GENESYS INTERNATIONAL CORPORATION LTD., MUMBAI V. DY CIT 9(3)(2), MUMBAI

ITA 7574/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3320 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 10-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VINOD KUMAR
• Assessee Lawyers: V CHANDRASEKHAR; HARSHAD SHAH A RS
• Keywords: Reopening of assessment; Audit objection; Reason to believe; CHAPTER IV
• Section: 143(3); 10AA; 274; 147; 148; 6; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G, BENCH MUM BAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.7574/MUM/2019 ( ASSESSMENT YEAR: 2011-12 ) GENESYS INTERNATIONAL CORPORATION LIMITED 73A, SDF III, 2 ND FLOOR SEEPZ, ANDHERI MUMBAI-400 096 VS. DCIT-9(3)(2) AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 PAN/GIR NO. A A ACA4528L APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI V.CHANDRASEKHAR & SHRI HARSHAD SHAH, ARS REVENUE BY SHRI V.VINOD KUMAR, DR DATE OF HEARING 2 5 /02/2020 DATE OF PRONOUNCEME NT 04 /03/2020 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)16, MUMBAI, DATED 30/10/2019 AND IT PERTAINS TO ASSESSMENT YEAR 2011-12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HON'BLE COMMISSIONER OF INCOME-TAX [APPEALS] -18 ('CIT) ER RED IN NOT CONSIDERING THE OBJECTION OF THE APPELLANT TO THE R EASONS FOR THE RE- OPENING OF THE ASSESSMENT U/S-147 OF INCOME TAX ACT , 1961(THE ACT) 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE HON'BLE CIT(A) ERRED IN , NOT CONSIDERING THAT NOTICE ISSUE D U/S 148 THE ACT AS INVALID AND VOID AB INITIO AS THE REASON RECORDED A MOUNTS TO REASON TO SUSPECT AND DO NOT AMOUNT TO REASON TO BELIEVE AND THE SAID REASON DO NOT CONSTITUTE BELIEF. ITA NO.7574/MUM/2019 GENESYS INTERNATIONAL CORPORATION 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE HON'BLE CIT(A) ERRED IN UPHOLDING THE RE-OPENING OF THE ASS ESSMENT AS VALID WITHOUT CONSIDERING THE FACTS THAT APPELLANT HAD TR ULY AND FULLY DISCLOSED ALL FACTS FOR SETTING OFF OF LOSSES OF NON-ELIGIBLE UNIT AGAINST THE ELIGIBLE, FILLED REPORT U/S 10AA AND THE SAME WAS DISCLOSED I N THE COMPUTATION OF INCOME, DURING THE ORIGINAL SCRUTINY ASSESSMENT 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE HON'BLE CIT(A) ERRED IN UPHOLDING THE RE-OPENING OF THE ASS ESSMENT WITHOUT CONSIDERING THE FACTS THAT RE-OPENING OF THE ASSESS MENT PURSUANT TO AUDIT OBJECTION CANNOT BE SAID THAT THE LD AO HAD FORMED HIS OWN OPINION THAT THE INCOME HAD ESCAPED ASSESSMENT 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE HON'BLE CIT(A) ERRED IN NOT APPRECIATING THE FACTS THE REOP ENING OF THE ASSESSMENT IS AFTER 4 YEARS FROM THE END OF THE ASS ESSMENT YEAR AND THE EARLIER ASSESSMENT WAS COMPLETED U/S.143(3} OF THE ACT AND THERE IS NO FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE AL L MATERIAL FACTS FOR THE COMPUTATION OF TOTAL INCOME AND HENCE, THE REOPENIN G OF THE ASSESSMENT AFTER 4 YEARS FROM THE END OF THE ASSESSMENT YEAR I S BAD IN LAW, INVALID AND LIABLE TO BE QUASHED. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE HON'BLE CIT(A} ERRED IN NOT APPRECIATING THE RE-OPENING OF THE ASSESSMENT IS INVALID AND VOID AB INITIO, AS APPELLANT HAD TRULY AND FULLY DISCLOSED ALL MATERIAL AND THERE WAS NO FRESH OR ADVERSE MATERIAL FOUND OR BROUGHT BY LD AO. WITHOUT PREJUDICE TO ABOVE, ALL BELOW GROUNDS ARE W ITHOUT 7. WITHOUT PREJUDICE TO ABOVE, ON THE FACTS AND CIR CUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN NOT ALLOWIN G THE SET OFF OF LOSSES OF NON-ELIGIBLE UNIT AGAINST THE INCOME OF ELIGIBLE UN IT BEFORE DEDUCTION U/S 10AA OF THE ACT AMOUNTING TO RS.1,68,97,503/- WITHO UT CONSIDERING THE FACTS THAT THE DEDUCTION U/S-10AA OF THE ACT IS TO BE CLAIMED UNIT PER SE. 8. WITHOUT PREJUDICE TO ABOVE, ON THE FACTS AND CIR CUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN NOT ALLOWIN G SET OFF OF LOSSES OF NON-ELIGIBLE UNIT AGAINST THE INCOME OF ELIGIBLE UN IT BEFORE DEDUCTION U/S- 10AA OF THE ACT WITHOUT CONSIDERING THE FACTS THAT IN APPELLANTS OWN CASE IN EARLIER YEARS, I.E. AY 2004-05 AND AY 2005-06, T HE HON'BLE ITAT IN ITA NO.3333 & 3334/MUM/2010 DATED 31.08.2012 HELD THAT IT IS PLAIN AND EVIDENT THAT THE DEDUCTION U/S-10AHAS TO BE GIVEN A T THE STAGE WHEN THE PROFITS AND GAINS OF BUSINESS ARE COMPUTED IN THE F IRST INSTANCE AND THE DEDUCTION IS UNIT PER SE. 9. WITHOUT PREJUDICE TO ABOVE, ON THE FACTS AND CIR CUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN NOT ALLOWIN G OF SET OFF OF LOSSES OF NON-ELIGIBLE UNIT AGAINST THE INCOME OF ELIGIBLE UN IT BEFORE CLAIMING DEDUCTION U/S-10AA OF THE ACT WITHOUT CONSIDERING T HE FACTS THAT HON'BLE APEX COURT IN CASE OF CIT VS. YOKOGAWA INDIA LTD. ( 2017) 391 ITR 274 ITA NO.7574/MUM/2019 GENESYS INTERNATIONAL CORPORATION 3 (SC) HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSE E AFTER EXAMINING CIRCULAR NO.7 DATED 16.07.2013 10. WITHOUT PREJUDICE TO ABOVE, ON THE FACTS AND CI RCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN NOT AP PLYING THE PRINCIPLE OF JUDICIAL PRECEDENT BY FOLLOWING THE DECISION OF THE SUPREME COURT IN CASE OF YOKOGAWA INDIA LTD. (SUPRA) IN RESPECT OF SECTIO N 10A OF THE ACT AS BEING THE LAW OF LAND INSTEAD OF BRUSHING IT ASIDE OR OVERLOOKING THE SAME. 11. WITHOUT PREJUDICE TO ABOVE, ON THE FACTS AND CI RCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN NOT CO NSIDERING THE FACTS AND LEGAL PROVISION THAT THE PROVISIONS OF SECTION 10A AND 10AA ARE PARI MATERIA SAME WITH REGARDS TO THIS MATTER. 12. WITHOUT PREJUDICE TO ABOVE, ON THE FACTS AND CI RCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN NOT AL LOWING SET-OFF OF LOSSES OF NON-ELIGIBLE UNIT AGAINST THE INCOME OF ELIGIBLE UNIT BEFORE CLAIMING DEDUCTION U/S-10AA OF THE ACT WITHOUT CONSIDERING T HE FACTS THE EXPLANATION HAS BEEN ADDED TO SECTION 10AA OF THE A CT BY FINANCE ACT, 2017 W.E.F FROM 01.04.2018 13. WITHOUT PREJUDICE TO ABOVE, ON THE FACTS AND CI RCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN NOT AL LOWING SET-OFF OF LOSSES OF NON-ELIGIBLE UNIT AGAINST THE INCOME OF ELIGIBLE UNIT BEFORE CLAIMING DEDUCTION U/S-10AA OF THE ACT TREATING THE AMENDMEN T TO SECTION 10AA OF THE ACT BY FINANCE ACT, 2017 AS CLARIFICATION AND H ENCE RETROSPECTIVE IN NATURE. 14. THE APPELLANT PRAYS THAT IT MAY BE ALLOWED TO A DD, ALTER OR AMEND THE ABOVE GROUNDS OF APPEAL AND TO MAKE DETAILED SUBMIS SIONS AT THE TIME OF APPEAL 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING GEOGRAPHICAL I NFORMATION SERVICES COMPRISING OF PHOTOGRAMMETRY REMOTE SENSIN G CARTOGRAPHY, DATA CONVERSION, STATE OF THE ART TERR ESTRIAL AND 3D GEO- CONTENT, INCLUDING LOCATION AND OTHER COMPUTER BASE D RELATED SERVICES. THE ASSESEE HAS FILED ITS RETURN OF INCOM E FOR THE AY 2011- 12 ON 29/09/2011, DECLARING TOTAL LOSS AT RS.3,20,0 1,621/-. THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) OF THE I.T .ACT, 1961 ON 17/01/2014, DETERMINING THE TOTAL LOSS AT RS.1,68,9 7,503/-. THE CASE ITA NO.7574/MUM/2019 GENESYS INTERNATIONAL CORPORATION 4 HAS BEEN, SUBSEQUENTLY REOPENED U/S 147 OF THE I.T. ACT, 1961 AND THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) R.W.S. 147 OF THE I.T.ACT, 1961, DETERMINING THE TOTAL INCOME AT RS. NIL , AFTER SET OFF OF LOSS FROM BUSINESS WITH PROFIT OF ELIGIBLE UNITS U/ S 10AA OF THE I.T.ACT, 1961. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE TH E LD.CIT(A), THE ASSESSEE HAS CHALLENGED REOPENING OF ASSESSMENT, AS WELL AS CONTESTED THE ISSUES ON MERIT, IN LIGHT OF THE DECI SION OF HONBLE SUPREME COURT, IN THE CASE OF CIT VS YOKOGAWA INDIA LTD (2017) 77 TAXMANN.COM 41 AND ARGUED THAT PROFIT OF ELIGIBLE U NIT CLAIMING EXEMPTION U/S 10AA OF THE I.T.ACT,1961, SHALL BE AL LOWED WITHOUT SET OFF OF LOSS OF OTHER UNITS. THE LD.CIT(A) AFTER CON SIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE, HAS REJECTED LEGAL GRO UND TAKEN BY THE ASSESSEE CHALLENGING REOPENING OF ASSESSMENT, ON TH E GROUND THAT IF, A PARTICULAR ISSUE IS BROUGHT TO THE NOTICE OF THE LD. AO BY THE AUDIT PARTY AND THE LD. AO ON HIS/HER APPLICATION O F MIND FINDS THAT THE GROUND IS VALID, REOPENING OF ASSESSMENT CANNOT BE QUASHED, MERELY BECAUSE SUCH GROUND WAS BROUGHT TO THE NOTI CE OF THE LD. AO BY THE AUDIT PARTY. THE LD.CIT(A) HAS ALSO, REJE CTED THE ARGUMENTS OF THE ASSESSEE THAT DEDUCTION CLAIMED U/ S 10AA SHALL BE ALLOWED WITHOUT SET OFF OF LOSS OF OTHER UNITS, ON THE GROUND THAT ALTHOUGH, THE HONBLE SUPREME COURT, IN THE CASE OF CIT VS YOKOGAWA INDIA LIMITED (SUPRA) HAS HELD THAT PROFIT OF ELIGIBLE UNIT SHOULD BE ALLOWED AS DEDUCTION WITHOUT SET OFF OF L OSS OF OTHER UNITS, BUT THE FINDINGS OF HONBLE SUPREME COURT IS BASED ON THE COMPUTATION OF DEDUCTION PROVIDED U/S 10A OF THE AC T, BUT NOT ON ITA NO.7574/MUM/2019 GENESYS INTERNATIONAL CORPORATION 5 COMPUTATION OF DEDUCTION PROVIDED U/S 10AA OF THE I .T.ACT, 1961. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER :- 6.2.4 I HAVE CONSIDERED THE SUBMISSIONS TO THE APP ELLANT AND PERUSED THE AVAILABLE ON RECORD. AT THE OUTSET, SEC 10AA OF THE ACT IS REPRODUCED HEREUNDER: - '10AA(1) SUBJECT TO THE PROVISIONS OF THIS SECTION, IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE, BEING AN ENTREPRENEUR AS REF ERRED TO IN CLAUSE (J) OF SECTION 2 OF THE SPECIAL ECONOMIC ZONES ACT, 200 5, HORN HIS UNIT, WHO BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR PROVIDE ANY SERVICES DURING THE PREVIOUS YEAR RELEVANT TO ANY Y EAR COMMENCING ON OR AFTER THE 1ST DAY OR APRIL, 2005, A DEDUCTION OF... ,.' 6.2.5 THE LITERAL INTERPRETATION OF THE ABOVE SECT ION. AS PER THE PROVISIONS (IF SECTION 10AA OF THE ACT, A TAXPAYER HAVING AN E LIGIBLE UNIT LOCATED IN SEZ IS ENTITLED TO A DEDUCTION OF PROFITS FROM EXP ORTS. IT IS TO BE NOTED THAT AS THE LEGAL INTERPRETATION OF THE DEDUCTION IN 'TH E INCOME IS FIRST INCLUDED IN THE TOTAL INCOME AND DEDUCTION IN ACCORDANCE WIT H THE PROVISIONS OF EACH SECTION IS THEN REDUCED' FURTHER, THE SAID SEC TION ALSO PROVIDES FOR COMPUTATION OF SUCH DEDUCTION. IN THE COMPUTATION O F THE DEDUCTION, IT IS REQUIRES AGGREGATION OF INCOME OF THE UNITS (I.E. I NCLUSIVE RESULT OF ELIGIBLE AND NON-ELIGIBLE UNITS) BEFORE GIVING EFFECT TO DED UCTION UNDER SECTION 10AA OF THE ACT. 6.2.6 CIRCULAR 7 OF 2013 DATED JULY 16, 2013 THE C BDT CLARIFIED THAT IRRESPECTIVE OF THE CONTINUED PLACEMENT OF SECTION 10A/10AA/10B IN CHAPTER III OF THE ACT, THE PROVISIONS, AS SUBSTITU TED BY FINANCE ACT, 2000, PROVIDE FOR DEDUCTION OF PROFITS FROM THE TOTAL INC OME OF THE TAXPAYER. IT ALSO CLARIFIED THAT THE INCOME COMPUTED UNDER VARIO US HEADS OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER IV OF THE ACT SHALL BE AGGREGATED IN ACCORDANCE WITH THE PROVISIONS OF CHA PTER VI OF THE ACT. IN OTHER WORDS, FIRST THE INCOME/LOSS FROM VARIOUS SOU RCES I.E. ELIGIBLE AND INELIGIBLE UNITS, UNDER THE SAME HEAD ARE AGGREGATE D IN ACCORDANCE WITH THE PROVISIONS OF SECTION 70 OF THE ACT. SUBSEQUENT LY, THE INCOME FROM ONE HEAD IS AGGREGATED WITH THE INCOME OR LOSS OF T HE OTHER HEAD IN ACCORDANCE WITH THE PROVISIONS OF SECTION 71 OF THE ACT. SUBSEQUENT TO GIVING EFFECT TO SUCH MECHANISM DEDUCTION IN ACCORD ANCE WITH THE PROVISIONS OF CHAPTER VI-A OR SECTIONS I0A/10AA/10B OF THE ACT SHALL BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE TAXPAY ER. 6.2.7 ALSO, IT IS IMPORTANT TO BE NOTED THAT THE AP PELLANT HAS PLACED RELIANCE ON THE DECISION RENDERED BY THE HON'BLE SU PREME COURT IN THE CASE OF CIT VS, YOKOGAWA INDIA LTD [2017] 77 TAXMAN N.COM 41 (SC). IN THE DECISION HON'BLE SUPREME COURT HAS CLEARLY POIN TED THE COMPUTATION OF DEDUCTION TAKEN U/S 10A OF THE ACT. HOWEVER, THE RE IS NOT A SINGLE POINT OF VIEW ON THE COMPUTATION OF DEDUCTION TAKEN U/S 1 0AA OF THE ACT. THEREFORE, THAT' CASE ON WHICH THE APPELLANT HAS PL ACED ITS RELIANCE ON, DOES NOT FALL WITHIN THE JOUR CORNERS OF THE ABOVE SAID CA.SE LAW AS THE FACTS OF BOTH THE CASES ARE DIFFERENT. IT IS ALSO S TATED THAT SECTION 10A AND ITA NO.7574/MUM/2019 GENESYS INTERNATIONAL CORPORATION 6 SECTION 10AA ARE INDEPENDENT OF EACH OTHER. THUS, A CASE LAW RELEVANT TO SECTION 10A WOULD NOT BE RELEVANT TOR SECTION 10 A A. FURTHER, IT IS ALSO NOTED THAT THE IN THY FINANCE BILL 2017-18 PROPOSES TO INSERT THE FOLLOWING EXPLANATION AFTER SUB-SECTION (1) OF SECTION 10AA O F THE ACT: 'EXPLANATION - FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT THE AMOUNT OF DEDUCTION UNDER THIS SECTION SHALL BE ALL OWED FROM THE TOTAL INCOME OF THE ASSESSEE' COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, BEFORE GIVING EFFECT TO THE PROVISIONS OF THIS SECTION AND THE DEDUCTION UNDER THIS SECTION SHALL NOT EXCEED SUCH TOTAL INCOME OF THE ASSESSES' AND THE MEMORANDUM IN THIS REGARD READS AS BELOW 'SECTION 10AA ALLOWS DEDUCTION IN COMPUTING THE TOT AL INCOME OF THE ASSESSEE, HENCE, THE DEDUCTION IS TO BE ALLOWED FOR THE TOTAL INCOME OF THE ASSESSEE AS COMPUTED IN ACCORDANCE WITH THE PRO VISION OF THE ACT BEFORE GIVING EFFECT TO THE PROVISIONS OF SECTION 6.2.8 FROM THE ABOVE EXPLANATION, IT IS CLEARLY U NDERSTOOD THAT THE INTERPRETATION OF SEC 10AA OF THE ACT HAS BEEN TAKE N WRONG BY SOME TAXPAYER, AS TAXPAYERS HAVING UNITS ELIGIBLE FOR TA X HOLIDAY UNDER SECTION 10AA OF THE ACT HAVE BEEN COMPUTING PROFITS OF THE UNIT AND CLAIMING EXEMPTION OF SUCH PROFIT PRIOR TO SETTING OFF LOSSE S OF ANY OTHER BUSINESS UNIT. AS A RESULT, TAXPAYERS WERE CARRYING FORWARD ENTIRE LOSSES UNDER NON-LAX HOLIDAY UNITS TO SUBSEQUENT YEARS. IT IS IMPORTANT TO CONSIDER THAT, THIS AMENDMENT HA S BEEN PASSED TO PROVIDE CLARITY TO THE INTERPRETATION OF THE SEC 10 AA OF THE ACT. BEFORE THIS AMENDMENT THE ACT HAD BEEN MISINTERPRETED AND AS SU CH THE NEED TO INTRODUCE THIS AMENDMENT AROSE THUS, THE ORIGINAL S ECTION TOO PROVIDED THE SAME INTERPRETATION WHICH HAS BEEN FURTHER CLAR IFIED BY THE INTRODUCTION OF THE AMENDMENT. THUS, THE INTENT OF THE LEGISLATURE HAS BEEN FURTHER REINFORCED BY THE ADDITION OF THE EXPL ANATION IN THE FORM OF AN AMENDMENT. THE ACTUAL INTERPRETATION OF THE SEC 10AA OF THE AC T IS TAXPAYER SHOULD AGGREGATION OF INCOME OF THE UNITS (I.E. INCLUSIVE RESULT OF ELIGIBLE AND NON- ELIGIBLE UNITS) BEFORE GIVING EFFECT TO DEDUCTION U NDER SECTION 10AA OF THE ACT. THE COMPUTATION MECHANISM SUGGESTED THE BENEFIT TO THE EXTENT OF CARRY FORWARD AND SET OFF OF LOSSES FROM OTHER ELIGIBLE A ND INELIGIBLE UNDERTAKING BECOME RESTRICTED, THOUGH THE DECISION IN YOKOGAWA WAS IN THE FAVOR OF THE ASSESSES THE SUGGEST AMENDMENT WILL TAKE AN OVE RRULING STRIDE BY MAKING THE DEDUCTION ASSESSEE WISE ANT] NOT ELIGIBL E UNDERTAKING WISE. THEREFORE AS PER DIE PROVISION OF SEC 10AA OF THE A CT, THE REQUIRED ELIGIBILITY TO CLAIM THE DEDUCTION IS; - FIRST DETERMINE THE PROFITS AND GAINS DERIVED FROM SEZ UNIT COMPUTE BALANCE INCOME AND ARRIVE AT THE GROSS TOTA L INCOME GIVE EFFECT TO OTHER DEDUCTIONS AND ARRIVE AT TOTAL INCOME AS PER THE SUGGESTED AMENDMENT. ITA NO.7574/MUM/2019 GENESYS INTERNATIONAL CORPORATION 7 THEREAFTER DETERMINE DEDUCTION UNDER SECTION 10 AA APPLYING THE FORMULA PROVIDED, THE PROFIT FROM 10 AA IS NOT EXHAUSTED BY SET OFF BY LOSSES FROM OTHER UNITS. 6.2.9 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE AND AS THE INTERPRETATION OF THE SEC 10AA OF THE AC T AND THE ALSO THE REQUIREMENT OF INTRODUCED THE EXPLANATION ON THE SE T. 10AA OF THE ACT. ALSO, NO FURTHER EVIDENCES OR ARGUMENTS HAVE BEEN P UT FORTH BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDING S, IT IS HELD THAT NO INTERFERENCE IS CALLED FOR IN THE DECISION OF ASSES SING OFFICER AS THE APPELLANT HAS FAILED TO DISCHARGE THE ONUS REQUIRED UNDER SECTION 10AA OF THE ACT AND THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWED THE CARRY FORWARD OF LOSSES OF RS.1,68,97,503-.THE APPEAL OF THE ASSESSEE ON THIS GROUND IS DISMISSED., 5. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HEAR ING SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF C IT VS YOKOGAWA INDIA LIMITED (SUPRA), WHERE THE HONBLE SUPREME CO URT HAS CLEARLY HELD THAT PROFIT OF ELIGIBLE UNITS CLAIMING DEDUCTI ON U/S 10A OF THE ACT, SHALL BE ALLOWED WITHOUT SET OFF OF LOSS OF NON EL IGIBLE UNITS. HE, FURTHER SUBMITTED THAT THIS ISSUE HAS BEEN CONSIDER ED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BLACK & VEATCH CO NSULTING PVT.LTD. 348 ITR 72, WHERE A SIMILAR VIEW HAS BEEN UPHELD BY THE HONBLE COURT. HE, FURTHER SUBMITTED THAT IN ASSESE E OWN CASE FOR EARLIER YEARS, THE TRIBUNAL HELD THAT IT IS PLAIN A ND EVIDENT THAT THE DEDUCTION U/S 10A HAS TO BE GIVEN AT THE STAGE, WHE N THE PROFITS AND GAINS OF BUSINESS ARE COMPUTED IN THE FIRST INSTANC E. THEREFORE, HE SUBMITTED THAT THE LD. AO, AS WELL AS THE LD.CIT(A) WERE INCORRECT IN SET OFF OF LOSS OF NON ELIGIBLE UNITS AGAINST PROFI T OF ELIGIBLE UNITS BEFORE ALLOWING DEDUCTION CLAIMED U/S 10AA OF THE A CT. 6. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTI NG ORDER OF THE LD. AO, AS WELL AS THE LD.CIT(A) SUBMITTED THAT THE LD.CIT(A) HAS CLEARLY DISTINGUISHED DECISION OF HONBLE SUPREME C OURT, IN THE CASE ITA NO.7574/MUM/2019 GENESYS INTERNATIONAL CORPORATION 8 OF CIT VS YOKOGAWA INDIA LIMITED AND OBSERVED THAT CASE BEFORE THE HONBLE SUPREME COURT IS COMPUTATION OF DEDUCTION U /S 10A OF THE ACT, WHEREAS THE CLAIM OF THE ASSESEE IS U/S 10AA O F THE ACT, AND HENCE, THE FINDINGS OF THE HONBLE SUPREME COURT IS NOT APPLICABLE. THEREFORE, THERE IS NO REASON TO DEVIATE FROM THE F INDINGS RECORDED BY THE LD. AO, AS WELL AS THE LD.CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. THE ISSUE INVOLVED IN PRESENT APPEAL, WHETHER DEDUCTION PROVIDED U/S 10AA OF THE ACT, HAS TO BE ALLOWED WITHOUT SET OFF OF BUSINESS LOSS OR NOT IS NOT A RES-INTEGRA . THE HONBLE SUPREME COURT, IN THE CASE OF CIT VS YOKOGAWA INDIA LIMITED HAS CLEARLY HELD THAT THE DEDUCTION U/S 10A OF THE ACT, WOULD BE PRIOR TO THE COMMENCEM ENT 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 TOT AL INCOME. THE HONBLE SUPREME COURT, FURTHER HELD THAT THOUGH, SE CTION 10A, AS AMENDED IS A PROVISION FOR DEDUCTION, A STAGE OF DE DUCTION WOULD BE, WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGI BLE UNDERTAKING UNDER CHAPTER IV OF THE ACT, AND NOT AT THE STAGE O F COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI OF THE ACT. THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF BLACK AND VEATCH CONSULTI NG PVT.LTD.VS CIT(SUPRA) HAS UPHELD SIMILAR POSITION OF LAW. THE ITAT, MUMBAI BENCHES IN ASSESEE OWN CASE FOR EARLIER YEARS HAS H ELD THAT THE DEDUCTION U/S 10A OF THE ACT, HAS TO BE GIVEN AT TH E STAGE, WHEN THE PROFITS AND GAINS OF THE BUSINESS IS COMPUTED IN TH E FIRST INSTANCE. THE SUM AND SUBSTANCE OF RATIO LAID DOWN BY THE HON BLE SUPREME COURT AND HONBLE BOMBAY HIGH COURT, IS THAT THE P ROFIT OF ELIGIBLE UNITS CLAIMING DEDUCTION U/S 10A/10AA OF THE ACT, S HALL BE ALLOWED ITA NO.7574/MUM/2019 GENESYS INTERNATIONAL CORPORATION 9 WITHOUT SETTING OFF OF LOSSES OF OTHER UNITS. THERE FORE, WE ARE OF THE CONSIDERED VIEW THAT THE LD. AO, AS WELL AS THE LD. CIT(A) WERE ERRED IN SET OFF OF LOSS OF BUSINESS FROM THE PROFIT OF E LIGIBLE UNITS CLAIMING DEDUCTION U/S 10AA OF THE ACT, 1961, BEFORE ALLOWIN G DEDUCTION PROVIDED U/S 10AA OF THE ACT, 1961. HENCE, WE DIREC T THE LD.AO TO ALLOW DEDUCTIONS TOWARDS PROFIT OF ELIGIBLE UNITS U /S 10AA OF THE ACT, WITHOUT SET OFF OF LOSS OF NON ELIGIBLE/OTHER UNITS . 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 04/03/2 020 SD/- (RAVISH SOOD) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 04/03/2020 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//