DCIT 8(2), MUMBAI V. PROTHIOUS ENGINEERING SERVICES P.LTD, MUMBAI

ITA 1693/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79102 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 01-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Assessee Lawyers: DILIP P BAPAT
• Keywords: Business income; Depreciation; Opportunity of being heard; Retrospective amendment; Unabsorbed depreciation
• Section: 115JB; 10B; 10

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C B ENCH, MUMBAI . . , , !'# , $ % BEFORE SHRI I.P. BANSAL, JM AND SHRI N.K. BILLAI YA, AM ./ I.T.A. NO. 1693/MUM/2013 ( & & & & / ASSESSMENT YEAR :2008-09 THE DCIT-8(2), AAYAKAR BHAVAN, MUMBAI-400 020 / VS. M/S. PROTHIOUS ENGINEERING SERVICES PVT. LTD., C-7, EEC HOUSE, 2 ND /3 RD FLOOR, DALIA INDUSTRIAL ESTATE, OFF NEW LINK ROAD, ANDHERI (W), MUMBAI-400 053 C.O. NO. 81/MUM/2014 (ARISING OUT OF I.T.A. NO. 1693/MUM/2013) ( & & & & / ASSESSMENT YEAR :2008-09 M/S. PROTHIOUS ENGINEERING SERVICES PVT. LTD., C-7, EEC HOUSE, 2 ND /3 RD FLOOR, DALIA INDUSTRIAL ESTATE, OFF NEW LINK ROAD, ANDHERI (W), MUMBAI-400 / VS. THE DCIT-8(2), AAYAKAR BHAVAN, MUMBAI-400 020 ' $ ./ () ./ PAN/GIR NO. : AADCP 5194J ( '* / CROSS OBJECTOR ) .. ( +,'* / RESPONDENT ) '* - / ASSESSEE BY: SHRI DILIP P. BAPAT +,'* . - / REVENUE BY: SHRI JITENDRA YADAV . /0$ / DATE OF HEARING :29.05.2014 12& . /0$ / DATE OF PRONOUNCEMENT :04.06.2014 PROTHIOUS ENGINEERING SERVICES 2 3 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE VERY SAME ORDER OF THE LD. CIT(A)-17, MUMBAI DT.11.12.2012 PERTAINING TO A.Y. 2008-09. AS BOTH THESE WERE HEARD TOGETHER, THEY ARE DISPOSED OF BY THIS COMMON ORDE R FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO. 1693/M/2013- REVENUES APPEAL 2. THE REVENUE HAS QUESTIONED THE VALIDITY OF THE O RDER OF THE LD. CIT(A) BY7 RAISING FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE ASSESSEES CL AIM OF CARRY FORWARD OF LOSS OF RS.1,17,07,3081.. WITHOUT APPREC IATING THAT THE TOTAL PROFIT OF RS. 10,69,10,1621- WAS DERIVED ONLY FROM 4 STP UNITS AND THEREFORE, THE ASSESSEE WAS ENTITLED FOR DEDUCTION U/S IOA ONLY TO THE EXTENT OF SUCH TOTAL INCOME OF RS. 10,6 9,10,162!- AND, THEREFORE, NO LOSS REMAINED TO BE CARRIED FORWARD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN UPHOLDING THE ASSESSEES CLA IM OF CARRY FORWARD OF LOSSES SUFFERED BY DELHI STP UNIT ( RS.5 ,32,531) AND CHENNAI STP UNIT (RS. 45,87,787 - PRIOR TO COMMERCI AL PRODUCTION AND RS.73,69,522/- POST COMMERCIAL PRODUCTION) WITH OUT APPRECIATING THAT THESE LOSSES WERE SUFFERED BY THE ASSESSEE DURING THE RELEVANT YEAR ITSELF AND HENCE FORMED PART OF T HE TOTAL INCOME OF THE ASSESSEE OF THE SAID UNITS FOR THE YEAR UNDER C ONSIDERATION AND SUCH BIFURCATION OF INCOME/LOSS, INTO PRE-COMMENCEM ENT AND POST- COMMENCEMENT PERIODS CLAIMED BY THE ASSESSEE IS IN CONTRAVENTION OF THE LAW AS ENSHRINED IN SECTION 2(45) OF THE ACT . PROTHIOUS ENGINEERING SERVICES 3 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN UPHOLDING THE ASSESSEES CLAIM O F CARRY FORWARD OF LOSSES OF THE DELHI STP UNIT IGNORING TH E FACT THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.1,09,998!- U/S IOA ON THE PROFITS OF THE SAID UNIT FOR A PART PERIOD OF THE P REVIOUS YEAR WHILE CLAIMING THE LOSS OF RS. 5,32,531!- OF THE REMAININ G PART OF THE SAME YEAR, BY ARTIFICIALLY BIFURCATING THE PROFITS/ LOSSES OF THE SAME PREVIOUS YEAR INTO PRO- COMMENCEMENT AND POST-COMME NCEMENT, WHICH IS NOT PERMITTED UNDER THE LAW. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION U/S IOA WITHOUT SETTING OFF THE BROUGHT FORWARD BUSINESS LOSSES AND UNABSOR BED DEPRECIATION WITHOUT CONSIDERING THE RATIO OF THE D ECISION IN THE CASE OF GALAXY SURFACTANTS LIMITED 343 ITR 0108 (20 12), WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT , A. SECTION 10 A AS AT PRESENT STANDS , CAME TO BE SUBSTITUTED BY THE FINANCE ACT, 2000 WITH EFFECT FROM 1 APRIL 2001 . THE SECTION AS IT STANDS NOW, IS NOT A PROVISION FOR EXEMPTION, BU T A PROVISION WHICH ENABLES AN ASSESSEE TO CLAIM A DEDUCTION B. ...THE DEDUCTION HAS TO BE ALLOWED FROM THE TOT AL INCOME OF THE ASSESSEE.... C. ...SECTION 72 WHICH PROVIDES FOR A CARRY FORWAR D OF A BUSINESS LOSS COMES INTO OPERATION ONLY WHEN THE PROVISIONS OF SECTIONS 70 AND 71 , AS THE CASE MAY BE, ARE EXHAUSTED. THERE I S NO PROVISION IN SECTION 1OB BY WHICH A PROHIBITION HAS BEEN INTR ODUCED BY THE LEGISLATURE IN SETTING OFF A LOSS WHICH IS SUSTAINE D FROM ONE SOURCE FALLING UNDER THE HEAD OF PROFITS AND GAINS OF THE BUSINESS AGAINST INCOME FROM ANY OTHER SOURCE UNDER THE SAME HEAD... . 3. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE RE VENUE IS THAT THE LD. CIT(A) ERRED IN NOT HOLDING THAT THE ASSESSEE W AS ENTITLED FOR DEDUCTION U/S. 10A ONLY TO THE EXTENT OF THE TOTAL INCOME. THEREFORE, THERE REMAINS NO LOSS TO BE CARRIED FORWARD. 4. THE ASSESSEE IS A COMPANY IN WHICH PUBLIC ARE NO T SUBSTANTIALLY INTERESTED, FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG AND IS ENGAGED IN THE BUSINESS OF ENGINEERING & DESIGNING SERVICES. THE RETURN FOR THE YEAR UNDER CONSIDERATION WAS FILED ON 30.9.2008 DEC LARING TOTAL INCOME AT PROTHIOUS ENGINEERING SERVICES 4 A LOSS OF RS. 1,19,42,650/-. THE BOOK PROFIT WAS R ETURNED AT RS. 9,85,80,369/- U/S. 115JB OF THE ACT. THE RETURN WA S REVISED ON 3.10.2008 DECLARING TOTAL LOSS AT RS. 1,19,42,650/- WHICH WAS AGAIN REVISED ON 10.11.2009 DECLARING TOTAL LOSS AT RS. 1,18,70,117/ -. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND STATUTORY NOTI CES WERE ISSUED AND SERVED UPON THE ASSESSEE. 4.1. DURING THE COURSE OF THE SCRUTINY ASSESSMENT P ROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS 4 S TPI UNITS SITUATED AT MUMBAI, NASHIK, CHENNAI AND DELHI. THE RELEVANT DE TAILS FOR THE CLAIM OF DEDUCTION U/S. 10A IN RESPECT OF STPI UNITS ARE AS UNDER: SR. NO. LOCATION & ADDRESS OF THE UNDERTAKING DATE OF INITIAL REGISTRATION DATE OF COMMENCEMENT OF MANUFACTURE OR PRODUCTION NO. OF THE CONSECUTIVE YEARFOR WHICH THE DEDUCTION IS CLAIMED. AMOUNT OF DEDUCTION (RS.) 1. C-7, EEC HOUSE, 2 ND & 3 RD FLOOR, DALIA IND. ESTATE, BEHIND KUBER BLDG., ANDHERI LINK ROAD, ANDHERI (W), MUMBAI-53 19.9.2005 10.10.2005 3 RD YEAR 3,29,08,100/- 2. CHATEAU D AMPAS, 5 TH FLOOR, NELSON MANICKAM ROAD, AMINJIKARI, CHENNAI-600 029 1.8.2007 1.10,2007 1 ST YEAR NIL 3. 89, AMRIT PURI, EAST OF KAILASH, NEW DELHI-110 065 22.2.2008 1.3.2008 1 ST YEAR 1,09,998/- 4. H - 37, SHIVAJI NAGAR, SATPUR, MIDC, NASHIK 27.7.2006 1.12.2006 2 ND YEAR 8,55,99,372/- 4.2. ORIGINALLY, THE ASSESSEE CLAIMED TOTAL DEDUCTI ON U/S. 10A AT RS. 11,73,64,556/- ON THE TOTAL PROFITS DERIVED FROM ST PI AND NON STPI UNITS OF RS. 10,54,16,711/-. SUBSEQUENTLY, THE CLAIM WAS REVISED AT RS. PROTHIOUS ENGINEERING SERVICES 5 11,86,17,470/- ON THE TOTAL PROFITS DERIVED FROM ST PI AND NON-STPI UNITS OF RS. 10,69,10,161/-. THE TOTAL INCOME WAS FINALL Y COMPUTED AT LOSS OF RS. 1,17,07,308/-. THE LOSS WAS CLAIMED TO BE CARR IED FORWARD TO THE SUBSEQUENT YEAR FOR SET OFF. THE WORKING OF THE DED UCTION U/S 10A IN RESPECT OF STPI UNIT AND NON-ASTPI UNIT IS AS UNDER : SR. NO . PARTICULARS MUMBAI NASHIK CHENNAI DELHI NON STPI CHENNAI NON STPI DELHI DOMESTIC MUMBAI TOTAL 1. TURNOVER OF UNDERTAKING 105,734,338 168,104,205 31,553,874 2,577,639 12,051 ,828 2,255,937 2,514,287 324,792,108 2. TOTAL PROFIT DERIVED FROM UNDERTAKING 33,690,631 85,599,372 (7,369,522) 109,998 (4,587,787) (532, 531) . 106,910,161 3. TOTAL EXPORT TURNOVER 105,734,338 168,104,205 31,553,874 2,577,639 12,051 ,828 2,255,937 . 322,277,821 4. EXPORT PROCEEDS RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE 105,734,338 168,104,205 31,553,874 2,577,639 12,051 ,828 2,255,937 . 322,277,821 5. AMOUNT OF DEDUCTION U/S. 10A 32,908,100 85,599,372 . 109,998 . . . . 118,617,470 4.3. THE AO FURTHER NOTICED THAT THE ASSESSEE IS CL AIMING DEDUCTION WHICH IS MORE THAN THE TOTAL INCOME OF THE ASSESSEE . THE AO WAS OF THE FIRM BELIEF THAT THE DEDUCTION CANNOT EXCEED THE TO TAL INCOME. ACCORDINGLY, THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM. THE ASSESSEE CLAIMED AS UNDER: 1. CLAIM FOR CARRY FORWARD OF LOSSES / DEPRECIATI ON: A. THE SUBJECT CLAIM IN THE AMOUNT OF RS.1,17,07,3 08/- IS MADE OF UP OF LOSSES SUFFERED BY DELHI STP UNIT OF RS.5,32,531/- RELATING TO THE PERIOD ANTERIOR TO THE INTIMATION OF COMMENCEMENT OF COMMERCIAL PRODUCTION TO THE STP AUTHORITIES, LO SSES OF CHENNAI STP UNIT OF RS.45,87,787/- ON SIMILAR FOOTING AND FURTHER LOSSES PROTHIOUS ENGINEERING SERVICES 6 OF CHENNAI STP UNIT OF RS.73,69,522, POST THE DATE OF INTIMATION OF COMMENCEMENT OF COMMERCIAL PRODUCTION, AS REDUCE D BY THE NON-DEDUCTIBLE INCOME OF MUMBAI STP UNIT OF RS.7,8 2,531 RELATING TO DOMESTIC SALES. B. IN RESPECT OF THE LOSSES ATTRIBUTABLE TO THE PER IOD ANTERIOR TO THE (LATE OF INTIMATION OF COMMENCEMENT OF COMMERCIAL P RODUCTION ARE CONCERNED, IT IS SUBMITTED THAT THEY ARE SUFFERED I N THE COURSE OF BUSINESS OPERATIONS CARRIED ON BEYOND THE AMBIT OF STP SCHEME AND HENCE, THE CLAIM FOR CARRY FORWARD IS BASED ON CORRECT APPLICATION OF THE PROVISIONS OF SECTION 72 OF THE ACT. C. IN RESPECT OF THE LOSSES SUFFERED POST THE INTIM ATION OF COMMENCEMENT OF COMMERCIAL PRODUCTION ARE CONCERNED , THEY ARE CLAIMED ON THE BASIS OF THE DECLARATION FILED UNDER SECTION 10A (8) (A COPY OF WHICH IS ENCLOSED HEREWITH). D. WITHOUT PREJUDICE TO THE AFORESAID CONTENTIONS, RELIANCE IS PLACED ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN UNILEVER LIMITED (325 ITR 103) WHERE THE -COURT HAS TAKEN SPECIFIC NOTE OF AMENDMENT BY THE FINANCE ACT , 2000 WHICH REPLACED THE PROVISION OF EXEMPTION BY THE PROVISIO N OF DEDUCTION AND WAS THEREFORE PLEASED TO HOLD THAT THE LOSSES OF ELIGIBLE UNIT COULD HE SET OFF AGAINST THE NORMAL BUSINESS INCOME . 4.4. SUBMISSION OF THE ASSESSEE WAS CONSIDERED. TH E AO WAS OF THE OPINION THAT THE DEDUCTION SHALL BE ALLOWABLE TO TH E ASSESSEE AFTER COMPUTING THE TOTAL INCOME OF THE ASSESSEE FROM ALL SOURCES, INCLUSIVE OF PROFIT/LOSS OF EOU OR NON EOU. THEREFORE, IF THE D EDUCTION CLAIMED BY THE ASSESSEE U/S. 10A IS MORE THAN THE TOTAL INCOME OF THE ASSESSEE, THE SAME WOULD BE RESTRICTED TO THE EXTENT OF THE TOTAL INCOME. FOR THIS PROPOSITION, THE AO RELIED UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF HINDUSTAN UNILEVER LTD. VS DCI T & ANR 325 ITR 102. DRAWING SUPPORT FROM THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT (SUPRA), THE AO WAS OF THE OPINION THAT THE CORRECT CLAIM OF DEDUCTION U/S. 10A WOULD BE AS UNDER: PROTHIOUS ENGINEERING SERVICES 7 PARTICULARS AMOUNT(RS) TOTAL INCOME AS PER ASSESSEES REVISED COMPUTATION 10,69,10,162/- LESS: DEDUCTION U/S. 10A OF THE ACT TO THE EXTENT 10,69,10,162/- TAXABLE INCOME NIL 4.5. THE ASSESSEE ALSO PUT AN ALTERNATIVE CLAIM STA TING THAT THE LOSSES SUFFERED ARE CLAIMED ON THE BASIS OF DECLARATION FI LED U/S. 10A(8) OF THE ACT. HOWEVER, THE AO NOTICED THAT THE DECLARATION WAS FILED ON 30.9.2009 WHICH WAS SUPPOSED TO BE FILED WITHIN THE DUE DATE OF FILING OF THE RETURN AND IN ASSESSEES CASE, THE DUE DATE OF FILING THE RETURN FOR THE YEAR UNDER CONSIDERATION WAS 30.9.2008. SINCE THE DECLARATION WAS NOT FILED AS PER THE PROVISIONS OF SEC. 10A(8), THE CON TENTION OF THE ASSESSEE WAS REJECTED. 5. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A), THE ASSESSEE MADE T HE FOLLOWING CONTENTIONS: A. LOSSES CARRIED FORWARD CONSIST OF : - RS. 5.32 LACS RELATING TO DELHI STP UNIT PRIOR TO I NTIMATION OF COMMENCEMENT OF COMMERCIAL PRODUCTION. - RS.45.87 LACS RELATING TO CHENNAI UNIT PRIOR TO INT IMATION OF COMMENCEMENT OF COMMERCIAL PRODUCTION. - RS.73.70 LACS RELATING TO CHENNAI UNIT POST INTIMAT ION OF COMMERCIAL PRODUCTION. PROTHIOUS ENGINEERING SERVICES 8 AS REDUCED BY PROFITS OF RS.7.82 LACS OF MUMBAI UNI T NON- DEDUCTIBLE U/S.10A. B. LOSSES PRIOR TO INTIMATION OF COMMENCEMENT OF CO MMERCIAL PRODUCTION AT STP UNITS ARE BEYOND STPI SCHEME AND THEREFORE, THESE LOSSES INCURRED IN THE ORDINARY COURSE OF BUS INESS OPERATIONS, ALLOW ABLE TO BE CARRIED FORWARD AS PER SECTION 72. C. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE FILED DECLARATION IN TERM OF SEC. 10A(8) IN RESPECT OF CH ENNAI UNIT THAT PROVISIONS OF SECTION 10A WOULD NOT APPLY FOR THE Y EAR UNDER CONSIDERATION. D. ACCORDINGLY, LOSSES OF THE SAID UNIT ARE OUTSID E PURVIEW OF STP AND ALLOWED TO BE CARRIED FORWARD AS PER SECTION 7 2. E. EFFECT OF AMENDED SECTION 10A BY FINANCE ACT 200 0 WHICH REPLACED THE EXEMPTION PROVISIONS BY PROVISIONS OF DEDUCTION IS THAT INCOME/LOSSES OF ALL UNITS INCLUDING STPI UNIT ARE AGGREGATED AND THEN DEDUCTION OF PROFITS OF THE ELIGIBLE UNIT IS CLAIM AS PER THE FORMULA GIVEN IN SECTION 10A. F. DEDUCTION U/S. 10A IS TO BE COMPUTED AS PER EAC H ELIGIBLE UNIT AND THEN CLAIMED AS DEDUCTION. G. SECTION 80A(4) INVOKED BY THE AO PROVIDES THAT ONCE DEDUCTION IS CLAIMED U/S. 10A, NO DEDUCTION IN RESPECT OF & TO THE EXTENT OF SUCH PROFITS IF ALLOWABLE UNDER ANY PROVISIONS OF T HE ACT AND DEDUCTION SHALL NOT EXCEED PROFITS OF ELIGIBLE UNIT . H. THE ABOVE PROVISIONS DO NOT SUGGEST THAT PROFITS OF ELIGIBLE UNITS WILL HAVE TO BE FIRST SET OFF AGAINST LOSSES OF ELI GIBLE UNIT AND THEN BALANCE AMOUNT IS DEDUCTIBLE U/S.10A TO THE EXTENT OF TOTAL INCOME. THUS, TOTAL INCOME COMPUTED BY THE AO AT RS.NIL BY RESTRICTING DEDUCTION U/S.10A TO RS.10,69,10,162/- ( AMOUNT OF TOTAL INCOME BEFORE CLAIMING DEDUCTION) AND NOT ALLOWING CARRY F ORWARD OF LOSSES OF RS.1,17,07,310/- IS CONTRARY TO THE PROV ISIONS OF THE ACT. I. RELIANCE IS PLACED ON THE DECISION OF BOMBAY HI GH COURT IN THE CASE OF HINDUSTAN UNILEVER LIMITED (325 ITR 103) FO R THE ABOVE PROPOSITION. PROTHIOUS ENGINEERING SERVICES 9 J. LOSSES SUFFERED BY CHENNAI AND DELHI UNIT WERE D ISALLOWED AS OPTION OF NOT CLAIMING DEDUCTION AS PER SEC. 10A(8) WAS FILED AFTER DUE DATE OF FILING OF RETURN. K. ITAT HYDERABAD IN THE CASE OF TECHTRAN POLYLENSE S LIMITED (117 TAXMANN 28), IT WAS HELD THAT PROCEDURE OF EXERCISI NG OPTION IS NOT MANDATORY IN THE INSTANT CASE EXEMPTION WAS WITHDRA WN BY FILING LETTER WITH THE AO DURING THE ASSESSMENT PROCEEDING S. THE ITAT HELD THAT AO SHOULD HAVE ON THIS BASIS NOT ALLOWED EXEMPTION FOR THAT YEAR. 5.1. AFTER CONSIDERING THE FACTS AND THE SUBMISSION S, THE LD. CIT(A) ALLOWED THE APPEAL HOLDING AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE ORDER OF THE AO. RECENTLY, THE HONBLE DELHI HIGH COURT IN THE CASE OF OF THE CIT VS. TEL TECHNOLOGY P.LTD. (2012) 25 TAXAMANN.COM 5 (DEL) HAS HELD THAT SECTION 10A OF T HE ACT SHOULD BE CONSIDERED AS AN EXEMPT PROVISION AND NOT AS DE DUCTION PROVISION. HENCE, LOSSES OF OTHER NON ELIGIBLE UNI TS CANNOT BE SET OFF AGAINST THE PROFITS OF 10A UNITS BEFORE GIVING EXEMPTION UNDER THE SAID SECTION. AS 10A BENEFIT WILL BE AVAILABLE ON THE ELIGIBLE UNIT AND THE LOSSES OF NON ELIGIBLE UNIT WILL BE AL LOWED TO BE CARRIED FORWARD TO SET OFF AGAINST THE FUTURE INCOME. IT I S PERTINENT TO NOTE THAT THE HONBLE DELHI HIGH COURT HAS REFERRED TO T HE DECISIONS OF THE BOMBAY HIGH COURT IN THE CASE OF BLCAK AND VEAT CH CONSULTING P. LTD. AND KARNATAKA HIGH COURT IN THE CASE YOGOGA WA INDIA LTD., WHEREIN ALSO IT WAS HELD THAT THE BROUGHT FOR WARD UNABSORBED DEPRECIATION AND LOSSES OF THE NON TAX ELIGIBLE UNI T CANNOT BE SET OFF AGAINST THE CURRENT PROFIT OF THE ELIGIBLE UNIT FOR COMPUTING THE BENEFIT U/S. 10A OF THE ACT. THE AO HAD FOLLOWED T HE DECISION OF HINDUSTAN UNILEVER LTD. OF HONBLE BOMBAY HIGH COUR T, WHICH WAS GIVEN IN 2010 WHILE THE HONBLE BOMBAY HIGH COU RT HAS IN THE CASE OF CIT VS. BLACK AND VEATCH CONSULTING P. LTD. HAS HELD IN 2012 THAT THE DEDUCTION U/S. 10A OF THE ACT HAS TO BE GIVEN AT THE STAGE OF COMPUTING THE PROFITS AND GAINS OF BUSIN ESS. THIS IS ANTERIOR TO THE APPLICATION OF THE PROVISIONS OF SE CTION 72 OF THE ACT WHICH DEALS WITH THE CARRY FORWARD AND SET OFF OF B USINESS LOSS. HENCE, THE GROUND OF APPEAL OF THE APPELLANT IS ALL OWED. 6. AGGRIEVED BY THIS, REVENUE IS BEFORE US. PROTHIOUS ENGINEERING SERVICES 10 7. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUB MITTED THAT THE LD. CIT(A) HAS GROSSLY ERRED IN RELYING UPON THE DE CISION WHICH WERE NOT ON THE FACTS OF THE PRESENT CASE. IT IS THE SAY OF THE LD. DR THAT THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HINDUSTAN UNILEVER LTD (SUPRA) SQUARELY APPLY ON TH E FACTS OF THE CASE AND THEREFORE THE SAME DESERVES TO BE FOLLOWED. 8. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHA T HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES AND RELIED U PON THE DECISIONS WHICH WERE CONSIDERED BY THE LD. CIT(A). 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO PERUSED THE DECISION RELIED UPON BY THE RIVAL PARTIES. THE LD. CIT(A) H AS RELIED UPON THE DECISION IN THE CASE OF CIT VS BLACK AND VEATCH CON SULTING PVT. LTD 348 ITR 72. IT WOULD BE PERTINENT TO NOTE THE OBSERVAT IONS OF THE HONBLE JURISDICTIONAL HIGH COURT WHICH GOES AGAINST THE AS SESSEE. THE HONBLE HIGH COURT THUS HELD AS UNDER: IN THE CIRCUMSTANCES, THE DECISION OF THE TRIBUNA L WOULD HAVE TO BE CONFIRMED. SINCE IT IS PLAIN AND EVIDENT THAT THE DEDUCTION U/S. 10A HAS TO BE GIVEN AT THE STAGE WHE N THE PROFIT AND GAINS OF BUSINESS ARE COMPUTED IN THE FIRST INS TANCE. 9.1. THE LD. CIT(A) HAS ALSO RELIED UPON THE DECISI ON OF THE HONBLE HIGH COURT IN THE CASE OF TEI TECHNOLOGY PVT. LTD 2 5TAXMANN.COM 5. WITH OUR UTMOST RESPECT TO THE HONBLE DELHI HIGH C OURT, WE FIND THAT THE HONBLE COURT HAS CONSIDERED SEC. 10A AS PROVIDING FOR AN EXEMPTION PROTHIOUS ENGINEERING SERVICES 11 WHEREAS THE HONBLE JURISDICTIONAL HIGH COURT OF BO MBAY IN THE CASE OF HINDUSTAN UNILEVER HAS CONSIDERED THE PROVISIONS OF SEC. 10A AS PROVIDING FOR DEDUCTION. THE RATIO OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HINDUSTAN UNILEVER (SUPRA) REA DS AS UNDER: SEC. 10B AS IT NOW STANDS IS NOT A PROVISION IN TH E NATURE OF AN EXEMPTION BUT PROVIDES FOR A DEDUCTION AND THE L OSS SUSTAINED BY THE UNIT FOR DEDUCTION U/S. 10B COULD BE SET OFF AGAINST THE NORMAL BUSINESS INCOME. THE NATURAL COROLLARY OF T HIS RATIO IS THAT THE LOSS SUSTAINED BY A NON ELIGIBLE UNIT COULD BE SET OFF AGAINST THE INCOME OF AN ELIGIBLE UNIT. 9.2. MOREOVER SEC. 80-IA(4) WHICH HAS BEEN INSERTED BY FINANCE ACT 2009 WITH RETROSPECTIVE EFFECT FROM 1.4.2003 AND TH EREFORE APPLICABLE FROM A.Y. 2003-04 PROVIDES THAT IN SUPER SECTION OF THE PROVISIONS CONTAINED IN SEC. 10A/10B ETC., OR ANY OTHER PROVIS ION DEDUCTION SHALL BE ALLOWED TO THE EXTENT OF PROFITS AND GAINS OF THE E LIGIBLE UNDERTAKING ONLY SUBJECT TO OVER ALL LIMIT OF TOTAL INCOME AND NO DE DUCTION WILL BE AVAILABLE FOR THE SAME PROVIDES UNDER ANY OTHER PROVISIONS OF THE ACT . 10. CONSIDERING THE FACTS IN TOTALITY, IN THE LIGHT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HI NDUSTAN UNILEVER(SUPRA), IN OUR UNDERSTANDING OF THE LAW, T HE FINDINGS OF THE LD. CIT(A) ARE ERRONEOUS. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THAT OF THE AO. THE APPEAL FILE D BY THE REVENUE IS ALLOWED. 11. BEFORE CLOSING, WE FIND THAT THE ASSESSEE HAS T AKEN AN ALTERNATIVE CLAIM THAT THE LOSSES SUFFERED POST THE INTIMATION OF COMMENCEMENT OF PROTHIOUS ENGINEERING SERVICES 12 COMMERCIAL PRODUCTION ARE TO BE CLAIMED ON THE BASI S OF DECLARATION -5 U/S. 10AA(8) OF THE ACT. 12. IT IS NOT IN DISPUTE THAT THE SAID DECLARATION WAS NOT FILED ON OR BEFORE THE DUE DATE OF FILING OF THE RETURN. THE T RIBUNAL HYDERABAD BENCH IN THE CASE OF TECHTRAN POLYLENSES LTD. VS I TO 177 TAXMANN 28 HAS HELD AS UNDER: ON GOING THROUGH THE SCHEME OF SECTION 1OB, IT IS C LEAR THAT THE ASSESSEE, WHO IS COVERED BY THE PROVISIONS OF S ECTION 1OB, HAS BEEN GIVEN AN OPTION TO AVAIL OR NOT TO AVAIL THE T AX CONCESSION PROVIDED UNDER SECTION10B, AT THE TIME OF FILING OF RETURN OF INCOME AS PER PROVISIONS OF SECTION IOB(8), AND IT CANNOT BE DEPRIVED OF ITS CLAIM FOR THE LAPSE ONLY, AS A PROCEDURE OF EXE RCISING THE OPTION CANNOT BE TREATED AS MANDATORY. THE SAME IS JUST DI RECTORY. IN THE INSTANT CASE, THE ASSESSEE HAD FILED A LETTER BEFOR E THE ASSESSING OFFICER FOR WITHDRAWING THE CLAIM UNDER SECTION 10A /10B DURING ASSESSMENT PROCEEDINGS AND BEFORE THE ASSESSMENT WA S COMPLETED. THEREFORE, THE REJECTION OF ITS REQUEST BY THE ASSE SSING OFFICER, WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3), WAS NOT JUSTIFIED. THEREFORE, THE ASSESSING OFFICER OUGHT TO HAVE ALLO WED THE ASSESSEE TO WITHDRAW THE CLAIM OF EXEMPTION UNDER S ECTION 10A/1OB. FURTHER, THE ASSESSING OFFICER COULD NOT T HRUST EXEMPTION UNDER SECTION 10B UPON THE ASSESSEE. THER EFORE, THE ORDERS PASSED BY THE LOWER AUTHORITIES ON THAT ISSU E WERE NOT JUSTIFIED AND WERE LIABLE TO BE SET ASIDE. ON A READING THE PROVISIONS OF SUB-SECTION (6) OF S ECTION 1OA/LOB, IT IS CLEAR THAT IN CASES WHERE EXEMPTION UNDER SECTION 1OA/1OB IS ALLOWED, THE ASSESSEE IS NOT ENTITLED TO CARRY FORWARD OR SET OFF OF DEPRECIATION AND LOSSES, SINCE THE OR DER OF THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2001 02, WHER EIN EXEMPTION UNDER SECTION 1OB HAD BEEN ALLOWED, HAD BEEN SET A SIDE AND THE REQUEST OF THE ASSESSEE FOR WITHDRAWING THE CLAIM O F EXEMPTION U/S. `10A/10B HAD BEEN ALLOWED, SUB-SECTION(6) OF SEC. 1 0A/10B WOULD NOT BE APPLICABLE TO THE ASSESSEE AND THE ASSESSEE WOULD BE ENTITLED PROTHIOUS ENGINEERING SERVICES 13 TO CARRY FORWARD AND SET OFF DEPRECIATION/LOSSES IN ACCORDANCE WITH LAW. RESPECTFULLY FOLLOWING THE DECISION OF THE CO ORDI NATE BENCH (SUPRA), WE RESTORE THIS ISSUE FOR THE LIMITED PURP OSE OF DETERMINING THE CLAIM OF THE ASSESSEE BACK TO THE FILE OF THE LD. C IT(A) TO DECIDE THIS LIMITED ISSUE IN THE LIGHT OF THE AFORESTATED DECIS ION OF THE TRIBUNAL AS PER THE PROVISIONS OF LAW AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. C.O. NO. 81/M/2013 ASSESSEES APPEAL 13. THE LD. COUNSEL BEFORE US STATED THAT HE IS NOT PRESSING THE CROSS OBJECTION FILED BY THE ASSESSEE. THEREFORE IT IS D ISMISSED AS NOT PRESSED. 14. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THE C.O. FILED BY THE ASSES SEE IS DISMISSED AS NOT PRESSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JUNE,2014 . 3 . 2& $ 4 56 4.6.2014 2 . 7 SD/- SD/- (I.P. BANSAL ) (N.K. BILLAIYA) /JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI; 5 DATED 4 TH JUNE, 2014 . . ./ RJ , SR. PS PROTHIOUS ENGINEERING SERVICES 14 3 3 3 3 . .. . +/ +/ +/ +/ 8 &/ 8 &/ 8 &/ 8 &/ / COPY OF THE ORDER FORWARDED TO : 1. '* / THE APPELLANT 2. +,'* / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- 4. 9 / CIT 5. :7 +/ , , / DR, ITAT, MUMBAI 6. 7; < / GUARD FILE. 3 3 3 3 / BY ORDER, , / +/ //TRUE COPY// = == = / > > > > ( ( ( ( (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI