M/s. KPIT Cummins Infosystems Ltd, Pune V. Dy. Comm. of Income-tax, Pune

ITA 1508/PUN/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0834 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-11-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 28-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Earning of tax free income; Reason to believe; Unabsorbed depreciation
• Section: 115JB; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM . / ITA NOS.1508 & 1509/PN/2011 & ' ' / ASSESSMENT YEARS: 2005-06 & 2006-07 M/S. KPIT CUMMINS INFOSYSTEMS LTD., PLOT NO.35 & 36, MIDC, PHASE-I, RAJIV GANDHI INFOTECH PARK, HINJEWADI, PUNE 411057 . APPELLANT PAN: AAACK7308N VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 11(1), PUNE . RESPONDENT / APPELLANT BY : SHRI KISHORE PHADKE / RESPONDENT BY : SHRI RAJESH DAMOR DATE OF HEARING : 01.09.2015 / DATE OF PRONOUNCEMENT: 30.11.2015 ( / ORDER PER SUSHMA CHOWLA, JM: BOTH THE APPEALS FILED BY THE ASSESSEE ARE AGAINST THE CONSOLIDATED ORDER OF CIT(A)-I, PUNE, DATED 28.02.2011 RELATING TO ASSESS MENT YEARS 2005-06 AND 2006-07 AGAINST RESPECTIVE ORDERS PASSED UNDER SECTION 143( 3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). ITA NOS.1508 AND 1509/PN/2011 M/S. KPIT CUMMINS INFOSYSTEMS LTD. 2 2. BOTH THE APPEALS FILED BY THE ASSESSEE ON SIMILA R ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FO R THE SAKE OF CONVENIENCE. HOWEVER, REFERENCE IS BEING MADE TO THE FACTS AND I SSUES IN ITA NO.1508/PN/2011 TO ADJUDICATE THE ISSUES. 3. THE ASSESSEE IN ITA NO.1508/PN/2011 HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL :- 1. THE LEARNED CIT(APPEALS)-I, PUNE ERRED IN LAW A ND ON FACTS IN UPHOLDING THE TAXABLE INCOME OF THE APPELLANT DECIDED BY THE LEAR NED DCIT, CIRCLE 11(1), PUNE OF RS.8,59,046/- INSTEAD OF INCOME (I.E. LOSS) RETU RNED BY THE APPELLANT AMOUNTING TO RS.3,89,37,510/-. 2. THE LEARNED CIT(A)-I, PUNE ERRED IN LAW AND ON F ACTS IN UPHOLDING DEDUCTION U/S 10A OF THE ITA, 1961 AS COMPUTED BY THE LEARNED DCI T, CIRCLE 11(1), PUNE AT RS.20,68,49,064/- INSTEAD OF INCOME RS.24,55,53,914 /- AS CLAIMED BY THE APPELLANT. 3. THE LEARNED CIT(A)-I, PUNE ERRED IN LAW IN UPHOL DING THE STAND OF THE DCIT, CIRCLE 11(1), PUNE THAT THE DEDUCTION U/S 10A SHOUL D BE COMPUTED AT UNIT / UNDERTAKING LEVEL BUT SHOULD BE ALLOWED ONLY AFTER SET-OFF OF LOSSES OF OTHER BUSINESS UNITS / UNDERTAKINGS. 4. THE APPELLANT CRAVES LEAVE TO ADD / MODIFY / DEL ETE / AMEND ALL / ANY OF THE GROUNDS OF APPEAL. 4. THE LD. AR FOR THE ASSESSEE AT THE OUTSET POINTE D OUT THAT THE ISSUE RAISED IN GROUNDS OF APPEAL NOS. 1 AND 2 ARE GENERAL. HENCE, THE SAME ARE DISMISSED AS GENERAL. THE ISSUE IN GROUNDS OF APPEAL NO. 3 RAIS ED BY THE ASSESSEE IS AGAINST THE COMPUTATION OF DEDUCTION U/S. 10A OF THE ACT AT THE UNIT/UNDERTAKING LEVEL BUT SHOULD BE ALLOWED ONLY AFTER SET-OFF OF LOSSES OF OTHER BUSIN ESS UNITS/UNDERTAKINGS. 5. THE PERUSAL OF THE GROUNDS OF APPEAL RAISED BY T HE ASSESSEE IN ITA NO. 1509/PN/2011 REFLECT THAT THE ASSESSEE HAS RAISED S IMILAR GROUNDS OF APPEAL NOS. 1 TO 3 AS IN ASSESSMENT YEAR 2005-06. FURTHER THE ASSES SEE HAD RAISED GROUNDS OF APPEAL NO. 4 IN ASSESSMENT YEAR 2006-07 FOR COMPUTATION OF BOOK PROFITS UNDER SECTION 115JB OF THE ACT. THE SAID GROUND OF APPEAL IS NOT PRESS ED BY THE ASSESSEE. HENCE, THE SAME IS DISMISSED AS NOT PRESSED. ITA NOS.1508 AND 1509/PN/2011 M/S. KPIT CUMMINS INFOSYSTEMS LTD. 3 6. WE PROCEED TO DECIDED THE ISSUE RAISED VIDE GROU NDS OF APPEAL NO. 3 I.E. THE QUANTUM OF DEDUCTION TO BE ALLOWED TO THE ASSESSEE U/S. 10A OF THE ACT. 7. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE A SSESSEE WAS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOP MENT. THE ASSESSEE HAD EIGHT UNITS FROM WHERE THE SOFTWARE DEVELOPMENT ACTIVITY WAS TAKING PLACE. THE SAID UNITS WERE SET-UP BY THE ASSESSEE AT DIFFERENT TIME INTER VALS. HOWEVER, ALL THE UNITS OF THE ASSESSEE WERE NOT DECLARING POSITIVE PROFITS DURING THE CAPTIONED ASSESSMENT YEAR BECAUSE OF CLAIM OF DEPRECIATION, ETC. THE ASSESSE E CLAIMED DEDUCTION U/S. 10A OF THE ACT ON ACCOUNT OF EXPORT OF SOFTWARE AND IT ENABLES SERVICES. IN THE RETURN OF INCOME, THE ASSESSEE COMPUTED THE DEDUCTION U/S. 10A OF THE ACT FOR EACH UNIT SEPARATELY AND INDEPENDENTLY. THE ASSESSING OFFICER DURING THE CO URSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD CLAIMED THE DEDUCTION U /S. 10A OF THE ACT AGAINST ELIGIBLE PROFITS OF UNITS SHOWING PROFITS AND THE LOSSES IN RESPECT OF THREE OF THE UNITS WERE CARRIED FORWARD, TOTALING RS.3,87,04,852/-. THE AS SESSING OFFICER WAS OF THE VIEW THAT IN VIEW OF PROVISIONS OF SECTION 70(1) THE DEDUCTIO N U/S. 10A OF THE ACT WOULD BE ALLOWED ONLY AGAINST THE PROFITS REMAINING AFTER IN TRA-HEAD SET OFF OF LOSSES AND CONSEQUENTLY THE DEDUCTION CLAIMED U/S. 10A OF THE ACT WAS REDUCED TO RS.20,68,49,064/- AS AGAINST THE ASSESSEES CLAIM A T RS.24,55,53,914/-. THE LOSSES FROM ELIGIBLE BUSINESS WERE COMPLETELY SET OFF OF A ND THERE WAS NIL BALANCE TO BE CARRIED FORWARD. IN THIS REGARD A SHOW CAUSE NOTIC E WAS ISSUED TO THE ASSESSEE TO WHICH THE ASSESSEE REPLIED AND THE COPY OF THE SHOW CAUSE NOTICE AND REPLY OF THE ASSESSEE IS REPRODUCED IN THE ASSESSMENT ORDER AT P AGES 3 TO 6. THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE, SI NCE PURSUANT TO THE AMENDMENT FROM 2001, THERE WAS A CHANGE IN THE PROVISIONS OF SECTI ON 10A OF THE ACT I.E. FROM EXEMPTION IT HAD BECOME DEDUCTION. THE ASSESSING O FFICER NOTED THAT THE EXEMPT INCOME DO NOT ENTER THE STREAM OF COMPUTATION AND D O NOT FORM PART OF THE TOTAL INCOME AND ARE EXCLUDED FROM THE COMPUTATION, WHEREAS THE TAX FREE INCOMES DO FORM PART OF ITA NOS.1508 AND 1509/PN/2011 M/S. KPIT CUMMINS INFOSYSTEMS LTD. 4 THE COMPUTATION PROCESS AND ARE TAX FREE BY VIRTUE OF THE ENABLING PROVISIONS I.E. SECTION 10A OF THE ACT. AS PER THE ASSESSING OFFIC ER THIS DIFFERENCE AFFECTED THE SET OFF PROVISIONS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE LOSSES AND ALSO INCOME DERIVED BY THE ASSESSEE FROM THE ELIGIBLE UNDERTAKI NGS HAVE TO BE INTRA-HEAD SET OFF AGAINST EACH OTHER, BEFORE QUANTIFYING THE DEDUCTIO N U/S. 10A OF THE ACT. IN THIS REGARD RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE D ELHI BENCH OF THE TRIBUNAL IN HONEYWELL INTERNATIONAL (INDIA) (P.) LTD., (2007) 1 08 TTJ (DEL.) 924. 7.1 THE ASSESSING OFFICER FURTHER REFERRED TO THE P ROVISIONS OF SECTION 80B(5) AND OBSERVED THAT THE PROFITS AND GAINS OF THE ELIGIBLE UNDERTAKING IN PROPORTION OF EXPORT TURNOVER TO TOTAL TURNOVER ARE ALLOWED AS DEDUCTION , WHILE COMPUTING THE TAXABLE INCOME OF THE ASSESSEE. CONSEQUENTLY, THERE WOULD NOT BE ANY DEDUCTION WORKED OUT IN CASE OF A LOSS IN THE ELIGIBLE UNDERTAKING AND S UCH LOSS IS TO BE SET OFF WITH THE PROFIT OF THE OTHER UNIT/BUSINESS, IF ANY, AS PER SECTION 70 OF THE ACT. THE ASSESSING OFFICER FURTHER REITERATED THAT WITH A VIEW TO RATIONALIZE THE EXISTING TAX INCENTIVE IN RESPECT OF SUCH UNDERTAKING, SUB-SECTION (6) OF SECTION 10A HA S BEEN AMENDED TO DO AWAY WITH RESTRICTION ON CARRY FORWARD OF BUSINESS LOSS AND U NABSORBED DEPRECIATION ARISING IN ASSESSMENT YEAR 2001-02 AND SUBSEQUENT YEAR. THE A SSESSING OFFICER STRESSED THAT THE TOTAL INCOME COULD BE COMPUTED ONLY AFTER ALLOW ING INTRA-HEAD SET OFF UNDER SECTION 70 AND INTER-HEAD SET OFF UNDER SECTION 71. THE AS SESSING OFFICER IN THIS REGARD PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HON'BLE SUPR EME COURT IN SYNCO INDUSTRIES LTD. VS. ASSESSING OFFICER, INCOME TAX, MUMBAI (2008) 29 9 ITR 444 (SC). THE ASSESSING OFFICER, THUS, RECOMPUTED THE DEDUCTION ALLOWABLE T O THE ASSESSEE U/S. 10A OF THE ACT. 8. THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE PA RA 4.3.2 AT PAGES 26 AND 27 OF THE APPELLATE ORDER OBSERVED THAT AFTER THE AMEN DMENT BROUGHT W.E.F. ASSESSMENT YEAR 2001-02 THE INCOME COMPUTED U/S. 10A OF THE AC T COULD NOT BE CONSIDERED AS EXEMPT FROM TAX. THE SAME WOULD FORM PART OF THE T OTAL INCOME UNDER SECTION 5. ITA NOS.1508 AND 1509/PN/2011 M/S. KPIT CUMMINS INFOSYSTEMS LTD. 5 THEREAFTER, REFERENCE WAS MADE TO THE VARIOUS SECTI ONS OF THE INCOME TAX ACT AND THE CHAPTER VI DEALING WITH AGGREGATION OF INCOME AND S ET OFF OR CARRY FORWARD OF LOSS AND CHAPTER VIA DEALING WITH THE DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME. THE COMMISSIONER OF INCOME TAX (APPEALS) THUS OBSERVED :- 4.3.3 THEREFORE, EVEN IF IT IS ACCEPTED THAT THE DEDUCTIO N AVAILABLE IN SEC. 10A IS NOT PART OF CHAPTER VIA WH ICH DEALS WITH DEDUCTIONS AND THEREFORE, THE RESTRICTIVE PROVISIONS WHICH ARE AVA ILABLE IN CHAPTER VIA WILL NOT APPLY, IT CANNOT BE STATED THAT CHAPTER VI WILL ALSO NOT APPL Y WHICH DEALS WITH SET OFF AND CARRY FORWARD OF LOSSES MORE SO WHEN W.E.F. 1.4.2000 THE LOSSES ARE REQUIRED TO BE CARRIED FORWARD AS PER SEC. 10(6) OF THE I.T. ACT. SECTION 70 APPLIED BY THE ASSESSING OFFICER IS PART OF CHAPTER VI AND THEREFORE, I DO NOT FIND ANY REASON AS TO WHY THIS WILL NOT APPLY IN THE FACTS OF THE CASE. 9. THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE PA RA 4.3.8 HELD AS UNDER:- 4.3.8. CONSIDERING THE TOTALITY OF THE FACTS OF TH E CASE AND THE LAW, IT IS HELD THAT IN THIS CASE WHERE THE APPELLANT HAS EIGHT ELIGIBLE UNITS, FIVE OF WHICH HAVE EARNED PROFIT N THE CURRENT YEAR AND THREE OF THEM HAVE INCURRED LOSSES , THE DEDUCTION HAS TO BE COMPUTED U/S 10A WHICH W.E.F. 1.4.2000 HAS UNDERGONE CHANGE. THE BENEFIT AVAILABLE IN SEC. 10A HAS BEEN CHANGED FROM EXEMPTION TO DEDUCTION. THE PROFIT HAS TO BE COMPUTED UNDER CHAPTER V UNDER THE HEAD 'BUSINESS AND PROFESSION. HOWEVER, THE DEDUCTION U/S 10A IS TO BE COMPUTED SUBJECT TO THE PROVISION OF SEC. 10A. SECTION 10A(1) STARTS WITH 'SUBJECT TO THE PROVISION OF THI S SECTION, A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM TH E EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE A SSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEARS RELEVANT TO THE PREVIOUS YEARS IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE SUCH ARTICLES OR THINGS OR C OMPUTER SOFTWARE, AS THE CASE MAY BE, SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE A SSESSEE'. THEREFORE, WHAT IS COMPUTED U/S 10A IS DEDUCTION OUT OF THE INCOME FRO M BUSINESS AND PROFESSION COMPUTED U/S 29, WITH THE CHANGE BROUGHT W.E.F. 1 .4.2000 TO MAKE THE BENEFIT FROM EXEMPTION TO DEDUCTION, THE AFORESAID SECTION 10A A LSO BROUGHT CHANGES IN RESPECT OF CARRY FORWARD OF LOSSES AND DEPRECIATION. THIS CARR Y FORWARD WAS NOT ALLOWED WHEN THE BENEFIT WAS AVAILABLE AS EXEMPT INCOME, HOWEVER, WI TH THE CHANGE IN THE NATURE OF BENEFIT TO DEDUCTION THE PROVISION WAS MADE HARMONI OUS BY ALLOWING THE CARRY FORWARD AND SET OFF OF LOSSES AND DEPRECIATION. THEREFORE, WITH THIS CHANGE THIS DEDUCTION AVAILABLE U/S 10A BECAME SUBJECTED TO CHAPTER VI WH ICH DEALS WITH SET OFF AND CARRY FORWARD OF LOSSES/ DEPRECIATION. THEREFORE, THE ME CHANISM AVAILABLE IN SEC. 10A TO COMPUTE THE DEDUCTION UNITWISE, AS THE SAME HAD TO BE SUBJECTED TO DIFFERENT TIME FRAMES AND CONDITIONS DEPENDING ON ITS REGISTRATION UNDER DIFFERENT SCHEMES ETC., WILL NOT AFFECT THE OPERATION OF CHAPTER VI, MORE SO WHE N AF! THE UNDERTAKINGS ARE ELIGIBLE FOR DEDUCTION U/'S 10A. THE SIMILAR VIEW HAS BEEN GIVEN INDIRECTLY BY THE SPECIAL BENCH QUOTED SUPRA AS WELL AS THE HON'BIE ITAT DELHI BENC H IN THE CASE OF HONEYWELL INTERNATIONAL INDIA PVT. LTD. IN VIEW OF THE ABOVE, THE .GROUND NO. 2 OF THE APPELLANT IS TREATED AS DISMISSED. ITA NOS.1508 AND 1509/PN/2011 M/S. KPIT CUMMINS INFOSYSTEMS LTD. 6 10. THE LD. AR FOR THE ASSESSEE REFERRED TO THE CHA RT UNDER WHICH THE DEDUCTION CLAIMED UNDER SECTION 10A OF THE ACT AS PER THE ASS ESSEE AND AS ALLOWED BY THE ASSESSING OFFICER HAS BEEN TABULATED. IT WAS FURTH ER POINTED OUT BY THE LD. AR FOR HE ASSESSEE THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE RATIO LAID DOWN BY HON'BLE BOMBAY HIGH COURT IN HINDUSTAN UNILEVER LTD . VS. DCIT & ANR. (2011) 325 ITR 102 (BOM.) AND ALSO IN CIT VS. BLACK & VEATCH CONSU LTING PVT. LTD., ITA NO. 1237 OF 2011 (BOM.). 11. THE LD. DR FOR THE REVENUE ON THE OTHER HAND RE FERRED TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN HINDUSTAN UNILEVER LTD . VS. DCIT & ANR. (SUPRA) AND STATED THAT ONCE IT IS TREATED AS DEDUCTION UNDER S ECTION 10A OF THE ACT THEN THE DECISION OF THE HON'BLE SUPREME COURT IN SYNCO INDU STRIES LTD. VS. ASSESSING OFFICER, INCOME TAX, MUMBAI (SUPRA) WOULD BE APPLIED. THE L D. AR FOR THE ASSESSEE POINTED OUT THAT HON'BLE KARNATAKA HIGH COURT IN COMMISSION ER OF INCOME TAX & ANR. VS. YOKOGAWA INDIA LTD. & ORS., (2012) 341 ITR 385 (KAR N.) WHILE CONSIDERING THE PROVISIONS OF SECTION 10A OF THE ACT AND THE DEDUCT ION THEREON FOR THE RELEVANT YEARS HAD HELD THAT THE DEDUCTION U/S. 10A OF THE ACT WAS TO BE ALLOWED WITHOUT SETTING OFF OF BROUGHT FORWARD UNABSORBED LOSSES AND DEPRECATION F ROM EARLIER ASSESSMENT YEAR OR CURRENT ASSESSMENT YEAR. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN EXPORT OF SOFTWARE AND IT ENABLED SERVIC ES. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE WAS RUNNING EIGHT UNITS AT DIFFERENT PLACES AND FIVE OF WHICH UNITS HAD DECLARED POSITIVE PROFITS AND THE BALANCE THREE UNITS DECLARED LOSSES FOR THE CAPTIONED ASSESSMENT YEAR. THE ASSESSEE WAS ENTITL ED TO CLAIM DEDUCTION U/S. 10A OF THE ACT IN RESPECT OF EXPORT OF SOFTWARE. THE ASSE SSEE COMPUTED THE DEDUCTION U/S. 10A OF THE ACT BY TREATING EACH OF THE UNIT AS SEPA RATE UNIT/UNDERTAKING AND CLAIMED THE DEDUCTION AT RS.24,55,53,914/-. THE LOSSES FROM TH REE UNITS AGGREGATING ITA NOS.1508 AND 1509/PN/2011 M/S. KPIT CUMMINS INFOSYSTEMS LTD. 7 RS.4,55,31,667/- WAS CARRIED FORWARD TO BE ADJUSTED IN THE SUCCEEDING YEARS. ON THE OTHER HAND THE REVENUE AUTHORITIES WERE OF THE VIEW THAT THE LOSSES EARNED BY THE ASSESSEE FROM SEPARATE UNIT HAVE TO BE ADJUSTED AGA INST THE PROFITS EARNED BY THE ASSESSEE IN SEPARATE UNITS AND AFTER MAKING THIS IN TRA-HEAD SET OFF, THE DEDUCTION UNDER SECTION 10A OF THE ACT WERE TO BE ALLOWED TO THE AS SESSEE. IN THIS EXERCISE THE DEDUCTION UNDER SECTION 10A OF THE ACT WAS REDUCED TO RS.20,68,49,064/- AND THERE WERE NIL CARRY FORWARD LOSS IN THE HANDS OF THE ASS ESSEE. THE REASON FOR THE SAID ADJUSTMENT BY THE ASSESSING OFFICER AND COMMISSIONE R OF INCOME TAX (APPEALS) WAS ON THE SURMISE THAT THE AMENDMENT BROUGHT TO SECTIO N 10A OF THE ACT W.E.F. 1 ST APRIL, 2001 UNDER WHICH DEDUCTION FROM INCOME WAS TO BE AL LOWED TO THE ASSESSEE AND NOT ANY EXEMPTION. FURTHER, THE ASSESSING OFFICER REFE RRED TO THE PROVISIONS OF SECTION 70(1) AND OBSERVED THAT THE INTRA-HEAD ADJUSTMENT H AD TO BE MADE BEFORE CLAIMING THE DEDUCTION U/S. 10A OF THE ACT. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ORDER OF ASSESSING OFFICER, WHICH HAS BEEN UPHELD BY THE COM MISSIONER OF INCOME TAX (APPEALS). 13. UNDOUBTEDLY, AFTER THE AMENDMENT W.E.F. 1 ST APRIL, 2001 UNDER THE PROVISIONS OF SECTION 10A OF THE ACT, THE ASSESSEE IS NOW ENTITLE D TO DEDUCTION. PRIOR TO THE AMENDMENT THE ASSESSEE WAS ENTITLED TO EXEMPTION OF THE SAID INCOME. IN OTHER WORDS THE SAID INCOME DID NOT FORM PART OF THE TOTAL INCO ME AND WAS EXCLUDED AT THE ENTITY LEVEL ITSELF. THE QUESTION WHICH ARISES FOR ADJUDI CATION IS WHETHER IN VIEW OF THE AMENDED PROVISIONS OF SECTION 10A OF THE ACT, UNDER WHICH DEDUCTION CAN BE CLAIMED BY AN ENTERPRISES, WHETHER THE INTRA HEAD ADJUSTMEN T OF LOSSES OF CERTAIN UNITS IS TO BE MADE AGAINST THE PROFITS OF OTHER UNITS OF THE SAME ASSESSEE, BEFORE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT. 14. THE HON'BLE BOMBAY HIGH COURT IN HINDUSTAN UNIL EVER LTD. VS. DCIT & ANR. (SUPRA) IN AN APPEAL RELATING TO ASSESSMENT YEAR 20 04-05 WHERE REASSESSMENT ITA NOS.1508 AND 1509/PN/2011 M/S. KPIT CUMMINS INFOSYSTEMS LTD. 8 PROCEEDINGS WERE INITIATED UNDER SECTION 147/148 OF THE ACT ON SEVERAL ISSUES, CONSIDERED THE REASON TO BELIEVE RECORDED BY THE AS SESSING OFFICER WITH REGARD TO SET OFF OF LOSS INCURRED BY UNIT ELIGIBLE FOR DEDUCTION U/S. 10B OF THE ACT. THE ASSESSING OFFICER HAD REOPENED THE ASSESSMENT ON THE SURMISE THAT SINCE THE INCOME OF THE CRAB STICK UNIT WAS EXEMPTED FROM TAX UNDER SECTION 10B, THE LOSS OF THAT UNIT WAS WRONGLY SET OFF AGAINST THE NORMAL BUSINESS INCOME. THE HO N'BLE HIGH COURT NOTED THAT AFTER THE SUBSTITUTION OF SECTION 10B OF THE ACT BY THE F INANCE ACT OF 2000, THE PROVISIONS PROVIDED FOR DEDUCTION OF SUCH PROFIT OR GAINS AS W ERE DERIVED BY 100% EOU FOR THE PERIOD PRESCRIBED UNDER THAT SECTION. THE HON'BLE HIGH COURT THUS HELD THAT THE BASIS ON WHICH THE ASSESSMENT WAS SOUGHT TO BE REOPENED W AS BELIED BY A PLAIN READING OF THE PROVISIONS AND THE ASSESSING OFFICER WAS IN ERR OR IN PROCEEDING ON THE BASIS THAT BECAUSE THE INCOME WAS EXEMPTED, THE LOSS WAS NOT A LLOWABLE. THE HON'BLE HIGH COURT FURTHER CONSIDERED THAT ALL THE FOUR UNITS OF THE ASSESSEE WERE ELIGIBLE UNDER SECTION 10B, OUT OF WHICH THREE UNITS HAD RETURNED PROFITS DURING THE COURSE OF THE ASSESSMENT YEAR, WHILE THE CRAB STICK UNIT HAD RETU RNED A LOSS. THE HIGH COURT FURTHER HELD THAT THE ASSESSEE WAS ENTITLED TO A DEDUCTION IN RESPEC T OF THE PROFITS OF THE THREE ELIGIBLE UNITS WHILE THE LOSS SUSTAINED BY THE FOUR TH UNIT COULD BE SET OFF AGAINST THE NORMAL BUSINESS INCOME. IN THESE CIRCUMSTANCES, THE HON'BLE HIGH COURT HELD THAT THE BASIS ON WHICH THE ASSESSMENT WAS SOUGHT TO BE REOP ENED WAS CONTRARY TO THE PLAIN LANGUAGE OF SECTION 10B. 15. THE HON'BLE BOMBAY HIGH COURT IN CIT VS. BLACK & VEATCH CONSULTING PVT. LTD. (SUPRA) ALSO OBSERVED THAT SECTION 10A WAS A PROVIS ION WHICH WAS IN THE NATURE OF A DEDUCTION AND NOT AN EXEMPTION. THE HON'BLE HIGH C OURT FURTHER HELD THAT THE DEDUCTION UNDER SECTION 10A, IN OUR VIEW, WAS TO BE GIVEN EFFECT TO AT THE STAGE OF COMPUTING THE PROFITS AND GAINS OF BUSINESS. THIS IS ANTERIOR TO THE APPLICATION OF THE PROVISIONS OF SECTION 72 WHICH DEALS WITH THE CARRY FORWARD AND SET OFF OF BUSINESS LOSSES. THE HON'BLE HIGH COURT HELD THAT THE DEDUC TION UNDER SECTION 10A HAS TO BE ITA NOS.1508 AND 1509/PN/2011 M/S. KPIT CUMMINS INFOSYSTEMS LTD. 9 GIVEN AT THE STAGE WHEN THE PROFITS AND GAINS OF BU SINESS ARE COMPUTED IN THE FIRST INSTANCE. THE ISSUE BEFORE THE HON'BLE HIGH COURT WAS WITH REGARD TO THE ADJUSTMENT OF BROUGHT FORWARD UNABSORBED DEPRECIATION AND LOSS OF THE UNIT, WHICH WERE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT AND IT WAS HELD THAT THE SAME COULD NOT BE SET OFF AGAINST THE CURRENT PROFIT OF THE EL IGIBLE UNITS WHILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT. 16. THE CASE OF THE REVENUE BEFORE US ON THE OTHER HAND IS THAT RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN SYNCO INDUSTRIES LTD. VS. ASSESSING OFFICER, INCOME TAX, MUMBAI (SUPRA) IS TO BE APPLIED WHILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT. IN THE FACTS OF THE CASE BEFORE HON'BLE S UPREME COURT THE ASSESSEE HAD CLAIMED DEDUCTION FROM THE PROFITS AND GAINS OF THE BUSINESS UNDER SECTION 80HH R.W.S. 80-I AND 80B OF THE ACT. THE HON'BLE SUPREME COURT HELD THAT WHILE WORKING OUT GROSS TOTAL INCOME OF THE ASSESSEE, LOSSES SUFFERED BY IT IN EARLIER YEARS HAVE TO BE ADJUSTED AND IF GROSS TOTAL INCOME OF ASSESSEE IS NIL THEN T HE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTION UNDER CHAPTER VI-A. 17. THE AUTHORITIES BELOW HAVE FURTHER PLACED RELIA NCE ON THE PROVISIONS OF SECTION 70(1) FOR THE PROPOSITION OF SET OFF OF LOSS FROM O NE SOURCE AGAINST INCOME FROM ANOTHER SOURCE UNDER THE SAME HEAD OF INCOME. THE PROVISIO NS OF SECTION 10A AND 10B OF THE ACT ARE PARA MATERIA. IN SUCH A SITUATION THE RATI O LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN HINDUSTAN UNILEVER LTD. VS. DCIT & ANR. (S UPRA) ARE TO BE APPLIED. THE HON'BLE HIGH COURT HAD HELD THAT WHERE THREE UNITS OF THE ASSESSEE HAD RETURNED PROFIT DURING THE COURSE OF ASSESSMENT YEAR AND ONE UNIT H AD RETURNED THE LOSS, THE ASSESSEE WAS ENTITLED TO DEDUCTION IN RESPECT OF THE PROFITS OF THREE ELIGIBLE UNITS, WHILE THE LOSS SUSTAINED BY THE FOURTH UNIT COULD BE SET OFF AGAIN ST NORMAL BUSINESS INCOME. APPLYING THE SAID RATIO TO THE FACTS OF THE PRESENT CASE WE ARE OF THE VIEW THAT THE DEDUCTION U/S. 10A AND 10B ARE UNITS SPECIFIC IN CONTRADICTION TO BE ASSESSEE SPECIFIC. THE ASSESSEE ITA NOS.1508 AND 1509/PN/2011 M/S. KPIT CUMMINS INFOSYSTEMS LTD. 10 WHILE CLAIMING THE DEDUCTION U/S. 10A OF THE ACT IN RESPECT OF EACH OF ITS UNIT HAS TO SATISFY THE CONDITIONS VIZ-A-VIZ EACH UNIT/UNDERTAK ING. EVEN THE QUANTIFICATION OF AMOUNT OF DEDUCTION HAS TO BE WORKED OUT INDEPENDEN TLY IN EACH UNIT. THE ASSESSEE BEFORE US HAS FURNISHED ON RECORD THE AUDIT REPORT IN FORM NO. 56F IN RESPECT OF EACH OF THE UNIT AGAINST WHICH IT HAS CLAIMED THE DEDUCT ION UNDER SECTION 10A OF THE ACT. THE QUANTIFICATION OF THE DEDUCTION UNDER SECTION 1 0A OF THE ACT IS TO BE WORKED OUT INDEPENDENTLY FOR EACH ELIGIBLE UNIT AND IN CASE AF TER THE DEDUCTION SO CLAIMED UNDER SECTION 10A OF THE ACT, THERE ARE PROFITS IN THE HA NDS OF THE ASSESSEE FOR SUCH UNIT THEN THE SAME CAN BE SET OFF AGAINST THE LOSSES, IF ANY, INCURRED BY THE ASSESSEE IN ANY OTHER UNIT. THERE IS NO MERIT IN FIRST AGGREGATING THE PROFITS OF EACH OF THE ELIGIBLE UNIT AND SETTING OF THE LOSSES OF OTHER UNITS AND ON THE NET PROFITS, IF ANY, THE DEDUCTION UNDER SECTION 10A OF THE ACT TO BE COMPUTED. WE FI ND SUPPORT FROM THE RATIO LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN CIT VS. BLACK & VEATCH CONSULTING PVT. LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT THE DEDUCTION UNDER SECTION 10A OF THE ACT HAS TO BE GIVEN AT THE STAGE WHEN THE PROFITS AND GAINS OF THE BUSINESS ARE COMPUTED IN THE FIRST INSTANCE. IN VIEW THEREOF WE REVERSE THE ORD ER OF COMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD. 18. NOW COMING TO THE RELIANCE PLACED BY THE LD. DR FOR THE REVENUE OF THE HON'BLE SUPREME COURT IN SYNCO INDUSTRIES LTD. VS. ASSESSIN G OFFICER, INCOME TAX, MUMBAI (SUPRA) WHEREIN THE HON'BLE SUPREME COURT HAD CONSI DERED THE PROVISIONS OF SECTION 80HH R.W.S. 80-I AND 80B OF THE ACT. IN VIEW OF TH E SPECIFIC PROVISIONS OF 80B(5) PROVIDED UNDER CHAPTER VIA THEN THE DEDUCTION UNDER SECTION 80HH HAS TO BE COMPUTED IN LINE THEREOF. HOWEVER IN THE ABSENCE O F ANY SUCH PROVISION BEING PROVIDED IN SECTION 10A OF THE ACT, WE FIND NO MERI T IN THE SAID RELIANCE PLACED UPON BY THE LD. DR FOR THE REVENUE. SECTION 10A OF THE ACT ENTITLED THE UNDERTAKINGS FOR DEDUCTION FROM ITS PROFITS IN CASE THE CONDITIONS A RE FULFILLED. WE REITERATE THAT THE SAID DEDUCTION UNDER SECTION 10A OF THE ACT IS TO BE COM PUTED UNIT/UNDERTAKING WISE AND ITA NOS.1508 AND 1509/PN/2011 M/S. KPIT CUMMINS INFOSYSTEMS LTD. 11 NOT FOR THE ASSESSEE IN TOTALITY. REVERSING THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS), WE ALLOW THE GROUNDS OF APPEAL NO. 3 RAISED BY THE ASSESSEE IN BOTH THE ASSESSMENT YEARS 2005-06 AND 2006-07. 19. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 30 TH DAY NOVEMBER, 2015. SD/- SD/- (PRADIP KUMAR KEDIA) ( SUSHMA CHOWLA) # / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 30 TH NOVEMBER, 2015. RK ( ) *+, -,* / COPY OF THE ORDER IS FORWARDED TO : THE APPELLANT; THE RESPONDENT; # # $ () THE CIT(A)-I, PUNE; # # $ / THE CIT-I, PUNE; '() **+,, # +, , . / DR A, ITAT, PUNE; )/0 1 / GUARD FILE. (& / BY ORDER ' * // TRUE COPY // *2 +3 / PRIVATE SECRETARY # +, , ITAT, PUNE