C.J.JEWELLERIES PRIVATE LIMTED , MUMBAI V. DEPUTY COMMISSIONER OF INCOME 5(1)(2), MUMBAI

ITA 5975/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2317 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 22-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKEYAN
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 10AA; 80HHC; 115JB; 10B; 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENCH M UMBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEM BER ITA NO.5975/MUM/2017 ( ASSESSMENT YEAR :2012-13 ) C.J.JEWELLERIES PVT.LTD. 401, BLOCK, SEEPZ, MIDC ANDHERI (EAST) MUMBAI-400 096 VS. DCIT-5(1)(2) ROOM NO.568, 5 TH FLOOR AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 PAN/GIR NO.AACCC3607N APPELLANT ) .. RESPONDENT ) ASSESSEE BY MS. AARTI VISSANJI REVENUE BY ABI RAMA KARTIKEYAN DATE OF HEARING 23 / 07 /201 9 DATE OF PRONOUNCEMENT 28/08/2019 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)10, MUM BAI, DATED 24/07/2017 AND IT PERTAINS TO THE ASSESSMENT YEAR 2 012-13. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE ORDER PASSED BY LEARNED ASSESSING OFFICER AN D THE LEARNED CIT(A) IS AGAINST EQUITY AND JUSTICE. 2. THE LEARNED CIT(A) ERRED IN HOLDING AS UNDER: KEEPING IN VIEW OF THE DECISION OF THE HONBLE APE X COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. YOKOGAWA IND IA LTD., THE AO WAS JUSTIFIED IN ADJUSTING BROUGHT FORWARD UNABS ORBED DEPRECIATION WHILE COMPUTING INCOME OF THE ELIGIBLE UNIT FOR THE PURPOSE OF DEDUCTION UNDER SECTION 10A. 3. THE ASSESSING OFFICER OUGHT TO HAVE COMPUTED DED UCTION U/S10A, FIRST ON CURRENT INCOME OF THE YEAR AND THEREAFTER SET OFF BROUGHT ITA NO.5975/MUM/2017 C.J.JEWELLERIES PVT.LTD. 2 FORWARD LOSSES AND UNABSORBED DEPRECIATION TO COMPU TE TAXABLE INCOME. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R THE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING DIAMOND ST UDDED, GOLD JEWELLERY AT SEEPZ, MUMBAI. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR AY 2012-13 ON 28/09/2012, DECLARING TOTA L INCOME OF RS. NIL, UNDER NORMAL PROVISION OF THE I.T.ACT, 1961 AND BOOK PROFIT OF RS. 1,76,08,544/- U/S 115JB OF THE I.T.ACT, 1961. T HE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN C OMPLETED U/S 143(3) OF THE I.T.ACT, 1961 ON 23/12/2014, DETERMIN ING THE TOTAL INCOME AT RS. NIL, AFTER REJECTING DEDUCTION CLAI MED U/S 10A OF THE I.T.ACT, 1961, IN RESPECT OF ELIGIBLE PROFIT, AFTER SETTING OFF OF, THE BROUGHT FORWARD BUSINESS LOSS OF RS. 45,24,709/- AN D UNABSORBED DEPRECIATION OF RS. 1,42,96,964/-. THE RELEVANT FIN DINGS OF THE AO ARE AS UNDER:- 4.1. . DEDUCTION U/S 10A OF THE ACT.: ON GOING THROUGH THE COMPUTATION OF INCOME, IT IS NOTICED THAT THE ASSESSES HAS CLAIMED SET OFF OF BUSINESS LOSSES AND UNABSORBED LOSSES OF EARLIER YEARS AGAINST THE TOTAL INCOME OF THE YEAR AFTER CLAIMING DEDUCTION, U/S 10A OF THE ACT AMOUNT ING TO RS. 94,09745/-, HOWEVER, THE DEDUCTION U/S 10A OF THE ACT CAN BE AL LOWED ONLY AFTER SETTING OFF THE BROUGHT FORWARD BUSINESS LOSSES/UNABSORBED DEPRECIATION OF EARLIER YEARS. HENCE THE ASSESSES VIDE THIS OFFICE DATED 28 .11.2014 WAS REQUESTED TO EXPLAIN AS TO WHETHER THE CONDITIONS AS SPECIFIED I N SECTION 10A/10B OF ACT ARE SATISFIED FOR CLAIMING DEDUCTION UNDER THAT SEC TION. IN RESPONSE TO THE SAME, THE ASSESSEE VIDE LETTER DATED 15.12.2014 SUB MITTED THAT THE CONDITIONS SPECIFIED UNDER THAT SECTION HAVE 'BEEN FULFILLED. THE ASSESSES HAS ALSO STATED THAT 'THE MAIN PURPOSE AND OBJECT OF SECTION 10A IS TO ALLOW DEDUCTION OF ITA NO.5975/MUM/2017 C.J.JEWELLERIES PVT.LTD. 3 SUCH PROFITS AND GAINS BY AN UNDERTAKING FROM EXPOR T THE ENTIRE INCOME OF ELIGIBLE UNIT U/S 10A, HAS TO BE EXCLUDED BEFORE AR RIVING AT THE GROSS TOTAL INCOME. THUS, THE INCOME HAS TO BE EXEMPTED AT THE SOURCE ITSELF AND NOT AFTER COMPUTING THE GROSS TOTAL INCOME. 4.2 THE EXPLANATION OF THE ASSESSEE HAS BEEN CO NSIDERED AND FOUND TO BE NOT TENABLE. IT IS TO STATE THAT THE DEDUCTION UNDE R SECTION 10A IS TO BE CLAIMED ALTER SETTING OFF OF BROUGHT FORWARDED BUSINESS LOS SES/UNABSORBED DEPRECIATION OF THE EARLIER YEARS. IN THIS REGARD, RELIANCE IS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS SHRIKE CONSTRUCTION EQUIPMENT LTD. (SC) 291 ITR 380 WHEREIN IT HAS BEEN HELD THAT BROUGHT FORWARD LOSSES/UNABSORBED DEPRECIATION OF EARLIER YEARS NEEDS TO BE DEDUCTED FROM PROFITS ,OF THE YEAR BEFORE CAL CULATING DEDUCTION UNDER CHAPTER VIA OF THE ACT. 4.3 IN VIEW OF THE SAME, THE BROUGHT FORWARD BUSINE SS LOSSES AND UNABSORBED DEPRECIATION OF EARLIER YEARS IS FIRST S ET OFF AGAINST THE INCOME OF THE CURRENT YEAR. IT IS THUS SEEN THAT AFTER SET TING OFF OF THE BROUGHT FORWARD OF THE BUSINESS LOSS OF RS. 45,24,709/- AND UNABSORBED DEPRECIATION TOT EH EXTENT OF RS. 1,42,94,964/- THE RE IS NO PROFIT AVAILABLE FOR ALLOWING DEDUCTION U/S 10A OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESEE CONTENDED THAT ELIGIBLE PROFIT OF AN UNDERTAKING SH ALL BE DETERMINED WITHOUT RESTORING TO ADJUSTMENT OF BROUGHT FORWAR D BUSINESS LOSS AND UNABSORBED DEPRECIATION, FOR THE PURPOSE OF DED UCTION CLAIMED U/S 10A OF THE I.T.ACT, 1961. IN THIS REGARD, RELIE D UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS YOK OGAWA INDIA LTD. & OTHERS (2017) 291 CTR 001 (SC). THE LD. CIT( A), AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE AN D ALSO RELIED UPON, THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF CIT VS YOKOGAWA INDIA LTD & OTHERS (SUPRA) OBSERVED THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE ITA NO.5975/MUM/2017 C.J.JEWELLERIES PVT.LTD. 4 UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND THEREF ORE, IMMEDIATELY AFTER, THE STAGE OF DETERMINATION OF IT S PROFIT AND GAINS AND THE STAGE OF DEDUCTION WOULD BE, WHILE COMPUTI NG, THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDER CHAP TER-IV OF THE ACT, HOWEVER, HE FURTHER WENT ON TO DISCUSS THE ISSUE, I N LIGHT OF PROVISION OF SECTION 32(2) OF THE I.T.ACT, 1961 AND HELD THAT FOR THE PURPOSE OF SET OFF OF DEPRECIATION OF EARLIER YEARS, IT TAKES, THE CHARACTER OF CURRENT YEAR DEPRECIATION AND HENCE, WHEN IT COMES TO DETERMINATION OF PROFIT OF AN ELIGIBLE UNDERTAKING, THE BROUGHT F ORWARD DEPRECIATION OF EARLIER YEARS NEEDS TO BE CLUBBED WITH CURRENT D EPRECIATION TO DETERMINE ELIGIBLE PROFITS AND ACCORDINGLY, REWORKE D PROFIT OF THE UNDERTAKING ELIGIBLE FOR DEDUCTION U/S 10A. THE REL EVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER: 7.4 THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME TAX & ANR. VS. YOKOGAWA INDIA LTD. & ORS (2017) 291 CTR 0001 (SC): (2017) 145 DTR 0001 (SC) IS DIRECTLY ON THE ISSUE, WHEREAS THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS SHRIKE CONSTRUCTION. EQUIPMENT LTD. ( 2007) 291 TT6. 038O IS WITH REFERENCE TO DETERMINATION OF BUSINESS PROFIT UNDER S. 80HHC. THEREFORE, IN MY HUMBLE VIEW, THE DECISION O F THE HONBLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME TAX & A NR. VS. YOKOGAWA INDIA LTD. & ORS (2017) 291 CTR 0001 (SC): (2017) 1 45 DTR 0001 (SC, BEING DIRECTLY ON THE ISSUE, WILL BE APPLICABLE IN THE PRESENT CASE. IT HAS BEEN HELD IN THIS CASE THAT SECTION 10A, AS AMENDED , IS A PROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOULD BE WHILE CO MPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDER CHAP TER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI AND THAT AT THAT STAGE THE AGGREGATE OF THE INCOMES UND ER OTHER HEADS AND THE: PROVISIONS FOR SET OFF AND CARRY FORWARD CONTA INED IN SECTIONS 70, 72 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATIO N. ITA NO.5975/MUM/2017 C.J.JEWELLERIES PVT.LTD. 5 7.5 THE AO HAS DENIED THE ASSESSEE THE CLAIM OF DE DUCTION U/S 10A BY SETTING OFF OF THE BROUGHT FORWARD BUSINESS LOSS OF RS. 45,24,709/- AND UNABSORBED DEPRECIATION OF EARLIER YEARS TO THE EXT ENT OF RS. 1,42,94,964/- AGAINST THE PROFIT AVAILABLE FOR DEDU CTION U/S 10A OF THE ACT. THE HONBLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME TAX & ANR. VS. YOKOGAWA INDIA LTD. &ORS (SUPRA) HAS HELD THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND THEREF ORE, IMMEDIATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS AND THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, THERE FORE, IMMEDIATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS AND THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDER CHAPTER IV OF THE ACT. THE PROFIT AND GAINS OF BUSINESS OR PROFESSION ARE COMPUTED IN ACCORDANCE WITH THE P ROVISIONS CONTAINED IN SEC.30 TO 43 UNDER CHAPTER IV OF THE ACT. DEPREC IATION IS ALLOWED AS PER THE PROVISIONS OF SEC. 32(1) OF THE ACT. SECTIO N 32(2) UNDER CHAPTER IV OF THE ACT CONTAINS PROVISIONS RELATING TO UNABS ORBED DEPRECIATION WHICH IS AS UNDER: WHERE, IN THE ASSESSMENT OF THE ASSESSEE, FULL EF FECT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB-SECTION (1) IN ANY PREVIOUS YEAR, OWING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHA RGEABLE BEING LESS THAN THE ALLOWANCE, THEN, SUBJECT TO THE PROVI SIONS OF SUB SECTION (2) OF SECTION 7 AND SUB-SECTION (3) OF SEC TION 7, THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFF ECT HAS NOT BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO THE AM OUNT OF THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIO US YEAR AND DEEMED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE T HE ALLOWANCE FOR THAT PREVIOUS YEAR, AND SO ON FOR 7.6 IT IS CLEAR FROM THE PROVISIONS OF SEC. 32(2), THAT IF THE CURRENT YEARS DEPRECIATION CANNOT BE SET OFF OWING TO THE PROFITS OR GAINS CHARGEABLE BEING LESS THAN THE ALLOWANCE, THE ALLOW ANCE OR THE PART OF THE ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN SH ALL BE ADDED TO THE AMOUNT OF ALLOWANCE FOR DEPRECIATION FOR THE FOLLOW ING PREVIOUS YEAR AND DEEMED TO BE PART OF THE ALLOWANCE WHICH MEANS THA T BROUGHT FORWARD DEPRECIATION MERGES WITH THE CURRENT YEARS DEPRECIA TION BECAUSE FO THE LEGAL FICTION CREATED BY PROVISIONS OF SEC. 32(2) O F THE ACT. AS THE BROUGHT FORWARD UNABSORBED DEPRECIATION IS TREATED AS CURRE NT YEARS DEPRECIATION BECAUSE OF THE LEGAL FICTION, THE TREATMENT GIVEN T O THE CURRENT YEARS DEPRECIATION IS EQUALLY APPLICABLE TO BROUGHT FORWA RD DEPRECIATION AFTER THE APPLICATION FO FINANCE ACT, 2001. THEREFORE, KE EPING IN VIEW THE DECISION OF THE HONBLE APEX COURT THE HONBLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME TAX & ANR VS. YOKOGAWA INDIA LTD. & ORS (SUPRA), THE AO WAS JUSTIFIED IN ADJUSTING BROUGHT FORWARD UNABSORBED DEPRECIATION WHILE COMPUTING INCOME FO THE ELIGIBLE UNIT FOR THE PURPOSE OF DEDUCTION UNDER SECTION 10A. ITA NO.5975/MUM/2017 C.J.JEWELLERIES PVT.LTD. 6 7.7 HOWEVER, THE HONBLE APEX COURT ALSO HELD THAT THE PROVISIONS FOR SET OFF AN CARRY FORWARD CONTAINED IN SECTIONS 70,7 2 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATION AS THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGI BLE UNDERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPU TATION OF THE TOTAL INCOME UNDER CHAPTER VI. THEREFORE, THE AO IS NOT J USTIFIED IN SETTING OFF OF THE BROUGHT FORWARD BUSINESS LOSS OF RS. 45,24,7 09/- WHILE COMPUTING INCOME OF THE ELIGIBLE UNIT FOR THE PURPOSE OF DEDU CTION UNDER SECTION 10A. 7.8 AS THE ASSESSEE HAS BEEN ALLOWED RELIEF ON ACCO UNT OF SETTING OFF OF THE BROUGHT FORWARD BUSINESS LOSS F RS. 42,24,709/- AGAINST THE INCOME OF THE ELIGIBLE UNIT FOR THE PURPOSE OF DEDUCTION UNDE R SECTION 10, THE BALANCE UNABSORBED DEPRECIATION OF RS. 20,43,889/- A.Y. 2010-11 BECOMES AVAILABLE FOR ADJUSTMENT AGAINST THE INCOME OF THE ELIGIBLE UNIT FOR THE PURPOSE OF DEDUCTION UNDER SECTION 10A. ACC ORDINGLY, THE INCOME OF ELIGIBLE UNIT FOR THE PURPOSE OF DEDUCTION UNDER SECTION 10A IS DETERMINED AT RS. 24,80,631/-, AD THE ASSESEE IS EL IGIBLE FOR DEDUCTION OF RS. 12,40,316/- UNDER SECTION 10A OF THE ACT. 5. AGGRIEVED BY THE LD.CIT(A) ORDER, THE ASSESSEE I S IN APPEAL BEFORE US. 6. THE LD.AR FOR THE ASSESSEE, AT THE TIME OF HEARI NG, SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESEE BY THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF C IT VS YOKOGAWA INDIA LTD. & OTHERS (2017) 391 ITR 274 (SC), WHERE THE PROCEDURE OF DETERMINATION OF AN ELIGIBLE PROFITS FOR CLAIMING D EDUCTION U/S 10A HAS BEEN EXPLAINED BY THE HONBLE SUPREME COURT. TH E LD. AR, FURTHER SUBMITTED THAT AS PER, THE DECISION OF HON BLE SUPREME COURT ELIGIBLE PROFIT OF AN UNDERTAKING SHALL BE DETERMIN ED WITHOUT SETTING OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION OF ELIGIBLE AND NON-ELIGIBLE UNITS. ITA NO.5975/MUM/2017 C.J.JEWELLERIES PVT.LTD. 7 7. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTE D ORDER OF THE LD. CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. THE ONLY CONTROVERSY THAT NEEDS TO BE RESOLVED IN THE GIVEN FACTS AND CIRCUMSTANCES OF THIS CASE IS WHETHER, PROFIT OF AN ELIGIBLE UNDERTAKING, FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 10A SHALL BE DETERMINED WITHOUT SETTING OFF OF BROUGHT FORWARD B USINESS LOSS AND UNABSORBED DEPRECIATION OF EARLIER YEARS OF ELIGIB LE/NON-ELIGIBLE UNITS. WE FIND THAT THE HONBLE SUPREME COURT, IN T HE CASE OF CIT VS YOKOGAWA INDIA LTD. & OTHERS (SUPRA) HAD CONSIDERED AN IDENTICAL ISSUE IN LIGHT OF PROVISION OF SECTION 10A AND SECT ION 70,72 AND 74 OF THE I.T.ACT, 1961 AND HELD THAT THOUGH SECTION 10A HAS AMENDED AS A PROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION W OULD BE WHILE, COMPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UN DERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPU TATION OF TOTAL INCOME UNDER CHAPTER -V OF THE I.T.ACT, 1961. THE R ELEVANT FINDINGS OF THE HONBLE SUPREME COURT ARE AS UNDER:- SECTION 10A OF THE INCOME-TAX ACT, 1961 AS ORIGIN ALLY INTRODUCED, PROVIDED THAT ANY PROFITS AND GAINS DERIVED BY AN A SSESSEE FROM AN INDUSTRIAL UNDER-TAKING TO WHICH THE SECTION APPLIE D SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE ASSESEE. THE AMENDMENT O F THE SECTION BY THE FINANCE ACT, 2000 WITH EFFECT FROM APRIL 1, 2001, S PECIFICALLY USES THE ITA NO.5975/MUM/2017 C.J.JEWELLERIES PVT.LTD. 8 WORDS DEDUCTION OF PROFITS AND GAINS DERIVED BY AN ELIGIBLE UNIT.. FROM THE TOTAL INCOME OF THE ASSESSEE. THE RETENTION OF SEC TION 10A IN CHAPTER III OF THE ACT AFTER THE AMENDMENT MADE BY THE FINANCE ACT, 2000 WOULD BE MERELY SUGGESTIVE AND NOT DETERMINATIVE OF WHAT IS PROVIDED BY THE SECTION AS AMENDED, IN CONTRAST TO WHAT WAS PROVIDE D BY THE UN AMENDED SECTION. THE TRUE AND CORRECT PURPORT AND E FFECT OF THE AMENDED SECTION WILL HAVE TO BE CONSTRUED FROM THE LANGUAGE USED AND NOT MERELY FROM THE FACT THAT IT HAS BEEN RETAINED IN CHAPTER III. THE INTRODUCTION OF THE WORD DEDUCTION IN SECTION 10A BY THE AMENDMEN T, IN TE ABSENCE OF ANY CONTRARY MATERIAL, AND IN VIEW OF THE SCOPE OF THE DEDUCTIONS CONTEMPLATED BY SECTION 10A HAS TO BE UNDERSTOOD AS EMBODYING A CLEAR ENUNCIATION OF THE LEGISLATIVE DECISION TO ALTER TH E NATURE OF THE SECTION FROM ONE PROVIDING FOR EXEMPTION TO ONE PROVIDING F OR DEDUCTION. THOUGH THE DIFFERENCE BETWEEN THE TWO EXPRESSIONS EXEMPTION AND DEDUCTION, BROADLY MAY APPEAR TO BE THE SAME , IE. IMMUNITY FROM TAXATION, THE PRACTICAL EFFECT OF IT IN THE LIGHT O F THE SPECIFIC PROVISIONS CONTAINED IN THE DIFFERENT PARTS OF THE ACT WOULD B E WHOLLY DIFFERENT. THE ABOVE IMPLICATIONS WOULD BE OBVIOUS WHERE LOSS MAKI NG ELIGIBLE UNITS OR NON-ELIGIBLE ASSESSEE SEEK THE BENEFIT OF ADJUSTMEN T OF LOSES AGAINST PROFITS MADE BY ELIGIBLE UNITS. SUB-SECTION (4) OF SECTION 10AA WHICH PROVIDES FOR PRO RATA EXEMPTION NECESSARILY INVOLVING DEDUCTION OF THE PR OFITS ARISING OUT OF DOMESTIC SALES, IS ONE INSTANCE OF DEDUCTION PROVID ED BY THE AMENDMENT. PROFITS OF AN ELIGIBLE UNIT PERTAINING TO DOMESTIC SALES WOULD HAVE TO ENTER INTO THE COMPUTATION UNDER THE HEAD PROFIT AND GAI NS FROM BUSINESS IN CHAPTER IV AND BE DENIED THE BENEFIT OF DEDUCTION. THE PROVISION OF SUB SECTION (6) OF SECTION 10A, AS AMENDED BY THE FINAN CE ACT, 2003 GRANTING THE BENEFIT OF ADJUSTMENT OF LOSSES AND UNABSORBED DEPRECIATION, ETC, COMMENCING FROM THE YEAR 2001-02 ON COMPLETION OF T HE PERIOD OF TAX HOLIDAY ALSO VIRTUALLY WORK AS A DEDUCTION WHICH HA S TO BE WORKED OUT AT A FUTURE POINT OF TIME, NAMELY, AFTER THE EXPIRY OF T HE PERIOD OF TAX HOLIDAY. THE ABSENCE OF ANY REFERENCE IN CHAPTER VI OF THE A CT TO DEDUCTION UNDER SECTION 10A CAN BE UNDERSTOOD BY ACKNOWLEDGING THAT ANY SUCH REFERENCE OR MENTION WOULD HAVE BEEN A REPETITION O F WHAT HAS ALREADY BEEN PROVIDED IN SECTION 10A. THE PROVISIONS OF SEC TIONS 80HHC AND 80HHC OF THE ACT PROVIDING FOR SOMEWHAT SIMILAR DED UCTIONS WOULD BE WHOLLY IRRELEVANT AD REDUNDANT IF DEDUCTIONS UNDER SECTION 10A WERE TO BE MADE AT THE STAGE OF OPERATION OF CHAPTER VI OF THE ACT. THE RETENTION OF THE PROVISIONS OF THE ACT, I.E,., SECTIONS 80HHC, D ESPITE THE AMENDMENT 10A INDICATES THAT SOME ADDITIONAL BENEFIT TO ELIGI BLE SECTION 10A UNITS, NOT CONTEMPLATED BY SECTIONS 80HHC AND 80HHE, WAS I NTENDED BY THE LEGISLATURE. SUCH A BENEFIT CAN ONLY BE UNDERSTOOD BY A LEGISLATIVE MANDATE TO UNDERSTAND THAT THE STAGES FOR WORKING O UT THE DEDUCTIONS UNDER SECTIONS 10A AND 80HHCAND 80HHE ARE SUBSTANTI ALLY DIFFERENT. FROM A READING OF THE RELEVANT PROVISIONS OF SECTIO N 10A, IT IS MORE THAN CLEAR THAT THE DEDUCTION CONTEMPLATED THEREIN IS QUA THE ELIGIBLE UNDERTAKING OF AN ASSESSEE STANDING ON ITS OWN AND WITHOUT REFERENCE TO THE OTHER ELIGIBLE OR NON-ELIGIBLE UNITS OR UNDERTA KINGS OF THE ASSESSEE. ITA NO.5975/MUM/2017 C.J.JEWELLERIES PVT.LTD. 9 THE BENEFIT OF DEDUCTION IS GIVEN BY THE ACT TO THE INDIVIDUAL UNDERTAKING AND RESULTANTLY FLOWS TO THE ASSESSEE. CIRCULAR N. 794, DATED AUGUST 9,2000 STATES IN PARAGRAPH 15.6 THAT THE EXPORT TUR NOVER AND THE TOTAL TURNOVER FOR THE PURPOSES OF SECTIONS 10A AND 10B S HALL BE OF THE UNDERTAKING LOCATED IN SPECIFIED ZONES OR 100 PERCE NT EXPORT ORIENTED UNDERTAKINGS, AS THE CASE MAY BE, AND THIS SHALL NO T HAVE ANY MATERIAL RELATIONSHIP WITH THE OTHER BUSINESS OF THE ASSESSE E OUTSIDE THESE ZONES OR UNITS OF THE PURPOSES OF THIS PROVISION. IF THE SPECIFIC PROVISIONS OF THE ACT (THE FIRST PROVISO TO SUB-SECTION (1) OF SECTIO N10A AND SUB-SECTIONS (1A) AND (4) OF SECTION 10A) PROVIDE THAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDER TAKING AND THAT IS ALSO HOW THE CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT UNDERSTOOD THE SITUATION, IT IS LOGICAL AD NATURAL THAT THE DEDUCT ION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO B E MADE INDEPENDENTLY AND, THEREFORE, IMMEDIATELY AFTER THE STAGE OF DETE RMINATION OF ITS PROFITS AND GAINS. AT THAT STAGE THE AGGREGATE OF THE INCOM ES UNDER OTHER HEADS AND THE PROVISIONS FOR SET OFF AND CARRY FORWARD CO NTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICA TION. THE DEDUCTION UNDER SECTION 10A THEREFORE WOULD BE PRIOR TO THE C OMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE A CT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL I NCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION TOTAL INCOME OF T HE ASSESSEE IN SECTION 10A AS TOTAL INCOME OF THE UNDERTAKING. THEREFORE, THOUGH SECTION 10A, AS AMENDED, IS A PRO VISION FOR DEDUCTION THE STAGE OF DEDUCTION WOULD BE WHILE COM PUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDER CHAP TER-IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI. 9. IN THIS VIEW OF THE MATTER AND RESPECTFULLY FOLL OWING, THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF C IT VS YOKOGAWA INDIA LTD. & OTHERS (SUPRA), WE ARE OF THE CONSIDER ED VIEW THAT THE AO AS WELL AS, THE LD.CIT(A) WERE ERRED IN DETERMIN ATION OF PROFIT OF AN ELIGIBLE UNDERTAKING FOR DEDUCTION U/S 10A, AFTE R SETTING OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPREC IATION OF EARLIER YEARS OF AN ELIGIBLE AND NON-ELIGIBLE UNIT S. HENCE, WE DIRECT THE AO TO DETERMINE NET PROFIT OF AN ELIGIBLE UNDER TAKING WITHOUT ITA NO.5975/MUM/2017 C.J.JEWELLERIES PVT.LTD. 10 SETTING OFF OF BROUGHT FORWARD BUSINESS LOSS AND UN ABSORBED DEPRECIATION OF EARLIER YEARS. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28/08 /2019 SD/- (RAM LAL NEGI) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 28/08/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//