ACIT Circle 16 (1), V. Techspan India Ltd,

ITA 4673/DEL/2007

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5780 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 17-03-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 03-12-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Assessee Lawyers: C S AGGARWAL
• Keywords: Depreciation; Opportunity of being heard; Question of law; Benefit of exemption
• Section: 80HHC; 92

Judgement Text

ITA NO. 4673, 2656, 2657 & 3406/DEL/07 A.YRS. 2001-02, 2002-03, 2003-04 & 2004-05 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NOS. 4673, 2656, 2657 & 3406/DEL/2007 A.YRS. 2001-02, 2002-03, 2003-04 & 2004-05 ASSTT. COMMISSIONER OF INCOME TAX, VS. M/ S TECHSPAN INDIA LTD. CIRCLE-16(1), NEW DELHI 103, ASHOKA ESTATE, 24, BARAKHAMBA ROAD, NEW DELHI 110 001 (PAN: AABCT5650D) [APPELLANT] (RESPONDENT) ASSESSEE BY : SH. C.S. AGGARWAL, SR,. ADV. & SH. RAVI PRATAP MALL, ADV. DEPARTMENT BY : SH. H.K. LAL, SR. DR ORDER PER SHAMIM YAHYA, AM THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS OF THE LD. CIT(A) FOR THE CONCERNED ASSESSMENT YEARS. SINCE TH E ISSUES INVOLVED ARE COMMON & CONNECTED AND THE APPEALS WERE HEARD TOGETHER, THESE APPEALS ARE BEING CONSOLIDATED AND DISPOSED OF BY THIS COMMON ORDER. 2. ONE OF THE COMMON ISSUES RAISED IS THAT LD. CIT( A) ERRED IN DIRECTING THE AO TO ALLOW DEDUCTION U/S 10A OF THE IT ACT.. ITA NO. 4673, 2656, 2657 & 3406/DEL/07 A.YRS. 2001-02, 2002-03, 2003-04 & 2004-05 2 3. THE ASSESSEE COMPANY IN THIS REGARD CLAIMED EXE MPTION U/S 10A OF THE IT ACT TOWARDS DEVELOPMENT AND EXPORT OF COMPUTERS SOF TWARE. AO WAS OF THE OPINION THAT ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTIO N U/S 10A, IN VIEW OF THE DECLARATION MADE IN TERMS OF REQUIREMENT OF SUB-SEC TION (8) OF SECTION 10A. THE ASSESSEEES EXPLANATION IN THIS REGARD WAS NOT ACCE PTED BY THE AO AND HE PROCEEDED TO DENY THE EXEMPTION CLAIMED BY THE ASSE SSEE U/S 10A ON THE PREMISE THAT THE ASSESSEE HAS EXERCISED THE OPTION NOT TO CLAIM BENEFIT OF SECTION 10A IN RETURN FILED FOR THE A.Y. 2000-01. 4. UPON ASSESSEES APPEAL LD. CIT(A) ELABORATELY CO NSIDERED THE CASE LAWS AND LEGISLATIVE HISTORY IN THIS REGARD AND CONCLUDED AS UNDER IN APPELLATE ORDER FOR 2001-02. I HAVE GONE THROUGH THE ORDER OF THE AO AND ALSO T HE WRITTEN SUBMISSIONS OF THE APPELLANT. THE AO IS OF THE VIEW THAT ONCE THE ASSESSEE HAS OPTED FOR NOT AVAILING THE BENEFITS U/S 10A BY GIVING SUC H OPTION U/S10A(7) WHICH HAS AN OVERRIDING EFFECT ON THIS SECTION THEN SUBSE QUENTLY, IT CANNOT CLAIM THE ADVANTAGES OF SECTION 10A. IT HAS ALSO BEEN S TATED BY HIM THAT THE COMPANY HAS NOT AVAILED ANY DEDUCTION U/S 80HHE BY ITS OWN OPTION. HOWEVER, THE AO HAS NOT APPRECIATED THE FACTS AND T HE RELEVANT LAW ON THE SAID ISSUE. IN MY OPINION, THE ASSESSEE IS FREE TO EXERCISE THIS OPTION OF NOT AVAILING OR AVAILING THE BENEFITS OF SECTION 10A A S PER ITS OWN CONVENIENCE. IN THE FIRST YEAR OF ITS OPERATION, THE APPELLANT H AD GIVEN A NOTE IN THE RETURN ITSELF THAT AS THEY HAD NO POSITIVE INCOME FROM THE UNIT, THEY WOULD NOT CLAIM BENEFITS OF SECTION 10A. IT IS PERTINEN T TO NOTE THAT THEY HAD NOT GIVEN ANY DECLARATION U/S 10A(7) BEFORE FILING OF THE RETURN FOR THE YEAR ITA NO. 4673, 2656, 2657 & 3406/DEL/07 A.YRS. 2001-02, 2002-03, 2003-04 & 2004-05 3 CONCERNED. IN THE SUBSEQUENT YEARS AND ALSO IN THE RELEVANT YEAR UNDER CONSIDERATION, THE APPELLANT AFTER HAVING POSITIVE INCOME FROM CONCERNED UNIT DECIDED TO AVAIL THE DEDUCTION U/S 10A. SECTIO N 10A CLEARLY PROVIDES THIS BENEFIT TO THE CONCERNED COMPANY FOR TEN CONSE CUTIVE YEARS AND IT IS THE WILL OF THE COMPANY TO DECIDE IN WHICH 10 YEARS THEY WOULD AVAIL THE BENEFITS OF SECTION 10A. IN THIS CASE, THE APPELL ANT HAS ALSO NOT AVAILED THE BENEFIT OF SECTION 80HHE AND THEREFORE, IT IS CLEAR THAT THEY INTENDED ONLY TO AVAIL THE BENEFITS OF SECTION 10A OF THE IT ACT. ALSO, IN VIEW OF THE RECENT JUDGEMENT RELIED UPON THE IN CASE OF TECH BOO KS ELECTRONICS SERVICES (P) LTD. VS. ADDL. CIT 100 ITD 125 DECIDED BY HONB LE INCOME TAX APPELLATE TRIBUNAL, DELHI ;WHERE A SIMILAR ISSUE AROSE, THE TRIBUNAL HAS DECIDED THAT IT IS ON THE COMPANY TO DECIDE WHEN TO AVAIL THE DEDU CTION U/S 10A. KEEPING IN VIEW ALL THE FACTS AND CIRCUMSTANCES OF THIS CAS E AND THE DECISION OF HONBLE INCOME TAX APPELLATE TRIBUNAL, DELHI I AM OF THE OPINION THAT THE APPELLANT SHOULD BE ALLOWED TO AVAIL THE BENEFIT S OF DEDUCTION UNDER SECTION 10A. FOR ASSESSMENT YEAR 2003-04 AND ASSES SMENT YEAR 2004-05, I HAVE ALREADY DECIDED THIS ISSUE AND KEEPING THAT IN VIEW THE AO IS DIRECTED TO ALLOW DEDUCTION U/S 10A ACCORDINGLY. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEF ORE US. 6. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASESSEES BRIEF SUBMISSIONS IN THIS REGARD IS AS UNDER:- THE DEDUCTION HAS BEEN CLAIMED U/S 10A OF THE IN COME TAX ACT, BUT HAS BEEN DENIED, ON THE GROUND THAT THE ASSESSEE HAD EX ERCISED AN OPTION NOT TO CLAIM DEDUCTION U/S 10A OF THE ACT, WHEN IT FILE D ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2000-01. THE ASSESSING OFFICER HAS NOT HELD THAT THE ASSESEE HAS EXERCISED SUCH AN OPTION FOR ANY OF TH E ASSESSMENT YEAR INCLUDING ASSESSMENT YEAR 2001-02 TO 2004-05. THE ASSESSEE/ RESPONDENT SUBMITS THAT, THE ASSESSING OFFICER HAS MISCONCEIV ED THE FACTS, WHEN HE HAS ALLEGED THAT THE ASSESSEE HAS EVEN FOR THE ASSE SSMENT YEAR 2000-01 EXERCISED SUCH AN OPTION U/S 10A(7) OF THE INCOME T AX ACT. IN FACT THERE WERE NO PROFIT IN THE BUSINESS OF DEVELOPMENT AND E XPORT OF SOFTWARE FOR THE ASSESSMENT YEAR 2000-01, AS SUCH THERE AROSE NO QUESTION/ OCCASION OF ITA NO. 4673, 2656, 2657 & 3406/DEL/07 A.YRS. 2001-02, 2002-03, 2003-04 & 2004-05 4 EXERCISING SUCH AN OPTION. WITHOUT PREJUDICE TO THE AFORESAID, THE HONBLE TRIBUNAL IN THE CASE OF LEGATO SYSTEMS INDIA PVT. L TD. VS. ITO REPORTED IN 93 TTJ 828, WHICH HAS BEEN UPHELD IN THE CASE OF REPOR TED IN 203 CTR 101 HAS HELD THAT EVEN WHERE A DEDUCTION HAD BEEN CLAIMED U /S 80HHE AND THE ASSESSEE HAD OPTED BY AN EXERCISING AN OPTION NOT T O CLAIM DEDUCTION UNDER ANY OTHER PROVISION, A DEDUCTION ALLOWABLE U/S 10A OF THE ACT CANNOT BE DENIED. IN THE CASE OF THE ASSESSEE, IN FACT EVEN D EDUCTION U/S 80HHE OF THE ACT HAD NOT BEEN EITHER CLAIMED OR ALLOWED IN THE P RECEDING YEAR. 6.1 IT HAS FURTHER BEEN CLAIMED THAT THE AO HA D ALLOWED DEDUCTION U/S 10A OF THE ACT FOR THE A.Y. 2005-06. IT HAS FURTHER BE EN SUBMITTED THAT NO DEDUCTION HAD BEEN CLAIMED FOR THE A.Y. 2000-01 AS THERE WERE NOT PROFITS. IT HAS BEEN CLAIMED THAT AO HAS WENT ON MISCONCEIVED ASSUMPTION THAT ASSESSEE HAD DECIDED NOT TO CLAIM U/S 10A FOR THE A.Y. 2000-01 AND THEREFORE, DEDUCTION IS NOT ALLOWABLE IN VIEW OF THE PROVISION OF SECTION 10A(7 ) OF THE ACT. IT HAS FURTHER BEEN SUBMITTED THAT NO DEDUCTION HAS EVER BEEN CLAI MED U/S 80HHC OF THE ACT IN ANY OF THE ASSESSMENT YEARS AND IT HAS BEEN CLAIMED THAT IN THE ALTERNATIVE, IF IT IS HELD THAT DEDUCTION IS NOT ALLOWABLE U/S 10A OF THE ACT, SUCH A DEDUCTION MAY BE ALLOWED U/S 80HHC OF THE ACT. 6.2 LD. DR ON THE OTHER HAND PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER. HE FURTHER SUBMITTED THAT IN THIS CASE A SSESSEES CLAIM OF DEDUCTION U/S 10A HAS BEEN DENIED ON THE PREMISE THAT ASSESSEE HA S EXERCISED ITS OPTION NOT TO CLAIM DEDUCTION U/S 10A. LD. DR FURTHER SUBMITTED THAT IT HAS NOT BEEN ITA NO. 4673, 2656, 2657 & 3406/DEL/07 A.YRS. 2001-02, 2002-03, 2003-04 & 2004-05 5 EXAMINED IN THIS CASE AS TO WHETHER ALL THE RELEVAN T TERMS AND CONDITIONS FOR THE ELIGIBILITY FOR DEDUCTION U/S 10A ON THE FACTS AND CIRCUMSTANCES OF THE CASE HAVE BEEN COMPLIED OR NOT. HENCE, LD. DR SUBMITTED THA T IN CASE IT IS HELD THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10A, THE M ATTER MAY BE REMITTED TO THE FILES OF THE AO TO EXAMINE THE FACTUAL ASPECTS AS TO WHETHER THE TERMS AND CONDITIONS FOR THE ALLOWANCE OF EXEMPTION U/S 10A H AVE BEEN COMPLIED WITH OR NOT. 6.3 WE HAVE HEARD BOTH THE COUNSELS AND PERUSED TH E RECORDS. WE MAY GAINFULLY REFER HERE TO SECTION 10A(8), WHICH READS AS UNDER: 10A(8). NOTHWITHSTANDING ANYTHING CONTAINED IN THE FOREGOING PROVISIONS OF THIS SECTION, WHERE THE ASSESSEE, BE FORE THE DUE DATE FOR FURNISHING THE RETURN OF INCOME UN DER SUB-SECTION(1) OF SECTION 139, FURNISHES TO THE ASS ESSING OFFICER A DECLARATION IN WRITING THAT THE PROVISION S OF THIS SECTION MAY NOT BE MADE APPLICABLE TO HIM, THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO HIM F OR ANY OF THE RELEVANT ASSESSMENT YEARS. 6.4 WE FIND THAT THE TRIBUNAL IN THE CASE OF LEGAT O SYSTEMS INDIA (P) LTD. VS. ITO 93 TTJ 828 HAD THE OCCASION TO ANALYSE SUB-SECTION (8) OF SECTION 10A AND THE TRIBUNAL HAS EXPOUNDED AS UNDER:- PERUSAL OF SUB-S. (8) OF S. 10A REVEALS THAT THE D ECLARATION REQUIRED TO BE MADE IS IN RESPECT OF THAT YEAR ONLY FOR WHICH THE ASSESSEE DOES NOT DESIRE ITA NO. 4673, 2656, 2657 & 3406/DEL/07 A.YRS. 2001-02, 2002-03, 2003-04 & 2004-05 6 APPLICATION OF PROVISION OF THIS SECTION. IN CASE T HE ASSESSEE DID NOT FILE ANY SUCH DECLARATION IN THE FIRST ASSESSMENT YEAR IN W HICH IT WAS ELIGIBLE TO THE EXEMPTION, THE SAME CANNOT BE A CRITERIA TO DENY TH E EXEMPTION FOR THE SUCCESSIVE YEARS. THE PRINCIPLE OF ESTOPPELS IS N OT APPLICABLE IN TAX PROCEEDINGS TO THE SUCCESSIVE ASSESSMENT AS HAS AL SO BEEN LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN CWT VS. MEATLESS (P) LTD. (1984) 43 CTR (DEL) 281 : (1985) 156 ITR 569 (DEL) AND ALSO BY G UJARAT HIGH COURT IN ANANT MILLS LTD. VS. CIT (1993) 109 CTR (GUJ) 231 : (1994) 206 ITR 582 (GUJ) AND BOMBAY HIGH COURT IN KANTILAL CHIMANLAL SHAH VS. CI T (1954) 26 ITR 303 (BOM). 6.5 IN THE AFORESAID CASE THE TRIBUNAL AFTER EVALUA TING THE FACTS AND CIRCUMSTANCES OF THE CASE HAD RESTORED THE MATTER T O THE FILES OF THE AO TO ALLOW EXEMPTION U/S. 10A, IF THE ASSESSEE IS FOUND TO HAV E SATISFIED REQUISITES ENVISAGED IN SECTION 10A OF THE ACT. IN CASE THE EXEMPTION U/ S 10A WAS NOT ALLOWED FOR THE REASONS BY NOT SATISFYING THE REQUISITES THE CLAIM U/S 80HHE WAS TO BE ALLOWED, AFTER PROVIDING OPPORTUNITY TO MEET THE REQUISITES . THIS DECISION OF THE TRIBUNAL WAS THE SUBJECT MATTER OF THE ADJUDICATION BY THE HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF 203 CTR 101. THE ORDER OF THE COURT IS AS UNDER:- THE TRIBUNAL HAS RECORDED A FINDING OF FACT THAT TH E RESPONDENT- ASSESSEE WAS NOT AN OLD UNIT ALREADY IN EXISTENCE SO AS TO BE DISENTITLED TO THE BENEFIT OF EXEMPTION UNDER S. 10 A OF THE IT ACT, 1961. IT HAS, ON THAT FINDING, REMITTED THE MATTER BACK TO THE AO WITH THE FOLLOWING DIRECTIONS: WE, THEREFORE, SET ASIDE THE ORDERS OF THE AUTHORI TIES BELOW ON THIS POINT AND RESTORE THE MATTER BACK TO THE FILE OF TH E AO WITH A DIRECTION TO ALLOW EXEMPTION UNDER S. 10A IN BOTH THE YEARS IN CASE THE ASSESSEE IS FOUND TO HAVE SATISFIED ALL OTHER R EQUISITES ENVISAGED ITA NO. 4673, 2656, 2657 & 3406/DEL/07 A.YRS. 2001-02, 2002-03, 2003-04 & 2004-05 7 IN THE SCHEME OF S. 10 A OF THE ACT. IN CASE THE EXEMPTION UNDER S.10A CANNOT BE ALLOWED FOR THE REASONS OF NOT SAT ISFYING THE REQUISITES, THE CLAIM OF DEDUCTION UNDER S. 80HHE S HALL BE ALLOWED AFTER PROVIDING OPPORTUNITY TO MEET THE REQUISITES. THE ABOVE DIRECTION IS, IN OUR VIEW, JUST AND PROPE R HENCE DOES NOT CALL FOR ANY INTERFERENCE ESPECIALLY WHEN THE QUEST ION (WHETHER THE ASSESSEE) SATISFIES THE PRE-REQUISITES STIPULATED F OR THE PURPOSE OF GETTING BENEFIT UNDER S. 10A IS A MATTER LEFT TO BE DETERMINED BY THE AO. SO ALSO THE ENTITLEMENT OF THE ASSESSEE TO SE EK DEDUCTION UNDER S. 80HHE HAVING BEEN LEFT TO BE DETERMINED BY THE A O, SUBJECT TO ASSESSEES SATISFYING THE PRE-REQUISITES STIPULATED FOR THE GRANT OF SUCH A BENEFIT UNDER THE SAID PROVISION. NO QUESTI ON OF LAW MUCH LESS A SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSI DERATION IN THIS APPEAL TO WARRANT ITS ADMISSION. THE APPEAL IS ACCORDINGLY DISMISSED IN LIMINE. 6.6 NOW WE HAVE TO EXAMINE THE PRESENT CASE ON THE ANVIL OF THE AFORESAID CASE LAW. WE FIND THAT IN A.Y. 2000-01 IS NOT BE FORE US FOR ADJUDICATION. HENCE WHETHER THE ASSESSEE HAS EXERCISED ANY OPTION FO R A.Y. 2000-01 IS NOT BEFORE US FOR ADJUDICATION. HOWEVER, AS IT IS EVIDENT FROM T HE DECISION OF THE TRIBUNAL IN THE CASE OF LEGATO SYSTEMS INDIA (P) LTD. (SUPRA) DECLARATION REQUIRED TO BE MADE U/S 10A SUB-SECTION (8) IS IN RESPECT OF THAT YEAR ONLY FOR WHICH ASSESSEE DOES NOT DESIRE APPLICATION OF THE PROVISIONS OF THIS SECT ION. IT IS NOT THE CASE BEFORE US THAT FOR THE ASSESSMENT YEARS BEFORE US, THE ASSESS EE HAS EXERCISED ANY SUCH OPTION. HENCE, AOS GROUND OF DENIAL EXEMPTION U/ S10A THAT ASSESSEE HAS EXERCISED THE OPTION NOT TO CLAIM EXEMPTION U/S 10A IS NOT TENABLE FOR THE ITA NO. 4673, 2656, 2657 & 3406/DEL/07 A.YRS. 2001-02, 2002-03, 2003-04 & 2004-05 8 ASSESSMENT YEAR BEFORE US IN THE LIGHT OF THE ABOVE TRIBUNALS DECISION. NO CONTRARY DECISION IN THIS REGARD HAS BEEN BROUGHT B EFORE OUR NOTICE. HENCE IN THE PRESENT CASE ALSO WE, ARE OF THE OPINION THAT THE AOS GROUND OF DENIAL OF DEDUCTION U/S 10A FOR A.Y. 2000-01 BY INVOKING THE PROVISIONS OF SECTION 10A(8) CANNOT BE SUSTAINED PROVIDED, ALL THE OTHER REQUIS ITES OF GETTING EXEMPTION U/S 10A ARE FULFILLED IN THESE ASSESSMENT YEARS. HOW EVER WE FIND THAT IN THE ORDERS OF THE AUTHORITIES BELOW THE PRIMARY DISCUSSION HAS BEEN THE APPLICABILITY OF SUB- SECTION (8) OF SECTION 10A. OTHER ASPECTS AS TO WH ETHER THE REQUISITES OF SUB- SECTION 10(A) HAVE BEEN COMPLIED WITH OR NOT, HAVE NOT BEEN GONE THROUGH. RESPECTFULLY FOLLOWING THE PRECEDENT FROM THE AFORE SAID TRIBUNALS DECISION AND ALSO THE JURISDICTIONAL HIGH COURT DECISION, WE REM IT THE ISSUE TO THE FILES OF THE AO WITH THE DIRECTIONS TO ALLOW EXEMPTION U/S 10A I N ALL THE ASSESSMENT YEARS IN THIS REGARD, IF THE ASSESSEE IS FOUND TO BE SATIS FYING ALL OTHER REQUISITES ENVISAGED IN THE SCHEME OF SECTION 10A OF THE ACT IN CASE T HE EXEMPTION U/S. 10A CANNOT BE ALLOWED FOR THE REASONS OF NOT SATISFYING THE R EQUISITES THE CLAIM OF DEDUCTION U/S 80HHE SHALL BE ALLOWED AFTER PROVIDING OPPORTU NITY TO MEET THE REQUISITES. NEEDLESS TO ADD ASSESSEE SHALL BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. ITA NO. 4673, 2656, 2657 & 3406/DEL/07 A.YRS. 2001-02, 2002-03, 2003-04 & 2004-05 9 7. ANOTHER ISSUE RAISED IN A.Y. 2001-02 IS THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO SET OFF THE LOSS OF RS. 4,34,80,277/-. 7.1 ON THIS ISSUE THERE IS NO DISCUSSION IN THE AS SESSMENT ORDER. HOWEVER, THE ASSESSEE HAS TAKEN THE GROUND BEFORE THE CIT(A) THA T THE LD. AO ALSO ERRED IN NOT ALLOWING SET OFF FOR THE BROUGHT FORWARD LOSS FROM EARLIER YEAR. 7.2 THE LD. CIT(A) IN THE APPELLATE ORDER HAS MENTI ONED AS UNDER:- AO IS DIRECTED TO VERIFY THE CLAIM OF SET OFF FOR BROUGHT FORWARD LOSS OF EARLIER YEARS AND ALLOW THE SAME AS PER LAW. 7.3 WE HAVE HEARD BOTH THE COUNSELS AND PERUSED TH E RECORDS. ADMITTEDLY THERE IS NO DETAILED DISCUSSION IN THE ORDERS OF TH E AUTHORITIES BELOW WHATSOEVER. AS WE HAVE ALREADY REMITTED THE MAIN ISSUE TO THE F ILES OF THE AO, HENCE, AO IS DIRECTED TO EXAMINE THIS ISSUE ALSO AND GIVE A FIN DING AS PER LAW. 8. ANOTHER ISSUE RAISED FOR THE A.Y. 2002-03 THAT LD. CIT(A) ERRED IN DIRECTING THE AO TO RECOMPUTE THE LOSSES CLAIMED BY THE ASSES SEE AT RS. 87,35,398/- AS AGAINST RS. 6,81,857/- ALLOWED BY THE A.O. ITA NO. 4673, 2656, 2657 & 3406/DEL/07 A.YRS. 2001-02, 2002-03, 2003-04 & 2004-05 10 8.1 ON THIS ISSUE AO REFERRED TO THE VERIFICATION OF THE RECORD FOR THE PERIOD ENDING MARCH, 2000 AND OBSERVED THAT ASSESSEE COMP ANY HAD CLAIMED TOTAL BUSINESS LOSS OF RS. 1,18,99,508/- TO BE CARRIED FO RWARD FOR A.Y. 2000-01. AO FURTHER REFERRED TO THE MADRAS HIGH COURT DECISION IN THE CASE OF CIT VS. S.S. THIAGARAJAN (1981) 129 ITR 115, FOR THE PROPOSITION THAT ONLY THE LOSS OF THAT HEAD CAN BE SET OFF THE INCOME OF WHICH IS TAXABLE. LOSS FROM A SOURCE OF INCOME THAT IS TOTALLY EXEMPT FROM TAX CANNOT BE SET OFF A GAINST TAXABLE INCOME. HENCE AO PROCEEDED TO COMPUTE THAT FOR A.Y. 2001-02 AND H ELD THAT ONLY RS. 6,81,857/- (DEPRECIATION) REMAINED TO BE ALLOWED.. 8.2 ASSESSEES APPEALED BEFORE THE LD. CIT(A) THAT THERE IS SPECIFIC PROVISION IN SECTION 10A WHICH PERMITS CARRY FORWARD OF LOSS REL ATING TO STP UNIT WITHIN TAX HOLIDAY PERIOD. LD. CIT(A) REFERRED TO THE PROVIS ION OF SECTION 10A(6). LD. CIT(A) FURTHER DISTINGUISH THE DECISION IN THE CASE OF CIT VS. SS THIAGARAJAN (SUPRA) REFERRED BY THE AO. LD. CIT(A) FURTHER HELD THAT AO HAD WRONGLY INVOKED SECTION 92 OF THE ACT AND IN HIS OPINION LOSS FROM A UNIT WHOSE INCOME WAS FULLY DEDUCTIBLE U/S 10A CAN BE SET OFF AGAINST OTHER INC OMES AND IT CAN BE CARRIED FORWARD. IN THIS REGARD, HE PLACED RELIANCE THE JUDG EMENT OF THE ITAT, BANGALORE IN ITA NO. 4673, 2656, 2657 & 3406/DEL/07 A.YRS. 2001-02, 2002-03, 2003-04 & 2004-05 11 THE CASE OF MINDTREE CONSULTING (P) LTD. VS. ACIT ( 102 TTJ 691). ACCORDINGLY, LD. CTI(A) DIRECTED THE AO TO SET OFF THE LOSSES AND CO MPUTE THE INCOME ACCORDINGLY. 8.3 WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. WE FIND THAT SECTION 10A(6)(II) PROVIDES AS UNDER:- NO LOSS REFERRED TO IN SUB-SECTION (1) OF SECTION 72 OR SUB-SECTION (1) OR SUB-SECTION (3) OF SECTION 74, IN SO FAR AS SUCH LO SS RELATES TO THE BUSINESS OF THE UNDERTAKING, SHALL BE CARRIED FORWARD OR SET OF F WHERE SUCH LOSS RELATES TO ANY OF THE RELEVANT ASSESSMENT YEARS [ENDING BEF ORE THE 1 ST DAY OF APRIL, 2001] 8.4 A READING OF THE ABOVE SUPPORTS THE ASSESSEES CLAIM THAT SECTION 10A PERMITS CARRY FORWARD OF LOSS RELATING TO STP UNIT WITHIN TAX HOLIDAY PERIOD. HOWEVER A FINDING ON THIS ISSUE ALSO DEPENDS UPON A DJUDICATION OF QUANTUM OF CARRY FORWARD LOSS WITHIN TAX HOLIDAY PERIOD AND I S CONSEQUENTIAL TO EARLIER YEARS ASSESSMENT. IN THE INTEREST OF JUSTICE WE REMIT THI S ISSUE TO THE FILES OF THE AO AND AO EXAMINE THE SAME AND GIVE A FINDING AS PER LAW. NEEDLESS TO ADD THAT THE ASSESSEE SHOULD BE GIVEN ADEQUATE OPPORTUNITY OF BE ING HEARD. ITA NO. 4673, 2656, 2657 & 3406/DEL/07 A.YRS. 2001-02, 2002-03, 2003-04 & 2004-05 12 9. IN THE RESULT, THESE APPEALS FILED BY THE RE VENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31/03/201 0 SD/- SD/- [A.D. JAIN] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 31/03/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES