Loxim Industries Ltd., Ahmedabad V. DCIT (OSD)-1, Circle-4, Ahmedabad

ITA 1564/AHD/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 4270 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 20-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S SHUKLA
• Assessee Lawyers: S N DIVATIA
• Keywords: Depreciation; Carry forward of business losses; Principle of natural justice; Retrospective amendment; Unabsorbed depreciation; Capital Gains; CHAPTER IV
• Section: 143(3); 10AA; 10B; 274; 72

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD ( CONVENED THROUGH VIRTUAL COURT ) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO. 1564/AHD/2018 ( ASSESSMENT YEAR : 2011-12) LOXIM INDUSTRIES LTD. 803, SHILP BUILDING, C. G. ROAD, AHMEDABAD 380006 / VS. DCIT(OSD)-1 CIRCLE - 4, NAVJEEVAN BUILDING, OFF ASHRAM ROAD, AHMEDABAD ./ ./ PAN/GIR NO. : AAACL9043M ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. N. DIVATIA, A.R. / RESPONDENT BY : SHRI S. S. SHUKLA, SR.DR DATE OF HEARING 09/02/2021 !'# / DATE OF PRONOUNCEMENT 16/02/2021 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-6, AHMEDABAD (CIT(A) IN SHORT), DATED 2 6.04.2018 ARISING IN THE ASSESSMENT ORDER DATED 27.03.2014 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2011-12. ITA NO. 1564/AHD/18 [LOXIM INDUSTRIES LTD. VS. DCIT(OSD)] A.Y. 2011-12 - 2 - 2. GROUNDS OF APPEAL RAISED BY ASSESSEE READ HEREUN DER: 1.1 THE ORDER PASSED U/S.250 ON 26.04.2018 FOR A.Y .2011-12 BY CIT(A)-06, ABAD UPHOLDING THE DEDUCTION U/S. 10B AT RS.3,96,08,955/- AFTER SET OFF OF INCOME/LOSS FROM OTHER UNITS/HEADS OF INCOME INSTEAD OF ALLOWING THE SAID DEDUCTION ON STANDALONE BASIS IS WHOLLY ILLEGAL, UNLAWFUL AND AG AINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE SUBMISSIONS MADE AND EVIDENCE PRODUCED BY THE APPELLANT WITH REGARD TO T HE IMPUGNED DEDUCTION. 2.1 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DEDUCTION U/S.10B AS PER CBDT CIRCUL AR DATED 16.07.2013 INSTEAD OF THE AMOUNT WORKED ON STANDALO NE BASIS AND THEREBY ALLOWING C/F OF THE BALANCE RS.75,41,41 2/-. (CORRECT FIGURE CLAIMED AT THE TIME OF HEARING RS.79,24,927/ -) 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE DEDUCTIO N U/S.10B AT RS.4,71,50,367/- INSTEAD OF THE AMOUNT ON STANDALON E BASIS WITHOUT CONSIDERING INCOME/LOSS OF DIFFERENT UNITS/ HEADS. THE DEFICIT OF RS.75,41,412/- OUGHT TO HAVE BEEN ALLOWE D TO BE C/F INSTEAD OF SETTING OFF AGAINST OTHER INCOME. 3. BRIEFLY STATED, THE ASSESSEE IS A CLOSELY HELD C OMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURERS, FORMULATO RS AND PROCESSORS OF ALL TYPES OF CHEMICALS, CHEMICAL COMPOUND, PVC, HDPE ETC. IT FILED ITS RETURN OF INCOME FOR A.Y.2011-12 ON 29.09 .2011 DECLARING LOSS OF RS.87,18,981/-. THE RETURN SO FILED WAS SE LECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S.L0B OF RS.4,77,1 4,761/- IN RESPECT OF EOU UNIT AT PADRA, OUT OF 4 UNITS. THE AO PROPOS ED TO CONSOLIDATE THE PROFIT/LOSS OF ALL THE UNITS IN ORDER TO ARRIVE AT THE QUANTUM OF DEDUCTION U/S.L0B IN THE LIGHT OF CBDT CIRCULAR DAT ED 16.07.2013. AS A RESULT, THE SAID DEDUCTION WAS WORKED OUT TO RS.4,7 1,50,3677- AS PER PAGE-5 OF THE ORDER, BUT, IT WAS LIMITED TO THE GRO SS TOTAL INCOME OF RS.3,96,08,955/-. 4. BEING AGGRIEVED, THE ASSESSEE PREFERRED APPEAL T O CIT(A). TWO FOLD GRIEVANCES WERE RAISED BY THE ASSESSEE BEFORE CIT(A ), NAMELY (I) ITA NO. 1564/AHD/18 [LOXIM INDUSTRIES LTD. VS. DCIT(OSD)] A.Y. 2011-12 - 3 - DEDUCTION OF CLAIM UNDER S.10B OF THE ACT WAS ERRON EOUSLY REDUCED TO ONLY RS.3,96,08,955/- AS AGAINST THE CLAIM OF THE A SSESSEE OF RS.4,77,14,761/- (II) LOSS OF NON-ELIGIBLE UNITS OF RS.79,24,927/- NOT ALLOWED TO BE CARRIED FORWARD. IT WAS CONTENDED TH AT THE COMPUTATION OF DEDUCTION IN RESPECT OF EOU UNIT U/S. 10A/10B HA S TO BE MADE ON STANDALONE BASIS WITHOUT SET OFF OF PROFIT/LOSS OF OTHER UNITS. IT WAS SUBMITTED THAT ASSESSEE HAD RELIED UPON VARIOUS DEC ISIONS INCLUDING YOKAGAVA INDIA LTD. HOWEVER, THE CIT(A) REJECTED THIS CLAIM RELYING SOLELY UPON THE AFORESAID CBDT CIRCULAR. 5. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CIT(A) IS REPRODUCED HEREUNDER: 5.3 AFTER CONSIDERING FINDINGS OF THE AO AND SUBMI SSIONS OF THE APPELLANT, THIS GROUND IS ADJUDICATED AS UNDER. IT IS SEEN THAT DURING THE ASSESSMENT PROCEEDINGS T HE AO NOTED THAT THE ASSESSEE WAS HAVING AN EXPORT ORIENTED UNI T AT PADRA FOR WHICH THE APPELLANT WAS ELIGIBLE FOR DEDUCTION SECT ION 10B OF THE ACT. THE AO FURTHER NOTED THAT OTHER THREE UNITS OF THE APPELLANT WERE NOT ELIGIBLE FOR SUCH DEDUCTION. THE AO OBSERVED THAT T HE APPELLANT HAD NOT AGGREGATED THE PROFIT/LOSS OF OTHER UNITS AS WELL A S THE INCOME /LOSS FROM OTHER HEADS FOR CLAIMING DEDUCTION U/S. 10B OF THE ACT. THE AO OBSERVED THAT THIS WAS NOT IN ACCORDANCE WITH CBDT CIRCULAR F.NO. 279/M(SC./M-116/2012-ITJ DATED 16.7.2013, ON THIS I SSUE WHERE IT WAS HELD THAT DEDUCTION U/S. 10B OF THE ACT IS TO BE AL LOWED AFTER CONSOLIDATING THE PROFIT/LOSS OF OTHER UNITS AS WEL L AS THE INCOME/ LOSS FROM OTHER HEADS. THE AO ASKED THE APPELLANT TO EXP LAIN WHY THE DEDUCTION U/S. 10B OF THE ACT SHOULD NOT BE WORKED OUT AS PER THE ABOVE CIRCULAR OF CBDT. THE APPELLANT DID NOT FILE ANY JU STIFICATION. ACCORDINGLY, THE AO CALCULATED THE DEDUCTION U/S, 1 0B AT RS. 4,71,50,367/- AS AGAINST RS. 4,77,14,761/- AS COMPU TED BY THE APPELLANT. THE AO RESTRICTED THE DEDUCTION U/S. 10B OF THE ACT TO THE INCOME AVAILABLE OF RS. 3,96,08,955/-, THE APPELLAN T IS IN APPEAL AGAINST THIS ACTION OF THE AO. DURING THE APPEAL PROCEEDING THE MAIN CONTENTION OF THE APPELLANT WAS THAT THE PROVISION CONTAINED IN SECTI ON 10A/10B OF THE ACT IS NOT AN EXEMPTION BUT A DEDUCTION UNDER CHAPT ER III OF THE ACT, UNLIKE PROVISION FOR DEDUCTION PROVIDED IN CHAPTER VI-A. THEREFORE IT COULD NOT BE PERMISSIBLE LO APPLY CONTAINED IN CHAP TER VIA OF THE ACT BUT IT WILL APPLIED IN THE CONTEXT OF PROVISIONS CO NTAINED IN CHAPTER VI A OF THE ACT. THE APPELLANT SUBMITTED THAT FOR THE PURPOSE OF SECTION 10A/10B OF THE ACT, THE LOSSES SUFFERED IN THE NON ELIGIBLE UNITS NEED NOT BE SET: OFF AGAINST THE PROFIT/INCOME OF THE EL IGIBLE UNIT FOR COMPUTING THE DEDUCTION U/S 10A/10B OF THE ACT, THE APPELLANT FURTHER SUBMITTED THAT DEDUCTION U/S. 10A/10B OF THE ACT IS TO BE ALLOWED FROM THE TOTAL INCOME OF THE UNDERTAKING AND NOT FROM TO TAL INCOME OF THE ITA NO. 1564/AHD/18 [LOXIM INDUSTRIES LTD. VS. DCIT(OSD)] A.Y. 2011-12 - 4 - ASSESSEE, THE APPELLANT IN SUPPORT OF ITS CONTENTIO N RELIED ON THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN CIT, RAJK OT VS ACE SOFTWARE LTD VIDE ORDER DATED 1.03.2013 IN TAX APPEAL NO. 83 1 OF 2012, THE APPELLANT ALSO RELIED ON THE FOLLOWING JUDGMENTS:- - CIT VS BLACK & VEATCH CONSULTING PVT. LTD,(2012) 348 ITR 0072(BOMBAY). - CIT VS. TEI TECHNOLOGIES PVT. LTD. (2014) 361 I TR 036 (DELHI). - SCIENTIFIC ATLANTA VS ACIT 129 TTJ 273 (BOMBAY ITAT SPECIAL BRANCH) - ACIT VS YOKAGAVA INDIA LTD (2007) 111 TTJ 548 AFTER CONSIDERING ALL FACTS AND CIRCUMSTANCES OF TH E CASE, I AM NOT INCLINED TO AGREE WITH THE CONTENTION OF THE AP PELLANT. IT IS SEEN THAT THE AS MENTIONED ABOVE ALSO THE AO ALLOWED DED UCTION U/S. 10B OF THE ACT BASED ON CBDT CIRCULAR F.NO. 279/MISC./M-11 6/2012-ITJ DATED 16.7.2013 WHERE IT HAS BEEN CLEARLY HELD THAT DEDUC TION U/S. 10B OF THE ACT IS TO BE ALLOWED AFTER CONSOLIDATING PROFIT/LOS S OF OTHER UNITS AS WELL AS INCOME/LOSS FROM OTHER HEADS. THE MAIN CONT ENTION OF THE APPELLANT IS BASED ON JUDGMENT OF HON'BLE GUJARAT H IGH COURT IN CIT, RAJKOT VS ACE SOFTWARE EXPORT LTD(SUPRA) WHICH IS D ATED 1.3.2013 WHILE THE CIRCULAR RELIED ON BY THE AO IS DATED 16.7.2013 . THUS IT IS CLEAR THAT THE JUDGMENT RELIED ON BY THE APPELLANT IS DAT ED BEFORE THE DATE OF THE CIRCULAR ON WHICH THE AO HAS RELIED, THUS THE C IRCULAR WOULD BE APPLICABLE TO THE FACTS OF THE PRESENT CASE, OTHER DECISIONS RELIED ON BY THE APPELLANT: ALSO PRE DATE THE CIRCULAR DATED 16. 7.2013 RELIED ON BY THE AO AND HENCE ARE NOT APPLICABLE. IN VIEW OF THI S, THERE IS NO SUBSTANCE IN THE CONTENTION OF THE APPELLANT. IN VIEW OF DISCUSSION ABOVE, IT IS HELD THAT THE AO IS JUSTIFIED IN RESTRICTING DEDUCTION UNDER SECTION 10B OF THE ACT TO RS.3,96,08,955/-. ACCORDINGLY, THIS GROUND OF APPEAL IS REJECTED. 6. AGGRIEVED BY THE DENIAL OF RELIEF BY THE CIT(A), THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 7. THE LEARNED COUNSEL MR. S. N. DIVATIA APPEARING FOR THE ASSESSEE SUBMITTED AT THE OUTSET THAT CONTROVERSY HEREIN IS SQUARELY COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F CIT VS. YOKOGAWA INDIA LTD. 391 ITR 274 (SC). LEARNED COUNSEL FURTHER SUPPORTED HIS CASE BY THE JUDGMENT RENDERED BY THE HONBLE GUJARAT HIGH COURT IN CIT VS. ACE SOFTWARE EXPORTS LTD. TAX APPEAL NO. 83 1 OF 2012 JUDGMENT DATED 01.03.2013 AND PR.CIT VS. INFOSYS BPO LTD. [2021] 123 TAXMANN.COM 216 (KARNATAKA). ITA NO. 1564/AHD/18 [LOXIM INDUSTRIES LTD. VS. DCIT(OSD)] A.Y. 2011-12 - 5 - 8. THE LEARNED DR FOR THE REVENUE, ON THE OTHER HAN D, RELIED UPON THE ORDERS PASSED BY THE AO AND CIT(A). THE LEARNE D DR FURTHER SUBMITTED THAT THE ISSUE IS SQUARELY GOVERNED BY TH E CBDT CIRCULAR NO. 7/DV/2013 [FILE NO.279/MIS./M-116/2012-ITJ], DA TED 16-7- 2013. 9. THE CIRCULAR RELIED UPON BY THE LEARNED DR FOR T HE REVENUE IS REPRODUCED HEREUNDER: SECTION 10A, READ WITH SECTIONS 10AA & 10B OF THE INCOME-TAX ACT, 1961 - FREE TRADE ZONE - CLARIFICAT ION ON ISSUES RELATING TO APPLICABILITY OF CHAPTER IV O F THE ACT AND SET OFF AND CARRY FORWARD OF BUSINESS LOSSES CIRCULAR NO. 7/DV/2013 [FILE NO.279/MISC./M-116/201 2-ITJ], DATED 16-7-2013 IT HAS BEEN BROUGHT TO THE NOTICE OF THE BOARD THAT THE PROVISIONS OF 10A/10AA/10B/10BA OF THE INCOME-TAX ACT, WITH REGAR D TO APPLICABILITY OF CHAPTER IV OF THE ACT AND SET OFF AND CARRY FORW ARD OF LOSSES, ARE BEING INTERPRETED DIFFERENTLY BY THE OFFICERS OF TH E DEPARTMENT AS WELL AS BY DIFFERENT HIGH COURTS. 2. THE TWO SECTIONS 10A AND 10B OF THE ACT WERE INI TIALLY PLACED ON STATUTE IN 1981 AND 1988 RESPECTIVELY, AND CONTINUE D WITH SOME MODIFICATIONS AND AMENDMENTS TILL 31.03.2001. SECTI ON 10A AS INSERTED BY FINANCE ACT, 1981 READ AS UNDER: '10A. SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLI SHED INDUSTRIAL UNDERTAKINGS IN THE FREE TRADE ZONES.(1 ) SUBJECT TO THE PROVISIONS OF THIS SECTION, ANY PROFITS AND GAI NS DERIVED BY AN ASSESSEE FROM AN INDUSTRIAL UNDERTAKING TO WHICH THIS SECTION APPLIES SHALL NOT BE INCLUDED IN THE TOTAL INCOME O F THE ASSESSEE.' 2.1 SIMILARLY SECTION 10B AS INSERTED BY FINANCE AC T, 1988 READ AS UNDER: '10B. SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLI SHED HUNDRED PER CENT EXPORT ORIENTED UNDERTAKINGS.SUBJECT TO T HE PROVISIONS OF THIS SECTION, ANY PROFITS AND GAINS DERIVED BY A N ASSESSEE FROM A HUNDRED PER CENT EXPORT ORIENTED UNDERTAKING (HER EAFTER IN THIS SECTION REFERRED TO AS THE UNDERTAKING) TO WHICH TH IS SECTION APPLIES SHALL NOT BE INCLUDED IN THE TOTAL INCOME O F THE ASSESSEE.' ITA NO. 1564/AHD/18 [LOXIM INDUSTRIES LTD. VS. DCIT(OSD)] A.Y. 2011-12 - 6 - 3. VIDE FINANCE ACT, 2000 SECTIONS 10A AND 10B OF T HE ACT WERE SUBSTITUTED. SECTION 10A AS SUBSTITUTED BY FINANCE ACT, 2000 READS AS UNDER: '10A. (1) SUBJECT TO THE PROVISIONS OF THIS SECTION , A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY AN UNDE RTAKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWA RE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE SUCH A RTICLES OR THINGS OR COMPUTER SOFTWARE, AS THE CASE MAY BE, SH ALL BE ALLOWED FORM THE TOTAL INCOME OF THE ASSESSEE....' 3.1 SIMILARLY, SECTION 10B AS SUBSTITUTED BY FINANC E ACT, 2000 READS AS UNDER: '10B. (1) SUBJECT TO THE PROVISIONS OF THIS SECTION , A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY A HUNDR ED PER CENT EXPORT-ORIENTED UNDERTAKING FROM THE EXPORT OF ARTI CLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OFTEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT T O THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MA NUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMPUTER SOFTWARE, AS THE CASE MAY BE, SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE A SSESSEE...' 3.2 THE EFFECT OF THE SUBSTITUTION OF SECTIONS 10A AND 10B OF THE ACT HAS BEEN ELABORATED IN CIRCULAR NO. 794 DATED 9.8.2 000 WHICH CLEARLY PROVIDES THAT THE NEW PROVISIONS PROVIDE FOR DEDUCT ION IN RESPECT OF PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM EX PORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE. 4. SUB-SECTION (6) OF SECTIONS 10A AND 10B WERE AME NDED BY FINANCE ACT 2003 WITH RETROSPECTIVE EFFECT FROM 1-4 -2001. CIRCULAR NO. 7/2003, DATED 5-9-2003 EXPLAINS THE AMENDMENTS BROU GHT BY FINANCE ACT, 2003. THE RELEVANT PARAGRAPH IS REPRODUCED BEL OW: '20. PROVIDING FOR CARRY FORWARD OF BUSINESS LOSSES AND UNABSORBED DEPRECIATION TO UNITS IN SPECIAL ECONOMI C ZONES AND 100% EXPORT ORIENTED UNITS. 20.1 UNDER THE EXISTING PROVISIONS OF SECTIONS 10A AND 10B, THE UNDERTAKINGS OPERATING IN A SPECIAL ECONOMIC ZONE ( UNDER SECTION 10A) AND 100% EXPORT ORIENTED UNITS (EOU'S) (UNDER SECTION 10B) ARE NOT PERMITTED TO CARRY FORWARD THE IR BUSINESS LOSSES AND UNABSORBED DEPRECIATION. 20.2 WITH A VIEW TO RATIONALIZE THE EXISTING TAX IN CENTIVES IN RESPECT OF SUCH UNITS, SUB-SECTION (6) IN SECTIONS 10A AND 10B HAS BEEN AMENDED TO DO AWAY WITH THE RESTRICTIONS O N THE CARRY FORWARD OF BUSINESS LOSSES AND UNABSORBED DEPRECIAT ION. 20.3 THE AMENDMENTS HAVE BEEN BROUGHT INTO EFFECT RETROSPECTIVELY FROM 1-4-2001 AND HAVE BEEN MADE AP PLICABLE TO BUSINESS LOSSES OR UNABSORBED DEPRECIATION ARISING IN THE ASSESSMENT YEAR 2001-02 AND SUBSEQUENT YEARS.' ITA NO. 1564/AHD/18 [LOXIM INDUSTRIES LTD. VS. DCIT(OSD)] A.Y. 2011-12 - 7 - 5. FROM THE ABOVE IT IS EVIDENT THAT IRRESPECTIVE O F THEIR CONTINUED PLACEMENT IN CHAPTER III, SECTIONS 10A AND 10B AS S UBSTITUTED BY FINANCE ACT, 2000 PROVIDE FOR DEDUCTION OF THE PROF ITS AND GAINS DERIVED FROM THE EXPORT OF ARTICLES OR THINGS OR CO MPUTER SOFTWARE FOR A PERIOD OF 10 CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE SUCH ARTICLE OR TH ING OR COMPUTER SOFTWARE. THE DEDUCTION IS TO BE ALLOWED FROM THE T OTAL INCOME OF THE ASSESSEE. THE TERM 'TOTAL INCOME' HAS BEEN DEFINED IN SECTION 2 (45) OF THE IT ACT AND IT MEANS THE TOTAL AMOUNT OF INCOME REFERRED TO IN SECTION 5, COMPUTED IN THE MANNER LAID DOWN IN THE INCOME-TAX ACT. 5.1 ALL INCOME FOR THE PURPOSES OF COMPUTATION OF T OTAL INCOME IS TO BE CLASSIFIED UNDER THE FOLLOWING HEADS OF INCOME A ND COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER IV OF THE ACT- SALARIES INCOME FROM HOUSE PROPERTY PROFITS AND GAINS OF BUSINESS AND PROFESSION CAPITAL GAINS INCOME FROM OTHER SOURCES 5.2 THE INCOME COMPUTED UNDER VARIOUS HEADS OF INC OME IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER IV OF THE IT ACT SHALL BE AGGREGATED IN ACCORDANCE WITH THE PROVISIONS OF CHA PTER VI OF THE IT ACT, 1961. THIS MEANS THAT FIRST THE INCOME/LOSS FR OM VARIOUS SOURCES I.E. ELIGIBLE AND INELIGIBLE UNITS, UNDER THE SAME HEAD ARE AGGREGATED IN ACCORDANCE WITH TOE PROVISIONS OF SECTION 70 OF THE ACT. THEREAFTER, THE INCOME FROM ONE AHEAD IS AGGREGATED WITH THE INCOME OR LOSS OF THE OTHER HEAD IN ACCORDANCE WITH THE PROVISIONS OF SEC TION 71 OF THE ACT. IF AFTER GIVING EFFECT TO THE PROVISIONS OF SECTIONS 7 0 AND 71 OF THE ACT THERE IS ANY INCOME (WHERE THERE IS NO BROUGHT FORW ARD LOSS TO BE SET OFF IN ACCORDANCE WITH THE PROVISIONS OF SECTION 72 OF THE ACT) AND THE SAME IS ELIGIBLE FOR DEDUCTION IN ACCORDANCE WITH T HE PROVISIONS OF CHAPTER VI-A OR SECTIONS 10A, 10B ETC. OF THE ACT, THE SAME SHALL BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESS EE. 5.3 IF AFTER AGGREGATION OF INCOME IN ACCORDANCE WI TH THE PROVISIONS OF SECTIONS 70 AND 71 OF THE ACT, THE RESULTANT AMO UNT IS A LOSS (PERTAINING TO ASSESSMENT YEAR 2001-02 AND ANY SUBS EQUENT YEAR) FROM ELIGIBLE UNIT IT SHALL BE ELIGIBLE FOR CARRY FORWAR D AND SET OFF IN ACCORDANCE WITH THE PROVISIONS OF SECTION 72 OF THE ACT. SIMILARLY, IF THERE IS A LOSS FROM AN INELIGIBLE UNIT, IT SHALL B E CARRIED FORWARD AND MAY BE SET OFF AGAINST THE PROFITS OF ELIGIBLE UNIT OR INELIGIBLE UNIT AS THE CASE MAY BE, IN ACCORDANCE WITH THE PROVISIONS OF SECTION 72 OF THE ACT. 6. THE PROVISIONS OF CHAPTER IV AND CHAPTER VI SHAL L ALSO APPLY IN COMPUTING THE INCOME FOR THE PURPOSE OF DEDUCTION U NDER SECTIONS 10AA AND 10BA OF THE ACT SUBJECT TO THE CONDITIONS SPECI FIED IN THE SAID SECTIONS. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE PIVOTAL QUESTION IN CONTROVERSY IS WHETHER THE REVENUE IS R IGHT IN LAW IN ITA NO. 1564/AHD/18 [LOXIM INDUSTRIES LTD. VS. DCIT(OSD)] A.Y. 2011-12 - 8 - HOLDING THAT ASSESSEE IS NOT ENTITLED TO THE BENEFI T OF DEDUCTION GIVEN BY THE ACT UNDER S.10A/10B AS AMENDED WITH RETROSPE CTIVE EFFECT BY THE FINANCE ACT, 2003 WITH EFFECT FROM 01.04.2001 QUA INDIVIDUAL ELIGIBLE UNDERTAKING. 11. IT IS THE CASE OF THE REVENUE THAT IN THE LIGHT OF CIRCULAR DATED 16.07.2013 EXPOUNDING THE LAW, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION OF PROFITS AND GAINS OF THE BUSINESS OF E LIGIBLE UNDERTAKING INDEPENDENTLY WITHOUT TAKING INTO ACCOUNT AND WITHO UT GIVING EFFECT TO THE PROVISIONS OF SET OFF AND CARRY FORWARD CONTAIN ED IN SECTIONS 70, 72 AND 74 OF THE ACT. WE HOWEVER DISAGREE WITH THE PROPOSITION CANVASSED ON BEHALF OF REVENUE. WE FIND THAT IDENTI CAL ISSUE AROSE BEFORE HONBLE SUPREME COURT IN THE CASE OF YOKOGAWA INDIA LTD. (SUPRA). HONBLE SUPREME COURT ORDAINS THAT THOUGH S. 10A/ 1 0B WERE AMENDED BY FA 2000 W.E.F. 01.04.2001 TO CHANGE THEI R TENOR FROM 'EXEMPTION' TO 'DEDUCTION', THE 'DEDUCTION' CONTEMP LATED IS S.10A/S.10B QUA THE ELIGIBLE UNDERTAKING OF AN ASSESSEE STANDING O N ITS OWN AND WITHOUT REFERENCE TO THE OTHER ELIGIBLE OR NON-ELIGIBLE UNITS OR UNDERTAKINGS OF THE ASSESSEE. THE BENEFIT OF DEDUCTION IS GIVEN BY THE ACT TO THE INDIVIDUAL UNDERTAKING. TH E DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UN DERTAKING HAS TO BE MADE INDEPENDENTLY AND BEFORE GIVING EFFECT TO THE PROVISIONS FOR SET OFF AND CARRY FORWARD CONTAINED IN S. 70, 72 AND 74 . IT WAS FURTHER HELD BY THE HONBLE SUPREME COURT THAT THE DEDUCTIO NS U/S 10A/10B ARE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE ACT FOR ARRIVING AT THE TOTAL INC OME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. 12. WHILE EXAMINING THE ISSUE, THE HONBLE SUPREME COURT HAS ALSO CONSIDERED THE PROVISIONS OF SECTION 10A OF THE ACT ( PARI MATERIA WITH S.10B OF THE ACT) AS IT STOOD PRIOR TO THE AMENDMEN T MADE BY FINANCE ACT, 2000 WITH EFFECT FROM 01.04.2001 AS WELL AS TH E AMENDED SECTION 10A THEREAFTER AND ALSO THE AMENDMENT MADE BY FINAN CE ACT, 2003 ITA NO. 1564/AHD/18 [LOXIM INDUSTRIES LTD. VS. DCIT(OSD)] A.Y. 2011-12 - 9 - WITH RETROSPECTIVE EFFECT FROM 01.04.2001. HENCE, THE CBDT CIRCULAR BEING IN CONFLICT WITH THE JUDGMENT OF HONBLE SUPR EME COURT CANNOT BE TAKEN IN RECKONING. GOVERNED BY THE JUDICIAL FI AT, THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDER CHAPTER IV OF THE ACT AN D NOT AT THE STAGE OF COMPUTATION OF TOTAL INCOME UNDER CHAPTER VI. A LL CONSEQUENCES UNDER SECTIONS 70, 72 AND 74 OF THE ACT WOULD CONSE QUENTLY FLOW UNIT WISE. IN VIEW OF THE RESOUNDING CONCLUSION DRAWN I N FAVOUR OF THE ASSESSEE ON THE AFORESAID LEGAL POSITION, THE GROUN DS RAISED BY THE ASSESSEE ARE ANSWERED IN AFFIRMATIVE. 13. IN THE RESULT, THE CAPTIONED APPEAL OF ASSESSEE IS ALLOWED. SD/- SD/- (RAJPAL YADAV) (PRADIP KUMA R KEDIA) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD: DATED 16/02/2021 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED ON 16/02/2021