I.T.O. 9(3)(4), MUMBAI V. REXTONE INDUSTRIES LIMITED, MUMBAI

ITA 7231/MUM/2011

• Counselvise Citation: 723119914 RSA 2011
• Duration Of Justice: 1 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 26-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 25-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J K GARG
• Assessee Lawyers: DEEPAK TRALASHAVALA
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 80C; 10B

Judgement Text

1 , INCOME TAX APPELLATE TRIBUNAL,MUMBAI - D BENCH. . .. . , ,, , !'# !'# !'# !'# / $ $ $ $ !%&'( !%&'( !%&'( !%&'( , &! )* &! )* &! )* &! )* BEFORE S/SH.D.MANMOHAN,VICE-PRESIDENT & RAJENDRA,A CCOUNTANT MEMBER ./ ITA NO.7231/MUM/2011, ! ! ! ! + + + + / ASSESSMENT YEAR-2008-09 ITO 9(3)(4) 225,AAYKAR BHAVAN,M K ROAD, MUMBAI-20 REXTON INDUSTRIES LIMITED, LAXMI BUILDING 1 ST FLOOR, SIR P M ROAD,FORT,MUMBAI-1 PAN: AAAFR4471Q ( !,- / APPELLANT ) ( ./,- / RESPONDENT ) !,- !,- !,- !,- 0 0 0 0 & && & / APPELLANT BY :SH.J.K.GARG ./,- 1 0 & / RESPONDENT BY :SH.DEEPAK TRALASHAVALA ! ! ! ! 1 11 1 2! 2! 2! 2! / DATE OF HEARING : 26-06-2013 3+ ! 1 2! / DATE OF PRONOUNCEMENT : 26-08-2013 , 1961 1 11 1 !! !! !! !! 254(1) & && & '242 '242 '242 '242 )&5 )&5 )&5 )&5 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. CHALLENGING THE ORDER DT.03.08.2011OF THE CIT(A)-20 ,MUMBAI,ASSESSING OFFICER (AO)HAS RAISED FOLLOWING GROUNDS OF APPEAL : 1.WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) IS RIGHT IN ALLOWING DEDUCTION U/S.10B,HOLDING THAT LOSS OF NON -ELIGIBLE UNIT CANNOT BE SET OFF AGAINST THE PROFITS OF AN ELIGIBLE UNIT EVEN THOUGH AS PER THE PROVISIONS OF SECTION 10B(1) OF THE I.T.ACT, THE PROFITS AND GAINS OF ELIGIBLE UNIT IS DEDUCTIBLE FR OM ONLY TOTAL INCOME OF THE ASSESSEE. THE TERM TOTAL INCOME AS DISTINGUISHED FROM GROSS TOTAL INCO ME IS DERIVED AFTER SET-OFF OF ALL BROUGHT FORWARD LOSSES.MOREOVER IN SECTION 10B(1) THE TERM USED IS TOTAL INCOME OF ASSESSEE AND NOT TOTAL INCOME OF ELIGIBLE UNIT. 2.THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF TRADING IN DYES AND INTERMEDIARIES, MANUFACTUR - ING OF SPECIALITY DYES AND INKS FOR WIDE FORMAT INK JET PRINTERS FILED ITS RETURN OF INCOME ON 27.09. 2008 DECLARING TOTAL INCOME OF RS.NIL.AO FINALISED THE ASSESSMENT ORDER U/S.143(3) OF THE ACT, 2 ON14.12.2010,DETERMINING THE TOTAL INCOME AT RS.NIL .HE CALCULATED BOOK PROFIT U/S.115JB OF THE ACT AT RS.1,23,79,148/- 2.1. EFFECTIVE GROUND OF APPEAL PERTAINS TO ALLOWABILITY OF DEDUCTION U/S 10B OF THE ACT, AMOUNTING TO RS.43,24,376/- BEFORE GIVING SET OFF O F CARRIED FORWARD LOSSES AND DEPRECIATION. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE-COMPANY WAS HAVING THREE INDEP -ENDENT UNDERTAKINGS (TRADING),FACTORY (UNIT 1) AND UNIT II (EOU),THAT UNIT II WAS ELIGIBLE FOR DEDUCTION U/S.10B OF THE ACT,THAT THE PROFIT FROM T HE SAID UNIT FOR A.Y. 2008-09 WAS RS.57, 01, 658/-BEFORE 10B DEDUCTION,THAT THE 10B DEDUCTION FO R A.Y. 2008-09 WORKED OUT TO RS.43,24, 376/-,THAT SAME WAS CLAIMED IN THE ORIGINAL RETURN, THAT NON-ELIGIBLE UNITS WERE HAVING LOSS OF RS.56,60,545/-FOR THE ASSESSMENT YEAR UNDER CONSIDE RATION.THAT THE CARRIED FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION PERTAINED TO NON-ELIGIB LE UNITS.AO HELD THAT SET OFF OF UNABSORBED DEPRECIATION OF RS.8,12,647/-AND CARRIED FORWARD BU SINESS LOSSES OF RS.1,05,49,556/- HAD TO BE CONSIDERED AGAINST THE PROFITS OF ELIGIBLE UNIT.FIN ALLY,HE DENIED THE ASSESSEE DEDUCTION OF RS.43, 24,376/-U/S.10B OF THE ACT. 2.2. AGAINST THE ORDER OF THE AO,ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE AND THE ASSESSMENT ORDER HE HELD THAT THE DEDUCTIONS U/S.10A AND U/S.10B WERE PROVIDED TO AN UNDERTAKING AND NOT TO THE BUSINESS AS A WHOLE,THAT THERE WAS NO DOUBT THAT THE UNIT 2 OF TH E ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S. 10B,THAT THE AO HAD SET-OFF CARRIED FORWARD BUSINE SS LOSS AND UNABSORBED DEPRECIATION PERTAIN - ING TO NON-ELIGIBLE UNITS WHICH WAS NOT ACCORDANCE WITH LAW.HE RELIED UPON THE ORDER OF THE SPECIAL BENCH OF CHENNAI SPECIAL BENCH IN THE CASE OF M/S.SCIENTIFIC ATLANTA 2 ITR (TRIB) 66.HE ALSO REFERRED TO THE CBDTS CIRCULAR NO.14 OF 2001. FINALLY,HE HELD THAT LOSS OF A NON-ELIGIBLE CANNOT BE SET OFF AGAINST THE PROFITS OF AN ELIGIBL E UNIT. 2.3. BEFORE US,DEPARTMENTAL REPRESENTATIVE (DR) RELIED U PON THE ORDER OF THE AO.AUTHORISED REPRESENTATIVE(AR)SUBMITTED THAT ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH DELIVERED IN THE CASE OF BLACK AND VEATCH CONSULTING PVT. LTD. (348 ITR72). 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE J UDGMENT OF THE HONBLE BOMBAY HIGH COURT, RELIED UPON BY THE AR.WHILE DECIDING THE ISSUE OF 1 0 A OF THE ACT,HONBLE COURT HAS HELD AS UNDER : SECTION 10A OF THE INCOME-TAX ACT, 1961, IS A PRO VISION WHICH IS IN THE NATURE OF A DEDUCTION AND NOT AN EXEMPTION. THE DEDUCTION UNDER SECTION 1 0A HAS TO BE GIVEN EFFECT TO AT THE STAGE OF COMPUTING THE PROFITS AND GAINS OF BUSINESS. THIS I S ANTERIOR TO THE APPLICATION OF THE PROVISIONS OF SECTION 72 WHICH DEALS WITH THE CARRY FORWARD AN D SET OFF OF BUSINESS LOSSES. A DISTINCTION HAS BEEN MADE BY THE LEGISLATURE WHILE INCORPORATING TH E PROVISIONS OF CHAPTER VI-A. SECTION 80A(1) STIPULATES 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 THE CHAPTER, THE DEDUCTIONS SPECIFIED IN SECTIONS 80C TO 80U. SECTION 80B(5) DE FINES FOR THE PURPOSES OF CHAPTER VI-A 'GROSS TOTAL INCOME' TO MEAN THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, BEFORE MAKING ANY DEDUCTION UNDER THE CHAPTER. THER EFORE, 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. 3 THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE DEDUCTIO N UNDER SECTION 10A IN RESPECT OF THE ALLOWABLE UNIT UNDER SECTION 10A HAS TO BE ALLOWED BEFORE SETTING OFF BROUGHT FORWARDED LOSSES OF A NON-SECTION 10A UNIT. RESPECTFULLY, FOLLOWING THE JUDGMENT OF BLACK AND V EATCH CONSULTING PVT. LTD.(SUPRA),WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSE D. 6 !27 !62 ! 8!! )!9 1 4 !%: 1 %!2 ; . ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 26 TH AUGUST,2013 . )&5 1 3+ ! & '!! < =)! 26 4*2 , 2013 1 4 > SD/ SD/- . / (D.MANMOHAN ) ( !%&'( !%&'( !%&'( !%&'( / RAJENDRA) !'# !'# !'# !'# / VICE-PRESIDENT &! &! &! &! )* )* )* )* /ACCOUNTANT MEMBER / MUMBAI, =)! /DATE: 26 TH AUGUST,2013 SK )&5 )&5 )&5 )&5 1 11 1 .2? .2? .2? .2? @&?+2 @&?+2 @&?+2 @&?+2 / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / !,- 2. RESPONDENT / ./,- 3. THE CONCERNED CIT (A) / A B , 4. THE CONCERNED CIT / A B 5. DR D BENCH, ITAT, MUMBAI / ?C!4 .2 , . . '!! . 6. GUARD FILE/ 4! D! /!?2 /!?2 /!?2 /!?2 .2 .2.2 .2 //TRUE COPY// )&5!! / BY ORDER, / ! %! DY./ASST. REGISTRAR , /ITAT, MUMBAI