M/S. UNI DESIGN JEWELLERY P. LTD, Mumbai V. THE ITO 8(3)(4), Mumbai

ITA 9042/MUM/2004

• Counselvise Citation: 904219914 RSA 2004
• Duration Of Justice: 7 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 22-02-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 13-12-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Keywords: Business income; Depreciation; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, B, MUMBAI BEFORE HONBLE PRESIDENT SHRI G.E.VEERABHADRAPPA AND SHRI D.K.AGARWAL (JM) ITA NO.9042/MUM/2004 (ASSESSMENT YEAR:2001-02) UNI DESIGN JEWELLERY PVT.LTD., PLOT NO.4, 5 & 6 (PART) SEEPZ, ANDHERI (EAST), MUMBAI-400093. PAN:AAACU0572G INCOME TAX OFFICER 8(3)(4), AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020. APPELLANT V/S RESPONDENT APPELLANT BY : SMT.AARTI VISSAN JI RESPONDENT BY : SHRI P.C.MAURYA O R D E R PER D.K.AGARWAL (JM) THE APPEAL ARISES AS A RESULT OF ORDER PASSED IN MISCELLANEOUS APPLICATION NO.191/MUM/2011 ARISING O UT OF ITA NO.9042/MUM/2004 FOR THE ASSESSMENT YEAR 2001-02 WH EREIN THE TRIBUNAL VIDE ORDER DATED 23.9.2011 HAS RECAL LED ITS ORDER FOR LIMITED PURPOSES TO DECIDE THE GROUND NO.2 OF THE APPEAL OF THE ASSESSEE. DATE OF HEARING : 22.2.2012 DATE OF PRONOUNCEMENT : 20.3.2012 ITA NO.9042/MUM/2004 (ASSESSMENT YEAR:2001-02) 2 2. GROUND NO.2 READS AS UNDER : THE LD.CIT(A) HAS ERRED IN CONFIRMING ACTION OF TH E LEARNED AO IN RESTRICTING DEDUCTION U/S 10A TO THE EXTENT OF RS.1,43,12,012/- I.E. INCOME FROM BUSINESS AS COMPUTED BY THE LEARNED AO INSTEAD OF RS.1,46,67,9 08/- BEING THE INCOME FROM UNITS ENTITLED TO SECTION 10A BENEFITS. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING ACTIVITY OF JEWELLERY AND EXPORT OF THE SAME. THE AO ALLOW ED THE DEDUCTION U/S 10A OF THE INCOME TAX ACT, 1961 (THE ACT) TO THE EXTENT OF BUSINESS INCOME RS.1,43,12,022/- AFTE R REDUCING THE LOSS FROM CITY OFFICE RS.3,55,856/-. IN APPEAL, THE LD. CIT(A) WHILE AGREEING WITH THE VIEWS OF THE AO C ONFIRMED THE ORDER OF THE AO. 4. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THERE IS NO DISPUTE THAT THE ASSESSEE IS HAVING TWO UNITS, THE INCOME OF WHICH IS EXEMPT U/S 10A OF THE ACT. SHE FURTHER SUBMITS THAT THE LOSS OF CITY OFFICE R S.3,55,856/- NOT ELIGIBLE FOR DEDUCTION U/S 10A HAS BEEN ADJUST ED BY THE AO WHILE COMPUTING THE DEDUCTION U/S 10A OF THE A CT. HOWEVER, ACCORDING TO THE PROVISIONS OF THE ACT, T HE SAME IS NOT TO BE SET OFF AGAINST THE UNITS ELIGIBLE FOR D EDUCTION U/S 10A AND FOR THIS PROPOSITION THE RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN CIT V/S ITA NO.9042/MUM/2004 (ASSESSMENT YEAR:2001-02) 3 M/S YOKOGAWA INDIA LTD. (2011) TIOL-711-HC-KAR-IT, DATED 9.8.2011 , WHEREIN IT HAS BEEN HELD THAT THE INCO ME OF 10A UNIT HAS TO BE EXCLUDED AT SOURCE ITSELF BEFORE A RRIVING AT THE GROSS TOTAL INCOME, THE LOSS OF NON 10A UNIT CANNO T BE SET OFF AGAINST THE INCOME OF 10A UNIT U/S 72 OF THE ACT. S HE, THEREFORE, SUBMITS THAT THE SET OFF OF LOSS OF NON 10A UNIT MADE BY THE AO AND UPHELD BY THE LD. CIT(A) BE DEL ETED. 5. ON THE OTHER HAND, THE LD.DR SUPPORTS THE ORDER OF THE AO AND LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. WE FIND MERIT S IN THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE LOSS OF NON 10A UNIT CANNOT BE SET OFF AGAINST THE INCOME OF 10A UNIT. 7. IN M/S YOKOGAWA INDIA LTD. (SUPRA) IT HAS BEEN HELD IN PARAGRAPH 31 OF THE JUDGMENT AS UNDER : 31. AS THE INCOME OF 10-A UNIT HAS TO BE EXCLUDED AT SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL IN COME, THE LOSS OF NON 10-A UNIT CANNOT BE SET OFF AGAINST THE INCOME OF 10-A UNIT UNDER SECTION 72. THE LOSS INCURRED B Y THE ASSESSEE UNDER THE HEAD PROFITS AND GAINS OF BUSINE SS OR PROFESSION HAS TO BE SET OFF AGAINST THE PROFITS AN D GAINS IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY SU CH ASSESSEE. THEREFORE, AS THE PROFITS AND GAINS UNDER SECTION 10A IS NOT BE INCLUDED IN THE INCOME OF THE ASSESSE E AT ALL, THE QUESTION OF SETTING OFF THE LOSS OF THE ASSESSE E OF ANY PROFITS AND GAINS OF BUSINESS AGAINST SUCH PROFITS AND GAINS ITA NO.9042/MUM/2004 (ASSESSMENT YEAR:2001-02) 4 OF THE UNDERTAKING WOULD NOT ARISE. SIMILARLY, AS P ER SECTION 72(2), UNABSORBED BUSINESS LOSS IS TO BE FI RST SET OFF AND THEREAFTER UNABSORBED DEPRECIATION TREATED AS CURRENT YEARS DEPRECIATION UNDER SECTION 32(2) IS T O BE SET OFF. AS DEDUCTION UNDER SECTION 10-A HAS TO BE EXC LUDED FROM THE TOTAL INCOME OF THE ASSESSEE, THE QUESTIO N OF UNABSORBED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFIT AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. IN THAT VIEW OF THE MATTER, THE APPROACH OF THE ASSESSING A UTHORITY WAS QUITE CONTRARY TO THE AFORESAID STATUTORY PRO VISIONS AND THE APPELLATE COMMISSIONER AS WELL AS THE TRI BUNAL WERE FULLY JUSTIFIED IN SETTING ASIDE THE SAID ASSE SSMENT ORDER AND GRANTING THE BENEFIT OF SECTION 10-A TO T HE ASSESSEE. HENCE, THE MAIN SUBSTANTIAL QUESTION OF L AW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BRO UGHT ON RECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING T HE ABOVE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN M/S YOKOGAWA INDIA LTD. (SUPRA) WHILE REVERSING THE ORDERS PAS SED BY THE AO AND THE LD.CIT(A) ON THIS ACCOUNT ALLOW THE CLAI M OF THE ASSESSEE. THE GROUND NO.2 TAKEN BY THE ASSESSEE I S, THEREFORE, ALLOWED. 8. IN THE RESULT, THE ASSESSEES APPEAL TO THE EXTE NT AS STATED ABOVE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20TH MARCH, 2012. SD SD (G.E.VEERABHADRAPPA) (D.K.AGARWAL) PRESIDENT JUDICIAL MEMBER MUMBAI, DATED 20TH MARCH, 2012. ITA NO.9042/MUM/2004 (ASSESSMENT YEAR:2001-02) 5 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUM BAI