M/s Rangsons Electronics Pvt. Ltd., Mysore V. CIT, Bangalore

ITA 448/BANG/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1501 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-10-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 24-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DINESH P
• Keywords: Depreciation; Question of law; Unabsorbed depreciation
• Section: 10B; 263

Judgement Text

ITA.448/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.448/BANG/2015 (ASSESSMENT YEAR : 2010-11) M/S. RANGSONS ELECTRONICS P. LTD, NO.347/D1 & 2, ELECTRONICS CITY, HEBBAL INDUSTRIAL AREA, MYSORE 570 016 .. APPELLANT PAN : AAACR8750R V. COMMISSIONER OF INCOME-TAX (CENTRAL), BANGALORE .. RESPONDENT ASSESSEE BY : SHRI. DINESH P, ADVOCATE REVENUE BY : SHRI. SUNIL KUMAR AGARWALA, JCIT HEARD ON : 15.10.2015 PRONOUNCED ON : 20.10.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, IT IS AGGRIE VED THAT CIT (A) INVOKED POWERS VESTED ON HIM U/S.263 OF THE INCOME- TAX ACT, 1961 ( THE ACT IN SHORT), FOR A REASON THAT EXEMPTION U/S.1 0A OF THE ACT WAS ALLOWED TO THE ASSESSEE WITHOUT ABSORBING THE CARRY FORWARD LOSS AND UNABSORBED DEPRECIATION. ITA.448/BANG/2015 PAGE - 2 02. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT A S IMILAR ISSUE HAD COME UP BEFORE THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEAR 2009-10. AS PER THE LD. AR THERE ALSO THE CIT (A) HAD INVOKED POWERS U/S.263 OF THE ACT FOR THE VERY SAME REASON. RELYING ON THE DECISION OF TRIBUNAL IN ITA.566/BANG/2014, DT.10.04 .2015, LD. AR SUBMITTED THAT AO HAD TAKEN ONE LAWFUL VIEW WHICH W AS POSSIBLE AND THE CIT WAS JUST TRYING TO SUBSTITUTE HIS VIEW FOR THE SAME. 03. PER CONTRA, LD. DR SUPPORTED THE ORDER OF CIT. 04. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. ORDER U/S.263 OF THE ACT PASSED BY THE CIT DOES SHOW THAT HE HAD INVOKED THE JURISDICTION FOR THE REASON THAT AO HAD ALLOWED EXE MPTION CLAIMED BY THE ASSESSEE U/S.10A OF THE ACT WITHOUT EFFECTING A SET OFF OF CARRY FORWARD OF BUSINESS LOSS AND UNABSORBED DEPRECIATION. WE FIND THAT A SIMILAR ISSUE HAD COME UP IN ASSESSEES OWN CASE FOR A. Y. 2009-10 (S UPRA), WHERE ALSO CIT HAD RESORTED TO SECTION 263 OF THE ACT, BEFORE THIS TRIBUNAL IN ITA566/BANG/2014 (SUPRA). THIS TRIBUNAL HAD HELD A S UNDER AT PARAS 6 AND 7 OF ITS ORDER : 6. WE HAVE PERUSED THE ORDERS AND HEARD THE CONTENTIONS CAREFULLY. PARA 3 TO 4 OF THE ORIGINAL ASSESSMENT ORDER DATED 29/12/2011 CLEARLY BRING OUT THAT ASSESSING OFFICER WAS AWARE ABOUT THE TWO UNITS VIZ. DTA AND EHTP. HE HAD REST RICTED THE CLAIM OF RS.1,96,56,386/- MADE BY THE ASSESSEE UNDE R SECTION 10A OF THE ACT FOR ITS EHTP UNIT TO RS.1,15,90,014/- AF TER EFFECTING A RE- ITA.448/BANG/2015 PAGE - 3 ALLOCATION OF THE EXPENSES CLAIMED BETWEEN THE DTA AND EHTP UNITS. ASSESSING OFFICER HAD ALSO RESTRICTED THE L OSS THAT COULD BE CARRIED FORWARD TOWARDS THE SUCCEEDING YEAR FROM RS .1,94,23,422/- CLAIMED BY THE ASSESSEE TO RS.1,13,57,050/-. HE HA D ALSO MADE A DETAILED COMPUTATION OF THE INCOME OF THE ASSESSEE STARTING FROM THE PROFIT BEFORE TAX RS.12,92,140/- AND ARRIVING AT A LOSS OF RS.6,28,631/- AFTER MAKING VARIOUS ALLOWANCES AND D ISALLOWANCES. THEREAFTER HE HAD GIVEN THE DISTRIBUTION OF THE LOS S FIGURE OF RS.6,28,631/- IN BETWEEN THE TWO UNITS ALLOCATING L OSS OF DTA UNIT AT RS,1,97,62,639/- AND PROFIT OF EHTP UNIT AT RS.1 ,41,34,108/-. THEN HE HAD ALLOWED EXEMPTION OF RS.1,15,90,014/- U NDER SECTION 10A FOR THE EHTP, WHICH WAS SEPARATELY WORKED OUT. FROM THE RESULTANT LOSS OF RS.1,22,18,645/- HE HAD SET OFF I NTEREST INCOME OF RS.8,61,595/- TO ARRIVE AT THE CARRIED FORWARD LOSS OF RS.1,13,57,050/-. WHAT THE ASSESSING OFFICER HAD D ONE EFFECTIVELY WAS TO GIVE EXEMPTION U/S 10A OF THE ACT TO THE PRO FITS FROM EHTP UNIT CONSIDERING IT SEPARATELY, OR IN OTHER WORDS, WITHOUT FIRST SETTING OFF THE LOSS FROM DTA UNIT. THE QUESTION I S WHETHER THERE WAS AN ERROR IN THE COMPUTATION DONE BY THE ASSESSI NG OFFICER. THE ASSESSMENT ORDER WAS PASSED ON 29/12/2011. JUDGMEN T OF HONBLE JURISDICTIONAL HIGH COURT IN HIMATSINGIKE SEIDE LTD . (SUPRA) CASE WAS PRONOUNCED ON 04/08/2006 AND THAT OF YOKOGAWA I NDIA LTD.(SUPRA) WAS PRONOUNCED ON 09/08/2011. THUS WHE N THE ASSESSMENT ORDER WAS PASSED BOTH THE JUDGMENTS WERE AVAILABLE. LD. CIT HIMSELF HAS ADMITTED THAT LATTER DECISION W AS IN FAVOUR OF THE ASSESSEE WHEREIN IT WAS HELD THAT DEDUCTION UND ER SECTION 10A/10B IS TO BE GIVEN ON STAND-ALONE BASIS. NO DO UBT HONBLE APEX COURT IN THE CIVIL APPEAL FILED BY M/S. HIMATS INGIKE SEIDE LTD., HAD UPHELD THE JURISDICTIONAL HIGH COURT ORDER. TH E EFFECT OF THIS WAS ELABORATELY DISCUSSED BY THE COORDINATE BENCH I N THE CASE OF M/S.CLEAR WATER TECHNOLOGY SERVICES PVT.LTD. (SUPRA ) WHERE IT WAS HELD AS UNDER AT PARAS.7 TO 8 OF THE ORDER: 7. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. A SIMILAR ISSUE AND SIMILAR ARGUMENTS ON THAT ISSUE H AD BEEN CONSIDERED BY THIS TRIBUNAL IN THE CASE OF DCIT VS. BIOCON (SU PRA). THIS TRIBUNAL ON AN IDENTICAL ISSUE HELD AS FOLLOWS: 23. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. THE ISSUE RAISED BY THE ASSESSEE IN G ROUND NO.21 IS IDENTICAL TO THE GROUND RAISED BY THE ASSESSEE IN B IOCON (SUPRA). ITA.448/BANG/2015 PAGE - 4 THE FACTS OF THE CASE BEFORE THE TRIBUNAL IN THE CA SE OF BIOCON (SUPRA) WERE THAT THE ASSESSEE DURING THE PREVIOUS YEAR HAD FOUR UNITS WHICH WERE ENTITLED TO CLAIM DEDUCTION U/S. 1 0B OF THE ACT VIZ., CMZ UNIT, SAP UNIT, RHI UNIT AND IFP UNIT. TH E ASSESSEE HAD CLAIMED DEDUCTION U/S. 10B OF THE ACT IN RESPEC T OF THE AFORESAID UNITS TOTALING RS.157,22,33,066 WHICH IS THE SUM TOTAL OF DEDUCTION U/S. 10B FOR THE FOUR UNITS AS FOLLOWS :- (1) CMZ UNIT : 6,87,70,229 (2) SAP UNIT : 76,60,29,880 (3) RHI UNIT : 52,42,56,278 (4) IFP UNIT : 21,31,76,679 TOTAL 157,22,33,066 THE ASSESSEE HAD NON-10B UNITS AS WELL. IN THOSE NO N-10B UNITS, THERE WAS A LOSS OF RS.105,92,19,172. IN THE RETURN OF INCOME FILED BY THE ASSESSEE, THE ASSESSEE SOUGHT TO CARRY FORWARD THE LOSS OF NON-10B UNITS FOR SET OFF AGAINST THE PROFI TS OF NON-10B UNITS IN THE SUBSEQUENT ASSESSMENT YEARS. THE AO FI RSTLY NOTICED THAT THERE WAS INCOME FROM OTHER SOURCES TO THE EXT ENT OF RS.4,71,15,896 AND SUCH HAD TO BE SET OFF AGAINST T HE LOSS OF THE NON-10B UNITS. ACCORDINGLY, THE AO HELD THAT THE LO SS OF THE NON- 10B UNITS THAT HAD TO BE CONSIDERED FOR CARRY FORWA RD WOULD BE RS.101,21,03,280. THEREAFTER, THE AO WAS OF THE VIE W THAT INCOME OF THE 10B UNITS HAD TO BE SET OFF AGAINST T HE LOSS OF THE NON-10B UNITS AND IF IT IS SO SET OFF, THERE WILL B E NO LOSS THAT NEEDS TO BE CARRIED FORWARD. IN COMING TO THE AFORE SAID CONCLUSION, THE AO EXPRESSED THE OPINION THAT PROVI SIONS OF SECTION 10B ARE DEDUCTION PROVISIONS AND THEREFORE EFFECT WILL HAVE TO BE GIVEN TO THE PROVISIONS OF SECTION 72 OF THE ACT, EVEN IN RESPECT OF PROFITS OF THE 10B UNIT. ACCORDINGLY, TH E CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF LOSS OF NON-10B UNIT WAS NOT ALLOWED BY THE AO. ON APPEAL BY THE ASSESSEE, IT W AS CONTENDED THAT THE PROVISIONS OF SECTION 10A AND SECTION 10B ARE EXEMPTION PROVISIONS AND THEREFORE THE PROFIT OF 10A AND 10B UNITS WILL NOT ENTER THE COMPUTATION OF TOTAL INCOME AT ALL AND TH EREFORE THE PROFITS OF THESE UNITS NEED NOT BE SET OFF AGAINST THE LOSS OF NON- 10B UNIT BY INVOKING THE PROVISIONS OF SECTION 72 O F THE ACT. THE CIT(APPEALS) DID NOT AGREE WITH THE CONTENTION OF T HE ASSESSEE AND IN DOING SO, HE PLACED RELIANCE ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. ITA.448/BANG/2015 PAGE - 5 HIMATSINGIKE SEIDE LTD., 286 ITR 255 (KAR). IN THE AFORESAID DECISION, THE HONBLE HIGH COURT HAS TAKEN THE VIEW THAT DEDUCTION U/S. 10B HAS TO BE ALLOWED AFTER SET OFF OF UNABSORBED DEPRECIATION AND UNABSORBED INVESTMENT ALLOWANCE. T HE HONBLE COURT TOOK THE VIEW THAT THE AFORESAID PROVISION WA S ONLY AN EXEMPTION PROVISION. THE CIT(APPEALS) NOTICED THAT THE AFORESAID DECISION WAS FOLLOWED BY THE ITAT BANGALO RE BENCH IN THE CASE OF INTELNET TECHNOLOGIES INDIA PVT. LTD. V . ITO, ITA NO.1021/BANG/2009 DATED 12.3.2010. SIMILAR VIEW EXP RESSED BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF GLOB AL VANTAGE PVT. LTD. V. DCIT, 2010 TIOL 24 ITAT (DEL) WAS ALSO REFERRED TO BY THE CIT(A). A CONTRARY VIEW WAS EXPRESSED BY THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF KPIT CUMMINS INFO SYSTEMS (BANGALORE) PVT. LTD. V. ACIT, 120 TTJ 956. THE CIT(A) FOUND THAT IN THE CASE OF GLOBAL VANTAGE PVT . LTD. (SUPRA) DECIDED BY THE DELHI TRIBUNAL THIS DECISION HAS BEE N HELD TO BE NOT IN TUNE WITH THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF HIMATSINGIKE SEIDE LTD. (S UPRA). THE CIT(A) ALSO REFERRED TO THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF SWORD GLOBAL INDIA PVT. LTD . V. ITO, 306 ITR 286 (AT), WHEREIN THE PROVISIONS OF SECTION 10A AND 10B HAVE BEEN HELD TO BE DEDUCTION PROVISIONS AND NOT E XEMPTION PROVISIONS. FOR ALL THE ABOVE REASONS, THE CIT(APPE ALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAI NST THE ORDER OF THE CIT(A), THE ASSESSEE WAS IN APPEAL BEFORE TH E TRIBUNAL. 25. THIS TRIBUNAL DEALT WITH THE ISSUE IN THE FOLL OWING WORDS : 63. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RI VAL SUBMISSIONS. THE ISSUE AS TO WHETHER THE PROVISION S OF SEC.10B OF THE ACT ARE DEDUCTION PROVISIONS OR EXEMPTION PROVISIONS WILL ASSUME GREAT IMPORTANCE. THE REASON IS THAT IF THE PROVISIONS ARE CONSIDERED AS EXEMPTION PROVISIONS THEN THEY WILL NOT ENTER THE COMPUTATION OF TOTAL INCOME AND THEREFORE THE LOSS OF THE ELIGIBLE UNIT CANNOT BE SET OFF AGAINST THE PROFITS OF THE NON-ELIGIBLE UNIT. THIS ISSUE HAS ALREADY BEEN SET TLED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD. (SUPRA). THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF YOKOGAWA (SUPRA) HAD TO D EAL WITH TWO SUBSTANTIAL QUESTION OF LAW. THE FIRST SUB STANTIAL ITA.448/BANG/2015 PAGE - 6 QUESTION OF LAW WAS ON THE RIGHT OF SET OFF OF LOSS OF NON- ELIGIBLE UNIT AGAINST THE PROFIT OF THE ELIGIBLE UN IT ON WHICH DEDUCTION U/S.10B WAS TO BE ALLOWED. THE HON BLE COURT IN PARA 10 TO 20 OF ITS JUDGMENT DEALT WITH T HE ISSUE. THE HONBLE COURT NOTICED THAT SEC.10-A(1) O F THE ACT (WHICH IS IN PARI MATERIA WITH SEC.10-B OF THE ACT) READ AS FOLLOWS: 10B. SPECIAL PROVISIONS IN RESPECT OF NEWLY ESTABLISHED UNDERTAKING IN FREE TRADE ZONE ETC.,- (1) SUBJECT TO THE PROVISIONS OF THIS SECTION, A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS-YEAR IN WHICH THE UNDER-TAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMPUTER SOFTWARE, AS THE CASE MAY BE, SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSE E : (EMPHASIS SUPPLIED) 64. THE EXPRESSION DEDUCTION AND SHALL BE ALLOWE D FROM THE TOTAL INCOME OF THE ASSESSEE USED IN THE AFORESAID PROVISIONS WAS CONSIDERED BY THE HONBLE HIGH COURT AND IT HELD IN PARA 13 TO 15 OF ITS JUDG MENT THAT THE EXPRESSION SHALL BE ALLOWED FROM THE TOT AL INCOME OF THE ASSESSEE DOES NOT MEAN TOTAL INCOME AS DEFINED U/S.2(45) OF THE ACT BUT THAT EXPRESSION ME ANS PROFITS AND GAINS OF THE STP UNDERTAKING AS UNDERS TOOD IN ITS COMMERCIAL SENSE OR THE TOTAL INCOME OF THE STP UNIT. THUS THE VIEW EXPRESSED IS THAT INCOME OF THE STP UNDERTAKING GETS QUARANTINED AND WILL NOT BE ALLOWE D TO BE SET OFF AGAINST LOSS OF EITHER ANOTHER STP UNDER TAKING OR A NON STP UNDERTAKING. THE HONBLE COURT THEREAF TER HELD THAT THOUGH THE EXPRESSION USED IN SEC.10A WAS DEDUCTION BUT IN EFFECT IT WAS ONLY AN EXEMPTION SECTION. THESE CONCLUSIONS CLEARLY EMANATE FROM PAR A 17 OF THE HONBLE COURTS JUDGMENT. ITA.448/BANG/2015 PAGE - 7 65. THE SITUATION WITH WHICH WE ARE CONCERNED IN TH E PRESENT CASE IS A SITUATION WHERE THERE IS POSITIVE INCOME OF THE ELIGIBLE UNIT THEN THE SAME SHOULD BE ALLOWE D DEDUCTION U/S.10B OF THE ACT WITHOUT SETTING OF THE LOSS OF NON-ELIGIBLE UNIT. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF YOKOGAWA (SUPRA) WAS CONCERNED WITH SIMILAR SITUATION AS SET OUT ABOVE. IN VIEW OF THE AFORESAID DECISION OF THE HONBLE KARNATAKA HIGH COURT, WE ARE OF THE VIEW THAT THE CLAIM AS MADE BY THE ASSESSEE FOR CARRY FORWARD OF LOSS OF THE NON-ELIGI BLE UNIT HAD TO BE ALLOWED WITHOUT SET OFF OF PROFITS O F THE 10A/10B UNIT. WE HOLD ACCORDINGLY AND ALLOW THE RELEVANT GROUNDS OF APPEAL OF THE ASSESSEE. 66. WE MAY ALSO OBSERVE THAT THE HONBLE KARNATAKA HIGH COURTS DECISION IN THE CASE OF HIMATASINGIKE SEIDE (SUPRA) HAS HELD THAT UNABSORBED DEPRECIATION (AND BUSINESS LOSS) OF SAME (S. 10A/10B) UNIT BROUGHT FO RWARD FROM EARLIER YEARS HAVE TO BE SET OFF AGAINST THE P ROFITS BEFORE COMPUTING EXEMPT PROFITS. THE ASSESSEE IN TH AT CASE SET UP A 100% EOU IN AY 1988-89. FOR WANT OF PROFITS IT DID NOT CLAIM BENEFITS U/S 10B IN AYS 19 88-89 TO 1990-91. FROM AY 1992-93 IT CLAIMED THE SAID BENEFITS FOR A CONNECTIVE PERIOD OF 5 YEARS. IN AY 1994- 95, THE ASSESSEE COMPUTED THE PROFITS OF THE EOU WI THOUT ADJUSTING THE BROUGHT FORWARD UNABSORBED DEPRECIATI ON OF AY 1988-89. IT CLAIMED THAT AS S. 10B CONFERRED EXEMPTION FOR THE PROFITS OF THE EOU, THE SAID BR OUGHT FORWARD DEPRECIATION COULD NOT BE SET-OFF FROM THE PROFITS OF THE EOU BUT WAS AVAILABLE TO BE SET-OFF AGAINST INCOME FROM OTHER SOURCES. IT WAS ALSO CLAIMED THAT THE PROFITS HAD TO BE COMPUTED ON A COMMERCIAL BASIS. THE AO ACCEPTED THE CLAIM THOUGH THE CIT REVISED HI S ORDER U/S 263 AND DIRECTED THAT THE EXEMPTION BE COMPUTED AFTER SET-OFF. ON APPEAL BY THE ASSESSEE, THE TRIBUNAL REVERSED THE ORDER OF THE CIT. ON APPEAL B Y THE DEPARTMENT, THE HIGH COURT IN CIT VS. HIMATASINGIKE SEIDE LTD. 286 ITR 255 (KAR) REVERSED THE ORDER OF THE TRIBUNAL AND HELD THAT THE BROUGHT FORWARD DEPRECIA TION ITA.448/BANG/2015 PAGE - 8 HAD TO BE ADJUSTED AGAINST THE PROFITS OF THE EOU B EFORE COMPUTING THE EXEMPTION ALLOWABLE U/S 10B. IN CIVIL APPEAL NO.1501 OF 2008 DATED 19.9.2013 AGAINST THE AFORESAID DECISION OF THE HONBLE KARNATAKA HIGH COURT, THE HONBLE SUPREME COURT OBSERVED AS FOLLOW S WHILE DISMISSING THE APPEAL:- HAVING PERUSED THE RECORDS AND IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF OPINION THAT THE CIVIL APPEAL BEING DEVOID OF ANY MERIT DESERVES TO BE DISMISSED AND IS DISMISSED ACCORDINGLY. 67. THUS THE RATIO HAS TO BE CONFINED TO THE FACTS AND CIRCUMSTANCES OF THE CASE. THE AFORESAID OBSERVATIO NS HAVE TO BE CONFINED TO THE FACTS OF THAT CASE AND A S APPLICABLE TO A CASE WHERE BROUGHT FORWARD LOSSES A ND DEPRECIATION OF THE VERY SAME STP UNDERTAKING ARE N OT ADJUSTED WHILE ARRIVING AT THE PROFITS OF THE 10B UNIT FOR ALLOWING DEDUCTION U/S.10A/10B OF THE ACT AND NOT I N RESPECT OF BROUGHT FORWARD LOSSES AND DEPRECIATION OF OTHER UNDERTAKINGS/NON-10A/10B UNITS. S. 10A/10B(6) AS AMENDED BY THE FA 2003 W.R.E.F. 1.4.2001 PROVIDES T HAT DEPRECIATION AND BUSINESS LOSS OF THE ELIGIBLE UNIT RELATING TO THE AY 2001-02 & ONWARDS IS ELIGIBLE FO R SET- OFF & CARRY FORWARD FOR SET-OFF AGAINST INCOME POST TAX HOLIDAY WHICH MEANS THAT THEY NEED NOT BE SO SET OF F AS MANDATED IN THE DECISION OF THE HONBLE KARNATAKA H IGH COURT IN THE CASE OF HIMATASINGIKE SEIDE LTD. (SUPR A). AS WE HAVE ALREADY SEEN, IN YOKOGAWA INDIA LTD. 341 IT R 385 (KAR), IT WAS HELD THAT EVEN AFTER S. 10A/10B W ERE CONVERTED INTO A DEDUCTION PROVISION W.E.F 1.4.20 01, THE BENEFIT OF RELIEF U/S 10A/10B IS IN THE NATURE OF EXEMPTION WITH REFERENCE TO COMMERCIAL PROFITS AND THAT AS THE INCOME OF THE S. 10A UNIT HAS TO BE EXC LUDED AT SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL INCOME, THE QUESTION OF SETTING OFF THE LOSS OF THE CURRENT YEARS OR THE BROUGHT FORWARD BUSINESS LOSS (AND UNABSORBE D DEPRECIATION) AGAINST THE S. 10A PROFITS DOES NOT A RISE. THEREFORE THE DECISION OF THE HONBLE KARNATAKA HIG H ITA.448/BANG/2015 PAGE - 9 COURT IN THE CASE OF HIMATASINGIKE SEIDE (SUPRA) WI LL NOT APPLY TO THE FACTS OF THE PRESENT CASE. 26. IN VIEW OF THE AFORESAID DECISION, WE ARE OF TH E VIEW THAT THE CLAIM MADE BY THE ASSESSEE DESERVES TO BE ACCEP TED. WE MAY ALSO OBSERVE THAT CBDT CIRCULAR NO.7 DATED 16.07.20 13, ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE IS NOT A BENEVOLENT CIRCULAR VIS--VIS, THE ASSESSEE, AND THEREFORE THE DECISION TO THE CONTRARY OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF YOKOGAWA INDIA (SUPRA) WILL CONTINUE TO APPLY. FOR THE REASONS GIVEN ABOVE, WE DIRECT THE ASSESSING OFFICER TO ACC EPT THE CLAIM OF THE ASSESSEE, AS RAISED IN GROUND NO.21. 8. THE REASONING GIVEN BY THE TRIBUNAL FOR ALLO WING THE CLAIM OF THE ASSESSEE AS SET OUT ABOVE WILL EQUALLY APPLY TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. WE THEREFORE FO LLOWING THE AFORESAID DECISION, FIND NO GROUNDS TO INTERFERE WI TH THE ORDER OF THE CIT(A). GROUNDS NO.2 & 3 RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. WE ALSO FIND THAT HONBLE APEX COURT IN THE CASE OF CIT VS. MAX INDIA LTD.(2007) (295 ITR 282) HAD HELD THAT EVEN A RETRO SPECTIVE AMENDMENT TO THE ACT WILL NOT RENDER THE ORDER OF T HE ASSESSING OFFICER PREJUDICIAL TO THE INTEREST OF THE REVENUE, WHEN AT THE TIME OF PASSING THE ORDER TWO VIEWS WERE POSSIBLE AND ASSES SING OFFICER HAD TAKEN ONE VIEW. IN SUCH CIRCUMSTANCES WE ARE OF THE OPINION THAT ORDER OF THE ASSESSING OFFICER WAS NOT ERRONEOUS, S O AS TO CALL FOR APPLICATION OF SECTION 263 OF THE ACT. ORDER OF TH E LD. CIT IS SET ASIDE. 05. FACT-SITUATION BEING THE VERY SAME WE ARE OF TH E OPINION THAT ASSESSMENT ORDER COULD NOT BE CONSIDERED AS ERRONEO US AND CIT WAS NOT JUSTIFIED IN INVOKING THE POWERS VESTED ON HIM U/S. 263 OF THE ACT. ORDER OF CIT IS SET ASIDE. ITA.448/BANG/2015 PAGE - 10 06. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 20TH DAY OF O CTOBER, 2015. SD/- SD/- (SMT. ASHA VIJAYARAGHAVAN) (ABRAHAM P GEORGE) JUDICIAL MEMBER ACCOUNTA NT MEMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR