FAMY CARE PRIVATE LIMITED (FORMERLY KNOWN AS FAMY CARE LIMITED), MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2(1)(2), MUMBAI

ITA 5984/MUM/2017

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9990 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 25-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSHIL KUMAR PODDAR
• Assessee Lawyers: A K GHOSH; HEMA KATARIA ARS
• Keywords: Depreciation; Question of law; Unabsorbed depreciation; CHAPTER IV
• Section: 80C; 143(3); 10AA; 10B; 143(2); 72; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI PAWAN SINGH (JM) AND SHRI S. RIFAUR RAHMAN (AM) ITA NO. 5984/MUM/2017(ASSESSMENT YEAR: 2011-12) FAMY CARE PVT LTD, 3 RD FLOOR, BRADY HOUSE, 12/14, VEER NARIMAN ROAD, FORT, MUMBAI-400001 PAN:AAACF 0632Q V/S ACIT, CIRCLE-2(1)(2), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SH A.K. GHOSH & MS. HEMA KATARIA ARS RESPONDENT BY SH. SUSHIL KUMAR PODDAR CIT-DR DATE OF HEARING 04.12.2019 DATE OF PRONOUNCEMENT 11.12.2019 O R D E R PER PAWAN SINGH JUDICIAL MEMBER ; 1. THIS APPEAL UNDER SECTION 253 OF INCOME-TAX ACT (AC T) BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 3, MUMBAI DATED 6 TH JULY 2017, WHICH IN TURN ARISE FROM THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) ON 29 TH MARCH 2015 FOR ASSESSMENT YEAR 2011- 12. THE ASSESSEE HAS RAISED F OLLOWING GROUNDS OF APPEAL; (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELL ANTS CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING AOS ACTION OF SETTI NG OF LOSS OF 11,63,21,868/- OF INELIGIBLE UNITS AGAINST THE PROF IT OF ELIGIBLE UNITS UNDER SECTION 10AA & 10 B. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD CIT(A ) ERRED IN CONFIRMING THE AOS ACTION OF SETTING OF UNABSORBED APPRECIATI ON OF EARLIER YEARS AGAINST THE PROFIT OF ELIGIBLE UNITS AMOUNTING TO 4,03,23,795/-. ITA NO. 5984/MUM/216 FAMY CARE PVT LTD , 2 (III) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE LD C IT (A) ERRED IN CONFIRMING THE AOS ACTION OF ALLOWABLE DEDUCTION/E XEMPTION UNDER SECTION 10 AA AND 10 B AMOUNTING TO 94,78,27,276/- AS AGAINST THE CLAIM OF APPELLANT AMOUNTING TO 110,22,64,922/-. 2. FACTS IN BRIEF AS GATHERED FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MA NUFACTURING OF COPPER- T, ORAL CONTRACEPTIVE PILLS, INJECTABLES, TUBAL RIN GS, WIND MILLS FOR POWER GENERATION, TEXTILES, RESEARCH & DEVELOPMENT IN A S EPARATE UNIT, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2011-12 ON 30 TH SEPTEMBER 2011 DECLARING NIL INCOME AND LOSS OF RS. 10.11 CRORE. T HE RETURN OF INCOME WAS REVISED ON 30.03.2012 AND AGAIN ON 31.03.2012 DECLA RING LOSS RS. 11,42,31,627/-. THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICES UNDER SECTION 143(2) AND 142 (1), THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 143 (3) ON 2 9 TH MARCH 2015. THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT NOTED THAT IN THE COMPUTATION OF INCOME ASSESSEE HAS CLAIM INCOME FROM ELIGIBLE U NITS FOR DEDUCTION UNDER SECTION 10B AND 10AA AS EXEMPT AND HAS NOT INCLUDED THE SAME IN THE COMPUTATION OF INCOME. THE ASSESSEE HAS NOT SET OFF THE LOSS OF INELIGIBLE UNIT OF RS. 11.43 CRORE WITH THE INCOME OF ELIGIBLE UNIT OF RS. 110.22 CRORE. THE ASSESSEE WAS ASKED TO JUSTIFY AS TO WHY THE PRO FIT AND GAINS FROM ELIGIBLE UNIT SHOULD NOT BE SET OFF WITH THE LOSS O F INELIGIBLE UNITS. THE ASSESSEE FILED ITS REPLY VIDE REPLY DATED 18 TH DECEMBER 2014, MAKING DETAILED SUBMISSION. IN THE REPLY, THE ASSESSEE STA TED THAT THE DEDUCTION UNDER SECTION 10B AND 10AA SHOULD BE ALLOWED WITHOU T SETTING OFF ANY ITA NO. 5984/MUM/216 FAMY CARE PVT LTD , 3 BROUGHT FORWARD LOSSES, THE ASSESSEE ALSO RELIED UP ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN CIT VS BLACK & VEATCH CONSULTING PVT. LIMITED (348 ITR 72) AND SUBMITTED THAT THE DECISIO N OF JUDICIAL HIGH COURT WILL PREVAIL UPON THE CBDT CIRCULAR DATED 28 TH AUGUST 2012. THE ASSESSEE SPECIFICALLY CONTENDED THAT THE LOSS OF INELIGIBLE UNIT SHOULD NOT BE SET OFF AGAINST THE INCOME OF ELIGIBLE UNIT IN VIEW OF THE DECISION OF KARNATAKA HIGH COURT IN CASE OF CIT VS YOKOGAVA LTD (341 ITR 385) AND THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS TEI TECH NOLOGIES (25 TAXMANN.COM 5). 3. THE REPLY OF ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER BY TAKING HIS VIEW THAT CBDT CIRCULAR NO. 7/DV/2013 DATED 16 TH JULY 2017 PROVIDES FOR DEDUCTION UNDER SECTION 10A/10AA/ 10B AND NOT EXEMP TION. THE DEDUCTION IS TO BE ALLOWED AFTER GIVING EFFECT TO THE PROVISI ON OF SECTION 70 AND 71 OF THE ACT. FURTHER THE ASSESSING OFFICER REFERRED THE OFFICE MEMORANDUM DATED 28 TH AUGUST 2012 ISSUED BY CBDT STATING THAT THE DEPART MENTAL VIEW THEREIN IN CIRCULAR SHALL NOT BE OPERATIVE IN THE A REA FALLING IN THE JURISDICTION OF THE RELEVANT HIGH COURTS. AFTER REFERRING THE DE CISION OF MUMBAI TRIBUNAL IN G. JEWELS CRAFT VS ITO IN ITA NO. 5087/ MUMBAI/2012, THE ASSESSING OFFICER HELD THAT UNABSORBED DEPRECIATION SHALL FORM PART OF CURRENT YEAR DEPRECIATION AND THE SAME IS REQUIRED TO BE DEDUCTED BEFORE ALLOWING DEDUCTION UNDER SECTION 10 AA AND 10B. ITA NO. 5984/MUM/216 FAMY CARE PVT LTD , 4 4. ON APPEAL BEFORE CIT(A), THE ASSESSEE FILED DETAILE D SUBMISSION AND REPEATED THE SAME SUBMISSION AS SUBMITTED BEFORE TH E ASSESSING OFFICER. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE AFFIRMED THE ACTION OF ASSESSING OFFICER. THUS, FURTHER AGGRIEVE D BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED PRESENT APPEAL BEFOR E US. 5. WE HAVE HEARD THE SUBMISSION OF THE LEARNED AUTHORI SED REPRESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. A R FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE COMPANY HAS TWO 100% EXPO RT ORIENTED UNITS ['EOU-I AND EOU-II'] AND A SPECIAL ECONOMIC ZONE UN IT ('SEZ') LOCATED AT VAPI AND AHMEDABAD RESPECTIVELY IN THE STATE OF GUJARAT. IN RELATION TO THESE UNITS THE ASSESSEE HAS CLAIMED EXEMPTION U/S 10B AND 10AA OF THE ACT RESPECTIVELY. THE EOU UNIT I, IS IN OPERATION FROM A Y 2004-05 AND EOU II, IS IN OPERATION FROM AY 2005-06 AND PROFIT OF BOTH THESE UNITS WHICH IS EXEMPT UNDER SECTION 10B OF THE ACT HAS B EEN CONSISTENTLY CLAIMED BY THE ASSESSEE . THE SEZ UNIT IS IN OPERA TION FROM FY 2009-10 (AY 2010-11) AND PROFIT OF THIS UNIT IS ALSO EXEMPT UNDER SECTION 10AA OF THE ACT. FOR THE YEAR UNDER CONSIDERATION, DEDUCTI ON CLAIMED U/S 10B FOR EOU-I WAS RS. 56,70,94,902/- WHEREAS NOTHING WAS CL AIMED FOR EOU-II. FURTHER, DEDUCTION U/S 10AA FOR SEZ UNIT WAS CLAIME D AT RS. 53,51,70,020/- AND THE SAME WERE NOT INCLUDED IN THE COMPUTATION OF INCOME. THE ASSESSING OFFICER REJECTED THE TREATMENT OF 'NOT IN CLUDING' THE INCOME FROM ITA NO. 5984/MUM/216 FAMY CARE PVT LTD , 5 ELIGIBLE UNITS IN THE COMPUTATION OF INCOME BY TAKI NG VIEW THAT THE LOSS FROM INELIGIBLE UNITS HAS TO BE SET OFF AGAINST THE INCO ME OF ELIGIBLE UNITS. THE ASSESSING OFFICER FURTHER CONCLUDED THAT THE UNABSO RBED DEPRECIATION SHALL FORM PART OF THE CURRENT YEAR DEPRECIATION AND THE SAME IS REQUIRED TO BE DEDUCTED BEFORE ALLOWING DEDUCTION U/S 10AA AND 10B . THUS, THE ASSESSING OFFICER SET-OFF THE LOSSES AND UNABSORBED DEPRECIAT ION TOTALLING TO RS. 15,46,76,609/- FROM THE TOTAL PROFITS OF THE UNITS ELIGIBLE U/S 10AA AND 10B OF THE ACT OF RS.110,22,64,922/- THEREBY RESULTING IN DEDUCTION OF ONLY OF RS. 94,78,27,276/- UNDER SECTION 10AA AND SECTION 1 0B OF THE ACT. THE LD. AR FOR THE ASSESSEE SUBMITS THAT THIS POSITION IS N OW SETTLED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. YOKOGAWA INDIA LTD. (CIVIL APPEAL NO. 849812013). TO STRENGTHEN HER SUB MISSIONS THE LD AR FOR THE ASSESSEE ALSO RELIED ON THE FOLLOWING DECISIONS ; CIT VS BLACK & VEATECH CONSULTING PVT LTD (348 ITR 72 BOM), CHANGEPOND TECHNOLOGIES P LTD VS ACIT ( 22SOT 22) C HENNAI, PATSPIN INDIA LTD VS CIT (38 SOT 369 ) CHENNAI, SCIENTIFIC ATLANTA INDIA TECHNOLOGY P LTD VS ACIT ( 38 SOT 252) CHENNAI, GENSTENER DUPLICATORS PVT LTD VS CIT (117 ITR 1) SC , CIT VS HIMATSINGHIKE SEIDE LTD ( 286 ITR 255 KNT), G JWELECRAFT LTD VS CIT (ITA NO. 5087/MUM/2012 AND CBDT CIRCULAR NO. 279/MISC/M/-116/2012-ITJ DATED 16.07.2013. 6. ON THE OTHER HAND THE LD. DR FOR THE REVENUE SUPPOR TED THE ORDER OF THE LOWER AUTHORITIES. THE LD. DR FOR THE REVENUE FURTH ER SUBMITS THAT AS PER SECTION 5 OF INCOME TAX ACT, ALL INCOME OF THE ASSE SSEE HAS TO BE COMPUTED FROM WHATEVER SOURCES DERIVED OR ACCRUE BY THE ASSE SSEE OR DEEM TO BE ITA NO. 5984/MUM/216 FAMY CARE PVT LTD , 6 RECEIVED DURING THE YEAR. THUS, OVERALL BUSINESS IN COME OF THE ASSESSEE HAS TO BE COMPUTED. THE ASSESSING OFFICER HAS COMPUTED THE INCOME IN ACCORDANCE WITH THE DIRECTIONS OF CBDT CIRCULAR NO. 7/DV/2013 DATED 16.07.2013. THE LD. DR PRAYED FOR DISMISSAL OF THE APPEAL. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. THE AS SESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER NOT INCLUDED THE INCOM E OF ELIGIBLE UNITS IN THE COMPUTATION OF INCOME BY TAKING VIEW THAT LOSS FROM INELIGIBLE UNIT HAS TO BE SET OFF AGAINST THE INCOME OF ELIGIBLE UNITS. FU RTHER, THE UNABSORBED DEPRECIATION WAS ALSO MADE A PART OF CURRENT YEAR D EPRECIATION AND WAS DEDUCTED BEFORE ALLOWING DEDUCTION UNDER SECTION 10 AA & 10B OF ELIGIBLE UNITS. THE LD. CIT(A) CONFIRMED THE ACTION OF ASSES SING OFFICER BY REFERRING THE CBDT CIRCULAR DATED 16.07.2013 BY TAKING VIEW T HAT THE CBDT CIRCULAR IS BINDING ON THE OFFICERS OF THE DEPARTME NT, BEING APEX BODY IN ADMINISTRATIVE TAX LAW AND THAT ASSESSING OFFICER HAS CORRECTLY APPLIED THE CONTENTS OF AFORESAID CIRCULAR. 8. THE HONBLE SUPREME COURT IN CIT VS. YOKOGAWA INDIA LTD. (SUPRA) WHILE CONSIDERING THE SIMILAR QUESTION OF LAW HELD AS UND ER: '16. FROM A READING OF THE RELEVANT PROVISIONS OF S ECTION 10A IT IS MORE THAN CLEAR TO US THAT THE DEDUCTIONS CONTEMPLATED THEREIN IS Q UA THE ELIGIBLE UNDERTAKING OF AN ASSESSEE STANDING ON ITS OWN AND WITHOUT REFERENCE TO THE OTHER ELIGIBLE OR NON- ELIGIBLE UNITS OR UNDERTAKINGS OF THE ASSESSEE. THE BENEFIT OF DEDUCTION IS GIVEN BY THE ACT TO THE INDIVIDUAL UNDERTAKING AND RESULTANT LY FLOWS TO THE ASSESSEE. THIS IS ITA NO. 5984/MUM/216 FAMY CARE PVT LTD , 7 ALSO MORE THAN CLEAR FROM THE CONTEMPORANEOUS CIRCU LAR NO. 794 DATED 9.8.2000 WHICH STATES IN PARAGRAPH 15.6 THAT, 'THE EXPORT TU RNOVER AND THE TOTAL TURNOVER FOR THE PURPOSES OF SECTIONS 10A AND 10B SHALL BE OF TH E UNDERTAKING LOCATED IN SPECIFIED ZONES OR 100% EXPORT ORIENTED UNDERTAKING S, AS THE CASE MAY BE, AND THIS SHALL NOT HAVE ANY MATERIAL RELATIONSHIP WITH THE OTHER BUSINESS OF THE ASSESSEE OUTSIDE THESE ZONES OR UNITS FOR THE PURPOSES OF TH IS PROVISION. ' 17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [ FIRST PROVISO TO SECTIONS 10A(L); 10A (1A) AND 10A (4)] THAT THE UNIT THAT IS CONTEMPLATE D FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDERTAKING AND THAT IS ALSO HOW TH E CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT (NO. 794 DATED 09.08.2000) UNDERSTOOD TH E SITUATION, IT IS ONLY LOGICAL AND NATURAL THAT THE STAGE OF DEDUCTION OF THE PROF ITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY A ND, THEREFORE, IMMEDIATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS . AT THAT STAGE THE AGGREGATE OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SE T OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOUL D BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION 10A THEREFORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF T HE ACT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION 'TOTAL INCOME OF THE ASSESSEE' IN SE CTION 10A HAS ALREADY BEEN DEALT WITH EARLIER AND IN THE OVERALL SCENARIO UNFOLDED B Y THE PROVISIONS OF SECTION 101 THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERSTA NDING THE EXPRESSION 'TOTAL INCOME OF THE ASSESSEE' IN SECTION 10A AS 'TOTAL IN COME OF THE UNDERTAKING' ..... 18. FOR THE AFORESAID REASONS WE ANSWER THE APPEALS AND THE QUESTIONS ARISING THEREIN, AS FORMULATED AT THE OUTSET OF THIS ORDER, BY HOLDING THAT THOUGH SECTION 10A, AS AMENDED, IS A PROVISION FOR DEDUCTION, 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 COMPUTATION O F THE TOTAL INCOME UNDER CHAPTER VI ALL THE APPEALS SHALL STAND DISPOSED OF ACCORDIN GLY' 9. FURTHER, THE HONBLE JURISDICTIONAL HIGH COURT IN B LACK & VEATCH CONSULTING PVT. LTD. (SUPRA) WHILE CONFIRMING THE V IEW OF TRIBUNAL IN THE SAID CASE, HELD AS UNDER: ITA NO. 5984/MUM/216 FAMY CARE PVT LTD , 8 'THE DEDUCTION UNDER SECTION 10A, IN OUR VIEW, HAS TO BE GIVEN EFFECT TO AT THE STAGE OF COMPUTING THE PROFITS AND GAINS OF BUSINESS. THI S IS ANTERIOR TO THE APPLICATION OF THE PROVISIONS OF SECTION 72 WHICH DEALS WITH THE C ARRY FORWARD AND SET OFF OF BUSINESS LOSSES. A DISTINCTION HAS BEEN MADE BY THE LEGISLATURE WHILE INCORPORATING THE PROVISIONS OF CHAPTER VIA. SECTION 80A(L) STIPU LATES THAT IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE, THERE SHALL BE ALLOWED FROM HIS GROSS TOTAL INCOME, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH E CHAPTER, THE DEDUCTIONS SPECIFIED IN SECTIONS 80C TO 80U SECTION 80B(5) DEF INES FOR THE PURPOSES OF CHAPTER VIA 'GROSS TOTAL INCOME' TO MEAN THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, BEFORE MAKING ANY D EDUCTION UNDER THE CHAPTER. WHAT THE REVENUE IN ESSENCE SEEKS TO ATTAIN IS TO T ELESCOPE THE PROVISIONS OF CHAPTER VIA IN THE CONTEXT OF THE DEDUCTION WHICH I S ALLOWABLE UNDER SECTION 10A, WHICH WOULD NOT BE PERMISSIBLE UNLESS A SPECIFIC ST ATUTORY PROVISION TO THAT EFFECT WERE TO BE MADE. IN THE ABSENCE THEREOF, SUCH AN AP PROACH CANNOT BE ACCEPTED. IN THE CIRCUMSTANCES, THE DECISION OF THE TRIBUNAL WOU LD HAVE TO BE AFFIRMED SINCE IT IS PLAIN AND EVIDENT THAT THE DEDUCTION UNDER SECTION 10A HAS TO BE GIVEN AT THE STAGE WHEN THE PROFITS AND GAINS OF BUSINESS ARE COMPUTED IN THE FIRST INSTANCE. SO CONSTRUED, THE APPEAL BY THE REVENUE WOULD NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW AND SHALL ACCORDINGLY STAND DISMISSED. ' 10. FURTHER, THE CO-ORDINATE BENCH OF CHENNAI TRIBUNAL WHILE ADJUDICATING THE SIMILAR GROUND OF APPEAL IN CHANGEPOND TECHNOLOGIES (P.) LTD. VS. ACIT (SUPRA) HELD AS UNDER: 'IN OUR VIEW THE COMMISSIONER (APPEALS) IS NOT CORR ECT IN SETTING OFF OF CARRIED FORWARD LOSSES BEFORE GIVING THE DEDUCTION UNDER SE CTION 10A. AS HELD BY THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF WEBS PECTRUM SOFTWARE P. LTD. (SUPRA) THERE IS 110 PROVISIONS IN THE ACT BY WHICH THE DEDUCTION SHOULD BE RESTRICTED TO THE TOTAL INCOME OF THE ASSESSEE COMP UTED UNDER THE PROVISIONS OF THE ACT BEFORE ALLOWING SUCH DEDUCTION. WHEREVER THE LE GISLATURE INTENDS SO TO RESTRICT THE DEDUCTION, THE SAME IS PROVIDED IN THE ACT ITSE LF. THEREFORE, THERE IS NO SCOPE FOR ANY INTERPRETATION THAT THE PROFITS AND GAINS O F THE SPECIFIED UNDERTAKING SHOULD BE COMPUTED UNDER THE NORMAL COURSE AS PER THE PROV ISIONS OF THE ACT AND NOT ITA NO. 5984/MUM/216 FAMY CARE PVT LTD , 9 UNDER THE SPECIAL PROVISIONS OF SECTION 10A. ACCORD INGLY THE DEDUCTION UNDER SECTION 10A IS NOT TO BE RESTRICTED TO THE TOTAL IN COME OF THE ASSESSEE COMPUTED BEFORE ALLOWING THE DEDUCTION UNDER SECTION 10A, SI NCE THE DEDUCTION IS GIVEN ON THE PROFIT AND GAIN DERIVED FROM THE EXPORT ACTIVIT Y AND NOT ON THE TOTAL INCOME AS COMPUTED UNDER THE PROVISIONS OF THE ACT. THEREFORE , THE ONLY INTERPRETATION WHICH IS APPLICABLE IN RESPECT OF SECTION 10A IS THAT THE DEDUCTION OF THE UNIT QUALIFYING FOR DEDUCTION IS TO BE GIVEN TO THE EXTENT OF INCOM E COMPUTED IN RESPECT OF THE SAID UNIT. KEEPING IN VIEW THE ABOVE DISCUSSION WE ARE O F THE VIEW THAT THE COMMISSIONER (APPEALS) WAS NOT JUSTIFIED IN HOLDING THAT THE TOTAL INCOME OF THE ASSESSEE FOR ANY RELEVANT ASSESSMENT YEAR IS REQUIR ED TO BE COMPUTED AFTER TAKING INTO CONSIDERATION THE CARRIED FORWARD LOSSES INCUR RED AFTER 1-4-2001 AND AFTER SETTING OFF THE LOSS IF THERE IS ANY POSITIVE INCOM E IS LEFT THE SAME IS EXEMPTED UNDER SECTION 10A. ' 11. THE HONBLE DELHI HIGH COURT IN A RECENT DECISION I N COSMO FILMS LTD. VS. CENTRAL BOARD OF DIRECT TAXES [2019] 108 TAXMANN.CO M 49 (DEL.) WHILE CONSIDERING THE CONTENTION OF ASSESSEE IN THAT CASE THAT SOFTWARE OF DEPARTMENT DID NOT PERMIT THE ASSESSEES CLAIM UNDE R SECTION 10AA WITHOUT SETTING OFF THE LOSS OF INELIGIBLE UNIT AND AS A RE SULT ENTIRE LOSS OF INELIGIBLE UNIT GET SET OFF AGAINST THE ELIGIBLE UNIT, THOUGH THE NET LOSS OF INELIGIBLE UNIT WERE TO BE CARRIED FORWARD WAS THUS BROUGHT TO DOWN NIL. THE HONBLE HIGH COURT BY FOLLOWING THE DECISION OF HONBLE SUP REME COURT IN CIT VS. YOKOGAVA INDIA LTD. (SUPRA) DIRECTED THAT COMPUTATI ON OF PROFIT AND GAIN OF ELIGIBLE UNIT FOR GRANT OF DEDUCTION UNDER SECTION 10AA WOULD BE INDEPENDENT OF COMPUTATION OF PROFIT & GAIN OF INEL IGIBLE UNIT AND THE ASSESSEE WAS PERMITTED TO CARRY FORWARD THE LOSSES OF ITS INELIGIBLE UNIT. ITA NO. 5984/MUM/216 FAMY CARE PVT LTD , 10 12. CONSIDERING THE AFORESAID LEGAL POSITION, THE GROUN DS OF APPEAL RAISED BY ASSESSEE ARE ALLOWED AND THE ASSESSING OFFICER IS D IRECTED TO ALLOW THE CARRY FORWARD LOSSES AND UNABSORBED DEPRECIATION OF INELI GIBLE UNITS WITHOUT SETTING OFF AGAINST THE INCOME OF ELIGIBLE UNITS. T HE SUBMISSIONS OF THE LD. DR FOR THE REVENUE THAT AS PER SECTION 5 OF INCOME TAX ACT THAT ALL INCOME OF THE ASSESSEE HAS TO BE COMPUTED FROM WHATEVER SO URCES DERIVED OR ACCRUE BY THE ASSESSEE OR DEEM TO BE RECEIVED DURING THE Y EAR. SECTION 5 OF THE INCOME TAX PROVIDES THE SCOPE OF TOTAL INCOME OF A PERSON, WHICH IS SUBJECT TO THE PROVISIONS OF THE ACT, OBVIOUSLY SUBJECT TO THE VARIOUS CHAPTER OF THE ACT. THUS, THE CONTENTION OF THE LD DR THAT THAT A LL INCOME OF THE ASSESSEE HAS TO BE COMPUTED FROM WHATEVER SOURCES DERIVED OR ACCRUE BY THE ASSESSEE OR DEEM TO BE RECEIVED DURING THE YEAR, IN OUR VIEW , HAS NO FORCE, UNLESS THE EXEMPTION OR DEDUCTIONS AS PROVIDED UNDER THE ACT I S NOT GRANTED TO A PERSON. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/12/2019. SD/- SD/- S. RIFAUR RAHMAN PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 11.12.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT ITA NO. 5984/MUM/216 FAMY CARE PVT LTD , 11 5. DR F BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI