Appeal details
Counselvise Citation
[2010] 135 COUNSELVISE.COM (IT) 3392 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 5 month(s) 18 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-08-2010
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
B
Assessment Year
2004-2005
Appeal Filed On
25-02-2008
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 344 /PN/2008 (ASSTT. YEAR : 2004-05) KANBAY SOFTWARE (INDIA) P. LTD. NOW KNOWN AS CAPGEMINI INDIA P LTD. A-1, TECHNOLOGY PARK TALAWADE, PUNE 412114 PAN:AAACK2632B .. APPELLANT V. ADDITIONAL COMMISSIONER OF INCOME TAX RANGE 9, PUNE . RESPONDENT APPELLANT BY : SHRI M.M. GOLVALA RESPONDENT BY : SHRI. A.S. SINGH ORDER PER D. KARUNAKARA RAO AM THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST T HE ORDER OF THE CIT(A) DATED 14.11.2007 . THE GROUNDS TAKEN BY THE ASSESSEE READ A S UNDER : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) III, PUNE HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER IN HOLDING THAT PROFITS OF UNIT I AND II ARE TO BE REDUCED BY THE LOSS OF U NIT III FOR ARRIVING AT DEDUCTION UNDER SECTION 10A OF THE ACT WHILST CALCU LATING BOOK PROFITS FOR THE PURPOSES OF MINIMUM ALTERNATE TAX (MAT) UNDER THE P ROVISIONS OF SECTION 115 JB OF THE ACT. 2. WITHOUT PREJUDICE TO GROUND NO.1, THE APPELLANT SUBMITS THAT FOR THE PURPOSE OF COMPUTING BOOK PROFITS UNDER SECTION 115 JB, THE ASSESSING OFFICER OUGHT TO HAVE REDUCED THE BOOK LOSS OF UNIT III AND NOT THE TAX LOSS, FROM THE DEDUCTION AVAILABLE UNDER SECTION 10A IN RESPEC T OF UNIT I AND II. 3. THE ASSESSING OFFICER ERRED IN HOLDING THAT THE FOLLOWING PROVISIONS WERE PROVISIONS FOR UNASCERTAINED LIABILITIES AND T HEREFORE ERRED IN HOLDING THAT THEY NEED TO BE ADDED BACK TO THE NET PROFIT A S PER THE APPELLANTS PROFIT AND LOSS ACCOUNT IN ACCORDANCE WITH THE PROVISIONS OF CLAUSE (C ) TO THE EXPLANATION BELOW SECTION 115JB(2), FOR THE PURPOSE OF COMPUTING BOOK PROFITS UNDER SECTION 115JB OF THE ACT. A. PROVISION FOR DOUBTFUL DEBT RS.1,67,699/- B. PROVISION FOR ANNUAL SALARY SURVEY RS.2,01,00 0/- C. PROVISION FOR ASSETS SCRAPPED RS.6,42,845/- D. PROVISION MADE FOR FOREX ADVANCE RS.6,21,124/ - E. PROVISION FOR CELEBRATION EXPENSES RS.1,76,500 /- F. PROVISION FOR REWARDS TO ASSOCIATES RS.1,50,00 0/- ITA NO 344/PN/2008 KANBAY SOFTWARE (INDIA) PVT.LTD., A.Y.2004-05 PAGE OF 11 2 2. AT THE VERY OUT SET, LD COUNSEL STATED THAT THE G ROUND 3 IS NOT PRESSED AND THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND EXPORT OF COMPUTER SOFTWA RE AND FILED THE RETURN OF INCOME DECLARING THE LOSS OF RS 2,47,66,120/-. FOR T HE PURPOSE OF SECTION 115JB, BOOK PROFITS ARE DETERMINED AT LOSS OF RS 1,11,18,7 26/-. 5. FROM THE RETURN FILED, IT IS SEEN THAT THE ASSESS EE. THE ASSESSEE ALSO HAS DOMESTIC SALES, THOUGH NOT VERY SIGNIFICANT AS COMPARED TO THE EXPORT TURNOVER. THE ASSESSEE HAS 3 UNITS. DURING THE YEAR THE COMPANY H AD DECLARED TAXABLE INCOME UNDER THE PROVISIONS OF MAT AS PER SECTION 115JB. AS PER THE NOTES ACCOMPANYING THE RETURN OF INCOME IT WAS SEEN THAT, UNIT I COMMENCED ITS OPERATIONS IN OCTOBER, 1995 WHERE AS UNIT II COMMENCED ITS OPERATION FROM OCTOBER, 2001. DURING TH E YEAR ENDED 31.03.2004 A NEW UNDERTAKING IE UNIT 3 HAD BEEN SET UP AT HYDERABAD. U NIT 3 IS ALSO REGISTERED AS STP UNIT AND THE COMPANY CLAIMED THAT IT WAS ELIGIBLE TO CLAIM DEDUCT ION UNDER SECTION 10A OF THE ACT ON SIMILAR LINES AS OTHER TWO OLD UNITS. AS PER THE CO MPUTATION OF INCOME THE FOLLOWING DETAILS ARE NOTICED :- S.NO. DESCRIPTION UNIT I UNIT II UNIT III 1 PROFIT DERIVED BY UNDERTAKING 260245180 41818575 (-)26358929 2 DEDUCTION CLAIMED U/S 259324679 40702235 0 THE ASSESSEE HAD COMPUTED INCOME AS PER PROVISIONS O F SECTION 115JB OF THE ACT, AT LOSS OF RS. (-) 1.11.18,726/- AND THE TAX PAYABLE ON SUCH INCOME WAS WORKED OUT AT RS.NIL. 6. THE COMPANY HAD SUBMITTED FOLLOWING WORKING OF THE T AXABLE INCOME U/S 115JB: PROFIT AFTER TAX AS PER THE BOOKS OF ACCOUNT : RS.2 7,16,97,964 ADD: PROVISION FOR TAX : RS. 44,97,382 LESS:DIVIDEND RECEIVED FROM MUTUAL FUND : RS. 8,3 1,291 LESS: INCOME & EXPENSES INCLUDED IN THE ABOVE ON WHICH DEDUCTION UNDER 10A IS AVAILABLE UNIT 1 RS.23,55,56,770 UNIT 2 RS. 5,09,26,011 RS.28,64,82,781 BOOK PROFIT RS.(-)1,11,18,726 7. CONSIDERATION OF LOSS OF UNIT UNDER SECTION 10A FOR MAT INCOME: ON THE BASIS OF THESE DETAILS AND THE SUBMISSIONS MADE BY THE COMPANY DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS SEEN THAT THE COMPUTATION SUBMITTED BY THE COMPANY FOR THE FIGURE OF TAXABLE PROFIT U/S 115JB WA S NOT AS PER THE PROVISIONS OF THE SECTION. THE RELEVANT PROVISIONS OF SECTION 115JB ARE B EING REPRODUCED BELOW: 115JB. SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN COM PANIES. (1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, WHERE IN THE CASE OF AN ASESSEE, BEING A COMPANY, THE INCOME-TAX, PAYABLE O N THE TOTAL INCOME AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE A SSESSMENT YEAR COMMENCING ON OR AFTER THE 1 ST ITA NO 344/PN/2008 KANBAY SOFTWARE (INDIA) PVT.LTD., A.Y.2004-05 PAGE OF 11 3 DAY OF APRIL, 2001, IS LESS THAN SEVEN AND ONE-HALF PER CENT OF ITS BOOK PROFIT, SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND T HE TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT OF INCOME-TAX AT THE RAT E OF SEVEN AND ONE-HALF PER CENT. THE EXPLANATION TO THE SECTION GIVES THE METHOD OF C OMPUTATION OF THE TAXABLE BOOK PROFIT: EXPLANATION .FOR THE PURPOSES OF THIS SECTION, BOOK PROFIT MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB-SECTION (2), AS INCREASED BY (A) THE AMOUNT OF INCOME-TAX PAID OR PAYABLE, AND T HE PROVISION THERE FOR, OR (B),(C),(D)(E). (F) THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH SECTION 10 (OTHER THAN THE PROVISIONS CONTAINED IN CLAUSE (23G) THEREOF) OR SE CTION 10B OR SECTION 11 OR SECTION 12 APPLY, IF ANY AMOUNT REFERRED TO IN CLAUSES (A) TO (F) IS DEB ITED TO THE PROFIT AND LOSS ACCOUNT, AND AS REDUCED BY (II)THE AMOUNT OF INCOME TO WHICH ANY OF THE PROVISI ONS OF SECTION 10(OTHER THAN THE PROVISIONS CONTAINED IN CLAUSE (23G) THEREOF) OR SECTION 10A OR SECTION 10B OR SECTION 11 OR SECTION 12 APPLY, IF ANY SUCH AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACC OUNT; OR A PLAIN READING OF THE SECTION WOULD MAKE IT CLEAR THAT WHILE COMPUTING THE TAXABLE BOOK PROFIT AS PER THE SECTION 115JB, THE BOOK PROFIT IS TO BE REDUCED BY THE AMOUNT OF INCOME TO WHICH ANY OF THE PROVISIONS OF SECTION 10A APPLY IF SUCH AMO UNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. IN THIS REGARD IT IS SEEN THAT THE ASSESSEE HA D TAKEN INTO ACCOUNT ONLY THE POSITIVE INCOME OF UNIT 1 AND UNIT 2 WHILE WORKING OUT THE TAXABLE BOOK PROFIT FOR THE YEAR WHEREAS THE LOSS OF UNIT 3 WAS IGNORED IN THIS COMPUTATION. THIS STAND OF THE ASSESEE EFFECTIVELY LOWERED THE TAXABLE BOOK PROFIT FOR THE YEAR. THE ASSESSEE WAS ASKED TO EXPL AIN AS TO WHY THE LOSS OF UNIT 3 WAS NOT TAKEN INTO ACCOUNT WHILE WORKING OUT THE TAXABLE BO OK PROFIT FOR THE YEAR. IN RESPONSE TO THE QUERY THE COMPANY STATED THE FOLLOWING VIDE LETTER DATED 1 3.12.2006:- THE PROVISIONS OF SECTIONS 115JB SPECIFICALLY PROVIDE FO R THE EXCLUSION OF THE AMOUNT OF INCOME DERIVED BY A COMPANY UNDER THE P ROVISIONS OF SECTION 10A OF THE INCOME TAX ACT, 1961. IT IS EVIDENT THAT THE EXCLUSIO N OF THE INCOME UNDER THE SECTION 10A FOR THE PURPOSES OF MAT CALCULATIONS HA BEEN MADE WITH A VIEW TO ENCOURAGE SUCH UNITS TO BRING IN MORE AND MORE FOREIGN EXCHANGE INTO THE COUNTR Y AND SUCH UNITS WHO HAVE ACHIEVED THIS GOAL HAVE BEEN ASSURED WITH A LOWER BURDEN OF MINIMUM ALTERNATE TAX. IF THE INTENTION OF THE LEGISLATION IS TO EXCLUDE THE INCOME UNDER SECTION 10A WITH A VIEW TO REDUCE THE BURDEN OF THE MINIMUM ALTERNATE TAX, IT WOULD BE INCONCEIVABLE TO INTERPRET THAT THE LOSSES MUST BE ADDED BACK TO THE BOOK PROFIT WITH A V IEW TO INCREASE THE BURDEN OF THE MINIMUM ALTERNATE TAX. IT IS GOOD LAW THAT WHENEVER TWO VIEWS ARE POSSIBLE IN INTERPRETING PROVISIONS OF ANY SECTION, THE VIEW FAVOURABLE TO THE A SSESSEE SHOULD BE ADOPTED AND THIS WOULD BE MORE SO IN CASE OF ASSESSEE WHO ENJOY RELIEF U NDER SECTION 10A FOR WHOSE BENEFIT THIS PROVISION HAS BEEN INCORPORATED IN SECTION 115JB. WE WOULD THEREFORE SUBMIT THAT ONLY THE PROFITS OF UNIT 1 AND UNIT 2 HAVE TO BE EXCLUDED FR OM MAT CALCULATIONS AND LOSS OF UNIT 3 HAS TO BE COMPLETELY IGNORED IN THE TRUE SPIRIT OF THE PROVISIONS OF THE SECTION 8 THE SUBMISSIONS MADE BY THE ASSESSEE HAVE BEEN CONS IDERED. FROM THE REPLY SUBMITTED BY THE ASSESSEE IT IS SEEN THAT THE ASSESSEE HAS TRIED TO READ THE SECTION 115JB AS PER ITS CONVENIENCE AND HAS TRIED TO INSERT WORDS WHICH ARE NOT THERE IN THE SECTION. IT IS TRUE THAT THE PROVISIONS OF SECTIOIN 115JB ARE UNAMBIGU OUS ON THE ISSUE OF EXCLUDING THE INCOME OF THE ASSESSEE TO WHICH PROVISIONS OF SECTION 10 A ARE APPLICABLE, HOWEVER THE SECTION DOES NOT PERMIT THE INTERPRETATION MADE BY THE ASSESSEE THAT WHILE TAKING THE INCOME FALLING UNDER SECTION 10A THE ASSESSEE HAS A LIBERT Y TO IGNORE ONE OR MORE SUCH UNITS WHICH ARE NOT PROFIT MAKING. THE SECTION CLEARLY LAYS DO WN THAT FOR THE PURPOSE OF REDUCING THE MAT INCOME BY THE AMOUNT OF INCOME TO WHICH PROVISIO NS OF SECTION 10A ARE APPLICABLE THE AMOUNT OF SUCH INCOME WHICH IS CREDITED TO THE PROF IT AND LOSS ACCOUNT OF THE ASSESSEE DURING THE RELEVANT FINANCIAL YEAR IS TO BE TAKEN INTO AC COUNT. THE PROVISIONS DO NOT PERMIT ASSESSEE TO HAVE LIBERTY TO IGNORE A PORTION OF ITS INCOM E WHICH HAD BEEN TAKEN INTO ACCOUNT IN THE PROFIT AND LOSS BY THE ASSESSEE. ACCORDINGLY IT IS HELD THAT THE INTERPRETATION TAKEN BY THE ASSESSEE TO IGNORE THE LOSS OF UNIT 3 WHILE COMPUTING THE TAXABLE BOOK PROFIT OF THE ASSESSEE IS WITHOUT ANY LEGAL BA SIS AND IS THEREFORE DIFFICULT TO ACCEPT. IN VIEW OF THIS DISCUSSION IT IS HELD THAT IN THE WORKING OF THE MAT INCOME ITA NO 344/PN/2008 KANBAY SOFTWARE (INDIA) PVT.LTD., A.Y.2004-05 PAGE OF 11 4 UNDER SECTION 115JB THE LOSSES INCURRED BY THE ASSE SEE IN UNIT 3 SHOULD HAVE ALSO BEEN TAKEN INTO ACCOUNT TO ARRIVE AT THE FIGURE OF TAXABLE BOOK PROFIT. ON THIS BASIS THE WORKING OF MAT INCOME SUBMITTED BY THE COMPA NY IS BEING REVISED AS PER THE COMPUTATION AT THE END OF THE ORDER. PENALTY PROCEED INGS UNDER SECTION 271(1) ARE BEING INITIATED SEPARATELY. 4. AGGRIEVED WITH THE ABOVE MANNER OF COMPUTATION OF THE TAXABLE INCOME FOR THE PURPOSE OF SECTIN 115JB OF THE ACT, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE SUBMISSION OF THE ASSESSEE BEFORE THE C IT(A) AND HIS DECISION ON THE TOPIC ARE NARRATED IN PARA 5.4 OF THE IMPUGNED ORDER AND THE SAME ARE PRODUCED AS UNDER. 5.4 DISPUTING THE ACTION OF THE ASSESSING OFFICER THE APPELLANT SUBMITTED THAT THE PROVISIONS OF SECTION 115JB SPECIFICALLY PROVIDE FO R THE EXCLUSION OF THE AMOUNT OF INCOME DERIVED BY A COMPANY UNDER THE PROVISIONS OF SECTION 10A OF THE I.T. ACT. THE APPELLANT SUBMITTED THAT THE EXCLUSION OF THE I NCOME U/S 10A FOR THE PURPOSES OF MAT CALCULATION HAS BEEN MADE WITH A VIEW TO EN COURAGE SUCH UNITS TO BRING IN MORE AND MORE FOREIGN EXCHANGE IN THE COUNTRY AND S UCH UNITS WHO HAVE ACHIEVED THIS GOAL HAVE BEEN ASSURED WITH A LOWER BURDEN OF MINIMUM ALTERNATIVE TAX. ACCORDING TO THE APPELLANT, IF THE INTENTION OF THE LEGISLATION IS TO EXCLUDE THE INCOME U/S 10A WITH A VIEW TO REDUCE THE BURDEN OF THE MIN IMUM ALTERNATIVE TAX, IT WOULD BE INCONCEIVABLE TO INTERPRET THAT THE LOSSES MUST BE ADDED BACK TO THE PROFIT WITH A VIEW TO INCREASE THE BURDEN OF MINIMUM ALTERNATIVE T AX. THE APPELLANT CONTENDED THAT ONLY THE PROFITS OF UNIT-I AND UNIT-II HAVE TO BE EXCLUDED FROM MAT CALCULATIONS AND THE LOSS OF UNIT-III HAS TO BE COMPLETELY IGNO RED IN THE TRUE SPIRIT OF THE PROVISIONS OF THE SECTION. 5.5 AFTER CAREFUL CONSIDERATION, I AM NOT INCLINED TO ACCEPT THE CONTENTION OF THE APPELLANT. I FULLY AGREE WITH THE VIEW OF THE ASSE SSING OFFICER THAT WHILE COMPUTING TAXABLE BOOK PROFIT UNDER THE SCHEME OF MAT, IGNOR ING OF A PORTION OF INCOME WHICH HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROV ISIONS OF PARTS II AND III OF SCHEDULE VI OF THE COMPANIES ACT AND THEREFORE, TH E LOSS OCCURRING IN UNIT III HAS ALSO TO BE TAKEN INTO ACCOUNT FOR THE PURPOSE OF CO MPUTING TAXABLE BOOK PROFITS U/S. 115JB OF THE ACT. 5.6 FURTHER, I ALSO DO NOT FIND MERIT IN APPELLANT S CONTENTION THAT IF THE INTENTION OF THE LEGISLATURE IS TO EXCLUDE THE INCOME U/S 10A WITH A VIEW TO REDUCE THE BURDEN OF THE MINIMUM ALTERNATIVE TAX, IT WOULD BE INCONCE IVABLE TO INTERPRET THAT THE LOSSES MUST BE ADDED BACK. WORDS IN BENEFICIAL SEC TION CANNOT BE IGNORED OR MISINTERPRETED TO CONFER BENEFITS NOT INTENDED. IN THE CASE OF A.M. MOOSA VS. CIT, 294 ITR 1, HONBLE SUPREME COURT HAS HELD THAT EVEN THOUGH LIBERAL INTERPRETATION HAS TO BE GIVEN TO A BENEFICIAL PROVISION, THE INT ERPRETATION HAS TO BE AS PER THE WORDING OF THE SECTION. IF THE WORDING OF THE SECT ION IS CLEAR, THEN BENEFITS WHICH ARE NOT AVAILABLE UNDER THE SECTION CANNOT BE CONFE RRED BY IGNORING OR MISINTERPRETING WORDS IN THE SECTION. ITA NO 344/PN/2008 KANBAY SOFTWARE (INDIA) PVT.LTD., A.Y.2004-05 PAGE OF 11 5 5.7 IN VIEW OF THE AFORESAID, THE ACTION OF THE ASSESSING OFFICER IN ADJUSTING LOSS OF UNIT III WHILE WORKING TAXABLE P ROFITS AS PER PROVISIONS OF SECTION 115JB IS UPHELD . 5. AGGRIEVED WITH THE SAME, THE ASSESSEE FILED THE P RESENT APPEAL BEFORE US. IN THIS REGAD, LD COUNSEL FOR THE ASSESSEE BROUGHT TO OUT ATTENTION THE SUBMISSION MADE BEFORE THE CIT(A) VIDE THE LETTER DATED 13.12.20 06 (PARA 2) (REFER TO PAGE 41 OF THE PAPER BOOK), LAST PARAGRAPH ON PAGE 43 OF THE PAPER BOOK (ASSESSEES LETTER DT 16.1.2007) AND PAGE 47/48 OF THE PAPER BOOK (ASSE SSEES LETTER DATED 28 TH MARCH 2008) AND ALL THESE THREE EXTRACTS ARE REPRODUCED AS UND ER. A. 2. LOSSES OF 10A UNITS IGNORED WHILE COMPUTING BOOK P ROFITS THE PROVISIONS OF SECTIONS 115JB SPECIFICALLY PROVID E FOR THE EXCLUSION OF THE AMOUNT OF INCOME DERIVED BY A COMPANY UNDER THE PROVISIONS OF SECTION 10A OF THE INCOME TAX ACT, 1961. IT IS EVIDENT THAT THE EXCLUSION OF THE INCOME UNDER SECTION 10A FOR THE PURPOSE OF MAT CALCULATIONS HAS BEEN MADE WITH A VIEW TO ENCOURAGE SUCH UNITS TO BRING IN MORE AND MORE FOREIGN EXCHANGE IN TO THE COUNTRY AND SUCH UNITS WHO HAVE ACHIEVED THIS GOAL HAVE BEEN ASSURED WITH A LOWER BURDEN OF MINIMUM ALTERNATE TAX. IF THE INTENTION OF THE LEGISLATION IS TO EXCLUDE THE INCOME UNDER SECTION 10A WITH A VIEW TO REDUCE THE BURDEN ON MIN IMUM ALTERNATE TAX, IT WOULD BE INCONCEIVABLE TO INTERPRET THAT THE LOSSES MUST BE ADDED BACK TO THE BOOKS PROFITS WITH A VIEW TO INCREASE THE BURDEN ON MINIMUM ALTE RNATE TAX. IT IS GOOD LAW THAT WHENEVER TWO VIEWS ARE POSSIBLE IN INTERPRETING T HE PROVISIONS OF ANY SECTION, THE VIEW FAVOURABLE TO THE ASSESSEE SHOULD BE ADOPTED A ND THIS WOULD BE MORE SO IN CASE OF ASSESSEE WHO ENJOY RELIEF UNDER SECTION 10A FOR WHOSE BENEFIT THIS SPECIFIC PROVISION HAS BEEN INCORPORATED IN SECTION 115JB. WE WOULD THEREFORE SUBMIT THAT ONLY THE PROFITS OF UNIT 1 AND UNIT 2 HAVE TO BE EX CLUDED FROM MAT CALCULATIONS AND LOSS OF UNIT 3 HAS TO BE COMPLETELY IGNORED IN THE TRUE SPIRIT OF THE PROVISIONS OF THIS SECTION. B . THOUGH WE DO NOT AGREE TO THE ADJUSTMENT OF THE LOSS OF UNIT III, WOULD LIKE TO POINT OUT THAT IF AT ALL THE SAID LOSS HAS TO B E ADJUSTED; YOU MUST CONSIDER THE BOOK LOSS OF RS.1,33,09,182 AND NOT THE LOSS OF RS. 2,63,58,929 WHICH IS THE COMPUTED LOSS AS PER INCOME TAX COMPUTATION. C . HOWEVER, WE WOULD LIKE TO BRING TO YOUR KIND NOTI CE THAT THE APPELLANT COMPANY HAD ALSO RAISED AN ALTERNATE PLEA IN THIS BEHALF TO SAY THAT, WITHOUT PREJUDICE TO THE ABOVE CONTENTION, IF AT ALL THE LO SSES OF UNIT III ARE TO BE ADJUSTED, WHAT SHOULD BE TAKEN INTO ACCOUNT ARE THE BOOK LOSS ES AND NOT THE TAX LOSSES AS WAS DONE BY THE ASSESSING OFFICER. IF THIS ALTERNATE P LEA IS TAKEN INTO ACCOUNT, IT IS SUBMITTED, THAT THE ASSESSING OFFICER SHOULD HAVE C ONSIDERED THE BOOK LOSSES ARISING OUT OF UNIT III OF RS.1,33,09,182/- AS AGAINST THE TAX LOSSES OF RS.2,63,58,929/- IN ARRIVING AT THE BOOK PROFITS FOR MAT PURPOSES. WE WOULD, THEREFORE, REQUEST YOU TO KINDLY CALL FOR THE RECORDS OF THE CASE AND CONSIDER THE ALTERNATE PLEA OF THE APPELLANT CO MPANY AS STATED ABOVE AND TO RECTIFY YOUR ORDER ACCORDINGLY, IF YOUR HONOUR IS S ATISFIED THAT OUR ARGUMENTS ARE IN LINE WITH THE GENERALLY ACCEPTED ACCOUNTING PRINCIP LES FOR COMPUTING BOOK PROFITS ITA NO 344/PN/2008 KANBAY SOFTWARE (INDIA) PVT.LTD., A.Y.2004-05 PAGE OF 11 6 AND ALSO CONSISTENT WITH THE SPIRIT OF THE PROVISIO NS OF SECTION 10A OF THE INCOME TAX ACT. 6. FURTHER, DURING THE APPELLATE PROCEEDINGS BEFORE US, TH E ASSESSEES COUNSEL FILED WRITTEN SUBMISSION DT 23.6.2010 AND THE RELEVAN T PARTS ARE DETAILED AS FOLLOWS. 1) WHILE COMPUTING THE PROFIT U/S. 115JB, THE ASSESSIN G OFFICER HAS NO POWER OF MAKING INCREASES AND REDUCTIONS, EXCEPT AS PROV IDED FOR IN THE EXPLANATION BELOW SECTION 115JB. NO OTHER ADJUSTMEN T, EXCEPT THOSE SPECIFICALLY PROVIDED FOR, IS PERMISSIBLE AFTER COM MENCING THE COMPUTATION WITH THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT APOLLO TYRES VS. CIT 255 ITR 273 (S.C) AND CIT VS. HCL COMMET SYSTEMS AND SERVICES LTD. 305 ITR 409 (S.C). 2) IGNORING THE LOSS OF UNIT III IS NOT AN ADJUSTMENT PRESCRIBED UNDER THE RELEVANT EXPLANATION. THE REASONS FOR THIS ARE :- A) SECTION 10A OF THE INCOME-TAX ACT, AS SUBSTITUTED B Y THE FINANCE ACT, 2000, WITH EFFECT FROM 1.4.2001 PROVIDES FOR A DED UCTION FROM INCOME, AS CONTRASTED TO THE PROVISIONS PRIOR TO TH E AMENDMENT WHICH PROVIDED FOR AN EXEMPTION (PLEASE SEE DETAILED DISC USSION FROM PAGES 509 TO 511 IN THE TRIBUNAL JUDGEMENT CITED IN THE C ASE OF HONEYWELL INTERNATIONAL (INDIA) PVT. LTD. VS. DCIT 26 SOT 503 (DEL.), WHEREIN CIRCULAR NO. 794 DATED 9.8.2000 ISSUED BY C BDT HAS ALSO BEEN CULLED OUT AND REPRODUCED). B) BECAUSE IT IS A DEDUCTION PROVISION, THE ASSESSEE I S ENTITLED TO CLAIM THE SAID DEDUCTION, WHEN THERE IS A POSITIVE INCOME AND TO IGNORE THE RELEVANT SECTION, WHEN THERE IS A LOSS. IN SHORT, IF THERE IS A POSITIVE INCOME, SECTION 10A IS TO APPLY AND IF THERE IS NO POSITIVE INCOME, SECTION 10A IS TO BE IGNORED. C) SECTION 10A ITSELF HAS SPECIFIED SITUATIONS WHERE A SET-OFF OF LOSS UNDER A PARTICULAR SECTION IS NOT PERMISSIBLE (SEE SECTIO N 10A(6)(II), SUCH AS UNDER SECTIONS 72(1), 74(1) AND 74(3). HOWEVER, TH ERE IS NO BAR TO THE APPLICATION OF SECTIONS 70 AND 71 WHICH PERMIT INTER-HEAD AND INTRA-HEAD SET OFF. D) ATTENTION IS SPECIFICALLY INVITED TO THE PROVISION S OF SECTION 115JB(5) WHICH READ AS UNDER :- (5) SAVE AS OTHERWISE PROVIDED IN THIS SECTION, AL L OTHER PROVISIONS OF THIS ACT SHALL APPLY TO EVERY ASSESSEE, BEING A COMPANY, MENTIONED IN THIS SECTION. THIS SHOWS THAT THE PROVISIONS OF SECTION 70 AND 71 ARE NOT TO BE EXCLUDED WHILE COMPUTING BOOK PROFIT U/S. 115JB. E) AS FAR AS NORMAL INCOME-TAX PROVISIONS ARE CONC ERNED, THE MATTER IS NO LONGER RES INTEGRA. THIS VERY ISSUE HAS BEEN DU LY CONSIDERED AND DECIDED IN SEVERAL JUDGEMENTS WHICH WERE CITED IN T HE COURSE OF HEARING :- HAVING REGARD TO THE JUDGMENTS OF THE TRIBUNAL WHIC H HAVE CONSIDERED SECTION 10A TO BE A DEDUCTION PROVISION AN IN PARTI CULAR, THE UNREPORTED JUDGMENT OF THE BOMBAY HIGH COURT REFERR ED TO ABOVE, IT IS RESPECTFULLY SUBMITTED THAT BECAUSE SECTION 10A IS A DEDUCTION ITA NO 344/PN/2008 KANBAY SOFTWARE (INDIA) PVT.LTD., A.Y.2004-05 PAGE OF 11 7 PROVISION, IT DOES NOT AT ALL APPLY IN THE CASE OF A LOSS MAKING AND, THEREFORE, IT IS PERMISSIBLE TO SET OFF THE LOSS UN IT III IN COMPUTING BOOK PROFIT U/S. 115JB. GROUND NO.2: WITHOUT PREJUDICE TO THE CONTENTION OF THE APPELLAN T THAT THE ASSESSING OFFICER WAS IN ERROR IN IGNORING THE LOSS OF UNIT I II WHILE COMPUTING THE BOOK PROFIT FOR THE PURPOSES OF SECTION 115JB, THE APPELLANT SUBMITS THAT HE ERRED IN REDUCING THE LOSS COMPUTED UNDER T HE NORMAL PROVISIONS OF THE INCOME-TAX ACT RS.2,63,58,929/- ( PAGE 29 OF COMPILATION). AT BEST, HE COULD HAVE REDUCED THE B OOK LOSS OF RS.1,33,09,182/- (PAGE 30 OF COMPILATION). IT IS O NLY THE LOWER FIGURE OF RS.1,33,09,182/- WHICH HAS BEEN CONSIDERED BY TH E APPELLANT AS A LOSS WHILE ARRIVING AT THE STARTING FIGURE OF BOOK P ROFIT I.E. RS.27,61,95,346/-. IT IS RESPECTFULLY SUBMITTED WI THOUT PREJUDICE TO GROUND NO.1, THAT EVEN IF THE LOSS WERE TO BE IGNOR ED, THE CORRECT FIGURE OF LOSS TO BE IGNORED WOULD BE THE LOWER FIG URE OF RS.1,33,09,182/-. 7. ON THE OTHER HAND, LD DR FOR THE REVENUE PUT FORWARD ED HIS ARGUMENTS AND THEY ARE SUMMARIZED AS FOLLOWS. (I) THE PROVISIONS OF SECTION 115JB ARE SELF CONTAINED PROVISIONS AND THEY ARE NOT TO BE INFLUENCE D BY THE REST OF THE PROVISIONS OF THE ACT UNLESS CLEARLY MENTIONED IN THE ACT. (II) RELEVANT PROVISION OF CLAUSE (F) AND SUB-CLAUSE (II) OF THE EXPLANATION 1 TO SECTION 115JB OF THE ACT DO NOT PROVIDE MANDATE FOR THE ADJUSTMENT OF THE LOSS AGAINST THE O THER INCOME OF THE ASSESSEE. (III) I NCREASE OF BOOK PROFITS HAVE TO BE DONE AS PER THE EXPLANATI ON 1 TO SECTION 115JB OF THE ACT AND SO IS THE GRANT OF REDUCTION OF SUCH PROFITS AND THE ITEMS MENTIONED IN SUB CLAUSE (I) TO (VIII) ONLY ARE TO BE REDUCED AND NOT OTHERWISE. (IV) IT IS EVIDENT THAT THE PROVISIONS OF CLAUSE (F) AND SU B CLAUSE (II) OF EXPLANATION 1 TO SECTION 115JB OF THE ACT ARE AMENDED AND AS A RESULT, REFERENCE OF THE WORDS SECTION 10A AND 10B HAVE BEEN OMITTED WITH EFFECT FROM 1.4.2008 BY THE FINANCE ACT 2007. AS A RESULT OF THE SAID AMENDMENT, THE EXE MPT INCOME U/S 10A AND 10B ARE NEITHER TO BE ADDED NOR TO BE REDUCED FROM THE BOOK PROFITS AS THE AMENDED EXPLANATION 1 TO SECTION 115JB OF THE ACT. (V) THE DEMAND OF ASSESSEE HAS THE EFFECT OF REDUCTION OF THE BOOK PROFITS AND CONSEQUEN TLY REDUCE THE MAT AND THE SAME IS NOT AUTHENTICATED BY THESE SELF CONTAINED P ROVISIONS OF SECTION 115JB OF THE ACT. IT SHOULD NOT BE ALLOWED. (VI) THE CASE LAWS RELIED UPON BY THE ASSESSEE RELATE TO THE REGULAR PROVISIONS AND THEREFORE, THEY ARE DISTING UISHABLE BOTH ON FACTS AND THE LAW AND HENCE, THEY HAVE NO APPLICATION TO THE PRESENT ISSUE UNDER CONSIDERATION. ITA NO 344/PN/2008 KANBAY SOFTWARE (INDIA) PVT.LTD., A.Y.2004-05 PAGE OF 11 8 8. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF T HE REVENUE TOGETHER WITH THE PAPER BOOKS AND OTHER WRITTEN SUBMISSIONS MAD E BEFORE US. 9. THE CORE ISSUE FOR ADJUDICATION RELATES TO THE TREAT MENT OF THE LOSS FROM THE UNIT III BY WAY OF ADJUSTMENT OR SET OFF AGAINST TH E OTHER INCOME OF THE ASSESSEE CHARGEABLE UNDER ANY OTHER HEADS OF INCOME SO THAT TH E ASSESSEE DOES NOT HAVE TO PAY MAT U/S 115JB OF THE ACT ON THE INCOME OF THE ASSESSEE TO THE EXTENT OF THE IMPUGNED LOSS FROM UNIT III. IN THIS REGARD, THE CASE OF THE ASSESSEE IS THAT THE PROVISIONS OF SECTION 10A/10B ARE DEDUCTION PROVISIONS AND NOT THE EXEMPTION PROVISIONS AS HELD BE VARIOUS JUDICIAL FORUMS AND CONS EQUENTLY, LOSS GENERATED BY THE UNDERTAKING IE UNIT III HAS TO BE TREATED IN ACCO RDANCE WITH THE PROVISIONS OF SECTIONS 70 TO 72 OF THE ACT. CONSEQUENTLY, IMPUGNE D LOSS IS ENTITLED FOR SET OFF AGAINST THE INCOME UNDER OTHER HEADS OF INCOME OF THE ASSESSEE AND CARRY FORWARD BENEFITS IF NECESSARY. 10. PER CONTRA , THE CASE OF THE REVENUE IS THAT THE PROVISIONS OF S ECTIONS 115J, 115JA AND 115JB OF THE ACT ARE THE DEEMED PROVISIONS AND THEY ARE AIMED AT MAKING CERTAIN CATEGORIES OF COMPANIES TO PAY TAX ON THEIR DEEMED TOTAL INCOME. BY VIRTUE OF THESE DEEMED PROVISIONS, SUCH COMPANIES, TH OUGH THEY ARE NOT ENTITLED TO PAY TAX UNDER NORMAL PROVISIONS, HAVE TO PAY TAX AT TH E SPECIFIED TAX RATES. THESE PROVISIONS ARE SELF CONTAINED ONES AS THEY CONTAINED THE PROCEDURE AND MANNER OF COMPUTING SUCH DEEMED TOTAL INCOME AND SUCH COMPUTA TION STARTS WITH THE BOOK PROFITS AS DEFINED IN THESE PROVISIONS. ACCORDING TO THE REVENUE, CONSIDERING THE SET PROCEDURE AND IN PRINCIPLE, GRANTING SET OFF TO SUCH LO SS GENERATED OUT OF SOME OF THE UNDERTAKINGS OF THE ASSESSEE AGAINST THE OTHER TA XABLE INCOME OF THE ASSESSEE GOES AGAINST THE VERY CONCENT OF MAT PROVISIONS. FURTH ER, AS PER THE REVENUE, SUCH GRANT OF SET OFF GOES AGAINST THE PROCEDURAL FICTION C REATED IN THE EXPLANATION 1 OF SECTION 115JB AND OTHER COMPARABLE PROVISIONS IE 115 AND 115JA OF THE ACT. SUCH INTERPRETATION TAKES STRENGTH FROM THE VERY OMISSION OF RELEVANT EXPRESSIONS FROM THE CLAUSE (F) AND SUB CLAUSE (II) OF THE EXPLANATI ON 1 TO SECTION 115JB OF THE ACT BY THE FINANCE ACT 2007. ITA NO 344/PN/2008 KANBAY SOFTWARE (INDIA) PVT.LTD., A.Y.2004-05 PAGE OF 11 9 11. WE HAVE CONSIDERED THE RIVAL POSITIONS OF THE PA RTIES IN THE APPEAL. THERE IS NO DISPUTE ON THE FACT THAT THE PROVISIONS OF SECTIO N 115JB ARE THE DEEMED PROVISIONS AND THE SELF CONTAINED PROVISIONS AND THEY PROVIDE FOR (I) WHAT CONSTITUTES THE DEEMED TOTAL INCOME AND (II) WHAT IS THE PROCEDU RE FOR COMPUTING SUCH DEEMED TOTAL INCOME FOR THE PURPOSES OF SECTION 115JB OF THE ACT. SO FAR AS TREATMENT TO THE EXEMPT INCOME IS CONCERNED, CLAUSE (F) AND SUB CLAUS E (II) OF THE EXPLANATION 1 TO SECTION 115JB OF THE ACT ARE RELEVANT. THESE PROVISION S DO NOT PROVIDE FOR THE MANNER OF TREATING THE LOSS GENERATED BY THE LOSS MAKI NG UNDERTAKING OF THE ASSESSEE VIS A VIS THE INCOME OF OTHER HEADS OF INCO ME. FURTHER, IT IS UNDISPUTED FACT THAT THE ASSESSEES GROUNDS HAVE TO BE DECIDED AS P ER THE PRE AMENDED PROVISIONS OF SECTION 115JB OF THE ACT. IN OUR OPINION, CONSIDE RING THE INTENTION OF THESE PROVISIONS OF SECTION 115JA, I.E. MAKING SUCH COMPAN IES TO PAY TAX ON DEEMED TOTAL INCOME, THESE PROVISIONS ARE NOT AIMED AT PROVIDING T HE BENEFITS TO THE LOSS MAKING UNDERTAKINGS BY ALLOWING SET OFF TO THE LOSS OF THE LOSS MAKING UNITS AGAINST THE OTHER INCOME OF THE ASSESSEE. FURTHER, IN OUR OPINION, GRANTING SET OFF OF THE IMPUGNED LOSS OF THE UNDERTAKING AGAINST THE OTHER TA XABLE INCOME OF THE ASSESSEE UNDER ANY HEAD OF INCOME IN ACCORDANCE WITH THE PROVIS IONS OF SECTION 70/71 OF THE ACT WILL AMOUNT TO ALLOWING UNINTENDED BENEFITS TO THE ASSESSEE AND ALSO ENCOURAGING THE GENERATION OF LOSS BY THE UNDERTAKINGS SUCH AS UNIT III OF THE ASSESSEE. 12. IN SO FAR AS THE ARGUMENT OF LD COUNSEL OF THE AS SESSEE IS CONCERNED, WE FIND THAT MOST OF THE ARGUMENTS REVOLVE AROUND THE OPINION THAT THE PROVISIONS OF SECTION 10A/10B ARE DEDUCTION PROVISIONS AND THEREFORE, ALL THE PROVISIONS OF SECTIONS 70 TO 72/71 RELATING TO SET OFF AND CARRY FORWARD OF THE LOSSE S ARE EQUALLY RELEVANT FOR COMPUTING THE DEEMED TOTAL INCOME FOR MAT PURPOSE U/S 115JB OF THE ACT. FURTHER, IT IS NOTICED THAT THERE IS NO PRECEDENT ON THE SUB JECT ON EITHER SIDE. IT IS EVIDENT THAT ALL THE JUDICIAL PROPOSITIONS AND CITATIONS BRO UGHT TO OUR NOTICE RELATE THE REGULAR PROVISIONS OF THE ACT AND UNRELATED TO THE MAT PROVISI ONS. CONSIDERING THE SPECIALIZED NATURE OF THE MAT PROVISIONS, WE ARE OF TH E OPINION, THE CITATIONS RELIED UPON BY THE COUNSEL HAS TO BE HELD DISTINGUISHABLE . 13. THE PROVISIONS OF EXPLANATION 1 TO SECTION 115JB OF THE ACT PROVIDE FOR THE LIST OF ITEMS TO BE ADDED TO INCREASE THE BOOK PROFITS AND THE LIST OF ITEMS TO REDUCED TO DECREASE THE SAID INCREASED PROFITS TO ARRIVE AT THE DEE MED TOTAL INCOME FOR THE MAT ITA NO 344/PN/2008 KANBAY SOFTWARE (INDIA) PVT.LTD., A.Y.2004-05 PAGE OF 11 10 PURPOSE. IT IS A SETTLED ISSUE THAT NO UNAUTHORIZED I NCREASES AND DECREASES ARE TO BE DONE UNDER ANY CIRCUMSTANCES AND THE ADJUSTMENT TO T HE BOOK PROFITS HAVE TO BE STRICTLY AS PER THE PROVISIONS OF THE EXPLANATION 1 TO SECTION 115JB OF THE ACT. IT IS A DECIDED ISSUE THAT WHILE COMPUTING THE BOOK PROFIT U /S. 115JB, THE ASSESSING OFFICER HAS NO POWER OF MAKING INCREASES AND REDUCTIONS, EXCEP T AS PROVIDED FOR IN THE EXPLANATION BELOW SECTION 115JB. NO OTHER ADJUSTMEN T, EXCEPT THOSE SPECIFICALLY PROVIDED FOR, IS PERMISSIBLE AFTER COMMENCING THE COMPU TATION WITH THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT APOLLO TYRES V S. CIT (255 ITR 273) (SC) AND CIT VS. HCL COMMET SYSTEMS AND SERVICES LTD(305 ITR 409) (S.C). 14. FURTHER, THIS VIEW IS FORTIFIED BY THE RECENT DEC ISION OF A SPECIAL BENCH IN THE CASE OF RAIN COMMODITIES LTD 4 ITR (TRIB) 551 (HYD)[ SB]. ALTHOUGH THIS DECISION IS PRONOUNCED IN THE CONTEXT OF REQUEST FOR GRANT OF DEDUC TION OF THE EXEMPT CAPITAL GAINS, IN OUR OPINION, THE DECISION OF DENIAL OF DED UCTION OF EXEMPT CAPITAL GAINS IN THE ABSENCE OF PROVISIONS IS RELEVANT TO THE PRESENT DISPUTE UNDER CONSIDERATION. RELEVANT HELD PORTION IS REPRODUCED HERE FOR READY REFERENC E. HELD ACCORDINGLY, THAT MERELY BECAUSE THE LONG-TER M CAPITAL GAINS ARE EXEMPT UNDER SECTION 47(IV) OF THE ACT UNDER THE NORMAL PR OVISIONS OF THE ACT, THEY COULD NOT ALSO BE REDUCED FROM THE NET PROFIT FOR THE PUR POSE OF COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT WHEN THE EXPLANATION 1 TO SECTION 115JB DOES NOT PROVIDE FOR ANY DEDUCTION IN TERMS OF SECTION 47(IV) OF THE ACT. SECTION 47(IV) OF THE ACT HAD NO APPLICATION IN THE COMPUTA TION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT. THE LONG-TERM CAPITAL GAINS EARN ED BY THE ASSESSEE HAD BEEN INCLUDED IN THE NET PROFIT DETERMINED ACCORDING TO THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH PARTS II AND III OF SCH EDULE VI TO THE COMPANIES ACT. IN THE NOTES ON ACCOUNTS, IT WAS NOWHERE MENTIONED AND CLAIMED THAT THOUGH THE LONG-TERM CAPITAL GAINS WERE INCLUDED IN THE PROFIT AND LOSS ACCOUNT, THERE WERE NOT INCLUDIBLE IN THE NET PROFIT IN TERMS OF THE PROVIS IONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT OR THE ACCOUNTING PRINCIPLE S ACCEPTED UNDER THE COMPANIES ACT. ONLY IN THE COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT, THE ASSESSEE HAD CLAIMED EXCLUSION OF LONG-TERM CAPITAL GAINS WHICH WERE EXEMPT UNDER SECTION 47(IV) OF THE ACT. CAPITAL GAINS ON SALE OF SHARES HAVING BEEN INCLUDED IN COMPUTING THE PROFITS PRESENTED BEFORE THE SHAREHOL DERS, THEY SHOULD ALSO BE INCLUDED IN COMPUTING BOOK PROFITS UNDER SECTION 11 5JB. IN THE ABSENCE OF ANY PROVISION FOR EXCLUSION OF EXEMPTED CAPITAL GAINS I N THE COMPUTATION OF BOOK PROFIT UNDER THE ABOVE PROVISION, THE ASSESSEE WAS NOT ENTITLED TO THE EXCLUSION CLAIMED . 15. CONSIDERING THE DEEMED AND SELF CONTAINED NATURE OF THE PROVISIONS OF SECTION 115JB OF THE ACT, WE ARE OF THE OPINION THAT THE AO HAS RIGHTLY DENIED THE DEDUCTION OF SET OFF OF THE LOSS FROM UNIT III IN THE ABSENCE OF THE EXPRESS PROVISIONS TO ITA NO 344/PN/2008 KANBAY SOFTWARE (INDIA) PVT.LTD., A.Y.2004-05 PAGE OF 11 11 AUTHORIZE SUCH DEDUCTION AND THEREFORE, ORDER OF THE CIT (A) DOES NOT CALL FOR INTERFERENCE IN THIS REGARD. ACCORDINGLY, GROUND 1 OF THE ASSESSEE IS DISMISSED . 16. IN SO FAR AS THE ALTERNATE GROUND IS CONCERNED, IT IS A SETTLED ISSUE THAT THE LOSS COMPUTED UNDER REGULAR PROVISIONS IS IRRELEVANT FOR D ETERMINING THE DEEMED INCOME OF THE ASSESSEE FOR MAT PURPOSE. THEREFORE, IN O UR VIEW, THE REVENUE HAS ERRED IN REDUCING THE LOSS COMPUTED UNDER THE NORMAL PRO VISIONS OF THE INCOME-TAX ACT. IN OUR VIEW AS REQUESTED BY THE ASSESSEE, AO SHO ULD RESTRICT TO THE BOOK LOSS OF RS.1,33,09,182/- AS THE SAME IS THE CORRECT FIGURE IF THE LOSS IS TO BE IGNORED. THEREFORE, THE AO IS DIRECTED TO COMPUTE THE CORRECT DEE MED TOTAL INCOME FOR MAT PURPOSE. ACCORDINGLY, GROUND 2 OF THE ASSESSEES APPEA L IS ALLOWED . 17. IN THE RESULT , THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DAY OF AUGUST 2010. SD/- SD/- (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER (D. KARUNAKARA RAO) ACCOUNTANT MEMBER PUNE, DATED THE 13TH AUGUST, 2010 US COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT -V, PUNE 4. THE CIT(A)-III, PUNE 4. THE D.R. B BENCH, PUNE 5. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE
