Bharathi Mediscribe Pvt Ltd, Bengaluru V. Income Tax Officer, Ward-1(1)(3), Bengaluru

ITA 150/BANG/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4737 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 16-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G D JAYANTH IRS JT CITOSD
• Assessee Lawyers: H N KHINCHA
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 10AA; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 150/BANG/2018 ASSESSMENT YEAR : 2009 - 10 BHARATHI MEDISCRIBE PVT. LTD., NO.135, 7 TH MAIN, 4 TH BLOCK, JAYANAGAR, BANGALORE 560 011. PAN: AABCB 2507M VS. THE INCOME TAX OFFICER, WARD 1(1)(3)[FORMERLY WD.11(1)], BENGALURU. APP ELLANT RESPONDENT A PPELLANT BY : SHRI H.N. KHINCHA, CA RE SPONDENT BY : SHRI G.D. JAYANTH, IRS, JT.CIT(OSD) DAT E OF HEARING : 14 . 0 5 .201 8 DATE OF PRONOUNCEMENT : 01. 0 6 .201 8 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 17.11.2017 OF CIT(APPEALS)-3, BENGALURU RELATING TO ASSESSMENT YEAR 2009-10. 2. THE GROUNDS OF APPEAL OF THE ASSESSEE READS AS F OLLOWS: 1. THE LEARNED ASSESSING OFFICER HAD ERRED IN PASS ING THE ORDER IN THE MANNER PASSED BY HIM AND THE LEARNED C IT(A) HAS ERRED IN CONFIRMING THE SAME. THE ORDERS PASSED ARE BAD IN LAW AND ARE LIABLE TO BE QUASHED. ITA NO.150/BANG/2018 PAGE 2 OF 6 2. WITHOUT PREJUDICE, THE LEARNED ASSESSING OFFICER HAD ERRED IN RECOMPUTING THE DEDUCTION CLAIMED U/S. 10A OF TH E ACT AND THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE SAME. TH E APPELLANT HAD RIGHTLY COMPUTED THE DEDUCTION U/S. 10A OF INCO ME-TAX ACT AND SAME IS TO BE ALLOWED AS SUCH. 3.1 THE LEARNED ASSESSING OFFICER HAD ERRED IN HOLD ING THAT BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION ARE TO BE SET- OFF BEFORE ALLOWING DEDUCTION / EXEMPTION U/S. 10A OF INCOME- TAX ACT, 1961 AND THE LEARNED CIT(A) HAVING ERRED I N CONFIRMING THE SAME. SUCH CONCLUSION HAS NO VALIDITY IN LAW AN D IS TO BE DISREGARDED. 3.2 THE AUTHORITIES BELOW HAVE ERRED IN NOT APPRECI ATING THAT THE PROFIT OF 10A UNIT DO NOT ENTER THE MAIN STREAM OF COMPUTATION AND ONLY EXEMPT AT SOURCE ITSELF. 4. THE LEARNED CIT(A) HAS ERRED IN NOT FOLLOWING TH E BINDING DICTUM OF THE HONOURABLE APEX COURT IN THE CASE OF YOKOGAWA LTD. HOLDING THAT THE FACTS OF THE CASE OF THE APPE LLANT ARE DIFFERENT AND ERRED IN RELYING UPON THE DECISION OF HIMMATSINGIKE SEIDE. THE CONCLUSION DRAWN IS TOTALLY ERRONEOUS BO TH ON FACTS AND LAW IS TO BE REJECTED IN TOTO. 5. WITHOUT FURTHER PREJUDICE, THE LEARNED ASSESSING OFFICER HAD ERRED IN NOT REDUCING THE B/F. LOSSES FOR THE P URPOSE OF COMPUTING BOOK PROFITS U/S. 115JB OF THE ACT HOLDIN G THAT THERE ARE NO B/F. LOSSES WHICH ARE LEFT OUT TO BE ADJUSTE D AFTER SETTING OFF ENTIRE B/F. LOSSES UNDER NORMAL INCOME COMPUTATION AND THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE SAME. TH E REASONING OF AUTHORITIES BELOW BEING CONTRARY BOTH FACTS AND THE LAW APPLICABLE IS TO BE DISREGARDED AND BOOK PROFITS AS COMPUTED BY THE APPELLANT IS TO BE ACCEPTED. 6. THE APPELLANT DENIES THE LIABILITY TO PAY INTERE ST. THE INTEREST HAVING BEEN LEVIED ERRONEOUSLY IS TO BE DE LETED. 7. IN VIEW OF THE ABOVE AND ON OTHER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE OR DER AS PASSED BE QUASHED OR ATLEAST THE DEDUCTION U/S. 10A OF THE AC T, ALLOWED AS PER CALCULATIONS AS DONE BY THE APPELLANT, AND EVEN THE BOOK ITA NO.150/BANG/2018 PAGE 3 OF 6 PROFIT FOR THE PURPOSE OF 115JB BE CALCULATED CORRE CTLY AND INTEREST LEVIED BE DELETED. 3. GROUND NO.1 TO 4 RAISED BY THE ASSESSEE IS WITH REGARD TO THE SET OFF OF BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED D EPRECIATION IN THE EARLIER ASST. YEARS WHILE ALLOWING DEDUCTION U/S.10 A OF THE INCOME TAX ACT, 1961 (THE ACT). THE ASSESSEE HAD CLAIMED DEDUCTION U/S 10A OF THE ACT FOR A SUM OF RS.49,02,808/- BEFORE SETTING OF BUSINESS LOSS AND UNABSORBED DEPRECIATION OF EARLIER YEARS. THE AO WAS OF THE V IEW THAT DEDUCTION U/S 10A OF THE ACT WAS NOT IN THE NATURE OF EXEMPTION P ROVISION AND, THEREFORE, THE BUSINESS LOSS AND UNABSORBED DEPRECIATION OF TH E EARLIER YEARS HAS TO BE FIRST SET OFF AGAINST THE INCOME OF THE ELIGIBLE UNIT AND ONLY ON THE REMINDER DEDUCTION U/S 10A OF THE ACT HAS TO BE ALL OWED. THE VIEW OF THE AO WAS CONFIRMED BY THE CIT(A), HENCE THIS APPEAL B Y THE ASSESSEE BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING, IT WAS BROUGHT TO OUR N OTICE THAT THIS ISSUE IS NO LONGER RES INTEGRA AND HAS BEEN SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF YOKOGAWA INDIA LTD., 391 ITR 274 BY ITS ORDER DATED 16.12.2016 AND IN THE AFORESAID DECISION THE HONBL E SUPREME COURT TOOK THE FOLLOWING VIEW :- THAT FROM A READING OF THE RELEVANT PROVISIONS OF SECTION 10A IT IS MORE THAN CLEAR 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-ELIG IBLE UNITS OR ITA NO.150/BANG/2018 PAGE 4 OF 6 UNDERTAKINGS OF THE ASSESSEE. THE BENEFIT OF DEDUCT ION IS GIVEN BY THE ACT TO THE INDIVIDUAL UNDERTAKING AND RESULTANT LY FLOWS TO THE ASSESSEE. THIS IS ALSO MORE THAN CLEAR FROM THE CONTEMPORANEO US CIRCULAR NO. 794, DATED 9-8-2000. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [FIRS T PROVISO TO SECTIONS 10A(1); 10A(1A) AND 10A(4)] THAT THE UNIT 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 9-8-2000) UNDERSTOOD T HE SITUATION, IT IS ONLY LOGICAL AND NATURAL THAT THE STAGE OF DE DUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UN DERTAKING 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 OT HER HEADS AND THE PROVISIONS FOR SET OFF AND CARRY FORWARD CONTAI NED IN SECTIONS 70, 72 AND 74 WOULD BE PREMATURE FOR APPLICATION. T HE DEDUCTIONS UNDER SECTION 10A THEREFORE WOULD BE PRI OR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EX PRESSION 'TOTAL INCOME OF THE ASSESSEE' IN SECTION 10A HAS A LREADY BEEN DEALT WITH EARLIER AND IN THE OVERALL SCENARIO UNFO LDED BY THE PROVISIONS OF SECTION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPRESSION 'TOTAL INCOME OF TH E ASSESSEE' IN SECTION 10A AS 'TOTAL INCOME OF THE UNDERTAKING'. FOR THE AFORESAID REASONS IT IS HELD THAT THOUGH SE CTION 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 AND' NOT AT THE STAGE OF COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI. 5. THE EFFECT OF THE AFORESAID DECISION WOULD BE TH AT THE PROVISION OF SET OFF AND CARRY FORWARD AS CONTEMPLATED UNDER CHA PTER-VI OF THE ACT WOULD NOT BE ATTRACTED AND THEREFORE INTRA HEAD SET OFF SOUGHT TO BE DONE BY THE CIT(APPEALS) BY SEEKING TO RELY ON THE PROVISI ON OF SECTION 70(1) OF THE ITA NO.150/BANG/2018 PAGE 5 OF 6 ACT AND SEEKING TO RESTRICT THE DEDUCTION U/S 10A A ND 10AA OF THE ACT TO THE EXTENT OF GROSS TOTAL INCOME AS CONTEMPLATED U/S 80 A(2) OF THE ACT, CANNOT BE SUSTAINED. WE THEREFORE HOLD THAT DEDUCTION U/S. 10A OF THE ACT HAS TO BE ALLOWED WITHOUT SETTING OFF THE BROUGHT FORWARD BUS INESS LOSSES AND UNABSORBED DEPRECIATION BEFORE ALLOWING THE DEDUCTI ON UNDER SECTION 10A OF THE ACT. GR.NO.1 TO 4 IS ACCORDINGLY ALLOWED. 6. AS FAR AS GR.NO.5 IS CONCERNED, THE BROUGHT FORW ARD LOSSES OF EARLIER YEAR WERE NOT ADJUSTED BY REDUCING THE SAME WHILE C OMPUTING BOOK PROFITS U/S.115JB OF THE ACT ON THE GROUND THAT THEY WERE A LREADY ADJUSTED AGAINST PROFITS OF THE SEC.10A UNIT OF THE CURRENT AY. SIN CE THE SAID ADJUSTMENT HAS ALREADY BEEN HELD BY US TO BE NOT IN ACCORDANCE WIT H LAW WHILE DECIDING GR.NO.1 TO 4, WE ARE OF THE VIEW THAT THE ASSESSEE SHOULD BE ALLOWED THE SET OFF OF BROUGHT FORWARD LOSS WHILE COMPUTING BO OK PROFITS U/S.115JB OF THE ACT. WE HOLD AND DIRECT ACCORDINGLY. 7. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF JUNE, 2018. SD/- SD/- ( INTURI RAMA RAO ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 1 ST JUNE, 2018. / D ESAI S MURTHY / ITA NO.150/BANG/2018 PAGE 6 OF 6 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.