The DCITNavsari Circle, Navsari V. M/s. Virat Industries Pvt.Ltd., Navsari

ITA 434/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76742 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-06-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 17-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PANDEY
• Assessee Lawyers: K K VED
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 10B; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTAN T MEMBER DY. COMMISSIONER OF INCOME TAX, NAVSARI CIRCLE, NAVSARI (APPELLANT) VS M/S. VIRAT INDUSTRIES PVT. LTD, A-1/2, GIDC INDUSTRIAL ESTATE, KABILPORE, NAVSARI PAN: AAACV8089E (RESPONDENT) REVENUE BY: SRI A.K. PANDEY, SR.D.R. ASSESSEE BY: SRI K.K. VED, A.R. DATE OF HEARING : 02-06-2014 DATE OF PRONOUNCEMENT : 06-06-20 14 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE REVENUES APPEAL AGAINST THE ORDER OF LD. CIT(A)-, VALSAD DATED 26-11-2010 GRANTING DEDUCTION U/S. 10B OF THE ACT OF RS. 98,34,684/- BEFORE SETTING OFF THE CARRIED FORWARD LOSS AND UNA BSORBED DEPRECIATION OF PREVIOUS YEAR. ITA NO. 434/AHD/2011 ASSESSMENT YEAR 2006-07 I.T.A NO. 434/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. M/S VIRAT INDUSTRIES PVT. LTD 2 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENG AGED IN THE BUSINESS OF MANUFACTURING OF PREMIER QUALITY SOCKS AND EXPOR TING THE SAME TO FOREIGN COUNTRIES. THE MANUFACTURING UNIT OF THE A SSESSEE WAS REGISTERED AS 100% EXPORT ORIENTED UNIT. THE ASSESSEE HAS STA RTED ITS MANUFACTURING ACTIVITIES IN THE ASSESSMENT YEAR 1997-98 AND THE Y EAR UNDER CONSIDERATION IS THE 10 TH YEAR AND HENCE ITS MANUFACTURING PROFITS WERE ELIGIBLE FOR DEDUCTION U/S. 10B OF THE ACT. DURING THE YEAR THE ASSESSEE- COMPANY CLAIMED DEDUCTION U/S. 10B OF THE ACT TO TH E TUNE OF RS. 98,34,684/-. THE AO OBSERVED THAT ASSESSEE HAS CLA IMED CARRIED FORWARD LOSSES AND DEPRECIATION LOSSES OF THE EARLIER YEARS TO THE YEAR UNDER APPEAL. ACCORDING TO HIM AFTER GIVING SET OFF OF C ARRY FORWARD LOSSES NO BALANCE OF POSITIVE INCOME WAS AVAILABLE FOR CLAIMI NG DEDUCTION U/S. 10B OF THE ACT. THE AO ACCORDINGLY DID NOT ALLOW THE CLAI M OF DEDUCTION U/S. 10B OF THE ACT. LD. CIT(A) HOWEVER DIRECTED THE AO TO GRANT DEDUCTION U/S. 10B OF THE ACT FOLLOWING THE DECISION OF HIS PREDECESSO R IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005-06 WHICH HAS BEEN CON FIRMED BY THE TRIBUNAL IN ITA NO. 3598/AHD2008 VIDE ITS ORDER DAT ED 2 ND JANUARY, 2009 BY OBSERVING AS UNDER:- 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE T HROUGH THE FACTS OF THE CASE AS ALSO DECISIONS RELIED UPON ON BEHALF OF THE TAXPAYER. WE FIND THAT A SIMILAR ISSUE WAS CONSIDE RED IN THE CASE OF FORD BUSINESS SERVICE CENTRE L. LTD (SUPRA) WHEREIN THE TRIBUNAL HELD AS UNDER:- 7. COMING THE FACTS OF THE CASE BEFORE US, THE ASS ESSEE HAS CLAIMED DEDUCTION UNDER S. 10B OF THE ACT. ONCE WH EN DEDUCTION UNDER S. 10B HAS TO BE ALLOWED, THE TOTAL INCOME OF THE UNDERTAKING WILL ENTER THE COMPUTATION AND THEN ONLY DEDUCTION WILL BE GIVEN TO THE GIVEN TO ASSESSEE IF THAT IS THE CASE, THEN ST AND OF THE CIT(A) THAT S. 10B IS A SECLUDED PROVISION CAN NOT BE ACCE PTED. HAD IT BEEN I.T.A NO. 434/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. M/S VIRAT INDUSTRIES PVT. LTD 3 A CASE WHERE TOTAL EXCLUSION FROM INCOME WAS PROVID ED FOR, THEN, PERHAPS, THE OBSERVATION OF THE CIT(A) THAT SUCH IN COME CANNOT BE TAKEN IN TO CONSIDERATION FOR SET OFF UNDER S. 70,7 1 OR 72 WOULD HAVE BEEN PROPER. IN THE LIGHT OF THESE PROVISIONS, WE ARE INCLINED TO AGREE WITH THE CONTENTIONS OF THE LEARNED COUNSEL A ND ACCORDINGLY, WE DIRECT THE AO TO CONSIDER THE SET OFF OF UNABSOR BED BUSINESS LOSSES AND DEPRECIATION AFTER AVAILING DEDUCTION UN DER S. 10B OF THE ACT. WE ALSO AGREE WITH THE CONTENTION THAT S. 10B (6) IS APPLICABLE ONLY FOR THE LAST YEAR OF DEDUCTION AND NOT FOR THE EARLIER YEARS OF DEDUCTION. ACCORDINGLY, THE CLAIM OF THE ASSESSEE IS ALLOWED. 8. THE AFORESAID VIEW HAS ALSO BEEN TAKEN IN OTHER TWO DECISIONS. ENERCON WIND FARMS (KRISHNA) LTD AND CH ANGEPOND TECHNOLOGIES P. LTD (SUPRA) IN THE CONTEXT OF PROVI SIONS OF SECTION 10B AND 10A OF THE ACT RESPECTIVELY. RECENTLY, THE BANGALORE BENCH OF THE ITAT IN THE CASE OF KPIT CUMMINS INFOS YSTEMS (BANGALORE)(P) LTD VS. ACIT, 26 SOT 529, ANALYZING VARIOUS CIRCULARS AND NOTIFICATIONS ISSUED BY THE CBDT AND DISTINGUISHING THE DECISION OF HONBLE KARNATKA HIGH COURT IN THE CASE OF CIT VS. HIMATSINGHIKA SEIDE LTD 286 ITR 255 HELD IN THE CON TEXT OF PROVISION OF SEC. 10A OF THE ACT THAT THE PROCESS ASCERTAININ G THE TOTAL INCOME WHERE SECTION 10A DEDUCTION IS INVOLVED WOULD COMPR ISE BY COMPUTING PROFITS AND GAINS DERIVED BY THE UNIT AND IN THIS PROCESS THE UNABSORBED DEPRECATION WHICH IS NOT PART OF THE DEPRECATION OF THE IMPUGNED ASSESSMENT YEAR IS NOT TO BE FACTORED, THEN THE DEDUCTION AS COMPUTED WILL BE AVAILABLE FOR CARRYIN G OUT SET OFF OF UNABSORBED DEPRECIATION. SECTION 10A DEDUCTION IS TO BE DONE UNDER SECTIONS 28 TO 44B BUT SEPARATELY AND INDEPEN DENT OF COMPUTATION OF PROFITS AND GAINS FROM ELIGIBLE BUSI NESS AND WITHOUT FACTORING UNABSORBED DEPREDATION. IN THE LIGHT OF T HE AFORESAID DECISIONS, PARTICULARS WHEN NO CONTRARY DECISION HA S BEEN BROUGHT TO OUR NOTICE BY THE LD. DR WE HAVE NO ALTERNATIVE BUT TO UPHELD THE FINDINGS OF THE LD. CIT(A). CONSEQUENTLY, GROUND N O. 1 OF THE APPEAL IS DISMISSED. IN VIEW OF THE ABOVE, WE ARE NOT INCLINED TO INTERF ERE WITH THE ORDER PASSED BY LD. CIT(A) AND THE SAME IS HEREBY UPHELD. I.T.A NO. 434/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. M/S VIRAT INDUSTRIES PVT. LTD 4 3. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (ANIL CHATURVEDI) ( D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 06/06/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,