ITR 307/49 TAX MANN.COM 540/[2015] 228 TAXMAN 214 (MAG.) (RAJ.) AND ACCORDI NGLY BOTH THE QUESTIONS ARE COVERED BY THE AFORESAID JUDGMENT AND AGAINST THE REVENUE. AGAINST WHICH THE REVENUE HAS FILED SLP BEFORE THE HON'BLE SUPREME COURT, WHICH WAS DISMISSED BY THE HON 'BLE APEX COURT IN (2017) [85 TAXMANN.COM 185]. ITA NO. 1120/HYD/2016 :- 5 -: THEREFORE, TAKING THE CONSISTENT VIEW AND RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE CO-ORDINATE BENCH OF TH E ITAT IN THE CASE OF KLR INDUSTRIES LTD., VS. DCIT (SUPRA), WE HOLD THAT NO DISALLOWANCE COULD BE MADE IN RESPECT OF EMPLO YEES CONTRIBUTION OF PF AND ESI IF THE SAME ARE DEPOSITED BE FORE THE DUE DATE OF FILING THE RETURN OF INCOME. ACCORDINGLY , WE SET ASIDE THE ORDER OF LD.CIT(A) AND DELETE THE ADDITION MA DE BY THE AO. THE APPEAL OF THE ASSESSEE ON THIS GROUND IS ALLOWED. 4. GROUND NO.3 IS RELATED TO CONFIRMING THE ADDITION OF RS.2 LAKHS, BY THE CIT(A), RELATING TO SALES PROMOTION EXPE NSES, WHICH WAS NOT PRESSED BY THE LD.AR DURING THE APPEAL HEARING. THEREFORE, GROUND NO.3 IS DISMISSED AS NOT PRESSED. 5. GROUND NO.4 IS RELATED TO SUSTAINING THE ADDITION OF RS.8,41,862/- PROPORTIONATE EXPENDITURE ATTRIBUTING TO NO N- TAXABLE UNITS. 5.1. ASSESSEE IS HAVING TAX EXEMPT UNITS AS WELL AS THE TAXABLE UNITS. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE IS HAVING ONE TAXABLE UNIT I.E. , THE INVESTMENT DIVISION AND OTHER NON-TAXABLE UNIT I.E., BPO OR SOFTWARE DIVISION AND MOST OF THE EXPENDITURE WAS DEB ITED TO THE TAXABLE UNIT, THUS VIEWED THAT THE TAXABLE INCOME WAS REDUCED. THEREFORE, THE AO DISALLOWED 25% OF THE MD S SALARY AND SECRETARIAL EXPENSES, WHICH WORKED OUT TO RS. 8,00 ,500/- AND IN RESPECT OF AUDIT FEES A SUM OF RS.41,362/- AG GREGATING TO RS.8,41,862/- ON ESTIMATION BASIS AND THE SAME IS BR OUGHT TO TAX. ITA NO. 1120/HYD/2016 :- 6 -: 5.2. AGAINST THE SAID ORDER, THE ASSESSEE WENT ON APPEA L BEFORE THE CIT(A) AND THE LD.CIT(A) CONFIRMED THE ORDE R OF AO HOLDING THAT ANY EXPENDITURE WHICH IS RELATED TO EXEMP TED INCOME CANNOT BE ALLOWED AGAINST THE TAXABLE INCOME. AGAINST THE ORDER OF LD.CIT(A), THE ASSESSEE IS IN APPEAL BEF ORE US. 5.3. DURING THE APPEAL HEARING, THE LD.AR SUBMITTED THA T THE ASSESSEE HAS SHOWN SEPARATE PROFIT AND LOSS A/C BEFOR E LOWER AUTHORITIES, ALLOCATING THE EXPENDITURE TOWARDS VARIOU S UNITS, RELATING TO THE ACTIVITIES CARRIED ON BY THE ASSESSEE. T HE ASSESSEE ALSO FILED THE PAPER BOOK, FURNISHING DIVIS ION-WISE PROFIT AND LOSS A/C IN PAGE NOS.16 AND 17 OF THE PAPE R BOOK AS PER WHICH THE ASSESSEE FURNISHED THE INCOME AND THE EXPENDITURE DETAILS, HEAD-WISE AND THE UNIT WISE. THE LD.AR FURTHER SUBMITTED THAT THE ASSESSEE IS MAINTAINING THE SEPARATE BOOKS OF ACCOUNT FOR EACH UNIT AND THE INCOME AND EXPENDITURE WAS DULY ACCOUNTED UNIT WISE, HENCE, AR GUED THAT THERE IS NO REQUIREMENT TO MAKE THE ESTIMATED DISALLOWANC E. LD.AR ARGUED THAT THE CIT(A) ERRED IN SUSTAINING THE A DDITION. HENCE, REQUESTED TO SET ASIDE THE ORDER OF THE LD.CIT(A) AND ALLOW THE APPEAL OF ASSESSEE. 5.4. ON THE OTHER HAND, THE LD.DR SUPPORTING THE ORDERS OF LOWER AUTHORITIES VEHEMENTLY ARGUED THAT THE CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE AO, HENCE, REQUESTE D TO UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE ASSESSEE. ITA NO. 1120/HYD/2016 :- 7 -: 5.5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL PLACED ON RECORD. AS SEEN FROM PGS.16 & 17 OF THE PAPER BOOK, THE ASSESSEE IS HAVING FOUR UNITS, FOR WH ICH THE INCOME AND EXPENDITURE HAS BEEN ALLOCATED UNIT-WISE AND HEAD-WISE. THE ASSESSEE ALSO STATED THAT SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED FOR EACH UNIT AND IF SEPARATE BOOKS ARE MAINTAINED, THERE IS NO CASE FOR DISALLOWANCE OF EXPENDITURE ON ESTIMATION BASIS. FURTHER, LD.AR ALSO SUBMITTED THAT ALL THE EXPENDITURE WAS DISTRIBUTED AMONG A LL THE UNITS PROPORTIONATELY AND THERE IS NO CASE OF MAKIN G ESTIMATED DISALLOWANCE RELATING TO NON-TAXABLE UNIT. TH E AO NEITHER REJECTED THE BOOKS OF ACCOUNTS NOR MADE OUT CASE OF SUPPRESSION OF TAXABLE INCOME, OR INFLATION OF EXPEN DITURE IN TAXABLE UNITS. THEREFORE, WE HOLD THAT THERE IS NO CAS E FOR MAKING THE ADDITION ON ESTIMATION BASIS, HENCE, WE SE T ASIDE THE ORDERS OF LOWER AUTHORITIES AND DELETE THE ADDITIONS MADE BY THE AO. THE APPEAL OF ASSESSEE ON THIS GROUND IS A LLOWED. 6. GROUND NO.5 IS RELATED TO SET-OFF OF LOSS BEFORE A LLOWING THE DEDUCTION U/S 10A OF THE ACT. THE ASSESSEE FILED ITS RETURN OF INCOME WHICH RESULTED IN A LOSS OF RS.11,11,940/- , HENCE, FILED THE RETURN OF INCOME, WITHOUT CLAIMING THE DEDUCT ION U/S.10A OF THE ACT. 6.1. DURING THE ASSESSMENT PROCEEDINGS, THE AO MADE CE RTAIN ADDITIONS AND AFTER MAKING THE ADDITIONS THE LOSS WAS CONVERTED POSITIVE INCOME, THEREFORE, THE ASSESSEE RE QUESTED THE AO FOR DEDUCTION U/S.10A OF THE ACT, WHICH WAS REJE CTED BY ITA NO. 1120/HYD/2016 :- 8 -: THE AO IN THE ASSESSMENT PROCEEDINGS AND THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 6.2. THE LD.CIT(A) DID NOT ACCEPT THE CONTENTIONS OF AO THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S.10A OF THE ACT IF THE SCRUTINY ASSESSMENT RESULTED IN POSITIVE INCOME, ACCORDINGLY DIRECTED THE AO TO ALLOW THE DEDUCTION. HOWE VER, THE CIT(A) FOUND THAT THERE WAS BUSINESS LOSS AND UN- ABSORBED DEPRECIATION BROUGHT FORWARDED FROM THE AY.20 07- 08, NET EFFECT OF THE SAME WOULD BE LOSS. FOLLOWING T HE CBDT CIRCULAR NO.07/2013, DT.16 TH JULY, 2013, THE CIT(A) HELD THAT PROFIT OR LOSS FROM VARIOUS SOURCES I.E., FROM ELIGI BLE AND NON- ELIGIBLE UNITS UNDER THE SAME HEAD HAVE TO BE AGGREGA TED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 70 OF THE A CT AND THEREAFTER INCOME FROM ONE HEAD HAS TO BE AGGREGATED WI TH INCOME OR LOSS OF OTHER HEAD IN ACCORDANCE WITH SECTI ON 71 OF THE ACT, GIVING EFFECT TO THE PROVISIONS OF SECTION 70 AN D 71 OF THE ACT AND IF THERE IS ANY INCOME WHERE THERE IS BRO UGHT FORWARD LOSS, THE SAME TO BE SET-OFF IN ACCORDANCE WI TH THE PROVISIONS OF SECTION 72 OF THE ACT AND THE BALANCE WOU LD BE ELIGIBLE FOR DEDUCTION U/S.10A OF THE ACT, AS PER THE PROVISIONS OF CHAPTER-VIA. IF AFTER AGGREGATION OF INCOME IN ACCO RDANCE WITH THE PROVISIONS OF SECTION 70 AND 71 OF THE ACT, THE RESULTANT AMOUNT IS LOSS FROM ELIGIBLE UNIT, IT SHALL BE ELIGIBLE FOR CARRY FORWARD AND SET-OFF IN ACCORDANCE WITH TH E PROVISIONS OF SECTION 72 OF THE ACT. SIMILARLY, IF THERE IS LOSS F ROM AN ELIGIBLE UNIT, IT SHALL BE CARRIED FORWARD AND MAY BE SET-OFF AGAINST THE PROFITS OF ELIGIBLE UNIT OR IN-ELIGIBLE UNI T AS THE CASE MAY BE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 72 OF THE ITA NO. 1120/HYD/2016 :- 9 -: ACT. SINCE IN THIS CASE, AFTER GIVING EFFECT TO THE PROVI SIONS OF SECTION 70 AND 71 OF THE ACT, IT RESULTED IN LOSS, THE LD.CIT(A) HELD THAT NO DEDUCTION IS ALLOWABLE U/S.10A OF THE ACT. 6.3. AGAINST THE ORDER OF THE LD.CIT(A), ASSESSEE FILE D APPEAL BEFORE THIS TRIBUNAL AND ARGUED THAT IN THE INSTANCE CAS E, THERE WAS PROFIT IN THE ELIGIBLE UNIT AND BY FOLLOWIN G THE ORDER OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. YO KOGAWA INDIA LTD., [77 TAXMANN.COM 41], ARGUED THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.10A OF THE ACT ON THE GROSS TOTAL INCOME OF ELIGIBLE UNDERTAKING UNDER CHAPTER-VI OF THE ACT AND NO ADDITION TO BE MADE AT THE STAGE OF COMPUTATION OF INC OME UNDER CHAPTER-VI OF THE ACT, THEREFORE ARGUED THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION AND HENCE REQUESTED TO SET ASIDE THE ORDER OF LD.CIT(A) AND ALLOW THE APPEAL OF ASSESSEE. 6.4. ON THE OTHER HAND, THE LD.DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 6.5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL PLACED ON RECORD. IN THE CASE OF CIT VS. YO KOGAWA INDIA LTD., (SUPRA), IT WAS HELD THAT THE PROFITS AND GA INS OF BUSINESS OF ELIGIBLE UNDERTAKING HAS TO BE MADE INDEP ENDENTLY AND IMMEDIATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS AND IT IS PREMATURE TO APPLY THE PROVISIONS OF SECTION 70, 71 AND 72 OF THE ACT AT THE STAGE OF DETERMI NATION OF PROFITS AND GAINS OF THE BUSINESS, THUS HELD THAT THE DEDUCTION U/S.10A OF THE ACT IS TO BE ALLOWED FROM THE G ROSS TOTAL INCOME OF ELIGIBLE UNDERTAKING BUT NOT AT THE STAGE O F ITA NO. 1120/HYD/2016 :- 10 -: COMPUTATION OF TOTAL INCOME. FOR THE SAKE OF CLARITY AND CONVENIENCE, WE EXTRACT PARA 17 OF THE JUDGEMENT OF THE HON'BLE SUPREME COURT, WHICH READS AS UNDER: 17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [FIRST PROVISO TO SECTIONS 10A(1); 10A (1A) AND 10A (4)] THAT THE UNI T THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS T HE ELIGIBLE UNDERTAKING AND THAT IS ALSO HOW THE CONTEMPORANEOU S CIRCULAR OF THE DEPARTMENT (NO. 794 DATED 09.08.2000) UNDERSTOO D THE SITUATION, IT IS ONLY LOGICAL AND NATURAL THAT THE STAGE OF DE DUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKIN G HAS TO BE MADE INDEPENDENTLY AND, THEREFORE, IMMEDIATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS. AT THAT STA GE THE AGGREGATE OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FO R SET OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 O F 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 T HE 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 EXPR ESSION 'TOTAL INCOME OF THE ASSESSEE' IN SECTION 10A AS 'TOTAL IN COME OF THE UNDERTAKING'. 18. FOR THE AFORESAID REASONS WE ANSWER THE APPEALS AND THE QUESTIONS ARISING THEREIN, AS FORMULATED AT THE OUT SET OF THIS ORDER, BY HOLDING THAT THOUGH SECTION 10A, AS AMENDED, IS A P ROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOULD BE WHILE CO MPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDER CHAP TER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTAL IN COME UNDER CHAPTER VI. ALL THE APPEALS SHALL STAND DISPOSED OF ACCORDI NGLY. RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE HON'BLE AP EX COURT, WE DIRECT THE AO TO ALLOW THE DEDUCTION AT THE STAGE OF COMPUTATION OF GROSS TOTAL INCOME BUT NOT UNDER CHAPTER-VI FOR ARRIVING THE TOTAL INCOME, ACCORDINGLY WE SET ASI DE THE ORDER OF THE CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE AO FOR LIMITED PURPOSE OF COMPUTING THE DEDUCTION U/S.10A OF THE ACT ITA NO. 1120/HYD/2016 :- 11 -: AS PER THE ORDER OF THE HONBLE APEX COURT SUPRA. ACCO RDINGLY, THE APPEAL OF THE ASSESSEE ON THIS GROUND IS ALLOWED F OR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH NOVEMBER,2020 SD/- SD/- (P.MADHAVI DEVI) (D.S.SUNDER SINGH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED:18-11-2020 TNMM ITA NO. 1120/HYD/2016 :- 12 -: COPY TO : 1.ELICO LIMITED, HYDERABAD. C/O. SRI S.RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS ELEGANCE, 3-6-643, STREET NO.9, HIMAYAT NAGAR, HYDERABAD. 2.THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE-2(2), HYDERABAD. 3. CIT(APPEALS)-5, HYDERABAD. 4. PR.CIT-5, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.