Appeal Details
Counselvise Citation
18421114 RSA 2012
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 8 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-10-2015
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
21-10-2015
Assessment Year
2005-2006
Appeal Filed On
03-02-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER IT(TP)A NO.184/BANG/2012 ASSESSMENT YEAR : 2005-06 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 12(1), BANGALORE. VS. M/S. MAKINO INDIA PVT. LTD., NO.11, EPIP WHITEFIELD ROAD, BANGALORE 560 066. PAN: AACCM 6536A APPELLANT RESPONDENT APPELLANT BY : SHRI SUDHAKAR RAO, CIT-I(DR) RESPONDENT BY : SHRI K.R. VASUDEVAN, ADVOCATE DATE OF HEARING : 21.10.2015 DATE OF PRONOUNCEMENT : 28.10.2015 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER D ATED 15.11.2011 OF THE CIT(APPEALS)-III, BANGALORE FOR THE ASSESSME NT YEAR 2005-06. 2. THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INC OME FOR THE AY 2005-06 ON 31.10.2005, DISCLOSING TAXABLE INCOME AT 3,66,32,180 U/S. 115JB OF THE ACT. IT HAD TAXABLE INCOME UNDER THE REGULAR PROVISIONS OF THE ACT AMOUNTING TO RS. 3,17,54,394/- AFTER CLAIMING D EDUCTION U/S. 10A ITA NO.184/BANG/2012 PAGE 2 OF 5 AMOUNTING TO RS. 2,12,21,787/-. THE ASSESSEE HAD B ROUGHT FORWARD BUSINESS LOSSES AMOUNTING TO RS. 64,34,368/- AND BR OUGHT FORWARD UNABSORBED DEPRECIATION AMOUNTING TO RS. 5,90,98,05 9/- AS AT THE BEGINNING OF THE ASSESSMENT YEAR 2005-06. 3. DURING THE ASSESSMENT YEAR 2005-06 THE ASSESSEE EARNED TAXABLE PROFITS FROM ITS STPI UNIT AND NON-STPI UNIT AMOUNT ING TO RS. 2,26,78,826 AND RS. 3,02,97,354 RESPECTIVELY. IT CLAIMED A DED UCTION U/S. 10A OF THE ACT AMOUNTING TO RS. 2,12,2 1,787 FROM THE TAXABLE PROFITS OF THE STPI UNIT. AFTER SUCH CLAIM, IT SET OFF THE BALANCE PROFITS UN DER THE STPI UNIT AND THE NON-STPI UNIT WITH THE AVAILABLE BROUGHT FORWARD BU SINESS LOSS AND THE UNABSORBED DEPRECIATION. THE DETAILS OF BROUGHT F ORWARD LOSS AND SET OFF AS PER THE RETURN OF INCOME ARE AS FOLLOWS:- PARTICULARS STPI UNIT AMOUNT IN RS. NON-STPI UNIT AMOUNT IN RS. TOTAL AMOUNT IN RS. TOTAL INCOME 2,26,78,826 3,02,97,354 5,29,76,181 LESS: EXEMPTION U/S. 10A 2,12,21,787 - 2,12,21,787 TOTAL INCOME 14,57,639 3,02,97,354 3,17,54,394 BUSINESS LOSS AND UNABSORBED DEPRECIATION OF AY 2002-03 AND 2003-04 SET OFF 3,17,54,394 NET TAXABLE INCOME NIL 4. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER A DJUSTED THE BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION AGAINST THE PROFITS OF STPI UNDERTAKING BEFORE COMPUTING DEDUCTION U/S. 10A OF THE ACT RESULTING IN ITA NO.184/BANG/2012 PAGE 3 OF 5 SETTING OFF THE ENTIRE CURRENT YEAR PROFITS OF THE COMPANY FOR A.Y. 2005-06 UNDER THE REGULAR PROVISIONS OF THE ACT. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(APPEALS). 6. IN THE APPELLATE PROCEEDINGS BEFORE THE CIT(APPE ALS), THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT DEDUCTION U /S. 10A IS TO BE COMPUTED ON THE INCOME OF THE STPI UNIT WITHOUT SET TING OFF THE LOSSES OF THE NON-STPI UNIT AND CONSEQUENTLY THE CARRY FORWAR D OF LOSSES AND DEPRECIATION OF NON-STPI UNIT IS TO BE ALLOWED. RE LIANCE WAS PLACED ON THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT OF K ARNATAKA IN ITA NO.78 OF 2011 IN THE CASE OF CIT, LTU V. M/S. YOKOGAWA INDIA LTD. 7. THE LD. CIT(APPEALS) WAS OF THE VIEW THAT THE IS SUE IS SETTLED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF YOKOGAWA INDIA LTD. CITED SUPRA. FOLLOWING THIS DECISION, HE HELD THAT DEDUCTION U/S. 10A IS TO BE COMPUTED WITHOUT SETTING OFF THE BROUG HT FORWARD BUSINESS LOSS OF THE ASSESSEE. 8. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE REVE NUE IS APPEAL BEFORE US ON THE FOLLOWING EFFECTIVE GROUND:- 2. THE ID. CIT(A) ERRED IN HOLDING THAT THE DEDUC TION U/S 10A SHOULD BE ALLOWED IN RESPECT OF PROFITS OF 10A UNIT WITHOUT SETTING OFF OF UNABSORBED BROUGHT FORWARD BUSINESS LOSS AND DEPRECIATION BY RELYING ON THE ORDER OF HONBLE HIGH COURT OF KA RNATAKA IN THE CASE OF CIT(LTU) VS. YOKOGAWA INDIA LTD., WHILE THIS ITA NO.184/BANG/2012 PAGE 4 OF 5 DECISION RUNS CONTRARY TO THE PROVISIONS OF SEC.70, 32(2) AND 72 OF THE L.T. ACT AND ACCORDINGLY IT WAS CONTESTED BE FORE THE HONBLE APEX COURT IN A SLP FILED BY THE DEPARTMENT . 9. WE FIND THAT THE ISSUE IS COVERED BY THE DECISIO N OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD. (SUPRA) , WHEREIN IT HAS BEEN HELD AS FOLLOWS:- 33. AS THE INCOME OF THE SECTION10A UNIT HAS TO B E EXCLUDED AT SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL IN COME, THE LOSS OF THE NON-SECTION 10A UNIT CANNOT BE SET OFF AGAINST THE INCOME OF THE SECTION 10A UNIT UNDER SECTION 72. THE LOSS INC URRED BY THE ASSESSEE UNDER THE HEAD 'PROFITS AND GAINS OF BUSIN ESS OR PROFESSION' HAS TO BE SET OFF AGAINST THE PROFITS A ND GAINS, IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY SUCH AS SESSEE. THEREFORE, AS THE PROFITS AND GAINS UNDER SECTION 1 0A IS NOT BE INCLUDED IN THE INCOME OF THE ASSESSEE AT ALL, THE QUESTION OF SETTING OFF THE LOSS OF THE ASSESSEE OF ANY PROFITS AND GAINS OF BUSINESS AGAINST SUCH PROFITS AND GAINS OF THE UNDE RTAKING WOULD NOT ARISE. SIMILARLY, AS PER SECTION 72(2), UNABSOR BED BUSINESS LOSS IS TO BE FIRST SET OFF AND THEREAFTER UNABSORB ED DEPRECIATION TREATED AS CURRENT YEAR'S DEPRECIATION UNDER SECTIO N 32(2) IS TO BE SET OFF. AS DEDUCTION UNDER SECTION 10A HAS TO BE E XCLUDED FROM THE TOTAL INCOME OF THE ASSESSEE THE QUESTION OF UN ABSORBED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFIT AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. IN THAT VIEW OF THE MA TTER, THE APPROACH OF THE ASSESSING AUTHORITY WAS QUITE CONTR ARY TO THE AFORESAID STATUTORY PROVISIONS AND THE APPELLATE CO MMISSIONER AS WELL AS THE TRIBUNAL WERE FULLY JUSTIFIED IN SETTIN G ASIDE THE SAID ASSESSMENT ORDER AND GRANTING THE BENEFIT OF SECTIO N 10A TO THE ASSESSEE. HENCE, THE MAIN SUBSTANTIAL QUESTION OF L AW IS ANSWERED IN FAVOUR OF THE ASSESSEES AND AGAINST THE REVENUE. ITA NO.184/BANG/2012 PAGE 5 OF 5 10. SINCE THE CIT(A) HAS FOLLOWED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE FIND NO INFIRMITY IN HIS ORDER. WE THEREFORE DISMISS THE APPEAL FILED BY THE REVENUE. 11. IN THE RESULT, THE APPEAL BY THE REVENUE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF OCTOBER, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) (ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 28 TH OCTOBER, 2015. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.
