Gulbrandsen Technologies (India) Pvt. Ltd, Vadodara V. DCIT, Circle-1(1)(1), Vadodara

ITA 2207/AHD/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0875 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 31-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANEESH AGARWAL
• Keywords: Depreciation; Question of law; Unabsorbed depreciation; CHAPTER IV
• Section: 143(3); 10B; 72; 10

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 2207/AHD/2018 ( ASSESSMENT YEAR : 2011-12) GULBRANDSEN TECHNOLOGIES (INDIA) PRIVATE LIMITED 405, SYNERGY SQUARE, KRISHNA INDUSTRIAL ESTATE, GOWRA, VADODARA / VS. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1)(1), VADODARA ./ ./ PAN/GIR NO. : AABCG9006E ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI MANEESH AGARWAL, A.R. / RESPONDENT BY : SHRI VIDHYUT TRIVEDI, CIT.D.R. DATE OF HEARING 18/12/2019 !'# / DATE OF PRONOUNCEMENT 20/12/2019 / 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), VADODARA, (CIT(A) IN SHORT), DATED 18. 05.2016 ARISING IN THE ASSESSMENT ORDER DATED 12.03.2015 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (T HE ACT) CONCERNING AY 2011-12. ITA NO.2207/AHD/18 [GULBRANDSEN TECHNOLOGIES (INDIA) P. LTD.] A.Y. 2011-12 - 2 - 2. THE SOLITARY OBJECTION INVOLVED IN THE PRESENT A PPEAL IS TOWARDS MANNER OF COMPUTATION OF EXEMPTION UNDER S.10B OF T HE ACT, THAT IS, WHETHER SET OFF OF UNABSORBED DEPRECIATION/BUSINESS LOSS OF EARLIER YEARS IS REQUIRED TO BE CARRIED OUT FIRST AND DEDUC TION UNDER S.10B OF THE ACT IS AVAILABLE THEREAFTER ON REMAINING PROFIT S AFTER SUCH SET OFF OR ASSESSEE IS ENTITLED TO CLAIM DEDUCTION UNDER S. 10B OF THE ACT ON HIGHER AMOUNTS OF ELIGIBLE PROFITS BEFORE SUCH SET OFF. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LE ARNED AR FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAV OUR OF THE ASSESSEE IN ITS OWN CASE CONCERNING AY 2010-11 IN IT(TP)A NO. 702/AHD/2015 ORDER DATED 23.03.2017 . 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE ASSESSEE HAS AGITATED THE ACTION OF THE AO TOWARDS THE MANNER OF COMPUTING THE EXEMPTION UNDER S.10B OF THE ACT AFTE R SETTING OFF THE UNABSORBED DEPRECIATION/BUSINESS LOSS OF EARLIER YE ARS. IT IS CLAIM OF THE ASSESSEE THAT THE ASSESSEE IS ENTITLED TO DEDUC TION UNDER S.10B OF THE ACT ON THE GROSS AMOUNT OF ELIGIBLE PROFIT DERI VED FROM 100% EXPORT ORIENTED UNDERTAKING WITHOUT TAKING INTO ACC OUNT BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION. WE FIND THAT THE ISSUE HAS BEEN EXAMINED BY THE CO-ORDINATE BENCH IN AY 2010-11 IN ASSESSEES OWN CASE IT(TP)A NO.702/AHD/2015 . THE RELEVANT OPERATIVE PARA OF THE CO-ORDINATE BENCH IS REPRODUC ED HEREUNDER FOR READY REFERENCE: 6. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD CAREFULLY. THE HONBLE KARNATAKA HIGH C OURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD.(SUPRA) HAS CONSIDERE D AN IDENTICAL SITUATION. QUESTION CONSIDERED BY THE HONBLE KARN ATAKA HIGH COURT WAS (II) WHETHER THE TRIBUNAL WAS CORRECT IN HOLDING THAT THE DEDUCTION UNDER SECTION 10A OR 10B OF THE ACT D URING THE CURRENT ASSESSMENT YEAR HAS TO BE ALLOWED WITHOUT S ETTING OFF BROUGHT FORWARD UNABSORBED LOSSES AND THE DEPRECIAT ION FROM EARLIER ASSESSMENT YEAR OR CURRENT ASSESSMENT YEAR EITHER IN ITA NO.2207/AHD/18 [GULBRANDSEN TECHNOLOGIES (INDIA) P. LTD.] A.Y. 2011-12 - 3 - THE CASE OF NON-STP UNITS OR IN THE CASE OF THE VER Y SAME UNDERTAKING ? THIS QUESTION WAS ANSWERED IN FAVOUR OF THE ASSESSE E. 7. THE CONCLUSIONS DRAWN BY THE HONBLE HIGH COURT ARE WORTH TO NOTE, WHICH READS AS UNDER: .. AFTER MAKING ALL SUCH COMPUTATIONS THE ASSESSE E WOULD BE ENTITLED TO THE BENEFIT OF SET OFF OR CARRY FORW ARD OF LOSS AS PROVIDED UNDER SECTION 72 OF THE ACT, THAT IS TH E BENEFIT WHICH IS GIVEN TO THE ASSESSEE UNDER THE ACT IRRESP ECTIVE OF THE NATURE OF BUSINESS WHICH HE IS CARRYING ON. THE SAI D BENEFIT IS AVAILABLE EVEN TO UNDERTAKINGS UNDER SECTION 10 B O F THE ACT. THE EXPRESSION 'DEDUCTION OF SUCH PROFITS AND GAINS AS DERIVED BY AN UNDERTAKING SHALL BE ALLOWED FROM THE TOTAL I NCOME OF THE ASSESSEE', HAS TO BE UNDERSTOOD IN. THE CONTEXT WITH WHICH THE SAID PROVISION IS INSERTED IN CHAPTER-ILL OF TH E ACT. SUB- SECTION (4) OF SECTION 10-A CLARIFIES THIS POSITION . IT. PROVIDES THAT THE PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS FROM COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS T O THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, THE SAM E PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE BEARS TO DIE TOTAL TURNOVER OF TH E BUSINESS CARRIED ON BY THE UNDERTAKING. THEREFORE, IT IS CLE AR THAT THOUGH THE ASSESSEE MAY BE HAVING MORE THAN ONE UND ERTAKING FOR THE PURPOSE OF SECTION 10-A IT IS THE PROFIT DE RIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE F ROM THE BUSINESS OF THE UNDERTAKING ALONE THAT HAS TO BE TA KEN INTO CONSIDERATION AND SUCH PROFIT IS NOT TO BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. IT IS ONLY ALTER THE DED UCTION OF THE SAID PROFITS AND GAINS, THE INCOME OF THE ASSESSEE HAS TO BE COMPUTED. THE PROVISIONS OF THIS SUB-SECTION WILL APPLY EVEN IN THE CASE WHERE AN ASSESSEE HAS OPTED OUT OF SECTION 10- A BY EXERCISING HIS OPTION UNDER SUB-SECTION (8). AS DIS CUSSED, IT IS PERMISSIBLE FOR AN ASSESSEE TO OPT IN ARID OPT OUT OF SECTION 10-A. IN THE YEAR WHEN THE ASSESSEE HAS OPTED OUT, THE NORMAL PROVISIONS OF THE ACT WOULD APPLY. THE PROFITS DERI VED BY HIM FROM THE STP UNDERTAKING WOULD SUFFER TAX IN THE NO RMAL COURSE SUBJECT TO VARIOUS PROVISIONS OF THE ACT INC LUDING THOSE OF CHAPTER VI-A. IF IN SUCH A YEAR, THE ASSESSEE HA S SUFFERED LOSSES, SUCH LOSSES WOULD BE SUBJECT TO INTER SOURC E AND INTER HEAD SET OFF. THE BALANCE IF ANY THEREAFTER CAN BE CARRIED FORWARD FOR BEING SET OFF AGAINST PROFITS OF THE SU BSEQUENT ASSESSMENT YEARS IN THE NORMAL COURSE, UNABSORBED DEPRECIATION ALSO MERITS A SIMILAR TREATMENT. AS THE INCOME OF SECTION 10-A UNIT HAS TO BE EXCLUD ED AT SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL IN COME, THE LOSS OF NON SECTION 10-A UNIT CANNOT BE SET OFF AGAINST THE INCOME OF 10-A UNIT UNDER SECTION 72. THE LOSS INCURRED BY THE ITA NO.2207/AHD/18 [GULBRANDSEN TECHNOLOGIES (INDIA) P. LTD.] A.Y. 2011-12 - 4 - ASSESSEE UNDER THE HEAD PROFITS AND GAINS OF BUSINE SS OR PROFESSION HAS TO BE SET OFF AGAINST THE PROFITS AN D GAINS IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY SU CH ASSESSEE. THEREFORE, AS THE PROFITS AND GAINS UNDER SECTION 1 0-A IS NOT. BE INCLUDED IN THE INCOME OF THE ASSESSEE AL ALL, T HE QUESTION OF SETTING OFF THE LOSS OF THE ASSESSEE OF ANY PROF ITS AND GAINS OF BUSINESS AGAINST SUCH PROFITS AND GAINS OF THE U NDERTAKING WOULD NOT ARISE. SIMILARLY, AS PER SECTION 72(2). U NABSORBED BUSINESS LOSS IS TO BE FIRST SET OFF AND THEREAFTER UNABSORBED DEPRECIATION TREATED AS CURRENT YEARS DEPRECIATION UNDER SECTION 32(2) IS TO BE SET OFF. AS DEDUCTION UNDER SECTION 10-A HAS TO BE EXCLUDED FROM THE TOTAL INCOME OF THE ASS ESSEE. THE QUESTION OF UNABSORBED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFIT AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. IN THAT VIEW OF THE MATTER, THE APPROACH OF THE ASSESS ING AUTHORITY WAS QUITE CONTRARY TO THE AFORESAID STATU TORY PROVISIONS AND THE APPELLATE COMMISSIONER AS WELL A S THE TRIBUNAL WERE FULLY JUSTIFIED IN SETTING ASIDE THE SAID ASSESSMENT ORDER AND GRANTING THE BENEFIT OF SECTIO N 10-A TO THE ASSESSEE. HENCE, THE MAIN SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEES AND AGAINST THE REVENUE. 8. DISPUTE TRAVELLED UPTO THE HONBLE SUPREME COURT , AND THE HONBLE SUPREME COURT HAS FORMULATED THE FOLLOWING QUESTION: 3. THE BROAD QUESTION INDICATED ABOVE MAY BE CONVE NIENTLY DISSECTED INTO THE FOLLOWING SPECIFIC QUESTIONS ARI SING IN THE CASES UNDER CONSIDERATION. (I) WHETHER SECTION 10A OF THE ACT IS BEYOND THE PU RVIEW OF THE COMPUTATION MECHANISM OF TOTAL INCOME AS DEFINE D UNDER THE ACT. CONSEQUENTLY, IS THE INCOME OF A SECTION 1 0A UNIT REQUIRED TO BE EXCLUDED BEFORE ARRIVING AT THE GROS S TOTAL INCOME OF THE ASSESSEE? (II) WHETHER THE PHRASE TOTAL INCOME IN SECTION 1 0A OF THE ACT IS AKIN AND PARI MATERIA WITH THE SAID EXPRESSI ON AS APPEARING IN SECTION 2(45) OF THE ACT? (III) WHETHER EVEN AFTER THE AMENDMENT MADE WITH EF FECT FROM 1.04.2001, SECTION 10A OF THE ACT CONTINUES TO REMA IN AN EXEMPTION SECTION AND NOT A DEDUCTION SECTION? (IV) WHETHER LOSSES OF OTHER 10A UNITS OR NON 10A UNITS CAN BE SET OFF AGAINST THE PROFITS OF 10A UNITS BEFORE DEDUCTIONS UNDER SECTION 10A ARE EFFECTED? (V) WHETHER BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION OF 10A UNITS OR NON 10A UNI TS CAN BE SET OFF AGAINST THE PROFITS OF ANOTHER 10A UNITS OF THE ASSESSEE. ITA NO.2207/AHD/18 [GULBRANDSEN TECHNOLOGIES (INDIA) P. LTD.] A.Y. 2011-12 - 5 - 9. THESE QUESTIONS HAVE BEEN ANSWERED IN FAVOUR OF THE ASSESSEE, AND IT WAS HELD THAT DEDUCTION UNDER SECTION 10A WO ULD BE PRIOR TO THE COMMENCEMENT OF EXERCISE TO BE TAKEN UNDER CHAP TER VI OF THE ACT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSE E FROM THE GROSS TOTAL INCOME. IN OTHER WORDS, HONBLE COURT HAS HE LD THAT UNABSORBED BUSINESS LOSS WOULD NOT BE SET OFF AGAIN ST THE INCOME. THE RELEVANT DISCUSSION MADE BY THE HONBLE SUPREME ON THIS ASPECT DESERVES TO BE NOTED. IT READS AS UNDER: 16. FROM A READING OF THE RELEVANT PROVISIONS OF S ECTION 10A IT IS MORE THAN CLEAR TO US THAT THE DEDUCTIONS CON TEMPLATED THEREIN IS QUA THE ELIGIBLE UNDERTAKING OF AN ASSES SEE STANDING ON ITS OWN AND WITHOUT REFERENCE TO THE OTHER ELIGI BLE OR NON- ELIGIBLE UNITS OR UNDERTAKINGS OF THE ASSESSEE. THE BENEFIT OF DEDUCTION IS GIVEN BY THE ACT TO THE INDIVIDUAL UND ERTAKING AND RESULTANTLY FLOWS TO THE ASSESSEE. THIS IS ALSO MOR E THAN CLEAR FROM THE CONTEMPORANEOUS CIRCULAR NO. 794 DATED 9.8 .2000 WHICH STATES IN PARAGRAPH 15.6 THAT, THE EXPORT TURNOVER AND THE TOTAL TURNOVER FOR THE PURPOSES OF SECTIONS 10A AND 10B SHALL BE OF THE UNDERTAKING LOCATED IN SPECIFIED ZONES OR 100% EXPO RT ORIENTED UNDERTAKINGS, AS THE CASE MAY BE, AND THIS SHALL NOT HAVE ANY MATERIAL RELATIONSHIP WITH THE O THER BUSINESS OF THE ASSESSEE OUTSIDE THESE ZONES OR UNI TS FOR THE PURPOSES OF THIS PROVISION. 17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [ FIRST 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 09.08.2000 ) UNDERSTOOD THE SITUATION, IT IS ONLY LOGICAL AND NA TURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTL Y AND, THEREFORE, IMMEDIATELY AFTER THE STAGE OF DETERMINA TION OF ITS PROFITS AND GAINS. AT THAT STAGE THE AGGREGATE OF T HE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SET OFF AN D CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION 10A THEREFORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE A CT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM T HE 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 UNFOLDED BY THE PROVISIONS OF SECTION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPRESSION TOTAL I NCOME OF THE ASSESSEE IN SECTION 10A AS TOTAL INCOME OF TH E UNDERTAKING. ITA NO.2207/AHD/18 [GULBRANDSEN TECHNOLOGIES (INDIA) P. LTD.] A.Y. 2011-12 - 6 - 18. FOR THE AFORESAID REASONS WE ANSWER THE APPEALS AND THE QUESTIONS ARISING THEREIN, AS FORMULATED AT THE OUT SET OF THIS ORDER, BY HOLDING THAT THOUGH SECTION 10A, AS AMEND ED, IS A PROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOU LD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UN DERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI. A LL THE APPEALS SHALL STAND DISPOSED OF ACCORDINGLY. 10. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON BLE SUPREME COURT, WE ARE OF THE VIEW THAT THE AO WAS NOT JUSTI FIED IN SET OFF OF THE UNABSORBED BUSINESS LOSS AGAINST PROFITS OF THE ELIGIBLE UNITS AND THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTIO N 10B OF THE INCOME TAX ACT. THIS GROUND OF APPEAL IS ALLOWED. IN CONSONANCE WITH THE VIEW TAKEN BY THE TRIBUNAL, WE FIND MERIT IN THE APPEAL OF THE ASSESSEE. THE ASSESSEE WOULD BE ENTITLED TO CLAIM DEDUCTION UNDER S.10B OF THE ACT ON ELIGIBLE PROFITS BEFORE SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION/BUSI NESS LOSSES. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. SD/- SD/- (MADHUMITA ROY) (PRADIP KUMAR K EDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 20/12/2019 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 IN OPEN COURT ON 20/12/2019