ACIT, V. M/s Pepsico India Holdings (P) Ltd.,

ITA 138/BANG/2014

• Counselvise Citation: 13821114 RSA 2014
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 24-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BIJOY KUMAR PANDA
• Keywords: Revision of order; Depreciation; Unabsorbed depreciation
• Section: 10B; 6; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH A, BANGALORE BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER ITA NO.406(BANG) 2013 (ASSESSMENT YEAR : 2004-05) THE DEPUTY COMMISSIONER OF INCOME-TAX, BANGALORE APPELLANT VS M/S OPTO CIRCUITS INDIA LTD., NO.83, I FLOOR, I PHASE, ELECTRONICS CITY, BANGALORE-560 0100 RESPONDENT PAN NO.AAACO2165P REVENUE BY : SHRI BIJOY KUMAR PANDA, ADDL.CIT ASSESSEE BY : SHRI NARENDRA SHARMA, ADVOCATE DATE OF HEARING : 05-08-2014 DATE OF PRONOUNCEMENT : 1 4-08-2014 O R D E R PER SHRI ABRAHAM P GEORGE, AM: IN THIS APPEAL FILED BY THE REVENUE IT IS AGGRIEV ED THAT CIT(A) DIRECTED THE AO TO ALLOW DEDUCTION UNDER SECTION 10B OF THE IT ACT, 1961 ( IN SHORT THE ACT) BEFORE SETTING OFF THE BROUGHT FORWARD LOS S OF ONE UNIT AGAINST INCOME OF ANOTHER UNIT RELYING ON THE DECISION OF T HE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT(A) VS M/S YOKOGAWA IN DIA LTD., (341 ITR 355) ITA NO.406(BANG)2013 2 2. ASSESSEE DOING MANUFACTURE AND SALE OF OPTIC SE NSORS, PHOTO SENSORS, DIGITAL THERMOMETERS ETC., AND THE CO., HA D THREE UNITS. FIRST WAS ELIGIBLE FOR BENEFITS UNDER SECTION 80HHC, SECOND U NDER SECTION 10B AND THE THIRD ONE WAS IN AN STPI PARK. DURING THE RELE VANT PREVIOUS YEAR THE THIRD WAS NOT IN BUSINESS. ASSESSEE HAD A LOSS IN THE FIRST ONE AND PROFIT IN SECOND ONE. ASSESSEE CLAIMED 10B DEDUCTION ON THE PROFITS OF THE SECOND UNIT AND AGAINST THE BALANCE REMAINING THEREAFTER, IT SET OFF THE LOSS INCURRED ON THE FIRST UNIT. THE AO DISALLOWED THIS AND HELD THAT 10B BENEFIT COULD BE GIVEN ONLY AFTER DEDUCTING SUCH LOSS. ASS ESEES APPEAL BEFORE THE CIT(A) WAS SUCCESSFUL. LEARNED CIT(A) RELYING ON T HE YOKOGAWA INDIA LTD., CASE (SUPRA) HELD THAT DEDUCTION U/S 10B WAS AKIN T O AN EXEMPTION AND SUCH DEDUCTION HAD TO BE GIVEN FIRST AND THE PROCES S OF COMPUTATION OF PROFITS WOULD BE ONLY SUBSEQUENT THERETO. IN OTH ER WORDS, HE UPHELD THE METHOD OF COMPUTATION FOLLOWED BY THE ASSESSEE. 3. NOW BEFORE US THE LEARNED DR STRONGLY ASSAILING THE ORDER OF THE LEARNED CIT(A) SUBMITTED THAT JURISDICTIONAL HIGH C OURT IN A SUBSEQUENT JUDGMENT IN THE CASE OF CIT VS HIMATASINGIKE SEIDE LTD., 286 ITR 255(KAR.) HAD HELD IN FAVOUR OF THE REVENUE AND RULED THAT LO SSES HAD TO BE SET OFF PRIOR TO APPLYING SECTION 10A OF THE ACT. ACCORDIN G TO HIM, SLP FILED BY THE ASSESSEE BEFORE THE HONBLE APEX COURT AGAINST THE ABOVE JUDGMENT STOOD REJECTED. ITA NO.406(BANG)2013 3 4. PER CONTRA, LEARNED COUNSEL FOR THE ASSESSEE RE LYING ON THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF DCIT VS BIOCON LTD.,(ITA NO.248,368,369,370,371 AND 1206(B)/2010 DATED 30-04 -2014) SUBMITTED THAT THIS TRIBUNAL AFTER CONSIDERING BOTH THE JUDGM ENTS MENTIONED SUPRA HAD REACHED A CONCLUSION THAT THE LATTER JUDGMENT H AD TO BE CONFINED TO A CASE WHERE THERE WAS BROUGHT FORWARD LOSSES AND DEP RECIATION OF VERY SAME STP UNDERTAKING WHICH THEN REQUIRED A SET OFF BEFOR E ALLOWING DEDUCTION UNDER SECTION 10A/10B OF THE IT ACT. 5. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. CO- ORDINATE BENCH IN THE CASE OF M/S BIOCON LTD.,(SUPR A) HELD AS UNDER IN PARAS 65 TO 67 OF ITS ORDER DATED 30-04-2014 OBSERV ED AS UNDER; 65.THE SITUATION WITH WHICH WE ARE CONCERNED IN THE PRESENT CASE IS A SITUATION WHERE THERE IS POSITIVE INCOME OF THE ELIGIBLE UNIT THEN THE SAME SHOULD BE ALLOWED DEDUC TION U/S.10B OF THE ACT WITHOUT SETTING OF THE LOSS OF NON-ELIGI BLE UNIT. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF YOKOGAW A (SUPRA) WAS CONCERNED WITH SIMILAR SITUATION AS SET OUT ABO VE. IN VIEW OF THE AFORESAID DECISION OF THE HONBLE KARNATAKA HIGH COURT, WE ARE OF THE VIEW THAT THE CLAIM AS MADE BY THE AS SESSEE FOR CARRY FORWARD OF LOSS OF THE NON-ELIGIBLE UNIT HAD TO BE ALLOWED WITHOUT SET OFF OF PROFITS OF THE 10A/10B UNIT. WE HOLD ACCORDINGLY AND ALLOW THE RELEVANT GROUNDS OF APPEA L OF THE ASSESSEE. ITA NO.406(BANG)2013 4 2. WE MAY ALSO OBSERVE THAT THE HONBLE KARNATAKA HIG H COURTS DECISION IN THE CASE OF HIMATASINGIKE SEIDE (SUPRA) HAS HELD THAT UNABSORBED DEPRECIATION (AND BUSINESS LOS S) OF SAME (S. 10A/10B) UNIT BROUGHT FORWARD FROM EARLIER YEAR S HAVE TO BE SET OFF AGAINST THE PROFITS BEFORE COMPUTING EXE MPT PROFITS. THE ASSESSEE IN THAT CASE SET UP A 100% E OU IN AY 1988-89. FOR WANT OF PROFITS IT DID NOT CLAIM BENEF ITS U/S 10B IN AYS 1988-89 TO 1990-91. FROM AY 1992-93 IT CLAIM ED THE SAID BENEFITS FOR A CONNECTIVE PERIOD OF 5 YEARS. I N AY 1994- 95, THE ASSESSEE COMPUTED THE PROFITS OF THE EOU WI THOUT ADJUSTING THE BROUGHT FORWARD UNABSORBED DEPRECIATI ON OF AY 1988-89. IT CLAIMED THAT AS S. 10B CONFERRED EXEMP TION FOR THE PROFITS OF THE EOU, THE SAID BROUGHT FORWARD DE PRECIATION COULD NOT BE SET-OFF FROM THE PROFITS OF THE EOU BU T WAS AVAILABLE TO BE SET-OFF AGAINST INCOME FROM OTHER S OURCES. IT WAS ALSO CLAIMED THAT THE PROFITS HAD TO BE COMPUTE D ON A COMMERCIAL BASIS. THE AO ACCEPTED THE CLAIM THOUG H THE CIT REVISED HIS ORDER U/S 263 AND DIRECTED THAT THE EXE MPTION BE COMPUTED AFTER SET-OFF. ON APPEAL BY THE ASSESSEE, THE TRIBUNAL REVERSED THE ORDER OF THE CIT. ON APPEAL B Y THE DEPARTMENT, THE HIGH COURT IN CIT VS. HIMATASINGIK E SEIDE LTD. 286 ITR 255 (KAR) REVERSED THE ORDER OF THE TR IBUNAL AND HELD THAT THE BROUGHT FORWARD DEPRECIATION HAD TO B E ADJUSTED AGAINST THE PROFITS OF THE EOU BEFORE COMPUTING THE EXEMPTION ALLOWABLE U/S 10B. IN CIVIL APPEAL NO.1 501 OF 2008 ITA NO.406(BANG)2013 5 DATED 19.9.2013 AGAINST THE AFORESAID DECISION OF T HE HONBLE KARNATAKA HIGH COURT, THE HONBLE SUPREME COURT OBS ERVED AS FOLLOWS WHILE DISMISSING THE APPEAL:- HAVING PERUSED THE RECORDS AND IN VIEW OF THE FACT S AND CIRCUMSTANCES OF THE CASE, WE ARE OF OPINION THAT T HE CIVIL APPEAL BEING DEVOID OF ANY MERIT DESERVES TO BE DIS MISSED AND IS DISMISSED ACCORDINGLY. THUS THE RATIO HAS TO BE CONFINED TO THE FACTS AND CIRCUMSTANCES OF THE CASE. THE AFORESAID OBSERVATI ONS HAVE TO BE CONFINED TO THE FACTS OF THAT CASE AND AS APPLIC ABLE TO A CASE WHERE BROUGHT FORWARD LOSSES AND DEPRECIATION OF THE VERY SAME STP UNDERTAKING ARE NOT ADJUSTED WHILE AR RIVING AT THE PROFITS OF THE 10B UNIT FOR ALLOWING DEDUCTION U/S.10A/10B OF THE ACT AND NOT IN RESPECT OF BROUGHT FORWARD LO SSES AND DEPRECIATION OF OTHER UNDERTAKINGS/NON-10A/10B UNIT S. S. 10A/10B(6) AS AMENDED BY THE FA 2003 W.R.E.F. 1.4.2 001 PROVIDES THAT DEPRECIATION AND BUSINESS LOSS OF THE ELIGIBLE UNIT RELATING TO THE AY 2001-02 & ONWARDS IS ELIGIBLE FO R SET-OFF & CARRY FORWARD FOR SET-OFF AGAINST INCOME POST TAX H OLIDAY WHICH MEANS THAT THEY NEED NOT BE SO SET OFF AS MAN DATED IN THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF HIMATASINGIKE SEIDE LTD. (SUPRA). AS WE HAVE ALREA DY SEEN, IN YOKOGAWA INDIA LTD. 341 ITR 385 (KAR), IT WAS HELD THAT EVEN ITA NO.406(BANG)2013 6 AFTER S. 10A/10B WERE CONVERTED INTO A DEDUCTION PROVISION W.E.F 1.4.2001, THE BENEFIT OF RELIEF U/S 10A/10B I S IN THE NATURE OF EXEMPTION WITH REFERENCE TO COMMERCIAL PROFITS AND THAT AS THE INCOME OF THE S. 10A UNIT HAS TO BE EXCLUDED AT SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL IN COME, THE QUESTION OF SETTING OFF THE LOSS OF THE CURRENT YEA RS OR THE BROUGHT FORWARD BUSINESS LOSS (AND UNABSORBED DEPRE CIATION) AGAINST THE S. 10A PROFITS DOES NOT ARISE. THEREFO RE THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF HIMATASINGIKE SEIDE (SUPRA) WILL NOT APPLY TO THE F ACTS OF THE PRESENT CASE. IN THE CASE BEFORE US, IT IS NOT AN ISSUE OF SETTIN G OFF OF ANY BROUGHT FORWARD LOSS OR DEPRECIATION OF SAME UNIT. IT IS ONLY SET OFF OF LOSS OF ANOTHER UNIT VIS-AVIS THE UNIT ON WHICH 10A/10B CLAIM IS PREFERR ED. HENCE, WE FIND NO REASON TO DEVIATE FROM THE DECISION GIVEN BY HONBL E JURISDICTIONAL HIGH COURT IN M/S YOKOGAWA INDIA LTD., CASE (SUPRA). 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. PRONOUNCED IN THE OPEN COURT ON 14-08-2014 SD/- (SHRI RAJPAL YADAV) SD/- (ABRAHAM P GEORGE) JUDICAL MEMBER ACCOUNTANT MEMBER BANGALORE: D A T E D : 14-08-2014 AM* ITA NO.406(BANG)2013 7 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE