M/s. Flexituff International Ltd., Dhar V. THE PR.CIT-1, Indore

ITA 282/IND/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5685 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-03-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 17-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Keywords: Business income; Depreciation; Opportunity of being heard; Additional depreciation; Period of limitation; Wrong claim; Difference of opinion; Benefit of exemption; Unabsorbed depreciation; Change of opinion; Set aside
• Section: 143(3); 72(1); 80HHC; 14A; 115JB; 10B; 205; 148; 263; 15

Judgement Text

FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.282/IND/2017 ASSESSMENT YEAR 2012-13 REVENUE BY SMT. ASHIMA GUPTA, CIT ASSESSEE BY S HRI MAN J I T SACHDEVA & AVINASH GAUR, ADVOCATES DATE OF HEARING 26 .03 . 201 9 DATE OF PRONOUNCEMENT 1 4 .0 5 . 201 9 O R D E R PER MANISH BORAD, AM. THE ABOVE CAPTIONED APPEAL IS FILED AT THE INSTANC E OF ASSESSEE PERTAINING TO ASSESSMENT YEAR 2011-12 AND IS DIRE CTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)- 1 (IN SHORT LD.CIT(A)], INDORE DATED 21.3.2016 FRAMED U/S 26 3 OF THE INCOME TAX ACT 1961(IN SHORT THE ACT). M /S. FLEXITUFF INTERNATIONAL LTD, C-41-50, SEZ, SECTOR-3, PITHAMPUR, DIST. DHAR VS. PR . COMMISSIONER OF INCOME TAX-1, INDORE ( APPELLANT ) (RESPONDENT ) PAN A AACN5986H FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 2 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECORD S ARE THAT THE ASSESSEE IS A PVT. LTD COMPANY ENGAGED IN MANUFACTU RING AND TRADING OF HDPE/PE WOVEN SACKS AND FIBC JUMBO BAGS. E-RETURN FOR ASSESSMENT YEAR 2012-13 FILED ON 27.9.2012 DECLARING NIL INCOM E AFTER CLAIMING LOSS FOR THE CURRENT YEAR AT RS.3,17,87,340/-. CASE SEL ECTED FOR SCRUTINY ASSESSMENT BY WAY OF SERVING NOTICE U/S 143(2) OF T HE ACT. ASSESSEE COMPANY WAS RUNNING 3 UNITS NAMELY DTA DIVISION, SE Z DIVISION AND KASHIPUR DIVISION. INCOME FROM SEZ DIVISION IS EXE MPT U/S 10A(1A) OF THE ACT. ASSESSEE INCURRED LOSS IN KASHIPUR DIVISI ON BUT WHILE COMPUTING INCOME ASSESSEE HAS FIRST CLAIMED EXEMPTI ON U/S 10A(1A) OF THE ACT AND REMAINING INCOME WAS USED TO SET OFF CU RRENT AND BROUGHT FORWARD LOSS. THIS CLAIM OF THE ASSESSEE ALLOWED B Y THE LD. A.O ON THE BASIS OF HIS UNDERSTANDING OF PROVISIONS OF INCOME TAX ACT AND CBDT CIRCULARS ISSUED ON THIS ISSUE AND DOCUMENTS FILED BEFORE HIM. HOWEVER, LD. A.O MADE DISALLOWANCE U/S 14A OF THE ACT AT RS. 61,43,940/- AND ALSO MADE DISALLOWANCE FOR INTEREST PAID ON INCOME TAX A T RS.15,82,154/- AND ASSESSED LOSS AT RS.2,40,10,826/-. SUBSEQUENTLY LD . PRINCIPLE COMMISSIONER OF INCOME TAX ASSUMING JURISDICTION U/ S 263 OF THE ACT PERUSED THE RECORDS AND OBSERVED THAT THE ORDER PAS SED BY LD. A.O U/S 143(3) OF THE ACT DATED 30.3.2015 IS ERRONEOUS AND PREJUDICIAL TO THE FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 3 INTEREST OF REVENUE BECAUSE IT WAS MADE WITHOUT PRO PER ENQUIRY, NON APPLICATION OF MIND AND BASED ON INSUFFICIENT MATER IAL. 3. NOW THE ASSESSEE IS IN APPEAL CHALLENGING THE ORDE R OF PRINCIPLE COMMISSIONER OF INCOME TAX U/S 263 OF THE ACT FOR WRONGLY ASSUMING THE JURISDICTION EVEN WHEN PROPER ENQUIRY WAS MADE BY LD. A.O. FOLLOWING GROUNDS HAVE BEEN RAISED; 01. THAT ON THE FACTS AND IN THE CIRCUMSTANCE OF T HE CASE THE LEARNED PR. COMMISSIONER OF INCOME TAX WAS WRONG IN INVOKING TH E POWER OF REVISION U/S 263 OF THE INCOME TAX ACT. 02. THAT, THE LEARNED PR. COMMISSIONER OF INCOME TA X-I, INDORE FAILED TO APPRECIATE THAT THE NECESSARY DOCUMENTS PERTAINING TO THE CLAI M OF DEDUCTION UNDER SECTION 10A(LA), INTEREST ON INCOME TAX AND ADDITIONAL DEPR ECIATION WERE BEFORE THE ASSESSING OFFICER. 03. THAT, THE LEARNED ASSESSING OFFICER AFTER APPLY ING HIS MIND AND VERIFYING THE DETAILS AND SUBMISSION OF THE ASSESSEE COMPANY ALLO WED DEDUCTION UNDER SECTION 10A(LA), INTEREST ON INCOME TAX AND ADDITIO NAL DEPRECIATION. 04.THAT THE LEARNED PR. COMMISSIONER OF INCOME TAX- I WITHOUT APPRECIATING THE SUBMISSION OF THE ASSESSEE COMPANY, TREATED THE ASS ESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND PASS ED ORDER UNDER SECTION 263 OF THE INCOME TAX. 05.THAT THE ASSESSEE COMPANY CRAVES LEAVE TO ADD, A LTER, AMEND AND OR DELETE ANY GROUNDS OF APPEAL. FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 4 4. LD. COUNSEL FOR THE ASSESSE VEHEMENTLY ARGUED REFER RING TO FOLLOWING WRITTEN SUBMISSIONS GIVEN FOR THE GROUNDS RAISED IN THESE APPEALS; THAT THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT OF THE ASSESSEE COMPANY WAS COMPLETED FOR THE ASSESSMENT Y EAR 2012-13 ON 30.03.2015 DETERMINING TOTAL LOSS AT RS.24010830/-. THAT THEREAFTER PROCEEDINGS UNDER SECTION 263 OF TH E INCOME TAX ACT WERE INITIATED CONSIDERING THE ASSESSMENT ORDER AS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND SHOW CAUSE NOTICE WAS ISSUE D TO THE ASSESSEE ON 25.07.2016. THAT THE LEARNED PRINCIPAL COMMISSIONER OF INCOME T AX ACT PASSED THE ORDER UNDER SECTION 263 OF THE INCOME TAX ACT AND SET ASI DE THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT. THAT AGGRIEVED BY THE ORDER PASSED UNDER SECTION 26 3 OF THE INCOME TAX ACT BY THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX AC T, THE ASSESSEE COMPANY HAS FILED APPEAL BEFORE THE HONORABLE INCOME TAX AP PELLATE TRIBUNAL, INDORE BENCH, INDORE AND THIS IS ASSESSEE APPEAL BEFORE TH E HONORABLE BENCH. THAT THE LEARNED PRINCIPAL COMMISSIONER OF INCOME T AX ACT INITIATED PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT ON THE GROUND OF THE ORDER PASSED BY ASSESSING OFFICER TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF THE FAILURE ON THE PART OF THE ASSESSING OFFICER TO MAKE NECESSARY ENQUIRIES AND PASSED ORDER UNDER SECTION 263 OF THE INCOME TAX ACT WITHOUT APPRECIATING THE SUBMISSION OF THE ASSESSEE COMPANY. SIR, WE ARE FILING HEREWITH THE FOLLOWING SUBMISSIO N, WHICH SHALL GO TO SHOW THAT THE ASSESSING OFFICER DID NOT ERR WHILE ALLOWING TH E EXEMPTION, BECAUSE HE HAD FULLY APPLIED HIS MIND TO THE FACTS OF THE CASE. FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 5 LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SPECIFI C ENQUIRY WERE MADE BY THE LD. A.O RELATING TO CLAIM OF EXEMPTION U/S 10A OF T HE ACT AND THE SAME WAS REPLIED IN DETAIL ALONG WITH SUPPORTING DOCUMENTS O N 3.2.2015 IN SUPPORT OF THE CLAIM THAT FIRSTLY THE EXEMPTION IS CLAIMED U/S 10A OF THE ACT AND THE PROVISIONS OF SECTION 71 & 72 RELATING TO BROUGHT FORWARD AND CARRY FORWARD LOSSES ARE FOLLOWED THEREAFTER. THAT THE ASSESSEE COMPANY ALSO FILED AUDITOR'S REPO RT UNDER SECTION L0A OF THE INCOME TAX ACT, 1961 IN FORM NO.S6F IN RESPONSE TO THE QUERY DURING THE ASSESSMENT PROCEEDINGS IN WHICH DETAILED CALCULATIO N OF DEDUCTION UNDER SECTION 1OA WAS GIVEN. COPY OF THE SAME IS ENCLOSED AT PAGE NO. 100 TO 102 OF THE PAPER BOOK. THAT IN THE REPLY THE ASSESSEE HAS REFERRED TO SECTION 10A(IA) AND HAD EXPLAINED THAT THE DEDUCTION HAS BEEN CLAIM ED ON THE PROFIT OF THE SEZ UNIT AND NOT ON THE TOTAL INCOME OF THE ASSESSEE CO MPANY. THAT THE LEARNED ASSESSING OFFICER AFTER SCRUTINIZI NG THE REPLY AND DETAILS SUBMITTED IN RESPECT OF CLAIM UNDER SECTION 10A(LAL ALLOWED THE EXEMPTION UNDER SECTION 10A(LA). THAT, FROM THE AFORESTATED FACTS, ITSELF, IT IS EVI DENT THAT THE LEARNED ASSESSING OFFICER AFTER APPLYING HIS MIND TO THE FACTS OF THE CASE PROCEEDED TO COMPLETE THE ASSESSMENT. THAT, REFERENCE TO THE CBDT CIRCULAR WOULD NOT BE A PPLICABLE IN A CASE WHERE THE ASSESSING OFFICER, HAVING KNOWLEDGE OF THE SAME PROCEEDED TO COMPLETE THE ASSESSMENT. THAT, THE EXEMPTION HAD BEEN ALLOWED IN THE EARLIER YEARS TOO, AND TAKING COGNIZANCE TO THE SAME THE LEARNED ASSESSING OFFICE R AFTER MAKING THE NECESSARY ENQUIRIES ACCEPTED THE CLAIM OF THE ASSES SEE COMPANY. THAT IN RESPECT OF INTEREST ON INCOME TAX, IT IS SU BMITTED THAT THE BOOKS OF FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 6 ACCOUNTS, VOUCHERS, LEDGERS WERE PRODUCED DURING TH E ASSESSMENT PROCEEDINGS FOR VERIFICATION OF THE LEARNED ASSESSING OFFICER A ND AFTER SCRUTINIZING THE BOOKS OF ACCOUNTS, VOUCHERS, LEDGERS, EXPENSES THE LEARNE D ASSESSING OFFICER ADDED INTEREST ON INCOME TAX IN CALCULATION OF NORMAL PRO FIT OF THE ASSESSEE COMPANY DURING THE ASSESSMENT AND PROCEEDED TO COMPLETE ASS ESSMENT. THAT IT ITSELF SHOWS THAT THE LEARNED ASSESSING OFF ICER WAS LIVE TO THE FACTS AND AFTER APPLYING HIS MIND MADE ADDITION OF INTEREST P AID ON INCOME TAX AND MADE THE ASSESSMENT. LD. COUNSEL FOR THE ASSESSEE HAS PLACED AND RELIED ON FOLLOWING JUDGMENTS AND DECISIONS; A. CIT VS. SHRI GOVINDRAM SCKSCRIA CHARITY TRUST [ 166 I.T.R 580(M.P) B. C.I.T. VS. RATLAM COAL ASH COMPANY; [1711TR 141 (M. P.H.C.) C. ITAT INDORE BENCH ( 53 TTJ 433) VIDISHA TRACTORS V S. ASSISTANT CIT D. CIT VS. MEHROTRA BROTHERS 270 ITR 157 (MP) E. PR. COMMISSIONER OF INCOME TAX VS. NARAYAN BALMU KUND DUBEY (2017) 30 ITJ 335 (MP) F. CIT VS. RAMESH SINGH HIGH COURT OF MADHYA PRADESH (2012) 73 DTR (MP) 297 G. ABHISHAN ENTERPRISES VS CIT (2016) 28 ITJ 139 ( THIB. - INDORE) H.M/S. GUPTA SPINNING MILLS PVT LTD V]S: CL'F DELHI ITA NO/ 338/DE1/2010 I. ANIL SHAH VS. ASSISTANT COMMISSIONER OF INCOME T AX, RANGE 24(1), MUMBAI FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 7 J. BHARTIA INDUSTRIES LTD VS. CIT (2011) 243 CTR (C A)) 328 (HIGH COURT OF CALCUTTA) K. KHAJRHO BUILDERS & CONSTRUCTION CO.LTD VS. CIT (2016) 29 ITJ 76 (TRIB. AGRA) L . UTTAM CONSTRUCTION COMPANY VS. ASSTT. COMMISSIONER OF INCOME TAX (2016) 28 ITJ 121 (TRIB. - RAIPUR) M. COMMISSIONER OF INCOME TAX & ANR V/S. M/S. YOKOGAWA INDIA LTD. 2016- TIO-228-SC-IT 391 ITR 274 N. DECISION CRAFT ANALYTICS LTD. VIS. DEPUTY COMMISSIONER OF INCOME TAX 2019- TIOL-542-ITAT-AHM. O. M/S. SCINTILLATING JEWELLERY V/S. PR. COMMISSIONER OF INCOME TAX-19, MUMBAI 2019- TIOL-S70-ITA T -MUM. P. M/S. BHAROOMAL AND COMPANY VS. PR. COMMISSIONER OF INCOME TAX-22, MUMBAI. 2019- TIOL-602-ITAT -MUM. Q. SANSPAREILS GREENLANDS PVT LTD V/S COMMISSIONER OF INCOME TAX, MEERUT AND OTHERS. 2019-TIOL-379-ITAT-DEL. R. COMMISSIONER OF INCOME TAX VS. IYCO ELECTRONICS TOOLS INDIA (P)LTD (2012)80 CCH 0275 KAR HC (2012) 205 TAXMAN 0403. 5. PER CONTRA DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUED AND SUPPORTING THE ORDER OF LD. PRINCIPAL COMMISSIONER OF INCOME TAX. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RE CORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE JUDGMENTS REFERRED AND RELIED BY FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 8 THE LD. COUNSEL FOR THE ASSESSEE. THROUGH THIS APPE AL THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. PRINCIPAL COMMISSIONER OF INCOME TAX ASSUMING JURISDICTION U/S 263 OF THE ACT AND HOLDIN G THE ORDER OF LD. ASSESSING OFFICER AS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST TO THE REVENUE. LD. PCIT ISSUED FOLLOWING SHOW CAUSE NOTI CE DURING THE COURSE OF PROCEEDINGS INITIATED U/S 263 OF THE ACT:- 2. IN VIEW OF THE ABOVE, PROCEEDINGS U/S 263 WERE INITIATED AND ACCORDINGLY A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE ON25.0 7.2016 FIXING THE CASE FOR HEARING ON 03.08.2016. THE RELEVANT PORTION OF THE SHOW CAUSE NOTICE IS REPRODUCED AS UNDER;_ A. THE ASSESSEE HAD CLAIMED EXEMPTION OF RS. 12,51 ,79,200/- U/S 10A(1A) FOR UNIT LOCATED IN SEZ, HOWEVER ASSESSEE H AD AGGREGATE LOSSES OF EARLIER YEARS OF RS.14,52,01,717/-. THE CBDT HAS ISSUED CIRCULAR NO.07/2013 DATED 16.0 7.2013, WHEREIN IT HAS BEEN CLARIFIED THAT LOSSES IF ANY, A RE REQUIRED TO BE SET-OFF AGAINST THE PROFITS OF A STP/EOU/SEZ UNIT (ELIGIBLE UNIT), BEFORE THE DEDUCTION U/S 10A/10B OF THE IT ACT, 1961 IS ALLOWE D. THUS BENEFIT U/S 10A/10B OF THE ACT SHOULD BE ALLOWED AFTER SETTING- OFF OF LOSSES AS PER PROVISIONS OF SECTION 71 & 72 FROM NON-ELIGIBLE UNI TS OF THE TAX PAYER. KEEPING IN VIEW OF THE CBDT CIRCULAR NO.07/2013 DA TED 16.07.2013, IT IS NOTICED THAT THE ASSESSEE HAS CLA IMED EXEMPTION OF RS.12,51,79,200/- U/S 10A WITHOUT SET OFF OF LOSSES OF EARLIER YEARS PERTAINING TO NON ELIGIBLE UNIT. THE ASSESSEE COMP ANY HAS SHOWN INCOME OF ONE UNIT AND PROFIT/LOSS OF TWO OR MORE UNIT CAN NOT BE ALLOWED SEPARATELY FOR EACH UNIT. THE CONSOLIDATED PROFIT OR LOSS FROM ALL UNITS CAN ONLY BE ALLOWED. FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 9 IN VIEW OF THE ABOVE, EXCESS BROUGHT FORWARDED LOS SES OF RS. 12,51,79,200/- HAS BEEN ALLOWED TO THE ASSESSEE. T HE LOSS SHOULD BE SET- OFF FROM THE EXEMPTED INCOME. THE ASSESSEE HAS TAK EN BENEFIT OF CARRY FORWARDED LOSS IN NEXT YEAR TO THE EXTENT OF RS.12, 51,79,200/-. IT WAS FURTHER NOTICED THAT THE ASSESSEE IS CLAIMI NG EXEMPTION BEFORE SETTING OF LOSS OF GROSS INCOME FROM EARLIER YEARS I.E. A.Y. 2009-10, 2010-11, 2011-12 AND ALSO IN THIS YEAR. THE ASSESS MENT FOR THE A.Y. 2009-10 AND 2010-11 HAS BEEN COMPLETED U/S 148 ASSE SSMENT FOR A.Y. 2011-12 HAS ALSO BEEN COMPLETED U/S 263 AND THE CLA IM OF ASSESSEE FOR SECTION 10A HAS BEEN ALLOWED AFTER SETTING OF BROUG HT FORWARD LOSSES. HENCE, THE ASSESSEES CLAIMS OF EXEMPTION U/S 10A F OR RS.12,51,79,200/- FOR THE A.Y. 2012-13 SHOULD BE ALLOWED AFTER SETTIN G OFF BROUGHT FORWARD LOSSES OF EARLIER YEARS. THE CORRECT CALCULATION O F CARRY FORWARD OF LOSSES AND EXEMPTION U/S 10A SHOULD BE AS UNDER:- A.YR. GROSS INCOME/LOSS ADDITION MADE (ORDER U/S 153A/143(3) ACTUAL BROUGHT FORWARD LOSSES REMAINING INCOME/LOSS DEDUCTION U/S 10A ELIGIBLE AMOUNT FOR CARRY FORWARD TO NEXT YEAR 2009-10 (-)10,26,99,579/- 268,13,973/- - (- )758,85,606/- NO PROFIT AVAILABLE (- )758,85,606 2010-11 (-)668,72,457/- 18,80,552/- (-) 758,85,606 649,91,905/- -DO- (-) 14,08,77,511 2011-12 17,21,02,447/- 470,000/- (-) 14,08,77,511 316,94,936/- 312,24,936 470,000/- OTHER THAN 10A 2012-13 934,42,221/- 77,26,096/- - 10,11,68,315 934 ,42,221 RS.77,26,094 IN VIEW OF THE ABOVE, THE EXEMPTION U/S 10A SHOULD BE RESTRICTED/ALLOWED AT RS.934,42,221/- FOR A.Y. 2012-13 IN PLACE OF RS. 12,51,79,200/- WHICH WAS ACTUALLY ALLOWABLE. B. IT IS FURTHER FOUND THAT DISALLOWANCE OF RS.15,8 2,154/- MADE UNDER THE HEAD INTEREST PAID ON INCOME TAX WHICH WAS DEBITED BY THE ASSESSEE IN P&L A/C AS FINANCE COST. IN VIEW OF SECTION 115JB OF INCOME TAX ACT, THE INTEREST ON FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 10 INCOME TAX SHOULD BE ADDED BACK IN THE BOOK PROFIT FOR CALCULATION OF MAT U/S 115JB. HENCE, THE OMISSION RESULTED IN UNDERASSESS MENT OF BOOK PROFIT TO THE EXTENT OF RS.15,82,154/- REQUIRED TO BE ADDED. C. THE ASSESSEE HAD CLAIMED AND ALLOWED BY THE ASS ESSING OFFICER, THE ADDITIONAL DEPRECIATION FOR RS.16,45,94,950/- (BEIN G RS. 229,12,326/- ON DTA UNIT, RS.141,47,233/- ON SEZ UNIT AND RS.12,74,35,3 91/- ON KASHPUR UNIT) IN ADDITION TO NORMAL DEPRECIATION. FURTHER, IT WAS O BSERVED THAT THE FOLLOWING OLD AND USED PLANT MACHINERY WERE PURCHASED BY THE ASSE SSEE:- S.NO. DATE OF ACQUISITION PARTY NAME FROM WHOM PURCHASED NAME OF UNIT PURCHASED AMOUNT ADDITIONAL DEPRECIATION CLAIMED 1 31-03-2012 PANKIT INTERNATIONAL PTE LTD KASHIPUR UNIT 218,63,652/- 21,86,365/- 2 13-01-2012 FIL XEZ DTA UNIT 20,68,106/- 206,811/- 3 26-03-2012 SATGURU POLYFAB PVT. LTD DTA UNIT 150, 51,853/- 15,05,185/- TOTAL 389,83,611/- 38,98,361/- SINCE, ASSESSEE HAS PURCHASED OLD AND USED PLANT & MACHINERY AND CLAIMED ADDITIONAL DEPRECIATION FOR THE SAME WAS NO T ALLOWABLE IN VIEW OF PROVISION OF SECTION 32. HENCE, THE EXCESS DEPRECI ATION OF RS.38,98,361/- REQUIRES TO BE ADDED. 7. IN THE ABOVE SHOW CAUSE NOTICES ISSUED U/S 263 OF THE ACT LD. PRINCIPAL COMMISSIONER OF INCOME TAX HAS MADE FOLLO WING THREE OBSERVATIONS; (1) THAT THE ASSESSEE SHOULD HAVE FIRST SET OFF THE AGGREGATE OF LOSS OF CURRENT YEARS AND BROUGHT FORWARD LOSSES AGAINST TH E AVAILABLE PROFITS FROM VARIOUS UNIT BEFORE CLAIMING EXEMPTION U/S 10A (1A) OF THE ACT. FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 11 (2) LD. A.O ERRED IN NOT CORRECTLY COMPUTING THE BO OK PROFIT U/S 115 JB OF THE ACT CORRECTING WITHOUT GIVING EFFECT TO INTERES T PAID ON INCOME TAX WHICH IS DEBITED ON PROFIT & LOSS ACCOUNT. (3) WRONG CLAIM OF ADDITIONAL DEPRECIATION ON THE O LD AND USED PLANT AND MACHINERIES. 8. SUBMISSIONS OF THE ASSESSEE WERE FILED BEFORE PR. COMMISSIONER OF INCOME TAX WHICH COULD NOT CONVINCE HIM AND HE DIRE CTED THE LD. A.O TO REFRAME THE ASSESSMENT ORDER U/S 143(3) OF THE ACT WITH REGARD TO THE THREE ISSUES REFERRED IN THE SHOW CAUSE NOTICE ISSU ED U/S 263 OF THE ACT. 9. THE POWER OF LD. PR. COMMISSIONER OR INCOME TAX CO MMISSIONER OF INCOME TAX TO CALL FOR AND EXAMINE THE RECORD OF AN Y PROCEEDINGS UNDER THIS ACT ARE PROVIDED U/S 263 OF THE ACT, WHICH REA DS AS FOLLOWS; 263. (1) THE PRINCIPAL COMMISSIONER OR COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD A ND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THER EON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSES SMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. EXPLANATION 1 .FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB- SECTION, ( A ) AN ORDER PASSED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988 BY THE ASSESSING OFFICER SHALL INCLUDE ( I ) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMM ISSIONER OR DEPUTY COMMISSIONER OR THE INCOME-TAX OFFICER ON THE BASIS OF THE DIRECTIO NS ISSUED BY THE JOINT COMMISSIONER UNDER SECTION 144A ; FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 12 ( II ) AN ORDER MADE BY THE JOINT COMMISSIONER IN EXERCI SE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE PRINCIP AL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL DIRECTOR GENERAL OR DIREC TOR GENERAL OR PRINCIPAL COMMISSIONER OR COMMISSIONER AUTHORISED BY THE BOAR D IN THIS BEHALF UNDER SECTION 120 ; ( B ) 'RECORD' SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE PRINCIPAL COMMISSIONER OR COMMISSIONER; ( C ) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION A ND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF ANY APPEAL FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988, THE POWERS OF THE PRINCIPAL COMMISSIONER OR] COMMISSIONER UNDE R THIS SUB-SECTION SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS H AD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. EXPLANATION 2. FOR THE PURPOSES OF THIS SECTION, IT IS HEREBY DECL ARED THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS I N SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF T HE REVENUE, IF, IN THE OPINION OF THE PRINCIPAL COMMIS SIONER OR COMMISSIONER, ( A ) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR V ERIFICATION WHICH SHOULD HAVE BEEN MADE; ( B ) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT I NQUIRING INTO THE CLAIM; ( C ) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH AN Y ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119 ; OR ( D ) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WITH ANY DECISION WHICH IS PREJUDICIAL TO THE ASSESSEE, RENDERED BY THE JURISDICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OTHER PERSON. (2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) AF TER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVI SED WAS PASSED. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TIME IN THE CASE OF AN ORDER W HICH HAS BEEN PASSED IN CONSEQUENCE OF, OR TO GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN ORDER OF THE APPELLATE TRIBUNAL, NATIONAL TAX TRIBUNAL, THE HIGH COURT OR THE SUPREME COURT. EXPLANATION .IN COMPUTING THE PERIOD OF LIMITATION FOR THE PUR POSES OF SUB-SECTION (2), THE TIME TAKEN IN GIVING AN OPPORTUNITY TO THE ASSESSEE TO B E REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PERIOD DURING WHICH ANY PROCEEDING UNDER THIS SECTI ON IS STAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED. 10. FROM THE AFORESAID PROVISION OF SECTION 263) OF THE ACT, IT IS APPARENT THAT THE POWER OF SUOMOTO REVISION EXERCISABLE BY PR.CIT/CIT IS UNDOUBTEDLY SUPERVISORY IN NATURE. SECTION 263 EMP OWER PR.CIT/CIT TO CALL FOR AND EXAMINE THE RECORD OF ANY PERSONS UNDE R THE ACT. PR. FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 13 CIT/CIT HAS TO SATISFY BETWEEN THE TWIN CONDITIONS NAMELY (I) WHETHER THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS AND(II) WHETHER IT IS PREJUDICIAL TO THE INTEREST OF REVENU E. AS HELD BY HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL COMPAN Y LTD 243 ITR83(SC), THAT IF ANY ONE OF THE CONDITIONS IS MI SSING I.E. IF THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS BUT IS NOT PREJU DICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE I NTEREST OF REVENUE, RECOURSE CANNOT BE HAD TO PROVISIONS OF SECTION 263(1) OF TH E ACT. FURTHER IF THE ASSESSING OFFICER ACTING IN ACCORDANCE WITH THE LAW , MAKES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY PR.CIT/CIT MERELY BECAUSE ACCORDING TO HIM THE ORDER SHOULD HA VE BEEN WRITTEN DIFFERENTLY OR MORE ELABORATELY. THE PROVISIONS OF SECTION 263 OF ACT DO NOT VISUALISE THE SUBSTITUTION OF THE JUDGMENT OF T HE PR.CIT/CIT FOR THAT OF THE ASSESSING OFFICER UNLESS HIS ORDER IS NOT IN ACCORDANCE WITH THE LAW. AS HELD BY HONBLE BOMBAY HIGH COURT IN THE C ASE OF CIT V/S GABRIEL INDIA LTD (1993) 203 ITR 108 (BOMBAY) THAT THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT THE TAX WHICH WAS LAWFULLY ELIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPL ICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATIO N, A LESSER TAX THAN WHAT HAS JUST HAS BEEN IMPOSED. FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 14 11. NOW LET US EXAMINE AS TO WHETHER LD. PRINCIPAL COM MISSIONER OF INCOME TAX WAS JUSTIFIED IN INVOKING THE POWER U/S 263 OF THE ACT ON THE THREE ISSUES MENTIONED IN THE SHOW CAUSE NOTICE. 12. AS FAR AS THE ISSUE RELATING TO EXEMPTION OF CLAIM U/S 10A OF THE ACT IS CONCERNED, WE FIND THAT THE ASSESSEE IS RUNNING THREE UNITS OF WHICH ONE IS ELIGIBLE FOR EXEMPTION U/S 10A OF THE ACT. ASSESSING WHILE COMPUTING TOTAL INCOME HAS FIRST CLAIMED EXEMPTION ON THE PROFITS OF THE SAID UNIT U/S 10A OF THE ACT AND THE LOSSES OF REMA INING UNITS AS WELL AS BROUGHT FORWARD LOSSES HAVE BEEN SET OFF AGAINST TH E REMAINING INCOME. THIS CLAIM OF THE ASSESSEE HAS BEEN ALLOWED BY LD. A.O WHEREAS LD. PRINCIPAL COMMISSIONER OF INCOME TAX HAS RAISED OBJ ECTION REFERRING TO THE CIRCULARNO.7/2013 DATED 16.7.2013 ISSUED BY CEN TRAL BOARD OF DIRECT TAXES CLARIFYING THAT LOSSES IF ANY ARE REQUIRED TO BE SET OFF AGAINST THE PROFITS OF STP/EQU/SEZ UNITS BEFORE THE DEDUCTION U /S 10A/10B OF THE ACT IS ALLOWED. THUS AS PER LD. PR. COMMISSIONER O F INCOME TAX THE BENEFIT OF SECTION 10A/10B SHOULD BE ALLOWED AFTER SETTING OFF LOSSES AS PER THE PROVISIONS OF SECTION 71 & 72 FROM ELIGIBLE UNITS RUN BY THE TAX PAYER WHEREAS ASSESSEE RELYING ON CIRCULAR NO.1/201 3 DATED 17.1.2013 HAS FIRST CLAIMED EXEMPTION U/S 10A OF THE ACT AND THEREAFTER FOLLOWED FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 15 PROVISIONS OF SECTION 71 & 72 OF THE I.T. ACT RELAT ING TO SET OFF OF LOSSES. 13. WE OBSERVE THAT DURING THE COURSE OF PROCEEDINGS U /S 143(3) OF THE ACT SPECIFIC QUERY WAS RAISED BY LD. A.O BY WAY OF QUESTIONNAIRE DATED 9.2.2015 REGARDING THE JUSTIFICATION OF DEDUCTION/ EXEMPTION CLAIMED U/S 10A OF THE ACT. THE RELEVANT EXTRACT OF QUESTIONNA IRE IS REPRODUCED BELOW; 2. (A) PLEASE JUSTIFY THE DEDUCTION CLAIMED U/S LOA TO IT ACT. WHETHER THE COMPANY HAS FULFILLED ALL THE CONDITIONS LAID DOWN THE INCOME TAX ACT OR NOT. PLEASE MENTION THE YEAR IN WHICH PRODUCTION IS STAR TED AND MENTION THE YEAR FROM WHICH YOU ARE TAKING DEDUCTION U/S 1OA. (B) AS PER STATEMENT OF TOTAL INCOME THERE ARE DTA DIVISION, SEZ DIVISION AND KASHIPUR DIVISION AND TOTAL INCOME HAS BEEN WORKED OUT FOR EACH DIVISION. IN THIS REGARD IT IS REQUIRED TO FILE COMPLETE COPY OF BALANCE SHEET/ PROFIT AND LOS S ACCOUNT FOR THE PREVIOUS YEAR 2011-12 RELEVANT TO A SSESSMENT YEAR 2012-13 FOR EACH DIVISION. IT IS NOTICED THAT YOU HAVE NOT MAIN TAINED HEAD OFFICE ACCOUNT AND IT APPEARS THE RELATED TO HEAD OFFICE/ADMINISTR ATION HAVE NOT BEEN ALLOCATED FOR EACH DIVISION IT IS THEREFORE NOT POSSIBLE TO W ORK OUT CORRECT INCOME FOR EACH DIVISION AS SUCH THE CLAIM MADE U/S 1 OA IS ALSO NOT CORRECT. TO FILE YOUR EXPLANATION ON THIS ISSUE. (C) AS REGARD CLAIM U/S 10A THE SAME HAS NOT BEEN WORKED OUT IN ACCORDANCE WITH PROVISION U/S 1 OA OF IT ACT. IT IS SEEN FROM ANNEXURE A TO FORM NO . 56F THAT TOTAL TURNOVER OF THE BUSINESS IS DECLARED AS RS. 6210438228/-/ TOTAL TURNOVER OF THE UNDERTAKING AT RS. 2376488789/- AND TOTAL PROFIT DERIVED BY THE BUSINESS DECLARED AT RS. 93442281/-. THEREFORE/ THE INCOME FROM INDUSTRIAL UNDERTAKING WOULD BE AT RS. 35756660/- I.E. (RS.934 42281/- X RS. 2376488789/)/6210438228/- ELIGIBLE AMOUNT U/S 1 OA IS RS. 50 OF RS. FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 16 17878330/WHEREAS YOU HAVE MADE CLAIM OF RS. 1251792 00/-. IT IS REQUIRED TO FILE YOUR EXPLANATION ON THIS ISSUE. 14. AGAINST ABOVE QUESTIONNAIRE LETTER DATED 9.2.2015 ASSESSEE MADE SUBMISSION ON 6.3.2015 GIVING JUSTIFICATION OF THE EXEMPTION CLAIMED U/S 10A OF THE ACT WHICH READS AS FOLLOWS; (D) AS PER SECTION 10A(IA) OF THE INCOME TAX ACT 1 961, AN UNDERTAKING WHICH BEGINS TO MANUFACTURE OR PRODUCE ARTICLE OR THINGS DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04 IN ANY SPEC IAL ECONOMIC ZONE, SHALL BE ENTITLED TO CLAIM 100 OF ITS PROFIT WHILE COMPUT ING ITS TOTAL INCOME. THE COMPANY HAS STARTED ITS PRODUCTION DURING THE FINAN CIAL YEAR 2003-04 AND CLAIMED DEDUCTION UNDER SECTION L0A (LA) IN THE FIN ANCIAL YEAR 2005-06. (E) COPY OF BALANCE SHEET, PROFIT & LOSS ACCOUNT FOR THE PREVIOUS YEAR 2011- 12 FOR OTA, SEZ & KASHIPUR UNIT IS ENCLOSED HERE WITH. (F) AS PER SECTION 10A(IA) OF THE INCOME TAX ACT 1961, THE AMOUNT OF DEDUCTION WILL BE COMPUTED AS UNDER: PROFIT OF THE BUSINESS OF UNDERTAKING X EXPORT TURNOVER OF UNDERTAKING X 50 TOTAL TURNOVER OF BUSINESS CARRIED ON BY THE UNDERTAKING AS PER ANNEXURE A TO FORM 56F THE WE HAVE CLAIMED DEDUCTION UNDER SECTIO N 10A OF RS.12,51,79,200/- WHICH IS COMPUTED AS UNDER- PROFIT OF THE BUSINESS OF UNDERTAKING = RS.27,31,06,234/- EXPORT TURNOVER OF UNDERTAKING = RS.2.17,85,43,940/- TOTAL TURNOVER OF BUSINESS CARRIED ON BY THE UNDERTAKING = RS.2.37,64,88,789/- FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 17 RS. 27,31,06,234 X RS. 217,85,43,940 X 50 = RS.12,51,79,200/- RS.237,64,88789 THEREFORE THE AMOUNT OF CLAIM OF RS.12,5L,79,200/- IS WORKED OUT IN ACCORDANCE WITH THE PROVISION UNDER SECTION 1OA OF INCOME TAX ACT, 1961.' 15. FROM PERUSAL OF THE EXTRACT OF THE QUESTIONNAIRE ISSUED BY LD. A.O DATED 9.2.2015 AND SPECIFIC REPLY DATED 3.3.2015 CL EARLY SHOWS THAT THIS IS NOT THE CASE OF NO ENQUIRY RATHER THE LD. A. O HAS MADE A PROPER AND DETAILED ENQUIRY AND ACCEPTED THE CLAI M OF THE ASSESSEE BY INTERPRETING THE PROVISIONS OF LAW, JUD ICIAL PRONOUNCEMENTS AS WELL AS THE CIRCULAR ISSUED BY CENTRAL BOARD OF DIRECT TAXES. 16. WE FIND THAT THE HONBLE APEX COURT IN THE CASE OF CIT & ANR V/S M/S. YOKOGAWA INDIA LTD (SUPRA) HAS SETTLED THE INSTANT ISSUE AFTER DISCUSSING THE PROVISIONS OF SECTION 10A & 10B IN D ETAIL AND ALSO MADE DISTINCTION BETWEEN THE EXEMPTION AND DEDUCTION PRO VISIONS. HONBLE APEX COURT HAS HELD THAT EXEMPTION U/S 10A OF THE A CT SHOULD BE ALLOWED TO THE ASSESSEE INDEPENDENTLY PRIOR TO THE COMMENCE MENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE ACT FOR ARRIVING ON THE TOTAL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. HONBLE COURT FURTHER HOLD THAT THOUGH SECTION 10A OF THE ACT AS AMENDED, IS A PROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOU LD BE WHILE COMPUTING FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 18 THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTA L INCOME UNDER CHAPTER VI. RELEVANT EXTRACT OF THE JUDGMENT OF THE HONBLE APEX COURT IS REPRODUCED BELOW; 9. THE AMENDMENT OF SECTION 1OA OF THE ACT, BY THE FINANCE ACT, 2000 WITH EFFECT FROM 1.4.2001, SPECIFICALLY USES THE WORDS ' DEDUCTION OF PROFITS AND GAINS DERIVED BY AN ELIGIBLE UNIT...FROM THE TOTAL INCOME OF THE ASSESSEE'. THERE ARE OTHER PROVISIONS OF SECTION 10A, AS AMEND ED, WHICH COULD BE SUGGESTIVE OF THE FACT THAT BY THE AMENDMENT MADE B Y FINANCE ACT, 2000, SECTION 1OA HAD CHANGED ITS COLOUR FROM BEING AN EX EMPTION SECTION TO A PROVISION PROVIDING FOR DEDUCTION. YET, SECTION 1OA CONTINUED TO REMAIN IN CHAPTER III OF THE ACT WHICH CHAPTER DEALS WITH INC OMES WHICH DO NOT FORM PART OF THE TOTAL INCOME. THERE ARE SEVERAL CIRCULA RS THAT HAVE BEEN PLACED BEFORE US BY THE CONTESTING PARTIES TO EXPLAIN THE PURPOSE AND OBJECT OF THE AMENDMENT. HAVING LOOKED AT THE AFORESAID CIRCULARS , ISSUED FROM TIME TO TIME, WHAT WE FIND IS A FAIR AMOUNT OF AMBIGUITY TH EREIN AS TO THE TRUE NATURE AND EFFECT OF THE AMENDMENT. SPECIFICALLY, WE MAY R EFER TO CIRCULAR NO. 7 DATED 16.07.2013 AS WELL AS CIRCULAR NO. 01/2013 DATED 17.01.2013 WHICH APPEAR TO BE CONFLICTING AND CONTRADICTORY TO EACH OTHER; IN THE FORMER CIRCULAR THE PROVISION, I.E., SECTION 1OA IS REFERR ED TO AS PROVIDING FOR DEDUCTIONS WHEREAS THE LATER CIRCULAR USES THE EXPR ESSION, EXEMPTION WHILE REFERRING TO THE PROVISIONS OF SECTIONS L0A AND L0B OF THE ACT. EVEN THE INCOME TAX-RETURN FORMS I.E. FORM NO. 1 DATED 17.08.2001 A ND FORM NO. 6 FOR THE ASSESSMENT YEAR 2012-13 ARE EQUALLY CONTRADICTORY. THE APPELLANT REVENUE WOULD, HOWEVER CONTEND THAT, EX FACIE, FROM THE LAN GUAGE APPEARING IN SECTION L0A IT IS CRYSTAL CLEAR THAT THE AFORESAID PROVISION OF THE ACT, AS AMENDED BY FINANCE ACT, 2000 PROVIDES FOR DEDUCTION S FROM THE GROSS TOTAL FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 19 INCOME, NOTWITHSTANDING THE USE OF THE WORDS 'TOTAL INCOME' IN SECTION LOA. EXEMPTIONS PROVIDED .FOR UNDER THE OLD SECTION L0A HAVE BEEN DISCONTINUED BY THE LEGISLATURE. ACCORDING TO THE REVENUE, WHERE THE PURPORT AND EFFECT OF THE STATUTE IS CLEAR FROM THE LANGUAGE USED THERE I S NO SCOPE TO TURN TO CHAPTER NOTES OR THE MARGINAL NOTES SO AS TO UNDERS TAND SECTION L0A TO BE AN EXEMPTION SECTION ON THE BASIS THAT THE SAID PROVIS ION IS STILL INCLUDED IN CHAPTER III OF THE ACT. RELIANCE IN THIS REGARD HAS BEEN PLACED ON THE DECISION OF THIS COURT IN TATA POWER CO. LTD. VS. RELIANCE EN ERGY LTD.3 WHEREIN AT PAGE 687, IT IS HELD THAT: 9. CHAPTER HEADINGS AND THE MARGINAL NOTES ARE PART S OF THE STATUTE. THEY HAVE ALSO BEEN ENACTED BY PARLIAMENT. THERE CANNOT, THUS , BE ANY DOUBT THAT IT CAN BE USED IN AID OF THE CONSTRUCTION. IT IS, HOWEVER, WELL SETTLED THAT IF THE WORDINGS OF THE STATUTORY PROVISION ARE CLEAR AND UNAMBIGUOUS, CONSTRUCTION OF THE STATUTE WITH THE AID OF 'CHAPTER HEADING;' AND 'MARGINAL NOTE' MAY NOT ARIS E. IT MAY BE THAT HEADING AND MARGINAL NOTE, HOWEVER, ARE OF A VERY LIMITED USE IN INTERPRETATION BECAUSE OF ITS NECESSARILY BRIEF AND INACCURATE NATURE. THEY A RE, HOWEVER, NOT IRRELEVANT. THEY CERTAINLY CANNOT BE T AKEN INTO CONSIDERATION IF THEY DIFFER FROM THE MATERIAL THEY DESCRIBE. 10. THE REVENUE FURTHER CONTENDS THAT BY VIRTUE OF THE AMENDMENT MADE BY FINANCE ACT, 2000, DEDUCTIONS UNDER SECTION L0A ARE REQUIRED TO BE MADE AND ALLOWED AT THE STAGE OF COMPUTATION OF TOTAL INC OME UNDER CHAPTER VI OF THE ACT NOTWITHSTANDING THE ABSENCE OF ANY SPECIFIC PROVISION IN CHAPTER VI TO THE SAID EFFECT. IN FACT, THE REVENUE CONTENDS T HAT IN VIEW OF THE CLEAR LANGUAGE OF SECTION L0A, AS BROUGHT ABOUT BY THE AM ENDMENT, A PARALLEL OR CONSEQUENTIAL AMENDMENT IN CHAPTER VI OF THE ACT WA S WHOLLY UNNECESSARY. 11. ON THE OTHER HAND, ON BEHALF OF THE ASSESSEE, IT IS CONTENDED THAT THOUGH THERE MAY BE SOME FEATURES OF DEDUCTION BROUGHT IN BY AMENDMENT TO SECTION 10A, AS FOR EXAMPLE, DISALLOWANCE OF PROFITS IN REG ARD TO DOMESTIC SALES, THE FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 20 LEGISLATIVE INTENT IN RETAINING SECTION 10A IN CHAP TER III OF THE A CT WOULD CLEARLY DEMONSTRATE THE TRUE NATURE OF THE SAID PROVISION OF THE ACT EVEN AFTER AMENDMENT THEREOF BY FINANCE ACT OF 2000. DEDUCTIO NS FROM THE TOTAL INCOME WHICH IS NOWHERE ENVISAGED UNDER THE ACT AND THE REF ERENCE TO THE TOTAL INCOME OF THE UNDERTAKING, REFERRED TO IN SECTION 2(4 5) HAS NO APPLICATION TO THE COMPUTATION UNDER SECTION L0A AND THE REFERENCE THEREIN IS ONLY TO THE TOTAL INCOME OF THE ELIGIBLE UNIT/UNDERTAKING. THE PRO VISIONS OF SECTION 10A(6), AS AMENDED BY FINANCE ACT OF 2003 RETROSPECTIVELY WI TH EFFECT FROM 1.4.2001, HAS ALSO BEEN STRESSED UPON TO CONTEND THAT WITH EFF ECT FROM THE ASSESSMENT YEAR 2001-02 LOSSES AND UNABSORBED DEPRECIATION OF ELIGIBLE UNITS WOULD BE ALLOWABLE FOR SET OFF IMMEDIATELY ON THE EXPIRY OF TH E PERIOD OF TAX HOLIDAY I.E. 10 YEARS. THE PROVISIONS OF SECTIONS 32, 32A, 33, 3 5 AND PART OF 36 DO NOT SEPARATELY APPLY TO AN ELIGIBLE UNIT DURING THE PERIOD OF TAX HOLIDAY. DURING THE SAID PERIOD THE DEDUCTION UNDER THE AFORESAID S ECTIONS OF THE ACT ARE DEEMED TO HAVE BEEN MADE. SIMILARLY, UNDER SECTION 10 A(6)(II) LOSSES REFERRED TO IN SECTION 72(1) OR 74(1) AND 74(3) ARE ALSO ELIGI BLE TO BE CARRIED FORWARD TO THE ASSESSMENT YEAR FOLLOWING THE END OF THE HOLIDAY PERIOD COMMENCING FROM THE ASSESSMENT YEAR 2001-02. ALL THESE, ACCORDING TO THE LEARNED COUNSELS FOR THE ASSESSEE, SUGGEST THAT, THOUGH HETEROGENEOUS EL EMENTS EXIST IN SECTION L0A, THE PROVISION IS REALLY AN EXEMPTION PROVISION. ALTERNATIVELY, ACCORDING TO THE LEARNED COUNSELS, EVEN IF SECTION L0A IS UNDERST OOD TO BE PROVIDING FOR DEDUCTIONS( THE STAGE OF SUCH DEDUCTIONS WOULD BE IM MEDIATELY AFTER COMPUTATION OF PROFITS AND GAINS OF BUSINESS AND BEF ORE THE AGGREGATE OF INCOMES UNDER DIFFERENT HEADS OF OTHER LOSS MAKING E LIGIBLE UNITS OR NON- ELIGIBLE UNITS OF THE ASSESSEE ARE TAKEN INTO ACCOUNT . IN OTHER WORDS, IT IS IMMEDIATELY AFTER THE COMPUTATION OF PROFITS AND GAIN S OF BUSINESS OF THE UNDERTAKING THAT THE DEDUCTION UNDER SECTION L0A IS REQUIRED TO BE MADE. THERE IS NO QUESTION OF SUCH DEDUCTIONS BEING COMPUT ED AT THE STAGE OF APPLICATION OF PROVISIONS OF CHAPTER VI OF THE ACT. FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 21 12. WE HAVE CONSIDERED THE SUBMISSIONS ADVANCED AND THE PROVISIONS OF SECTION L0A AS IT STOOD PRIOR TO THE AMENDMENT MADE B Y FINANCE ACT, 2000 WITH EFFECT FROM 1.4.2001; THE AMENDED SECTION L0A T HEREAFTER AND ALSO THE AMENDMENT MADE BY FINANCE ACT, 2003 WITH RETROSPECT IVE EFFECT FROM 1.4.2001. 13. THE RETENTION OF SECTION L0A IN CHAPTER III OF TH E ACT AFTER THE AMENDMENT MADE BY THE FINANCE ACT, 2000 WOULD BE MERELY SUGGE STIVE AND NOT DETERMINATIVE OF WHAT IS PROVIDED BY THE SECTION AS AMENDED, IN CONTRAST TO WHAT WAS PROVIDED BY THE UN-AMENDED SECTION. THE TR UE AND CORRECT PURPORT AND EFFECT OF THE AMENDED SECTION WILL HAVE TO BE CON STRUED FROM THE LANGUAGE USED AND NOT MERELY FROM THE FACT THAT IT H AS BEEN RETAINED IN CHAPTER ILL. THE INTRODUCTION OF THE WORD 'DEDUCTION ' IN SECTION L0A BY THE AMENDMENT, IN THE ABSENCE OF ANY CONTRARY MATERIAL, AND IN VIEW OF THE SCOPE OF THE DEDUCTIONS CONTEMPLATED BY SECTION L0A AS AL READY DISCUSSED, IT HAS TO BE UNDERSTOOD THAT THE SECTION EMBODIES A CLEAR ENU NCIATION OF THE LEGISLATIVE DECISION TO ALTER ITS NATURE FROM ONE PROVIDING FOR EXEMPTION TO ONE PROVIDING FOR DEDUCTIONS. 14. THE DIFFERENCE BETWEEN THE TWO EXPRESSIONS 'EXE MPTION' AND 'DEDUCTION', THOUGH BROADLY MAY APPEAR TO BE THE SAME I.E. IMMUNI TY FROM TAXATION, THE PRACTICAL EFFECT OF IT IN THE LIGHT OF THE SPECIFIC PR OVISIONS CONTAINED IN DIFFERENT PARTS OF THE ACT WOULD BE WHOLLY DIFFERENT. THE ABO VE IMPLICATIONS CANNOT BE MORE OBVIOUS THAN FROM THE CASE OF CIVIL APPEAL NOS. 8563/2013, 8564/2013 AND CIVIL APPEAL ARISING OUT OF SLP(C) NO. 18157/2015, W HICH HAVE BEEN FILED BY LOSS MAKING ELIGIBLE UNITS AND/OR BY NON-ELIGIBLE ASSESSEES SEEKING THE BENEFIT OF ADJUSTMENT OF LOSSES AGAINST PROFITS MADE BY ELIGIBLE UNITS. 15. SUB-SECTION 4 OF SECTION L0A WHICH PROVIDES FOR PRO RATA EXEMPTION, NECESSARILY INVOLVING DEDUCTION OF THE PROFITS ARISIN G OUT OF DOMESTIC SALES, IS ONE INSTANCE OF DEDUCTION PROVIDED BY THE AMENDMENT. PROFITS OF AN ELIGIBLE FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 22 UNIT PERTAINING TO DOMESTIC SALES WOULD HAVE TO ENTE R INTO THE COMPUTATION UNDER THE HEAD 'PROFITS AND GAINS FROM BUSINESS' IN CHAPTER IV AND DENIED THE BENEFIT OF DEDUCTION. THE PROVISIONS OF SUB-SECT ION 6 OF SECTION L0A, AS AMENDED BY THE FINANCE ACT OF 2003, GRANTING THE BE NEFIT OF ADJUSTMENT OF LOSSES AND UNABSORBED DEPRECIATION ETC. COMMENCING F ROM THE YEAR 2001-02 ON COMPLETION OF THE PERIOD OF TAX HOLIDAY ALSO VIRTUA LLY WORKS AS A DEDUCTION WHICH HAS TO BE WORKED OUT AT A FUTURE POINT OF TIME , NAMELY, AFTER THE EXPIRY OF PERIOD OF TAX HOLIDAY. THE ABSENCE OF ANY REFEREN CE TO DEDUCTION UNDER SECTION L0A IN CHAPTER VI OF THE ACT CAN BE UNDERST AND BY ACKNOWLEDGING THAT ANY SUCH REFERENCE OR MENTION WOULD HAVE BEEN A REPE TITION OF WHAT HAS ALREADY BEEN PROVIDED IN SECTION L0A. THE PROVISION S OF SECTIONS 8OHHC AND 80HHE OF THE ACT PROVIDING FOR SOMEWHAT SIMILAR DEDU CTIONS WOULD BE WHOLLY IRRELEVANT AND REDUNDANT IF DEDUCTIONS UNDER SECTION L0A WERE TO BE MADE AT THE STAGE OF OPERATION OF CHAPTER VI OF THE ACT. THE RETENTION OF THE SAID PROVISIONS OF THE ACT I.E. SECTION 80HHC AND 80HHE, D ESPITE THE AMENDMENT OF SECTION L0A, IN OUR VIEW, INDICATES THAT SOME ADDI TIONAL BENEFITS TO ELIGIBLE SECTION L0A UNITS NOT CONTEMPLATED BY SECTIONS 8OHHC AND 8OHHE, WAS INTENDED BY THE LEGISLATURE. SUCH A BENEFIT CAN ONLY B E UNDERSTOOD BY A LEGISLATIVE MANDATE TO UNDERSTAND THAT THE STAGES FO R WORKING OUT THE DEDUCTIONS UNDER SECTION L0A AND 80HHC AND 80HHE ARE SUBSTANTIALLY DIFFERENT. THIS IS THE NEXT ASPECT OF THE CASE WHIC H WE WOULD NOW LIKE TO TURN TO. 16. FROM A READING OF THE RELEVANT PROVISIONS OF SE CTION L0A IT IS MORE THAN CLEAR TO US THAT THE DEDUCTIONS CONTEMPLATED THEREIN IS QUA THE ELIGIBLE UNDERTAKING OF AN ASSESSEE STANDING ON 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 AND RESULTANTLY FLOWS TO THE ASSESSEE. THIS IS ALSO MORE THAN CLEAR FROM THE CONTEMPORANEO US CIRCULAR NO. 794 DATED 9.8.2000 WHICH STATES IN PARAGRAPH 15.6 THAT, FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 23 'THE EXPORT TURNOVER AND THE TOTAL TURNOVER FOR THE PURPOSES OF SECTIONS 10A AND 10B SHALL BE OF TRUE UNDERTAKING LOCATED IN SPE CIFIED ZONES OR 100 EXPORT ORIENTED UNDERTAKINGS, AS THE CASE MAY BE, AND THIS SHALL NOT HAVE ANY MATERIAL RELATIONSHIP WITH THE OTHER BUSINESS OF T HE ASSESSEE OUTSIDE THESE ZONES OR UNITS FOR THE PURPOSES OF THIS PROVI SION. 17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [ FIRST PROVISO TO SECTIONS 10A(1); L0A (LA) AND L0A (4)THAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDERTAKING AND THAT IS ALSO HOW TH E CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT (NO.794 DATED 09.08.2000) UNDERSTOOD THE SITUATION, IT IS ONLY LOGICAL AND NATURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, THEREFORE, IMMEDIATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS. AT THAT STA GE THE AGGREGATE OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SET OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 O F THE ACT WOULD BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION L0A T HEREFORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE ACT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM T HE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION TOTAL INCOME OF THE ASSESSEE' IN SECTION L0A HAS ALREADY BEEN DEALT WITH EARLIER AND IN THE OVERALL SCENARIO UNFOLDED BY THE PROVISIONS OF SECTION L0A THE AFORE SAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPRESSION 'TOTAL INCOME OF TH E ASSESSEE' IN SECTION L0A AS 'TOTAL INCOME OF THE UNDERTAKING'. 18. FOR THE AFORESAID REASONS WE ANSWER THE APPEALS AND THE QUESTIONS ARISING THEREIN, AS FORMULATED AT THE OUTSET OF THIS ORDER, BY HOLDING THAT THOUGH SECTION L0A, AS AMENDED, IS A PROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGI BLE UNDERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION O F THE TOTAL INCOME UNDER CHAP TER VI. ALL THE APP EALS SHALL STAND DISPOSED OF ACCORDINGLY. FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 24 17. WE FURTHER FIND THAT THE CO-ORDINATE BENCH IN THE CASE OF DECISION CRAFT ANALYTICS LTD V/S DCIT ITA NO.1161 & 1162/AH D/2015 DATED 21.1.2019 FOLLOWED THE ABOVE REFERRED JUDGMENT OF H ONBLE APEX COURT IN THE CASE OF CIT & ANR V/S YOKOGAWA INDIA LTD (SUPRA) HOLDING THAT THERE REMAINS NO AMBIGUITY THAT THE ASSESSEE SHALL WORK O UT THE DEDUCTION U/S 10A OF THE ACT FROM ITS TOTAL INCOME BEFORE ALLOWIN G THE BROUGHT FORWARD LOSSES. RELEVANT PORTION OF THE DECISION OF THE TR IBUNAL IS MENTIONED BELOW; 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. THE SOLITARY ISSUE IN THE INST ANT CASE RELATES TO THE FACT WHETHER THE DEDUCTION UNDER SECTION L0A NEEDS TO BE WORKED OUT AFTER SETTING OFF THE BROUGHT FORWARD LOSSES. IN THIS REG ARD, WE NOTE THAT THE IMPUGNED ISSUE IS WELL SETTLED NOW BY THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT & ANR. VS. M/S YOKOGAWA INDIA LTD. IN CIVIL APPEAL NO. 8498 OF 2013=2016 TLOL-228-SC-IT.. THE RELEVANT EXTRACT OF THE CASE (SUPRA) IS AS UNDER: '17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [FIRST PROVISO TO SECTIONS 10A(1); L0A (LA) AND L0A (4)] THAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDERTAKING AND THAT IS ALSO HOW THE CONTEMPORARY CIRCULAR OF THE DEPARTMENT (NO.794 DATED 09.08.2000) UNDERSTOOD THE SITUATION, IT IS ONLY LOGICAL AND NATURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, THEREFORE, IMMEDIATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS. AT THAT STAGE THE AGGREGATE OF THE FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 25 INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SET OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION LOA THEREFORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE ACT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME,' 16.1. FROM THE ABOVE JUDGMENT OF THE HON'BLE SUPREME COUR T THERE REMAINS NO AMBIGUITY THAT THE ASSESSEE SHALL WORK OUT THE D EDUCTION UNDER SECTION L0A OF THE ACT FROM ITS TOTAL INCOME BEFORE ALLOWIN G THE BROUGHT FORWARD LOSSES. WE HOLD ACCORDINGLY. HENCE THE GROUND OF AP PEAL OF THE ASSESSEE IS ALLOWED. 18. FROM PERUSAL OF THE ABOVE JUDGMENTS IT IS WELL ES TABLISHED THAT IN THE INSTANT CASE THE ASSESSEE MADE CORRECT CLAIM BY FIR STLY TAKING THE BENEFIT OF SECTION 10A OF THE ACT FOR THE PROFITS EARNED FR OM SEZ UNITS AND REMAINING PROFITS OF OTHER UNITS INCLUDING SEZ UNIT WERE UTILISED FOR SETOFF OF CURRENT AND BROUGHT FORWARD LOSSES. IT REMAINS A N UNDISPUTED FACT THAT THE ASSESSING OFFICER HAD MADE ADEQUATE ENQUIRES AS NOTED HEREIN ABOVE ADOPTING ONE OF PERMISSIBLE VIEW FOR ALLOWING THE ASSESSEES CLAIM FOR EXEMPTION U/S 10A OF THE ACT BEFORE THE CLAIM OF S ET OFF OF BROUGHT FORWARD AND CURRENT YEAR LOSS. THE LD. PR. CIT TO OK A DIFFERENT VIEW OF THE MATTER. HOWEVER THAT WOULD NOT BE SUFFICIENT TO PERMIT LD. PR. CIT TO EXERCISE THE POWER U/S 263 OF THE ACT BECAUSE WHEN TWO VIEWS ARE POSSIBLE AND LD. PR.CIT DOES NOT AGREE WITH THE VIE W TAKEN BY THE FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 26 ASSESSING OFFICER, ASSESSMENT ORDER CANNOT BE TREAT ED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE UNLESS T HE VIEW TAKEN BY THE ASSESSING OFFICER NOT UNACCEPTABLE IN LAW. THAT IS NOT THE POSITION IN THE PRESENT CASE BECAUSE THE VIEW TAKEN BY LD. A.O HAS BEEN CONFIRMED BY HONBLE APEX COURT IN THE CASE OF CIT & ANR V/S YOKOGAWA INDIA LTD (SUPRA) . THE ABOVE STATED FACTS WHERE SUFFICIENT ENQUIRY H AVE BEEN ESTABLISHED TO HAVE BEEN CONDUCTED BY THE LD. A.O BEFORE ALLOWING THE ASSESSEES CLAIM OF EXEMPTION U/S 10A OF THE ACT A T RS.12,51,79,200/- HAS NOT BEEN DISPUTED BEFORE US BY THE LD. DEPARTME NTAL REPRESENTATIVE. APPARENTLY THE LD. A.O HAS NOT SHRINKED HIS RESPONS IBILITY OF EXAMINING AND INVESTIGATING THE CASE. THEREFORE AS THE LD. A .O AFTER MAKING DETAILED ENQUIRY ALLOWED ASSESSEES CLAIM OF EXEMPTION U/S 1 0A OF THE ACT AT RS.12,51,79,200/-, THIS ACTION OF THE LD. A.O CANNO T BE HELD AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. WE THE REFORE SET ASIDE THE FINDING OF PR. COMMISSIONER OF INCOME TAX ON THIS I SSUE AS IT WAS A MERE CHANGE OF OPINION WHICH WOULD NOT ENABLE LD. PR. CO MMISSIONER OF INCOME TAX TO EXERCISE JURISDICTION U/S 263 OF THE ACT AS THE LD. A.O HAD CONSIDERED THE DETAILS AND THE EXPLANATION OFFERED BY THE ASSESSEE BEFORE ACCEPTING THE CLAIM. WE THEREFORE REINSTATE THE A CTION OF THE LD. A.O ALLOWING THE ASSESSEES CLAIM OF EXEMPTION U/S 10A OF THE ACT AT RS. FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 27 12,51,79,200/- AGAINST THE PROFITS EARNED FROM SEZ UNITS. 19. AS REGARDS THE REMAINING TWO ISSUES RAISED BY PR C OMMISSIONER OF INCOME TAX IN THE ORDER U/S 263 OF THE ACT DIRECTIN G THE LD. A.O FOR COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT FOR NOT INCLUDING THE DISALLOWANCE OF INTEREST PAID TO INCOME TAX AT RS.1 5,82,154/- AND ALSO DIRECTING THE LD. A.O FOR VERIFYING THE CLAIM OF AD DITIONAL DEPRECIATION OF RS.38,98,361/- ON THE ALLEGED PURCHASE OF OLD AND U SED PLANT AND MACHINERY OF RS.3,89,83,611/-, LD. COUNSEL FOR THE ASSESSEE FAIRLY ACCEPTED THAT THIS FINDING OF PR. COMMISSIONER OF I NCOME TAX IS CORRECT AND THE DIRECTIONS GIVEN TO THE LD. A.O TO EXAMINE THESE ISSUES TWO AFRESH IS VALID. WE, THEREFORE HOLD THAT SINCE THE LD. A. O HAS NOT APPLIED HIS MIND ON THESE TWO ISSUES OF CORRECTLY COMPUTATION O F BOOK PROFIT U/S 115JB OF THE ACT AS WELL AS CLAIM OF ADDITION OF DE PRECIATION OF RS.38,98,361/- ON THE OLD AND USED MACHINERY, THE F INDING OF LD. PRINCIPAL COMMISSIONER OF INCOME TAXS JURISDICTION U/S 263 OF THE ACT ON THESE TWO ISSUES IS UPHOLD. 20. WE THEREFORE UPHOLD THE ORDER OF PRINCIPAL COMMISS IONER OF INCOME TAX ASSUMING JURISDICTION U/S 263 OF THE ACT ONLY T O THE EXTENT OF DIRECTION GIVEN FOR COMPUTATION OF BOOK PROFIT U/S 115JB AFTER FLEXITUFF INTERNATIONAL LTD ITA NO.282/IND/2017 28 CONSIDERING THE INTEREST PAID ON INCOME TAX AND DIR ECTION TO VERIFY CLAIM OF ADDITIONAL DEPRECIATION ON OLD AND USED MACHINER IES BUT WE SET ASIDE THE FINDING OF PRINCIPAL COMMISSIONER OF INCOME TAX REGARDING CLAIM OF EXEMPTION/DEDUCTION U/S 10A OF THE ACT AS PER OUR F INDING GIVEN HEREIN ABOVE HOLDING THAT LD. A.O HAS RIGHTLY ALLOWED THE BENEFIT OF EXEMPTION U/S 10A OF THE ACT AT RS.12,51,79,200/- AFTER CONDU CTING SUFFICIENT ENQUIRY. 21. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 14.05.20 19. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 14 MAY, 2019 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE