REXTONE INDUSTRIES LTD, MUMBAI V. ITO 9(3)(4), MUMBAI

ITA 1212/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71798 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 10-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIM KUMAR
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI . . , , BEFORE SHRI B. R. MITTAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 1212/MUM/2011 ( / ASSESSMENT YEAR: 2007-08) REXTONE INDUSTRIES LTD. 16, YASHODHAM CENTRE, FILM CITY ROAD, GOREGAON (E), MUMBAI-400 063 / VS. INCOME TAX OFFICER-9(3)(4), AAYAKAR BHAVAN, MUMBAI-400 020 ! ./' ./PAN/GIR NO. AAAFR 4471 Q ( !# /APPELLANT ) : ( $!# / RESPONDENT ) !# % / APPELLANT BY : SHRI DEEPAK TRALSHAWALA $!# & % / RESPONDENT BY : SHRI ASHIM KUMAR ' ()* & + / DATE OF HEARING : 18.11.2013 ,-. & + / DATE OF PRONOUNCEMENT : 27.11.2013 / / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-20, MUMBAI (CIT(A) FOR SH ORT) DATED 09.11.2010, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A. Y.) 2007-08 VIDE ORDER DATED 30.11.2009. 2 ITA NO.1212/MUM/2011 (A.Y. 2007-08) REXTONE INDUSTRIES LTD. VS. ITO 2. OPENING THE ARGUMENTS FOR AND ON BEHALF OF THE A SSESSEE, IT WAS SUBMITTED BY THE LEARNED AUTHORIZED REPRESENTATIVE (AR), THE ASSESSE ES COUNSEL, THAT THE ASSESSEES APPEAL RAISES A SINGLE ISSUE, I.E., WHETHER SECTION 72 OF THE ACT WOULD HAVE EFFECT IN DETERMINING THE INCOME OF THE ASSESSEES ELIGIBLE U NIT EXEMPT U/S.10B OF THE ACT. THE MATTER IS SQUARELY COVERED BY THE DECISION BY THE H ON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BLACK & VEATCH CONSULTING (P.) LTD. [2012] 348 ITR 72 (BOM). HE WOULD THEN READ OUT FROM THE HEAD NOTES OF THE SAID DECIS ION, CLEARLY STATING THAT THE DEDUCTION U/S.10B WOULD HAVE TO BE COMPUTED PRIOR TO GIVING E FFECT TO THE PROVISION OF SECTION 72 OF THE ACT. HE WOULD THEN TAKE US THROUGH PARA 2 OF TH E IMPUGNED ORDER TOWARD THE FACTS OF THE CASE. AT THIS STAGE, TO A QUERY BY THE BENCH, A S TO WHETHER THE UNABSORBED LOSS OR UNABSORBED DEPRECIATION UNDER REFERENCE, WHICH STAN DS GIVEN EFFECT TO BY THE ASSESSING OFFICER (A.O.) PRIOR TO THE DETERMINATION OF DEDUCT ION U/S.10B, INCLUDES EITHER WHOLLY OR IN PART THAT PERTAINING TO THE ASSESSEES ELIGIBLE UNIT (EOU), HE REPLIED IN THE NEGATIVE. THE MATTER IN FACT STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER BY THE TRIBUNAL IN ITS OWN CASE FOR AN EARLIER YEAR, BEING AY 2006-07 (IN ITA NO. 7231/MUM/2011), PLACING A COPY OF THE SAME ON RECORD. THE LD. DEPAR TMENTAL REPRESENTATIVE (DR) RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD AS WELL AS THE CASE LAW CITED. THE PROFIT OF THE EOU, BEING THE ASSESSE ES, A TRADER AND MANUFACTURER OF INKS, SPECIALTY DYES AND INTERMEDIATES, UNIT NO. 2, HAS T O BE RECKONED ON A STAND-ALONE BASIS. THERE IS NO MERIT IN THE REVENUES STAND OF THE SET OFF OF UNABSORBED LOSS OR UNABSORBED DEPRECIATION OF THE ASSESSEES OTHER NON-ELIGIBLE U NITS AGAINST THE PROFIT AND GAINS OF THE SAID UNIT. THE MATTER STANDS DEALT WITH AND EXPLAIN ED AT LENGTH BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SCIENTIFIC ATLANTA INDIA TECHNOLOGY (P.) LTD. VS. A CIT [2010] 2 ITR 66 (TRIB) (CHENNAI), ALSO RELIED UPON BY THE AS SESSEE. THE PREMISE OF THE SAID DECISION IS THAT THE INCOME OF AN ELIGIBLE UNIT WOULD NOT ENTER THE COMPUTATION PROCESS FOR DETERMINING THE TOTAL INCOME INASMUCH AS IT FALLS UNDER CHAPTER III OF THE ACT. EVEN IF, IT WAS FURTHER EXPLAINED, THAT A PART OF THE INCOME BECOMES TAXABLE, I.E., ON ACCOUNT OF THE 3 ITA NO.1212/MUM/2011 (A.Y. 2007-08) REXTONE INDUSTRIES LTD. VS. ITO DEDUCTION NOT EXTENDING TO 100% OF THE SAID INCOME, AS IN THE INSTANT CASE, THE SAME WOULD BE TAXABLE AS SUCH, I.E., WITHOUT FORMING PAR T OF THE GROSS TOTAL INCOME. THE MATTER STANDS DECIDED BY THE TRIBUNAL IN THE ASSESSEES OW N CASE FOLLOWING THE DECISION IN THE CASE OF BLACK & VEATCH CONSULTING (P.) LTD . (SUPRA), DISAPPROVING THE SET OFF OF UNABSORBED LOSSES OF NON-ELIGIBLE UNITS. COMING TO THE FACTS OF THE CASE, THE ASSESSEE PER T HE STATEMENT OF FACTS FILED ALONG WITH THE MEMO OF APPEAL, PARTICULARLY PARA 3 THEREO F, STATES THE UNABSORBED LOSS AND DEPRECIATION SET OFF (PRIOR TO ALLOWING DEDUCTION U /S. 10B) TO PERTAIN TO THE ASSESSEES NON-ELIGIBLE UNIT/S ONLY, EVEN AS CLARIFIED BY THE LD. AR DURING HEARING. SO HOWEVER, THE LD. CIT(A), VIDE PARA 4 OF THE IMPUGNED ORDER, AS W ELL AS THE A.O. VIDE PARA 6 OF THE ASSESSMENT ORDER, HAVE STATED THAT A PART OF THE BR OUGHT FORWARD UNABSORBED BUSINESS LOSS AND UNABSORBED DEPRECIATION UNDER REFERENCE RELATE TO THE ASSESSEES ELIGIBLE UNIT. IF AND TO THE EXTENT SO, THE PROVISION OF SECTION 10B(6) W OULD APPLY. THE SAME, IN FACT, WOULD NOT BE COVERED BY THE PROVISION OF SECTION 72, WHIC H APPLIES ONLY TO THE INCOME FROM THE NON-ELIGIBLE UNITS, FORMING PART OF THE GROSS TOTAL INCOME AND, THUS, THE TOTAL INCOME. WE, ACCORDINGLY, UPHOLD THE ASSESSEES CASE IN PRINCIPL E, I.E., SUBJECT TO THE UNABSORBED LOSS OR DEPRECIATION UNDER REFERENCE BEING NOT OF THE ELIGI BLE UNIT, AS CLAIMED BY THE ASSESSEE, WHICH SHALL BE COVERED BY SECTION 10B, BEING A SEPA RATE CODE, INCLUDING FOR THE COMPUTATION OF DEDUCTION U/S.10B. WE DECIDE ACCORDI NGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED ON THE AFORESAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 27, 2013 SD/- SD/- (B. R. MITTAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' * MUMBAI; 0( DATED : 27.11.2013 ).(../ ROSHANI , SR. PS 4 ITA NO.1212/MUM/2011 (A.Y. 2007-08) REXTONE INDUSTRIES LTD. VS. ITO !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. ' 1 ( ) / THE CIT(A) 4. ' 1 / CIT CONCERNED 5. 4)56 $ (78 , + 78. , ' * / DR, ITAT, MUMBAI 6. 69: ;* / GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , ' * / ITAT, MUMBAI