Karle International P Ltd, Bangalore V. Deputy Commissioner of Income tax, Bangalore

ITA 1270/BANG/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7586 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 15-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: H N KHINCHA
• Keywords: Business income; Depreciation; Carry forward of business losses; Earning of tax free income; Retrospective amendment; Unabsorbed depreciation
• Section: 10B

Judgement Text

ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'C', BENGALURU BEFORE SHRI. INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER I.T.A NO.1270/BANG/2014 (ASSESSMENT YEAR : 2010-11) I.T.A NO.2061/BANG/2017 (ASSESSMENT YEAR : 2011-12) M/S. KARLE INTERNATIONAL P. LTD, NO.151, INDUSTRIAL SUBURB, YESHWANTPURA, BENGALURU 560 022 PAN : AADCK4886C .. APPELLANT V. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 11 (5), BENGALURU .. RESPONDENT ASSESSEE BY : SHRI. H. N. KHINCHA, CA REVENUE BY : DR. P. V. PRADEEP KUMAR, ADDL. CIT HEARD ON : 14.06.2018 PRONOUNCED ON : 31.07.2018 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE FOR A Y. 2010-11 AND 2011-12, ON THE FOLLOWING GROUNDS OF APPEAL : ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 2 A. Y. 2010-11 : A. Y. 2011-12 : ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 3 02. GROUND NOS.1 AND 2 FOR BOTH THE YEARS ARE GENER AL NEEDING NO ADJUDICATION. GROUND NOS.3.1 AND 3.2 FOR BOTH THE YEARS ARE NOT PRESSED BY THE LD. AR. NOW WE ARE LEFT WITH GROUND NO.4 F OR AY 2010-11 AND 4.1 FOR AY 2011-12. THESE GROUNDS BEING IDENTICAL, THEREFORE WE SHALL BE DECIDING THESE GROUNDS SIMULTANEOUSLY IN THE FOL LOWING PARAGRAPHS . 03. COMMON FACTS ARE AS UNDER. DURING THE ASSESSME NT YEAR 2010-11, THE PROFIT / LOSS INCURRED BY ALL THE THREE UNITS A RE AS UNDER: S1. NO UNIT INCOME / LOSS 1 UNIT - I 42,33,664 2 UNIT - II ( EOU ) ( - ) 34,65,337 3 UNIT OF KARLE INTERNATIONAL PVT. LTD., ( - ) 27,21,555 THE ASSESSEE HAS SET OFF THE LOSS OF EOU UNIT, UNIT -2 AND UNIT-3 AGAINST THE PROFIT OF UNIT -1(DTA) UNIT AND CARRIED FORWARD THE UNABSORBED LOSSES TO THE NEXT ASSESSMENT YEAR I.E., 2011-12. T HE AO ENQUIRED WITH THE ASSESSEE ABOUT THE ALLOWABILITY OF SET-OFF OF L OSSES OF THE EOU AGAINST THE DOMESTIC TARIFF AREA (DTA) UNIT. THE A SSESSEE SUBMITTED IN 4.2 OF THE REPLY WHICH WAS REPRODUCED IN THE ASSESS MENT ORDER TO THE FOLLOWING UNIT : 4.2 IN RESPONSE TO ABOVE, THE ASSESSEE SUBMITTED A S BELOW : 'FOR THE YEAR UNDER CONSIDERATION, WE CARRIED ON TH E BUSINESS THROUGH 3 UNITS VIZ., UNIT 1, UNIT II AND KARLE EXPORTS (UNIT OF KARLE INTERNATIONAL PVT. LTD.). UNIT 1 & K ARLE EXPORTS (UNIT OF KARLE INTERNATIONA1 PVT. LTD.) WERE NON 10 B UNITS I,E, DTA UNITS AND UNIT 11 WAS 10B UNIT. TLIE OPERATIONS OF UNIT U RESULTED IN A PROFIT WHEREAS THE OPERATIONS OF UNIT H AND KARLE EXPORTS (UNIT OF KANE INTERNATIONAL PUT. LTD.) RESU LTED IN A LO THE LOSSES OF UNIT II AND KARLE EXPORTS ( UNIT OF K ARLE INTERNATIONAL P LTD. INN SET OFF AGAINST THE PROFIT OF UNIT I THE REMAINING LOSS WAS CARRIED FORWARD. ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 4 WE ARE NOW ASKED TO EXPLAIN WHY CURRENT YEAR LOSSES OF 10B UNIT SHOULD NOT BE SET OFF AGAINST TH E PROFITS OF NON 10B UNIT. IN THIS CONNECTION, WE HAVE TO STATE THAT FOR THE YEAR THE 10B REGIME IS NOT APPLICABLE TO US. WE HAV E OPTED OUT OF THIS REGIME . THE FACT THAT THE LOSS IS SOUGHT TO BE SET OFF AGAINST NON 10B INCOME ITSELF SUGGEST THAT FOR THE YEAR 10B PROVISIONS ARE NOT APPLICABLE. EVEN OTHERWISE, THE APPLICABILITY OF SE CTION 10B IS CONDITIONAL UPON FILING AN AUDIT REPORT, WHA T IS NOT DONE IN THIS CASE. THEREFORE LOSS IS TO SETOFF AS CLAIMED ....( EMPHASIS SUPPLIED BY BENCH) THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSE E AND HAS NOT ALLOWED THE SET OFF OF THE LOSSES OF RS.34,65,377/- OF 10B UNIT (UNIT-2) AGAINST THE PROFIT OF UNIT -1 DTA UNIT. FOR THE P URPOSES OF CLARIFY, WE REPRODUCE HEREIN BELOW PARA 4.3, 4.4, 4.9 TO 4.12 O F THE ASSESSMENT ORDER WHERE THE ASSESSEE OFFICER DEALS WITH THESE ISSUES : 4.3 THE ASSESSEE'S CONTENTION IS NOT ACCEPTABLE FO R THE FOLLOWING REASONS. THE ASSESSEE'S CONTENTION THAT FOR THE YEA R UNDER CONSIDERATION 10B REGIME IS NOT APPLICABLE TO IT AS IT OPTED OUT OF THIS REGIME IS NOT ACCEPTABLE AS, AS PER THE PROVISIONS OF SECTION 10B(1) OF THE 1.T.ACT, THE AS SESSEE CAN CLAIM DEDUCTION FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAK ING MANUFACTURE OR PRODUCE SUCH ARTICLE OR THINGS OR CO MPUTER SOFTWARE. HENCE, THE ASSESSEE CANNOT CLAIM TO HAVE OPTED OUT OF THIS REGIME JUST TO SET OFF THE LOSS INCURRE D BY THE 10B UNIT AGAINST THE INCOME OF NON-10B UNIT. IT HAS TO BE NOTED THAT THE ASSESSEE HAS NOT FILED AUDIT REPORT FOR 10B MAINLY DUE TO THE FACT THAT 10B UNIT HAS INCURRED L OSS . THIS DOES NOT PRECLUDE THE APPLICABILITY OF SECTION 10B IN THE CASE OF THE ASSESSEE FOR THE A.Y. UNDER CONSIDE RATION. MOREOVER, AS PER THE PROVISIONS OF SUBSECTION (8) O F SECTION 10B OF THE I.T. ACT, THE ASSESSEE HAS TO FU RNISH A DECLARATION IN WRITING TO THE ASSESSING OFFICER BEF ORE THE DUE DATE OF FURNISHING THE RETURN OF INCOME U/S.139 (1) OF THE I.T. ACT THAT THE PROVISIONS OF SECTION 10B ARE NOT APPLICABLE TO IT FOR THIS ASSESSMENT YEAR, IN ORDER TO OPT ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 5 OUT OF 10B REGIME. THE PROVISIONS OF SUB SECTION (8 ) OF SECTION 10B OF THE I.T.ACT READS AS UNDER: NOTWITHSTANDING ANYTHING CONTAINED IN THE FORE GOING PROVISIONS OF THE SECTION, WHERE THE ASSESSEE, BEFO RE THE DUE DATE OF FURNISH THE RETURN OF INCOME UNDER SUB-SECTION(1) OF SECTION 139, FURNISHED TO THE ASSESSING QFFICER A DECLARATION IN WRITING THAT THE PROVISIONS OF THIS SECTION MAY NOT BE MADE APPLICABLE TO HIM, THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO HIM FOR (INK OF THE RELEVANT ASSESSMENT YE AR.' BUT, THE ASSESSEE COMPANY HAS NOT FILED ANY SUCH DE CLARATION BEFORE THE ASSESSING OFFICER BEFORE THE DUE DATE OF FURNISHING DIE RETURN OF INCOME U/S.139(1) OF THE I.T.ACT FOR THE A.Y.2010- 11 UNDER CONSIDERATION. 4.4 SECTION 10B BEING A SPECIAL PROVISIONS, IT HAS TO BE CONSIDERED CAREFULLY, IT. IS RELEVANT TO RE-PRODUCE SUB-SECTIO N(I) AND SUB- SECTION(6) OF SECTION 10B WHICH READ AS: SUB-SECTION(1): 'SUBJECT TO THE PROVISIONS OF THIS SECTION, A DEDUC TION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY A HUNDRED PER CENT EXPORT-ORIENTED UNDERTAKING FROM THE EXPORT OF ARTI CLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN. CO NSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGIN S TO MANUFACTURE OR PRODUCE ARTICLES O R THIS OF COMPUTER SOFTWARE, AS THE CASE MAY BE, SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE'.' SUB-SECTION(6) 'NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PR OVISION OF THIS ACT, N COMPUTING THE TOTAL INCOME OF THE ASSES SEE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR IMMED IATELY SUCCEEDING THE LAST OF THE RELEVANT ASSESSMENT YEAR S, OR OF ANY PREVIOUS YEAR, RELEVANT TO ANY SUBSEQUENT ASSESSMEN T YEAR -- NO LOSS REFERRED TO IN SUB-SECTION 72 OR SUB-SECTIO N(1) OR SUB-SECTION (3) OF SECTION 74, IN SO FAR AS SUCH LO SS RELATES TO THE BUSINESS OF THE UNDERTAKING, SHALL BE CARRIE D FORWARD ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 6 OR SET-OFF WHERE SUCH LOSS RELATES TO ANY OF THE RE LEVANT ASSESSMENT YEARS, ENDING BEFORE THE 1 ST DAY OF APRIL 2001. 4.5..... 4.6..... 4.7.... 4.8.... 4.9 FROM THE ABOVE, IT IS CLEAR THAT THE PROVISIONS OF SECTION 10B ARE TO BE APPLIED UNDERTAKING WISE FOR A PERIOD OF 10 CONSECU TIVE ASSESSMENT YEARS BEGINNING WITH THE ASST. YEAR RELE VANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MA NUFACTURE OR PRODUCE SUCH ARTICLE OR THINGS CIR COMPUTER SOFTWAR E. THE INTENTION OF LEGISLATURE IN AMENDING SECTION 10B(6) 4F THE I. T ACT. AND BOARD'S CIRCULAR NO.7/2003 DATED 05.09.2003 IN RATI ONALIONIZG THE PROVISION OF SECTION 10A 8G 108 IN RESPECT OF CARRY FORWARD OF BUSINESS LOSSES AND UNABSORBED DEPRECIATION IN RESP ECT OF 100% EXPORT ORIENTED UNITS IS TO GIVE BENEFIT UNDERTAKIN G WISE ONLY. AS DISCUSSED ABOVE, SECTIONS 70 & 71 WILL NOT COME INT O PLAY AND ACCORDINGLY SET-OFF OF LOSSES OF 10B UNITS CANNOT B E ALLOWED WITH THE PROFITS OF THE DTA UNITS. 4.10 IT COULD NOT BE ASCERTAINED WHETHER THE CASE C ITED BY THE ASSESSEE HAS REACHED ITS FINALITY OR DEPARTMENT HAS PREPARED APPEAL BEFORE HIGHER AUTHORITIES. THE DECISIONS OF BANGALO RE BENCH OF ITAT IN THE CASE OF ACIT VS YOKOGOWA INDIA LTD., 11 1 TTJ BANGALORE 546, IS RELIED UPON, WHEREIN THE ISSUE BE FORE THE HON'BLE HIGH COURT WAS WHETHER THE PROFIT OF 10A UN IT CAN BE SET- OFF AGAINST LOSSES OF DTA UNIT. HON'BLE ITAT HAS AN SWERED IN NEGATIVE. THE SAME IS CONFIRMED BY THE HON'BLE HIGH COURT OF KARNATAKA, VIDE ITA NO.78/2011 IN THE CASE OF CIT V S. M/S YOKOGAWA INDIA LTD, WHEREIN IT IS HELD THAT 10B PRO VISIONS ARE EXEMPTION PROVISIONS AND HAS HELD THAT THE BENEFIT OF SET OFF OF LOSS OF ELIGIBLE UNIT DURING THE TAX HOLIDAY PERIOD HAS TO BE CARRIED FORWARD FOR SET OFF IN ACCORDANCE WITH LAW AFTER TH E TAX HOLIDAY PERIOD. 4.11 FROM SUB-SECTION (1), IT IS CLEAR THAT ONLY PR OFITS OF THE UNIT EARNED IN TEN CONSECUTIVE YEARS IS TO BE ALLOWED AS DEDUCT ION OVER 10 ASSESSMENT YEARS. IF THE LOSSES INCURRED BY A PARTI CULAR UNIT IN FIRST FEW YEARS ARE ALLOWED FOR SETOFF WITH OTHER PROFITS AND PROFITS EARNED BY ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 7 THAT UNIT IN SUBSEQUENT YEARS ARE ALLOWED AS DEDUCT ION, IN A CONTINUUM OF TEN YEARS, DEDUCTION ALLOWED U/S.10B W OULD EXCEED THE NET PROFIT EARNED BY SUCH UNIT IN THIS PERIOD. THIS IS NOT THE SPIRIT AND MEANING OF THE SECTION. FURTHER, SUB -SECTION CONVEYS THAT LOSSES INCURRED ON SUCH UNITS SUBSEQUENT TO A.Y 2001-02 CAN BE CARRIED FORWARD BEYOND TEN RELEVANT ASSESSMENT YEARS AND ALLOWED FOR SETOFF IN ACCORDANCE WITH PROVISIONS OF SEC.72. 4.12 IN VIEW OF THE ABOVE REASONS, THE SIMILAR ISSU E OF SET OFF OF LOSSES OF UNITS AGAINST THE PROFIT OF DTA UNIT FOR THE A.Y.2008-09 IN THE ASSESSEE COMPANY'S OWN CASE WAS NOT ALLOWED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER U/ S.143(3) OF THE I.T.ACT DATED 31.12.2010 AND THIS I S UPHELD BOTH BY THE LC.I.CIT(A) AND THE HON'BLE ITAT VIDE I TS ORDER IN ITA. NO.381/BANG/2012 DT.12.10.2012. THE GIST OF THE SAID DECISION CONTAINED IN THE ORDER OF LD.CIT(APPEALS) QUOTED IN THE ITAT ORDER AT PAGE NO.4 IS AS BELOW: IN. VIEW OF THE CLEAR AND UNAMBIGUOUS FINDING OF THE JURISDICTIONAL HIGH COURT OF KARNATAKA, IT BECOMES CLEAR THAT THE UNIT EXEMPTED UNDER SECTION 10A IS AN INSU LATED ENTITY; WHICH HAS TO CARRY ITS BUSINESS PERFORMANCE IN ISOLATION FROM THE REST OF THE APPELLANT'S BUSINESS. IN VIEW OF THE FINDINGS OF THE COURT, IT BECOMES ACADEMIC AS TO WHETHER THE PROVISIONS OF SECTION 10.8(6) PLACES A SPECIFIC BAR OR RESTRICTION REGARDING SET OFF OF CARRY FORWARD OF THE LOSSES OR EXEMPTED UNITS. BE THAT AS IT MAY, THE PROVISIONS OF SECTION 108(6) THEMSELVES QUITE CLEARLY PRESCRIB E A SPECIFIC METHODOLOGY FOR CARRYING FORWARD THE LOSSES OF SUCH UNIT FOR A CERTAIN PERIOD, WHICH IS DISTINGUIS HABLE FROM THE FACT THAT-NO SUCH SPECIFIC STIPULATION IS GIVEN FOR ADJUSTMENT OF . THE INCOMES OF EXEMPTED UNITS AGAINST LOSSES OF OTHER UNITS. IT IS SIGNIFICANT TO MENTION THAT IN THE VERY CASE BEFORE IT, THE KARNATAKA HIGH COURT WAS HEARING AN APPEAL AGAINST THE ORDER OF THE APPELLATE TRIBUNAL HAD RULED M FAVOUR OF THE APPELLANT BY INSULATING THE PROFITS EXEMPTED UNITS FROM ADJUSTMENT AGAINST INCOME OF OTHER UNITS AS DONE BY THE ASSESSING OFFICER. THE EFFECT OF THE INSTALLATION, SINCE CONFIRMED BY THE HIGH. COURT, IS TO QUARANTI NE THE PERFORMANCE OF THE 10A UNIT COMPLETELY. IT LOGI CALLY ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 8 FOLLOWS THAT THE SAME INSULATION WOULD PREVENT THE FLOW OF THE ADJUSTMENT IN A REVERSE DIRECTION ALSO. HENCE, EITH ER THE INCOME NOR THE LOSS OF SUCH AN EXEMPTED UNIT CAN BE NOW ADJUSTED AGAINST THE RESULTS OF ANOTHER UNIT (WHETH ER EXEMPTED OR NOT) RUN BY THE APPELLANT, AS PER THE RATIONALE . OF THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT. 4.13 THEREFORE, THE LOSS OF RS.34,65,377/- OF 10B U NIT I.E. UNIT-II IS NOT ALLOWED TO HE SET-OFF AGAINST P ROFIT OF UNIT-I (DTA UNIT). FEELING AGGRIEVED, THE ASSESSEE FILED THE APPEAL BE FORE THE CIT (A). 04. THE CIT (A) AFTER DETAILED EXAMINATION OF THE S UBMISSIONS OF THE ASSESSEE HAD UPHELD THE DECISION OF THE AO. ORDER OF THE CIT (A) DEALING WITH THE CONTENTION OF THE ASSESSEE ARE REP RODUCED HEREIN BELOW IN PARA 5.5 TO 5.9 OF THE ORDER, AS UNDER : 5.5 HOWEVER, THE AO HAS NOT ACCEPTED THE APPELLANT' S CLAIM ON THE GROUND THAT: IT HAS NOT FILED AUDIT REPORT FOR 108 MAINLY DUE TO THE FACT THAT 10B UNIT HAS INCURRED LOSS. THIS DOES NOT PRECLUDE THE APPLICABILITY OF SECTION 10B FOR THE A.Y. UNDER CON SIDERATION. FURTHER AS PER THE PROVISIONS OF SUB-SECTION (8) OF SECTION 10B OF THE ACT, THE APPELLANT OUGHT TO HAVE FURNISHED A DE CLARATION IN WRITING TO THE ASSESSING OFFICER BEFORE THE DUE DAT E OF FURNISHING OF RETURN OF INCOME U/S 139(1) OF THE ACT THAT PROV ISIONS OF SECTION 10B ARE NOT APPLICABLE TO IT FOR THE ASSESS MENT YEAR UNDER CONSIDERATION IN ORDER TO OPT OUT 10B BENEFIT . THE FINDING OF THE AO IS THAT THE APPELLANT HAS NOT FILED SUCH DECLARATION BEFORE THE ASSESSING OFFICER BEFORE THE DUE DATE OF FURNISHING THE RETURN OF INCOME U/S 139(1) OF THE ACT FOR THE A.Y 2010-11. 5.6 I FIND FORCE IN THE AO'S FINDINGS. THE EXPRESSI ON 'ANY' IS USED IN SUB SECTION (8) OF SECTION 10B OF THE ACT TO MEAN ' ONE OR MORE OF SEVERAL' YEARS. SECTION 10B(8) MANDATES THE ASSESSE E TO FILE THE NECESSARY DECLARATION BEFORE THE DUE DATE FOR FURNI SHING THE RETURN OF INCOME. THE SECTION IS CLEAR ABOUT THE ASSESSMEN T YEAR IN RELATION TO WHICH THE DUE DATE FOR FURNISHING THE RETURN OF INCOME HAS TO BE TAKEN INTO ACCOUNT FOR FILING THE DECLARATION. THUS , IF THE ASSESSEE ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 9 SEEKS TO OPT OUT OF SECTION 10B FOR A PARTICULAR YE AR, THE ASSESSEE MAY DO SO FILING A DECLARATION IN THAT REGARD UNDER SUB-SECTION(8) BEFORE THE DUE DATE FOR FURNISHING THE RETURN OF IN COME FOR THAT YEAR. 5.7 IN CIT VS. TAMIL NADU JAI BHARATH MILLS LTD. ( 2006) 287 ITR 512 (MAD) HELD THAT SECTION 10B(8) OF THE ACT W HICH OPENS WITH A NON OBSTANTE CLAUSE CLEARLY CONFERS A RIGHT ON TH E ASSESSEE TO DECLARE THAT THE PROVISIONS OF THE ACT MAY NOT BE M ADE APPLICABLE TO THE ASSESSEE, PROVIDED SUCH A DECLARATION IS GIVEN ON OR BEFORE THE DUE DATE FOR FURNISHING THE RETURN UNDER SECTION 13 9(1) OF THE ACT. IT WAS THEREFORE, OPEN TO THE ASSESSEE, NOT WITHSTANDI NG THE FACT THAT THE ASSESSEE HAD EXERCISE THE OPTION TO HAVE SECTION 10 B MADE APPLICABLE TO WITHDRAW THAT OPTION, PROVIDED SUCH W ITHDRAW WAS MADE ON OR BEFORE THE DUE DATE FOR FILING THE RETUR N. THE FACTS DISCUSSED ABOVE, SINCE THE APPELLANT HAS NOT FILED THE NECESSARY DECLARATION BEFORE THE DUE DATE FOR FURNISHING THE RETURN OF INCOME, OPTION TO OPT OUT U/S 108 IS NOT MADE AVAILABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. 5.8 AS REGARD THE SET OFF OF LOSS OF 10B UNIT AGAIN ST PROFIT NON OF 10B UNIT IS CONCERN THE AO DISCUSSED IN DETAILS IN PARA 4.10 TO 4.12 AND SAME IS SUMMARISED BELOW:- IN CIT VS. M/S YOKOGAWA INDIA LTD. (2011) 341 ITR 3 85 (KAR), THE HON'BLE HIGH COURT HELD THAT THE PROVISI ONS ARE EXEMPTION PROVISIONS AND HAS HELD THAT THE BENEFIT OF SET OFF OF LOSS OF ELIGIBLE UNIT DURING THE TAX HOLDING PER IOD HAS TO BE CARRIED FORWARD AND SET OFF AFTER THE TAX HOLIDA Y PERIOD. THE APPELLANT'S OWN CASE FOR A.Y. 2008-09 IN ITA NO . 381/BANG/2012 DATED 12.10.2012 THE HON'BLE ITAT, BANGALORE HELD THAT NEITHER THE INCOME NOR THE LOSS -OF SUCH AS EXEMPTED UNIT CAN BE NOW ADJUSTED AGAINST THE RE SULTS OF ANOTHER UNIT (WHETHER EXEMPTED FOR NOT) RUN BY THE APPELLANT AS PER RATIONALE OF THE JUDGMENT OF THE JURISDICTIO NAL HIGH COURT. 5.9 IN VIEW OF THE LEGAL POSITION CITED ABOVE, I DO NOT FIND ANY REASON TO INTERFERE, THE AO'S OBSERVATION, THEREFORE, THE ORDER OF THE AO IS CONFIRMED. THE APPEAL IN THIS GROUND THUS FAILS. ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 10 AGGRIEVED BY THE ABOVE ORDER OF THE CIT (A), ASSESS EE IS IN APPEALS BEFORE US. 05. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE COORDINATE BENCH IN THE MATTER OF MINDTEK (INDIA) LTD V. ITO [15 TAX MANN.COM 335], HAD EXAMINED THE DECISION RENDERED BY THE TRIBUNAL IN T HE CASE OF THE ASSESSEE IN 140 ITD 261, AS WELL AS THE CIRCULAR IS SUED BY THE BOARD ON 16.07.2013 AND HELD THAT THE CIRCULAR ISSUED BY THE BOARD IS A BENEVOLENT CIRCULAR, THAT THE LOSSES OF 10A UNIT CAN BE SET OF F AGAINST THE INCOME FROM OTHER UNITS. 06. PER CONTRA, THE LD. DR RELIES UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE EARLIER YEAR AND ALSO RELIES UPON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN CIT V. KEI INDUS TRIES [373 ITR 574], SUPREME COURT IN CIT V. YOKOGAWA INDIA LTD (3 91 ITR 274) AND IT WAS SUBMITTED THAT AT THE TIME OF ISSUING THE CIRCU LAR THERE WAS AMBIGUITY IN THE INTERPRETATION OF THE PROVISIONS OF SECTION 10A AND 10B OF THE ACT AS THERE WERE CONFLICTING JUDGMENTS OF THE HONBLE KARNATAKA HIGH COURT IN THE MATTER OF CIT V. YOKOGAWA INDIA LTD [3 41 ITR 385] AS WELL AS OF THE BOMBAY HIGH COURT IN THE MATTER OF HINDUSTAN UNILEVER VS. DCIT [325 ITR 102] AND THAT OF HONBLE DELHI HIGH COURT IN THE MATTER OF CIT V. TEI TECHNOLOGIES P. LTD [361 ITR 36]. T HEREFORE, THE CBDT HAS ISSUED THE CIRCULAR CONSIDERING THE CONFLICTING THE DECISIONS OF VARIOUS HIGH COURTS. FURTHER IT WAS SUBMITTED BY T HE LD. DR THAT THE HONBLE SUPREME COURT VIDE ITS JUDGMENT DT.16.12.20 16 IN CIT V. YOKOGAWA INDIA LTD, [77 TAXMANN.COM 41] HAS FINALLY DECIDED THE CONTROVERSY AND HELD IN PARA 17 AND 18 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 ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 11 UNDERTAKING AND THAT IS ALSO HOW THE CONTEMPORANEOU S CIRCULAR OF THE DEPARTMENT (NO. 794 DATED AUGUST 9, 2000*) UNDE RSTOOD THE SITUATION, IT IS ONLY LOGICAL AND NATURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIG IBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, THEREFORE, IMMEDI ATELY 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 DED UCTIONS UNDER SECTION 10A THEREFORE WOULD BE PRIOR TO THE COMMENC EMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE A CT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION 'TOTA L INCOME OF THE ASSESSEE' IN SECTION 10A HAS ALREADY BEEN DEALT WITH EARLIER AND IN THE OVERALL SCENARIO UNFOLDED BY THE PROVISI ONS OF SECTION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDE RSTANDING THE EXPRESSION 'TOTAL INCOME OF THE ASSESSEE' IN SECTIO N 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 OUT SET 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 UNDE R CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTAL I NCOME UNDER CHAPTER VI. ALL THE APPEALS SHALL STAND DISPO SED OF ACCORDINGLY. THE LD. DR HAD ALSO DRAWN OUR ATTENTION TO PARA 14 OF THE ABOVE SAID JUDGMENT WHEREIN THERE IS A REFERENCE OF SLP(C ) 18 157/2015, ARISING OUT OF THE DELHI HIGH COURT JUDGMENT RENDERED IN TE I TECHNOLOGIES (SUPRA) AND COMMISSIONER OF INCOME-TAX VS KEI INDUSTRIES LT D. * [2015] 57 TAXMANN.COM 412 (DELHI) , WHEREIN THE HONBLE DELHI HIGH COURT HAS HELD THAT THE LOSSES OF THE ELIGIBLE UNDERTAKING CANNOT BE SET OFF AGAINST THE INCOME FROM OTHER UNI TS. THIS IS IN TERMS OF THE JUDGMENT RENDERED IN THE MATTER OF YOK OGAWA INDIA LTD [21 TAXMANN.COM 154]. IT WAS SUBMITTED BY THE LD. DR THAT ONCE THERE IS A FINDING GIVEN BY THE HONBLE SUPREME COU RT IN THE MATTER OF ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 12 YOKOGAWA INDIA LTD (SUPRA), WHEREBY THE HONBLE SUP REME COURT HAS CONCLUSIVELY DECIDED THE ISSUE AS TO THE MANNER IN WHICH THE INCOME OF THE ELIGIBLE UNDERTAKING IS REQUIRED TO BE COMPUTED AND HAS ALSO GIVEN THE MANNER IN WHICH THE BUSINESS INCOME OF THE ASSE SSEE IS TO BE COMPUTED. IN VIEW OF THE ABOVE IT WAS SUBMITTED TH AT THE ASSESSEE CANNOT TAKE THE BENEFIT OF THE CIRCULAR WHICH WAS I SSUED FOR THE INTERMITTENT PERIOD OF THE PENDENCY OF THE ORDER BY THE HONBLE SUPREME COURT AND AFTER THE PASSING OF THE ORDER BY THE H ONBLE SUPREME COURT. IT WAS SUBMITTED THAT THE ISSUE IS NOW REQUIRED TO BE EXAMINED IN TERMS OF THE LAW LAID DOWN BY THE HONBLE SUPREME COURT I N THE MATTER OF YOKOGAWA INDIA LTD (SUPRA). THE HONBLE DELHI HIGH COURT IN PARA 14 OF TEI TECHNOLOGIES P. LTD., HAS LAID DOWN AS UNDER : 14. THE RATIONALE BEHIND BOTH SUB-SECTION (4) AND S UB-SECTION (6) IS NOT FAR TO SEEK. THE LEGISLATURE OBVIOUSLY WANTE D TO ENSURE THAT IF THE PROFITS FROM THE ELIGIBLE UNDERTAKING ARE AL LOWED TO ENJOY THE BENEFITS OF SECTION 10A , THEY SHOULD NOT ENJOY ANY FURTHER RELIEFS OR BENEFITS WHICH ARE AVAILABLE UNDER THE P ROVISIONS OF THE ACT. WE HAVE ALREADY REFERRED TO THIS ASPECT WHEN W E REFERRED TO PARA 6.6 OF THE CIRCULAR NO.308 DATED 29.06.1981 (S UPRA) WHICH EXPLAINED SUB-SECTION (4) OF SECTION 10A WHEN THE SECTION WAS INTRODUCED BY THE FINANCE ACT , 1981. THE SAME RATIONALE HOLDS GOOD FOR SUB-SECTION (6) ALSO. IF THE PROFITS OF TH E ELIGIBLE UNDERTAKING DO NOT ENTER THE FIELD OF TAXATION FOR A PARTICULAR PERIOD KNOWN AS THE TAX HOLIDAY PERIOD, IT STANDS T O REASON THAT WHEN THE PROFITS ENTER THE FIELD OF TAXATION AFTER THE PERIOD OF THE TAX HOLIDAY, THOSE PROFITS SHOULD NOT BE REDUCED OR SET OFF BY OTHER RELIEFS PROVIDED IN THE ACT SUCH AS BROUGHT F ORWARD LOSSES, BROUGHT FORWARD UNABSORBED DEPRECIATION, ETC. THE M ANDATE OF THESE SUB-SECTIONS IS THAT ALL SUCH ALLOWANCES AND RELIEFS WOULD BE DEEMED TO HAVE BEEN EXHAUSTED DURING THE TAX HOL IDAY PERIOD ITSELF AND NO PART THEREOF WOULD SURVIVE FOR CONSID ERATION AFTER THE TAX HOLIDAY PERIOD. THE AMENDMENT MADE BY THE FINANCE ACT , 2003 TO SUB-SECTION (6) WITH RETROSPECTIVE EFFECT F ROM 01.04.2001 MADE A SIGNIFICANT DEPARTURE FROM THE LEGISLATIVE T HINKING OUTLINED ABOVE. IT PROVIDED THAT FROM THE ASSESSMEN T YEAR 2001- 02, THE RIGHT TO CARRY FORWARD THE LOSSES WILL BE R ECOGNIZED. THE ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 13 RESULT OF THIS RETROSPECTIVE AMENDMENT IS THAT EVEN THE BAR ON CLAIMING THE BENEFITS OF CARRIED FORWARD LOSSES AND ALLOWANCES AFTER THE PERIOD OF TAX HOLIDAY IS OVER WAS LIFTED AND FROM THE ASSESSMENT YEAR 2001-02, IRRESPECTIVE OF THE FACT T HAT THE PROFITS FROM THE ELIGIBLE UNIT DO NOT ENTER THE FIELD OF TA XATION, THE ASSESSEE WOULD BE STILL ENTITLED TO CLAIM THOSE ALL OWANCES AND RELIEFS AGAINST THE PROFITS OF THE ELIGIBLE UNDERTA KING. THIS HAS RESULTED IN THE POSITION THAT A DOUBLE BENEFIT HAS BEEN CONFERRED ON THE ELIGIBLE PROFITS FROM THE ASSESSMENT YEAR 20 01-02, WHICH THE SECTION INITIALLY DID NOT WANT TO CONFER. 08. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE BEFORE THE AO HAS SUBMITTED IN PURSUANCE T O THE NOTICE THAT SECTION 10B REGIME IS NOT APPLICABLE AS THE ASSESSE E OPTED OUT OF THIS REGIME AND THEREFORE THE ASSESSEE IS ENTITLED TO SE T OFF LOSSES OF THE ELIGIBLE UNDERTAKING WITH NON ELIGIBLE (DT) UNIT. HOWEVER, THE ASSESSEE HAD FAILED TO PRODUCE ANY DOCUMENT TO SUBSTANTIATE THIS SUBMISSION EITHER BEFORE THE LOWER AUTHORITIES OR BEFORE US. THEREFO RE THE ADVERSE INFERENCE IS REQUIRED TO BE DRAWN AGAINST THE ASSES SEE. ACCORDINGLY WE HOLD THAT THE ASSESSEE HAS NOT SUBMITTED ANY APPLIC ATION FOR OPTING OUT OF THE 10B REGIME.. HAVING SAID SO, NOW WE ARE DUTY-B OUND TO DECIDE WHETHER THE LOSSES OF THE ELIGIBLE UNDERTAKING CAN BE SET OFF AGAINST THE NON-ELIGIBLE UNIT (DTA) ON THE BASIS OF THE SUBMISS ION MADE BY THE ASSESSEE THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH IN THE MATTER OF M INDTEK (SUPRA). 09. BRIEFLY THE RELIANCE ON THE DECISION OF THE C OORDINATE BENCH IN THE CASE OF MINDTEK (SUPRA) BY THE ASSESSEE WAS ON THE PREMISE THAT THERE ARE CONFLICTING DECISIONS OF VARIOUS HIGH COURTS IN SO MUCH SO IN THE MATTER OF YOKOGAWA INDIA LTD (SUPRA), HINDUSTHAN UN ILEVER (SUPRA) AND TEI TECHNOLOGIES P. LTD (SUPRA). CONTRARY VIEWS WE RE TAKEN AS ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 14 MENTIONED IN PARA 16 OF THE DECISION IN MINDTEK (SU PRA) TO THE FOLLOWING EFFECT : 16. BEFORE WE DEAL WITH THE AFORESAID CBDT CIRCULAR , LET US ASCERTAIN THE EXACT LEGAL POSITION ON THIS ISSUE, A S IT PREVAILED PRIOR TO THE ISSUE OF THE SAID CIRCULAR, IT IS PERT INENT TO NOTE IN THIS REGARD THAT ALTHOUGH SECTION 10A WAS HELD TO B E AN EXEMPTION PROVISION BY THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF YOKOGAWA INDIA LTD, (SUPRA ), A DIFFERENT VIEW WAS EXPRESSED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN UNILEVER LTD., 325 I TR 102, HOLDING THAT SECTION 10B, THE PROVISIONS OF WHICH A RE ANALOGOUS TO THE PROVISIONS OF- SECTION IDA, IS-NO MORE AN EX EMPTION PROVISION, BUT PROVIDES FOR A DEDUCTION AFTER ITS SUBSTITUTION BY THE FINANCE ACT, 2000 W.E.F. 1.4.20 01. IN THE CASE OF HINDUSTAN UNILEVER LTD. (SUPRA), ALL THE FOUR UNITS OF THE ASSESSEE WERE ELIGIBLE FOR DEDUCTION U/S. 10B A ND OUT OF THE SAID FOUR UNITS, THREE UNITS HAD RETURNED THE PROFI TS WHILE THE REMAINING 4 TH UNIT HAD RETURNED A LOSS. IN THESE FACTS AND CIRCUMSTANCES, THE HON'BLE BOMBAY HIGH COURT HELD T HAT THE ASSESSEE WAS ENTITLED TO A DEDUCTION IN RESPECT OF THE PROFITS OF THE THREE ELIGIBLE UNITS, WHILE THE LOSS SUSTAINED BY THE 4 TH UNIT COULD BE SET OFF AGAINST THE NORMAL BUSINESS INCOME . BEFORE DISCUSSING THE CONTRARY VIEWS OF DIFFERENT H IGH COURTS IN THIS DECISION THE TRIBUNAL MENTIONED IN PARA10, THE CBD T HAS CIRCULAR DATED 16/07/2013 AND HELD THAT CIRCULAR IS BENEVOLENT IN NATURE THEREFORE IT WOULD BE APPLICABLE IN CASE ELIGIBLE UNDERTAKING SU FFERS LOSSES, IT CAN BE ADJUSTED AGAINST THE INCOME OF TAXING UNIT 09. AFTER PASSING OF DECISION BY THE COORDINATE BEN CH IN THE MATTER OF THE MINDTEK , DELHI HIGH COURT IN THE MATTER OF KEI (SUPRA) ON MARCH 13, 2015 DECIDED THE ISSUE AGAINST THE ISSUE AND FURT HER HONBLE SUPREME COURT IN YOKOGAWA INDIA (SUPRA) ON DECEMBER 16, 201 6 HAD REFERRED TO THE CIRCULAR RELIED UPON BY THE ASSESSEE IN PARA 9, WHEREIN THE HONBLE SUPREME COURT MENTIONED AS UNDER : ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 15 9. THE AMENDMENT OF SECTION 10A OF THE ACT, BY THE FINANCE ACT, 2000 WITH EFFECT FROM APRIL 1, 2001, SPECIFICALLY U SES THE WORDS 'DEDUCTION OF PROFITS AND GAINS DERIVED BY AN ELIGI BLE UNIT . . . FROM THE TOTAL INCOME OF THE ASSESSEE'. THERE ARE OTHER PROVISIONS OF SECTION 10A, AS AMENDED, WHICH COULD BE SUGGESTIVE OF THE FACT THAT BY THE AMENDMENT MADE BY THE FINANCE ACT, 2000, SEC TION 10A HAD CHANGED ITS COLOUR FROM BEING AN EXEMPTION SECTION TO A PROVISION PROVIDING FOR DEDUCTION. YET, SECTION 10A CONTINUED TO REMAIN IN CHAPTER III OF THE ACT WHICH CHAPTER DEALS WITH INC OMES WHICH DO NOT FORM PART OF THE TOTAL INCOME. THERE ARE SEVERA L CIRCULARS THAT HAVE BEEN PLACED BEFORE US BY THE CONTESTING PARTIE S TO EXPLAIN THE PURPOSE AND OBJECT OF THE AMENDMENT. HAVING LOOKED AT THE AFORESAID CIRCULARS, ISSUED FROM TIME TO TIME, WHAT WE FIND IS A FAIR AMOUNT OF AMBIGUITY THEREIN AS TO THE TRUE NATURE A ND EFFECT OF THE AMENDMENT. SPECIFICALLY, WE MAY REFER TO CIRCULAR N O. 7 DATED JULY 16, 2013* AS WELL AS CIRCULAR NO. 1 OF 2013 DATED J ANUARY 17, 2013** WHICH APPEAR TO BE CONFLICTING AND CONTRADIC TORY TO EACH OTHER ; IN THE FORMER CIRCULAR THE PROVISION, I.E., SECTION 10A IS REFERRED TO AS PROVIDING FOR DEDUCTIONS WHEREAS THE LATER CIRCULAR USES THE EXPRESSION 'EXEMPTION' WHILE REFERRING TO THE PROVISIONS OF SECTIONS 10A AND 10B OF THE ACT. EVEN THE INCOME-TA X RETURN FORMS, I.E., FORM NO. 1 DATED AUGUST 17, 2001 AND FORM NO. 6 FOR THE ASSESSMENT YEAR 2012-13 ARE EQUALLY CONTRADICTORY. THE APPELLANT- REVENUE WOULD, HOWEVER CONTEND THAT, EX FACIE, FROM THE LANGUAGE APPEARING IN SECTION 10A IT IS CRYSTAL CLEAR THAT T HE AFORESAID PROVISION OF THE ACT, AS AMENDED BY THE FINANCE ACT , 2000 PROVIDES FOR DEDUCTIONS FROM THE GROSS TOTAL INCOME, NOTWITH STANDING THE USE OF THE WORDS 'TOTAL INCOME' IN SECTION 10A. EXEMPTI ONS PROVIDED FOR UNDER THE OLD SECTION 10A HAVE BEEN DISCONTINUED BY THE LEGISLATURE. ACCORDING TO THE REVENUE, WHERE THE PU RPORT AND EFFECT OF THE STATUTE IS CLEAR FROM THE LANGUAGE USED THER E IS NO SCOPE TO TURN TO CHAPTER NOTES OR THE MARGINAL NOTES SO AS T O UNDERSTAND SECTION 10A TO BE AN EXEMPTION SECTION ON THE BASIS THAT THE SAID PROVISION IS STILL INCLUDED IN CHAPTER III OF THE A CT. RELIANCE IN THIS REGARD HAS BEEN PLACED ON THE DECISION OF THIS COUR T IN TATA POWER CO. LTD. V. RELIANCE ENERGY LTD.*** WHEREIN AT PAGE 687, IT IS HELD THAT : * [2013] 356 ITR (ST.) 7. ** [2013] 350 ITR (ST.) 34. *** [2009] 16 SCC 659. ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 16 '89. CHAPTER HEADINGS AND THE MARGINAL NOTES ARE PA RTS OF THE STATUTE. THEY HAVE ALSO BEEN ENACTED BY PARLIAMENT. THERE CANNOT, THUS, BE ANY DOUBT THAT IT CAN BE USED IN AID OF TH E CONSTRUCTION. IT IS, HOWEVER, WELL SETTLED THAT IF THE WORDINGS OF T HE STATUTORY PROVISION ARE CLEAR AND UNAMBIGUOUS, CONSTRUCTION O F THE STATUTE WITH THE AID OF 'CHAPTER HEADING' AND 'MARGINAL NOT E' MAY NOT ARISE. IT MAY BE THAT HEADING AND MARGINAL NOTE, HO WEVER, ARE OF A VERY LIMITED USE IN INTERPRETATION BECAUSE OF ITS N ECESSARILY BRIEF AND INACCURATE NATURE. THEY ARE, HOWEVER, NOT IRREL EVANT. THEY CERTAINLY CANNOT BE TAKEN INTO CONSIDERATION IF THE Y DIFFER FROM THE MATERIAL THEY DESCRIBE.' AND THEREAFTER IN PARA 17 AND 18 HONBLE SUPREME C OURT HAS DECIDED THAT SECTION 10A/10B IS A DEDUCTION AND NOT EXEMPTI ON AND FURTHER HELD THAT 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 UND ER CHAPTER VI., . IN NUT SHELL, IN OUR VIEW HONBLE SUPREME COURT, HE LD THAT INCOME OF BOTH ELIGIBLE AND NON-ELIGIBLE UNITS SHOULD BE COMP UTED INDEPENDENT OF EACH OTHER . FURTHER LOSSES, DEDUCTIONS ETC OF EACH OTHER SHOULD BE ADJUSTED AGAINST EACH INDIVIDUAL UNDERTAKING AT THE UNDERTAKING LEVEL AND NOT AT THE ASSESSEE LEVEL. THEREFORE IF ELIGIBLE U NDERTAKING EARNED PROFIT IT SHOULD NOT BE ADJUSTED AGAINST THE LOSS OF TAX E LIGIBLE UNIT AND SIMILARLY IF THE LOSS IF CAUSED TO ELIGIBLE UNDERTAKING THAN IT WOULD BE CARRY FORWARD IN SUBSEQUENT YEARS, AS THERE IS NO OCCASIO N FOR CLAIMING THE DEDUCTION AND FURTHER LOSS CANNOT BE SET OFF AGAINS T THE INCOME OF TAXING UNIT. IF WE ALLOW THE SETTING OFF LOSS OF ELIGIBLE WITH T AXING UNIT OF THE SAME ASSESSEE THEN THE PURPOSE FOR WHICH THE SECTION WAS INCORPORATED IN THE STATUTE BOOK WOULD BE DEFEATED. THE PURPOSE OF INSERTION OF THIS SECTION IS TO BOOS T THE EOU FOR EXPORT OF ARTICLES, THINGS, SOFTWARE ETC., AND WITH THIS OBJE CT IN MIND THE ENTIRE ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 17 INCOME OF THE ASSESSEE WAS ELIGIBLE FOR DEDUCTED AN D INCOME ( INCLUDING LOSSES) OF THE ELIGIBLE UNDERTAKING IS KEPT SEPARA TE, FROM THE REST OF THE BUSINESS OF THE ASSESSEE . IF WE ALLOW THE SET OFF OF LOSSES, MAY BE ARISING OUT OF DEPRECIATION OR BUSINESS LOSSES OR A NY OTHER REASON THAN THE ASSESSEE WILL NOT BE ABLE TO RUN THE INDUSTRY FOR T HE OBJECTIVE FOR WHICH IT WAS PERMITTED TO BE SET UP BY THE UNION OF INDIA. THE TAXING UNIT AND THE ELIGIBLE UNDERTAKING ARE MUTUALLY EXCLUSIVE UNITS F OR THE PURPOSES OF INCOME TAX ACT AND THEREFORE THERE IS SEPARATE REQU IREMENTS OF INSTALLING SEPARATE NEW MACHINES, EMPLOYEES, PREMISES, BOOKS O F ACCOUNT, INVENTORIES, FIXED ASSETS , BOOKS OF ACCOUNT ETC. SECONDLY THE HONBLE SUPREME COURT IN YOKOGAWA INDI A (SUPRA) HAD HELD THAT SECTION 10B IS A DEDUCTION PROVISION AND FURTHER SAID JUDGMENT ALSO PROVIDED THE STAGE AT WHICH THE DEDUCTION WOUL D BE GIVEN FOR THE PURPOSES OF COMPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY REASON TO AGREE WITH THE ARGUMENT OF THE ASSESSEE THAT THE LOSSES OF THE UND ERTAKING SHOULD BE ALLOWED TO BE ADJUSTED AGAINST THE PROFIT OF THE TA XING UNIT. 11. FURTHER FROM THE READING OF THE CIRCULAR DT.16 .07.2013, IT IS CLEAR AS TOTAL INCOME OF THE ASSESSEE IS TO BE COMPUTED A FTER AGGREGATING INCOME/ LOSS FROM VARIOUS SOURCES AND THEREAFTER IF THERE IS ANY INCOME, THAN THE SAME IS ELIGIBLE FOR DEDUCTION. HOWEVER S UBSEQUENTLY THE HONBLE SUPREME COURT IN PARA 18 HAS HELD THAT THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE TOTAL INCOME OF THE EL IGIBLE UNDERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF TOTAL INCOME UNDER CHAPTER VI. ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 18 THUS IN OUR VIEW, THE SETTING OFF OF THE LOSSES OF AN ELIGIBLE UNDERTAKING WITH THE NON ELIGIBLE UNIT WOULD NOT AR ISE AS THE DEDUCTION IS REQUIRED TO BE GIVEN WHILE COMPUTING THE TOTAL INCO ME UNDER CHAPTER IV, WHEREAS THE PROVISION FOR SETTING OFF OF THE LOSSES FALLS IN CHAPTER VI OF THE ACT, WHICH IN OUR HUMBLE UNDERSTANDING WOULD NO T BE A STAGE OF GRANTING THE DEDUCTION, AND IN CASE OF LOSS OF ELIG IBLE UNIT, THE SAME CAN BE CARRY FORWARD IN TERM OF THE SECTION 10A AND 10 B OF IT ACT. IN VIEW OF THE ABOVE, THE CIRCULAR RELIED UPON BY THE ASSESSEE DT.16.07.2013 IS NO MORE APPLICABLE AND THE JUDGMENT OF THE COORD INATE BENCH IN THE MATTER OF MINDTEK (SUPRA) WILL NOT BE OF ANY HELP T O THE ASSESSEE, AS BOTH ARE CONTRARY TO THE RATIO OF LAID DOWN BY HONBLE SC, IN YOKOGAWA INDIA (SUPRA) . FURTHER WE MAY MENTION IN IN GODREJ & BOYCE MFG. CO. LTD. V. STATE OF MAHARASHTRA REPORTED AT (2009)5 SCC 24, THE APEX COURT HELD TH AT CIRCULARS ARE ADMINISTRATIVE IN NATURE AND CANNOT A LTER THE PROVISIONS OF A STATUTE NOR CAN THEY IMPOSE ADDITIONAL CONDITIONS. SIMILARLY IN DECISION OF HIGH COURT OF GUJARAT IN THE CASE OF ASTIK DYESTUF F PVT LTD VS CCE (2014-TIOL-237-HC-AHM-ST) WHEREIN IT OBSERVED THAT IF THERE IS ANY CONFLICT BETWEEN THE JURISDICTIONAL HIGH COU RT / SUPREME COURT AND THE CBEC CIRCULAR, THE DECISION OF THE JURISDICTION AL HIGH COURT IS BINDING ON THE DEPARTMENT RATHER THAN CBEC CIRCULAR . FURTHER HON,BLE SUPREME COURT IN THE MATTER OF ASSTT. CIT V. SAURASHTRA KUTCH STOCK EXCHANGE LTD. (2008) 305 ITR 227 (SC). HELD AS UNDE R : 42. IN OUR JUDGMENT, IT IS ALSO WELL-SETTLED THAT A JUDICIAL DECISION ACTS RETROSPECTIVELY. ACCORDING TO BLACKSTONIAN THE ORY, IT IS NOT THE FUNCTION OF THE COURT TO PRONOUNCE A 'NEW RULE' BUT TO MAINTAIN AND EXPOUND THE 'OLD ONE'. IN OTHER WORDS, JUDGES D O NOT MAKE LAW, THEY ONLY DISCOVER OR FIND THE CORRECT LAW. TH E LAW HAS ALWAYS BEEN THE SAME. IF A SUBSEQUENT DECISION ALTE RS THE EARLIER ONE, IT (THE LATER DECISION) DOES NOT MAKE NEW LAW. IT ONLY ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 19 DISCOVERS THE CORRECT PRINCIPLE OF LAW WHICH HAS TO BE APPLIED RETROSPECTIVELY. TO PUT IT DIFFERENTLY, EVEN WHERE AN EARLIER DECISION OF THE COURT OPERATED FOR QUITE SOME TIME, THE DECISION RENDERED LATER ON WOULD HAVE RETROSPECTIVE EFFECT C LARIFYING THE LEGAL POSITION WHICH WAS EARLIER NOT CORRECTLY UNDE RSTOOD. 43. SALMOND IN HIS WELL-KNOWN WORK STATES ; ' . . . THE THEORY OF CASE LAW IS THAT A JUDGE DOES NOT MAKE LAW ; HE MERELY DECLARES IT ; AND THE OVERRULING OF A PRE VIOUS DECISION IS A DECLARATION THAT THE SUPPOSED RULE NEVER WAS L AW. HENCE ANY INTER MEDIATE TRANSACTIONS MADE ON THE STRENGTH OF THE SUPPOSED RULE ARE GOVERNED BY THE LAW ESTABLISHED I N THE OVERRULING DECISION. THE OVER RULING IS RETROSPECTI VE, EXCEPT AS REGARDS MATTERS THAT ARE RES JUDICATAE OR ACCOUNTS THAT HAVE BEEN SETTLED IN THE MEANTIME'. (EMPHASIS SUPPLIED) 12 FURTHER DELHI HIGH COURT IN THE MATTER OF C IT VS KEI NDUSTRIES LTD. * [2015] 57 TAXMANN.COM 412 (DELHI) HELD AS UNDER : 13. THIS COURT IN TEI TECHNOLOGIES (P.) LTD. ( SUPRA ) ALSO RULED OUT THAT BY VIRTUE OF SECTION 80A (4) THE POSITION IS A NY DIFFERENT. IT WAS HELD THAT EVEN IF SECTION 10A/ SECTION 10B ARE TREATED AS EXEMPTION PROVISIONS, SECTION 80A (4) CANNOT DEFEAT THAT INTERPRETATION. THE OBJECT OF SECTION 80-A (4) WAS EXPLAINED AS ENSURING THAT 'DOUBLE BENEFIT DOES NOT RESULT TO AN ASSESSEE IN RESPECT OF THE SAME INCOME, ONCE UNDER SECTION 10A OR SECTION 10B OR UNDER ANY OF THE PROVISIONS OF CHAPTER VIA A ND AGAIN UNDER ANY OTHER PROVISION OF THE ACT.' IT WAS HELD THAT EVEN IF SECTION 10A OR SECTION 10B IS CONSTRUED AS EXEMPTIO N PROVISIONS, 'IT IS STILL POSSIBLE TO INVOKE THE SUB-SECTION AND ENSURE THAT THE ASSESSEE DOES NOT OBTAIN A DEDUCTION IN RESPECT OF THE EXEMPTED INCOME UNDER ANY OTHER PROVISION OF THE ACT. THE ON LY OBJECT OF THE SUB-SECTION IS TO ENSURE THAT THERE IS NO DOUBL E BENEFIT ARISING TO THE ASSESSEE IN RESPECT OF THE SAME INCOME.' 14. IN THIS CASE, THIS COURT IS OF THE OPINION THAT TEI TECHNOLOGIES (P.) LTD. ( SUPRA ) APPLIES. THE TAX-EXEMPT INCOME OF THE ASSESSEE, ELIGIBLE UNDER SECTION 10-B COULD NOT HAVE BEEN SET OFF AGAINST THE LOSSES FROM TAX-LIABLE INCOME. ITA NO.1270/BANG/2014, 2064/BANG/2017 PAGE - 20 WE MAY LIKE TO POINT OUT THAT THE APPEAL PREFERRED BY THE ASSESSEE IN THE MATTER OF TEI TECHNOLOGIES (P.) ALONG WITH APPEAL IN THE MATTER OF YOKOGOWA INDIA LTD. (SUPRA), WAS DISMISSED BY THE H ONBLE SUPREME COURT. HENCE THE PRINCIPLE LAID DOWN IN TEI TECHNOLOGIES (P.) IS REQUIRED TO BE FOLLOWED. 13 IN VIEW OF THE ABOVE, WE DEEM IT PROPER TO REMAN D THE MATTER TO THE FILE OF THE CIT (A) WITH A DIRECTION TO APPLY T HE JUDGMENT OF THE HONBLE SUPREME COURT IN THE MATTER OF YOKOGAWA IND IA LTD TREATING THE PROVISION OF 10 B AS DEDUCTION AND GIVING THE DEDUC TION OF 10B AT THE STAGE OF COMPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UN DERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI. 14. IN THE RESULT, CROSS APPEALS FILED BY THE ASSE SSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2018. SD/- SD/- (INTURI RAMA RAO) (LALIET KU MAR) ACCOUNTANT MEMBER JUDICIAL MEMBER BENGALURU DATED : 31.07.2018 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.