DCIT, New Delhi V. M/s. Baba Global Ltd., Delhi

ITA 4252/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52541 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 16-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Keywords: Tax effect
• Section: 10

Judgement Text

ITA NO. 4252/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 4252/DEL/2010 A.Y. : 2007-08 DCIT, CIRCLE 2(1), ROOM NO. 398-D, CR BUILDING, NEW DELHI VS. M/S BABA GLOBAL LIMITED, 4873, CHANDNI CHOWK, DELHI 110 006 (PAN/GIR NO. : AAACB6357N) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. ASHOK KUMAR, CA DEPARTMENT BY : DR. B.R.R. KUMAR, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 24.6.2 010 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE ISSUE RAISED READ AS UNDER:- THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRE D ON FACTS AND IN LAW IN DIRECTING THE ASSESSING OFF ICER TO NOT SET OFF BUSINESS LOSS OF ONE UNIT AGAINST THE PROFI T OF ANOTHER UNIT SET UP IN NOIDA SPECIAL ECONOMY ZONE (NSEZ) IGNORING : A) THE UNAMBIGUOUS AND EXPLICIT PROVISIONS OF SECTION 1 0A READ WITH SECTION 2(45) OF THE IT ACT WHICH CLEAR LY IMPLY THAT THE DEDUCTION FOR ELIGIBLE PROFIT U/S. 10A O F THE IT ITA NO. 4252/DEL/2010 2 ACT IS TO BE ALLOWED ON THE ELIGIBLE PROFIT FORMIN G PART OF THE TOTAL INCOME OF THE ASSESSEE COMPANY UNDER THE HEAD OF PROFIT AND GAINS OF BUSINESS OR PROFESSIONS . B) THAT PARA A-34 OF SCHEDULE BP (COMPUTATION OF INCOME FROM BUSINESS OR PROFESSION) OF ITR-6, CLEARLY AND EXPLICITLY SHOWS THAT DEDUCTION U/S 10A IS TO BE AL LOWED FROM THE PROFIT OR LOSS OF BUSINESS COMPUTED ON THE BASIS OF PROFIT AND LOSS ACCOUNT MADE BY THE ASSE SSEE, BEFORE DEDUCTION U/S 10A OF THE IT ACT. 3. THE ASSESSEE COMPANY IN THIS CASE IS HAVING A UNIT IN NOIDA SEZ WHICH IS ENGAGED IN THE MANUFACTURING ACTIVITY OF T OBACCO AND ALLIED PRODUCTS AND EXPORT THEREOF. THE PROFITS OF THIS UNIT ARE EXEMPT U/S. 10A OF THE IT ACT. DURING THE YEAR UNDER ASSESSMEN T, THE PROFITS FROM THIS UNIT IS DETERMINED AT ` 5,58,46,163/-. APART F ROM THIS, THERE IS ANOTHER UNIT OF THE ASSESSEE COMPANY WHICH IS ENGAG ED IN TRADING ACTIVITY I.E. MERCHANT EXPORT OF GOODS. IN THIS, THE ASSESSEE HAS INCURRED A LOSS OF ` 97,40,415/-. ASSESSING OFFICE R HELD THAT DEDUCTION U/S 10A WAS TO BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE AND NOT FROM THE PROFIT OF THE ELIGIBLE BUSINESS AS CLA IMED BY THE ASSESSEE. THUS, ASSESSING OFFICER HAS RESTRICTED THE DEDUCT ION FOR EXEMPTION TO ` 4,63,60,402/- ONLY, THEREBY DISALLOWING THE CARRY FORWARD OF LOSS OF ` 94,85,761/- CLAIMED BY THE ASSESSEE OUT HIS LOSS FROM NON-10-A UNIT. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ISSUE AND HELD AS UNDER:- I HAVE PERUSED THE ASSESSMENT ORDER, GROUNDS OF APPEALS, WRITTEN SUBMISSIONS AND DISCUSSED THE ISSUES CAREFUL LY WITH THE A.R. THIS IS THE EIGHT YEAR OF CLAIM OF 10A. THER E IS NO DISPUTE ITA NO. 4252/DEL/2010 3 THAT THE APPELLANT COMPANY WILL NOT GET 10A EXEMPTION . THE DISPUTE RAISED BY THE ASSESSING OFFICER IS THAT TH E LOSS FROM OTHER UNIT IS SET OFF AGAINST THE PROFIT OF 10A UNIT AND BALANCE PROFIT OF 10A UNIT IS ALLOWED AS EXEMPT. BY THIS WAY, THE AS SESSEE IS LOSING THE CARRY FORWARD THE BUSINESS LOSS OF ` 94, 85,761/-, WHICH HAS A POTENTIAL TAX EFFECT OF ` 28,45,728/-, CONSID ERING TAX RATE @ 30%. THE ASSESSING OFFICER HAD A DIFFERENT INTERP RETATION OF ALLOWING DEDUCTION U/S 10A FROM TOTAL INCOME. HOW EVER, SECTION 10A IS IN CHAPTER III OF THE IT ACT, WHICH COVERS FROM SECTION 10 TO SECTION 13A, AND TITLE OF THE CHAPTE R IS INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME. THEREFORE, THE INCOME DERIVED UNDER THE ABOVE SECTIONS IN CHAPTER-III IS EXEMPT FROM TOTAL INCOME, AND CHARGEABILITY OF TAX, IF THEY SAT ISFY THE CONDITIONS LAID DOWN IN THOSE SECTIONS. HENCE, 10 A PROFIT IS EXEMPT, IF IT SATISFIES THE CONDITIONS LAID DOWN IN SUB-SECTION OF 10A. SINCE THE PRESENT 10A UNIT IS 100% EXPORT OR IENTED UNIT DURING THE A.Y. 2007-08, THE INCOME IS 100% EXEMPT U /S. 10A(4). CHAPTER IV OF IT ACT COVERS FROM SECTION 14 TO SECTI ON 59 AND ITS TITLE IS COMPUTATION OF TOTAL INCOME. CHAPTER VI O F IT ACT COVERS FROM SECTION 66 TO SECTION 80 AND TITLE IS AGGREGA TION OF INCOME AND SET OFF CARRY FORWARD OF LOSS. CONSIDERING THE ARRANGEMENT OF SECTIONS AND INTERP RETATION OF STATUTE, THE ASSESSING OFFICERS ACTION OF SETTING OFF OF BUSINESS LOSS FROM PROFIT OF 10A UNIT SEEMS TO BE INCORRECT. THIS IS ALSO SUPPORTED BY DESIGN OF ITR FORM-6, WHERE DEDUCTION O F DIFFERENT 10A UNITS ARE SEPARATELY GIVEN FROM TOTAL INCOME AN D THEN BUSINESS PROFIT/LOSS IS CONSIDERED FOR COMPUTATION P URPOSE. HAD ITA NO. 4252/DEL/2010 4 THERE BEEN SOME DOMESTIC SALE, THEN 10A(4) WOULD HAV E REDUCED THE EXEMPTION CLAIM PROPORTIONATELY. THUS, THE A.R. IS DIRECTED TO ALLOW THE CARRY FORWA RD BUSINESS LOSS OF ` 94,85,761/- OF NON 10A UNIT TO SUBSEQUENT YEAR S IN ACCORDANCE WITH LAW. THE ARGUMENTS OF A.R. ARE ALS O SUPPORTED BY CASE LAWS OF DIFFERENT ITAT BENCHES OF BANGALORE AND CHENNAI. THE GROUNDS OF APPEALS OF THE ASSESSEE ARE ALLOWED. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. IT TRANSPIRES THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH, ITAT IN THE C ASE OF SCIENTIFIC ATLANTA TECHNOLOGY (P) LTD. VS. ACIT 129 TTJ 273. IN THIS CASE VIDE PARA NO. 27, THE SPECIAL BENCH, ITAT HAS HELD AS UN DER:- 27. HAVING HELD THAT THE DEDUCTION UNDER SECTION 1 0A IS NOT AN EXEMPTION BUT ONLY A DEDUCTION UNDER CHAPTER III OF THE INCOME TAX ACT AND THE PROVISION S OF SECTION 80AB OF CHAPTER VI-A WOULD NOT BE APPLICABL E TO SUCH DEDUCTION UNDER SECTION 10A, AND ALSO THAT THE DEDUCTION UNDER SECTION 10A IS UNDERTAKING SPECIFIC , WE HAVE TO ANSWER THE QUESTION POSED BEFORE US BY HOLDING THAT THE BUSINESS LOSSES OF A NON-ELIGIBLE UNIT, WHOSE INCOME IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT, CANNOT BE SET OFF AGAINST T HE ITA NO. 4252/DEL/2010 5 PROFITS OF THE UNDERTAKING ELIGIBLE FOR DEDUCTION U NDER SECTION 10A FOR THE PURPOSE OF DETERMINING OF THE ALLOWABLE DEDUCTION UNDER SECTION 10A OF THE ACT. 7. RESPECTFULLY FOLLOWING THE PRECEDENT AS ABOVE, W E DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INC OME TAX (APPEALS). ACCORDINGLY, WE UPHOLD THE SAME. 8. IN THE RESULT, THE APPEAL FILED BY THE REVEN UE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/8/2011, UP ON CONCLUSION OF HEARING. SD/- SD/- [ [[ [R.P. TOLANI R.P. TOLANI R.P. TOLANI R.P. TOLANI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 02/8/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3.CIT 4.CIT (A) 5. DR, IT AT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES