STRIDES PHARMA SCIENCE LTD.,MUMBAI V. DCIT, CC - 6 (2), CHENNAI

ITA 2335/CHNY/2019

AI Insights

The case involves multiple appeals by both the assessee, M/s. Shasun Pharmaceuticals Ltd. (now merged with Strides Shasun Ltd.), and the Revenue, concerning the assessment years 2009-10, 2010-11, and 2011-12. The primary issues revolved around the rate of depreciation claimed on electrical fittings, the allocation of foreign exchange fluctuation losses, and the treatment of R&D expenses in relation to the deduction under section 10B of the Income Tax Act. The Income Tax Appellate Tribunal in Chennai addressed these issues by examining the precedents and statutory provisions applicable, leading to a decision that partly favored the assessee and partly the Revenue.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711856 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2010-2011
• Other Referred Cases: Commissioner of Income Tax v. Hoechst Dyes and Chemicals P. Ltd., Bush Boake Allen (India) Ltd. vs. ACIT, Zandu Pharmaceuticals Work Ltd. vs. CIT, CIT vs. Yokogava India Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MAITHILI
• Assessee Lawyers: N. ARJUN RAJ
• Keywords: Set aside; Question of law; Depreciation; Principle of natural justice; TDS; Unabsorbed depreciation; Double taxation relief; CHAPTER IV
• Section: 139; 80HHC; 40(a)(ia); 10B

Judgement Text

"आयकर अपीलीय अिधकरण, ‘डी’ \u0011ा यपीठ, चे\u0016ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI \u0019ी यस यस िव ने रिव, \u0011ा ियक सद एवं \u0019ी जगदीश, लेखा सद क े सम( BEFORE SHRI SS VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.2380/Chny/2018 िनधा 9रण वष9 /Assessment Year: 2009-10 M/s. Shasun Pharmaceuticals Ltd., (Merged with M/s. Strides Shasun Ltd., now known as Strides Pharma Science Ltd.,) No.28, Batra Centre, Sardar Patel Road, Guindy, Chennai – 600 032. [PAN: AADCS 8104P] Vs. The Dy. Commissioner of Income Tax, Non Corporate Circle-6(1), Chennai. (अपीलाथ\u0007/Appellant) (\b यथ\u0007/Respondent) आयकर अपील सं./ITA No.2335 & 769/Chny/2019 िनधा 9रण वष9 /Assessment Years: 2010-11 & 2011-12 M/s. Strides Pharma Science Ltd., (in the case of erstwhile M/s. Shasun Pharmaceuticals Ltd. now merged) 201, Devavrata, Sector-17, Vashi, Navi Mumbai – 400 703. [PAN: AADCS 8104P] (Erstwhile AAACS 5031L] Vs. The Dy. Commissioner of Income Tax, Corporate Circle-6(2), Chennai. (अपीलाथ\u0007/Appellant) (\b यथ\u0007/Respondent) आयकर अपील सं./ITA No.4945/Mum/2018 & आयकर अपील सं./ITA No.5404/Mum/2019 िनधा 9रण वष9 /Assessment Years: 2009-10 & 2010-11 The Dy. Commissioner of Income Tax, Corporate Circle- 15(3)(2), Chennai. Vs. M/s. Shasun Pharmaceuticals Ltd., (Merged with M/s. Strides Shasun Ltd., now known as Strides Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 2 -: Pharma Science Ltd.,) No.28, Batra Centre, Sardar Patel Road, Guindy, Chennai – 600 032. [PAN: AADCS 8104P] (Erstwhile AAACS 5031L] (अपीलाथ\u0007/Appellant) (\b यथ\u0007/Respondent) अपीला थM की ओर से/ Assessee by : Shri N. Arjun Raj, Advocate OPथM की ओर से /Revenue by : Ms. Maithili, Addl. CIT सुनवा ई की ता रीख/Date of Hearing : 11.06.2025 घोषणा की ता रीख /Date of Pronouncement : 25.07.2025 आदेश / O R D E R PER JAGADISH, A.M : Aforesaid five appeals arise out of the orders of Learned Commissioner of Income Tax (Appeals)-15, Chennai [hereinafter “CIT(A)”] dated 29.05.2018 pertaining to assessment orders passed by A.O for Assessment Years (AYs) 2009-10, 2010-11 & 2011-12. The assessee is in appeals for A.Ys 2009-10, 2010-11 & 2011-12 and the Revenue is in cross appeals for A.Ys 2009-10 & 2010-11. 2. The facts in all the appeals of the assessee are identical and issues are common hence, we proceed to pass a common order. For brevity, we shall take up the appeal of the assessee in ITA No.2380/Chny/2018 for A.Y 2009-10 as lead case. The grounds of Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 3 -: appeal raised by the assessee in ITA No.2380/Chny/2018 for A.Y 2009-10 are as under: “1. The order of The Commissioner of Income Tax (Appeals)- 15, Chennai dated 29.05.2018 in I.T.A.No.448/2013-14/CIT(A)-15 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case. 2. The CIT (Appeals) erred in confirming the grant of depreciation on electrical fittings @ 10% as against the claim of such depreciation at 15% by the Assessing Officer and consequently erred in sustaining the addition of the differential depreciation in the computation of taxable total income without assigning proper reasons and justification. 3. The CIT (Appeals) went wrong in recording the findings in this regard in para 5.3.1 of the impugned order without assigning proper reasons and justification. 4. The CIT (Appeals) erred in sustaining the allocation of loss Rs.11,38,54,392/- suffered from foreign exchange fluctuation among all the units on the basis of their turnover which had a cascading effect in quantification of the deduction claimed u/s 10B of the Act pertaining to the eligible unit(s) without assigning proper reasons and justification. 5. The CIT (Appeals) failed to appreciate that the stand of the Appellant by accounting/attributing such loss to the unit(s) directly was backed by evidence and ought to have appreciated that the rejection of the said stand was wholly unjustified especially without examination of the materials available/placed on record. 6. The CIT (Appeals) went wrong in recording the findings in this regard in para 8.1 to para 8.3 of the impugned order without assigning proper reasons and justification. 7. The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law.” Grounds No.1 & 7 are general in nature, hence no adjudication is required for the same. Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 4 -: 3. Grounds No.2 & 3 are relating to claim of depreciation on electrical fittings. The assessee has claimed depreciation in respect of electrical fittings @ 15% allowable to plant and machinery. The A.O allowed the depreciation @ 10% as allowed in A.Y 2006-07 holding the electrical installation not part of any plant and thus, making addition of Rs.51,77,581/-. On appeal, the Ld. CIT(A) upheld the disallowance relying on the decision of Jurisdictional High Court in assessee’s own case in earlier years in TCS Nos.517 & 518/2008 dated 25.01.2017. 3.1 The Ld. Authorized Representative (A.R) of the assessee has fairly accepted that the issue is covered against the assessee. However, he argued that the nature of the fixed assets during the assessment year falls within the ambit of 'plant and machinery' and, therefore, the assessee is eligible for depreciation at the rate of 15%. 3.2 On the other hand, the Ld. Departmental Representative (DR) has relied on the orders of lower authorities. 3.3 We have heard the rival submissions, and perused the materials available on record. The Ld. CIT(A) has upheld the allowance of depreciation on electrical fittings @ 10% as against 15% claimed by Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 5 -: the assessee, by relying on the decision of Hon’ble Jurisdictional High Court in assessee’s own case, supra, wherein it was held as under: “5. The third question of law relates to the entitlement to depreciation on electrical installations. The question as to whether electrical installations would fall under the category of furniture and fittings or plant and machinery has been decided by a Division Bench of the Bombay High Court in Commissioner of Income Tax v. Hoechst Dyes and Chemicals P. Ltd. ((1999) 240 ITR 1). The Bench concludes that electrical installations, wiring for lighting, installation of call bell indicators/buzzers/door locks, etc., would qualify as furniture and fittings entitled to depreciation at the rate of 10%.” Since the issue is covered against the assessee by the decision of Hon’ble Jurisdictional High Court, supra, these grounds of appeal are dismissed. 4. Grounds No.4 to 6 are relating to allocation of loss of Rs. 11.38 Crores suffered from foreign exchange fluctuation among all the units on the basis of turnover for the purpose of quantification of the claim of deduction u/s. 10B of the Act. 4.1 The assessee has claimed deduction u/s. 10B of the Act in respect of two units with EOU-1 and EOU-2 totaling to Rs.15,10,79,172/-. The assessee has allocated foreign exchange fluctuation loss amounting to Rs. 44,80,03,449/- under administrative expenses (corporate level) to various units based on their respective turnover and the balance of Rs. 11,38,54,392/- directly attributable to Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 6 -: the units have been allocated to the respective units on the basis of actuals. The A.O in respect of foreign exchange fluctuation loss of Rs. 11.39 Crores has reallocated the loss to various vertical units based on turnover of each vertical unit , on par with foreign exchange fluctuation loss at corporate level. On appeal, the Ld. CIT(A) has confirmed the allocation of loss made by the A.O on the ground that the assessee itself has allocated the foreign exchange fluctuation loss at corporate level in the ratio of turnover. 4.2 The Ld. AR has argued that both the lower authorities have not understood the factual distinction to the foreign exchange fluctuation loss at corporate level and foreign exchange fluctuation loss at unit level. The Ld. AR has submitted that foreign exchange fluctuation loss of Rs. 44.8 Crores incurred at corporate level cannot be assigned or allocated in all the vertical units unless there is a direct link to the said transactions. In the present case, the corporate level foreign exchange fluctuation loss pertains to transactions entered into for obtaining and repayment of loans and further relating to `forward contracts entered into to hedge against the foreign exchange fluctuation exposure at the entity or company level. It is further stated that the unit level foreign exchange fluctuation loss pertains to the transactions entered into by Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 7 -: each of the vertical unit in the nature of sales i.e., exports, purchases, import and other vertical units level expenses, which could be assigned or allocated to the related to the related identifiable vertical units. The Ld. AR has submitted that the disputed component of foreign exchange fluctuation loss is included in the administrative expenses incurred by each of the vertical units on its actual basis which reporting/quantification has been tempered with by the A.O without giving any cogent reasons. The Ld. AR therefore, requested that the A.O may be directed to accept the methodology adopted by the ass for the purpose of quantifying deduction u/s. 10B of the Act. 4.3 On the other hand, the Ld. DR has submitted that the assessee in the case of foreign exchange fluctuation loss incurred at corporate level has allocated on the basis of turnover therefore, remaining foreign exchange fluctuation loss at Rs. 11.39 Crores should also been allocated by the same formula. 4.4 We have heard the rival submissions, and perused the materials available on record. The assessee has claimed foreign exchange fluctuation loss of Rs. 11.39 Cores on the basis of actual loss unit wise. However, the A.O has allocated this loss on the basis of Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 8 -: turnover and made the disallowance of Section 10B of the Act. The Ld. AR has given reason for allocating corporate level foreign exchange fluctuation loss on the basis of turnover and submitted that Forex loss of Rs 11.9 crores have been allocated on the basis of actual as these are directly identifiable to each vertical unit and are in nature of sales , purchase and other identifiable expenses. The A.O/Ld CIT(A) have reallocated these losses on the basis of turnover only for the reason that the assessee itself has allocated forex loss of 44.8 crores at corporate level on basis of turn over . We agree with the argument of Ld. AR that there is no question of estimating by allocating the forex loss on the basis of turnover , if the same are identifiable and claimed on the basis of actuals. Therefore, we reverse the finding of Ld CIT(A) and the addition made on this account is deleted. In light of the above, the appeal filed by the assessee for A.Y 2009-10 is partly allowed. Revenue’s Appeal in ITA No.4945/Chny/2018 for A.Y 2009-10: 5. The ground of appeal raised by the Revenue are as under: 1. \"On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in allowing the claim of deduction of expenses of Rs. 40,56,636/-, without appreciating the fact that the TDS deducted but not remitted as stipulated in section 201 is not allowable under section 40(a)(ia).\" Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 9 -: 2. \"On the fact and in the circumstances of the case and in law, the Ld.CIT(A) erred in allowing section 10B deduction by directing the Assessing officer not to apportion Research & Development (R&D) expenses among all units, when the assessee could not substantiate its claim by adducing clinching evidences to show that R & D expenditure is in no way related to the EOUs\". 3. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the assessing officer be restored. 4. The applicant craves leave to add, amend or alter any grounds or add new ground, which may be necessary\". 5.1 Ground No.1 is relating to the claim of expenses of Rs.40,56,636/- u/s. 40(a)(i) of the Act for not remitting the TDS deducted within the stipulated time as per Section 201 of the Act . 5.2 The assessee has paid a sum of Rs.40,56,636/- towards the sale promotion expenses to Nages and Co. Ltd., Japan and deducted TDS and remitted to the credit of Central Government on 06.06.2009 before the due date specified u/s. 139 of the Act. The A.O disallowed the said expenditure on the ground that TDS was not remitted within the stipulated time u/s. 201 of the Act i.e 30.04.2009. The A.O also held that the extended due date specified u/s.139 of the Act would be available only in respect to payments made to residents, which is covered by Section 40(a)(ia) of the Act, but not to resident u/s 40(a)(i). On appeal, the Ld. CIT(A) has accepted the assessee’s arguments that as per Section 90(2) of the Act and non-discrimination clause Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 10 -: under Article 24 of the Indo-Japanese DTAA, the time to deposit TDS is applicable in the same way as applicable in the case of resident recipient .The Ld CIT(A) has also held that there has been amendment in Section 40(a)(i) r.w.s 200(1) of the Act which is to be applied retrospectively as it is curative in nature in view of the several decisions on this issue. 5.3 The Ld. DR has relied on the order of A.O and argued that the assessee has not deposited the TDS made in the case of non-resident by 30.04.2006, but has paid on 06.06.2006, which is beyond the due date therefore, disallowance u/s. 40(a)(i) of the Act is to be made. 5.4 On the other hand, the Ld. AR has supported the order of Ld. CIT(A) and reiterated that the assessee has deposited the tax within due date of filing the return u/s. 139(1) of the Act and therefore, as in Section 40(a)(ia) of the Act in the case of resident, no disallowances is called for. The Ld. AR further submitted that as per DTAA with Indo- Japanese Article 22, the payment made to a person in Japan should be treated on par with the payments made to residents in India and therefore, the same treatment of TDS is to be made in the case of payment to Non-resident. The Ld. AR also submitted that Finance Act, Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 11 -: 2014 has rationalized to Section 40(a)(i) of the Act by extending the payment of TDS before due date specified in section 139(1), which was already available for payments covered u/s. 40(a)(ia) of the Act to residents and therefore, same should be read as curative in nature. 5.5 We have heard the rival submissions, and perused the materials available on record. The assessee has deducted TDS of Rs. 40,56,636/- towards sales promotion expenses to Nages and Co. Ltd. and deposited on 06.06.2009. The A.O has disallowed the payment u/s. 40(a)(i) of the Act as the TDS was not paid by 30.04.2006 as required u/s. 40(a)(i) of the Act. The Ld. CIT(A) relying on the Article 24 of Indo-Japanese DTAA and amendment made in Section 40(a)(i) of the Act by Finance Act, 2014 has deleted the disallowance. The Ld. CIT(A) relying on the various case laws has held that after the amendment in Section 40(a)(i) of the Act, no disallowance under this section is to be made, if the assessee has deposited TDS even in the case of non-resident payee before due date of filing of return of income. The Ld. CIT(A) relying the case laws has held that the section is curative in nature and therefore, is applicable retrospectively. We find no infirmity in the order of Ld. CIT(A) and therefore, affirm the same. In light of above, this ground of appeal is dismissed accordingly. Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 12 -: 6. Ground No.2 is relating to allocation of R & D expenses in quantifying the deduction under section 10B of the Act. The assessee had claimed the R & D expenditure only at the company level and did not allocate it to any specific verticals, on the grounds that the expenses were incurred for ongoing research and did not result in any property or asset that could be attributed to individual units in the future. However, the Assessing Officer (A.O.) allocated the said expenses across all vertical units based on their turnover, without giving due consideration to the explanation provided by the assessee. The Learned CIT(A), after considering the factual submissions and relevant judicial precedents, accepted the assessee’s contention that R&D expenses should not be allocated to the eligible units for the purpose of computing the deduction under section 10B of the Act. 6.1 The Ld. DR relying on the order of A.O has submitted that the assessee has not been able to substantiate its claim by adducing the clinching evidence to show that R & D expenditure is in no way related to EOU units therefore, the A.O has correctly allocated the R & D expenditure in the ratio of turnover. Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 13 -: 6.2 On the other hand, the Ld. AR has submitted that R & D expenses incurred by the assessee relates to scientific research for development of new pharmaceuticals products and is not linked to the current commercial operation. Further, the expenses incurred towards R & D may even result as some cost without giving any benefit to the company. The Ld. AR also submitted that the assessee maintains separate books of account with respect to the R & D unit. The Ld. AR relied on the decision of Hon’ble Jurisdictional High court in the case of Bush Boake Allen (India) Ltd. vs. ACIT [2005] 273 ITR 152 (Mad.) and the decision of Hon’ble Bombay High Court in the case of Zandu Pharmaceuticals Work Ltd. vs. CIT 31 taxmann.com 191 (Bom.). 6.3 We have heard the rival submissions, and perused the materials available on record. The assessee has claimed scientific research expenditure amounting to Rs.14,03,32,595/-. The A.O while computing deduction u/s. 10B of the Act has allocated R & D expenditure to EOU units in the ratio of turnover. The Ld. CIT(A) has deleted the addition holding that the assessee has apportioned the common head office expenses among three categories R & D units, EOU units and DTAA units, but the A.O has apportioned the R & D expenses also among the aforesaid three units. The Ld. CIT(A) relying on the decision of Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 14 -: Hon’ble Jurisdictional High Court and order of ITAT has deleted the addition. Before us, the Ld. AR has argued that R & D expenditure in R & D division relates to scientific research for development of new product and is not linked to the current commercial operation, hence expenditure cannot be allocated to EOUs. It has been noted that the assessee has booked R & D expenses relating to the EOU unit 1 and EOU unit 2 for claiming deduction u/s 10B. The A.O has allocated R & D expenditure of R & D division by making general observation that assessee could not substantiate by clinching evidence to show that R & D expenditure is no way related to the EOUs ignoring the fact that assessee has booked R & D expenditure relatable to the EOUs in computing the profit for section 10B. We, accordingly confirm the order of Ld. CIT(A). In light of the above, the appeal of Revenue for A.Y 2009-10 is dismissed. Assessee’s Appeal in ITA No.2335/Chny/2019 for A.Y 2010-11: 7. Grounds No.2 & 3 relates to the claim of depreciation on electrical fittings at 10% as against the claim at 15%. This issue has already been adjudicated against the assessee in Grounds No.2 & 3 of the assessee’s appeal for A.Y. 2009-10, and the same reasoning applies to the present case as well. Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 15 -: 7.1 Grounds No.4 & 5 relates to the disallowance of expenses u/s. 40(a)(i) of the Act to the extent of TDS not remitted before the due date prescribed for filling return u/s 139(1). This issue has already been adjudicated in Grounds No.4 to 6 of the assessee’s appeal for A.Y. 2009-10, and the same reasoning applies to the present case as well. 7.2 Ground No. 6 to 8 relates to allocation of foreign exchange loss fluctuation in computing deduction u/s. 10B of the Act. We have already adjudicated this issue in favour of the assessee in Ground Nos.4 to 6 of the assessee’s appeal for A.Y 2009-10, and the same reasoning applies in the present case. In light of above, the appeal of assessee for A.Y 2010-11 is partly allowed. Revenue’s Appeal in ITA No.5404/Chny/2019 for A.Y 2010-11: 8. Ground No.1 is regarding disallowances u/s. 40(a)(i) of the Act. the Ld. CIT(A) has deleted the disallowances made u/s. 40(a)(i) of the Act in respect of sales promotion expenses paid to M/s. Nages Co. Ltd., Japan on which tax deducted, but not remitted within the stipulated time. The Ld CIT(A) has deleted the addition. We have already adjudicated this issue on Ground No.1 of the Revenue’s Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 16 -: appeal for A.Y 2009-10, and the same reasoning applies in the present case as well. The ground is accordingly dismissed. 8.1 Ground No.2 is regarding allocation of R & D expenses for quantifying the deduction u/s. 10B of the Act. We have already adjudicated this issue on Ground No.2 of the Revenue’s appeal for A.Y 2009-10, and the same reasoning applies in the present case as well. In light of the above, the appeal of Revenue for A.Y 2010-11 is dismissed. Assessee’s Appeal in ITA No.769/Chny/2019 for A.Y 2011-12: 9. Grounds No.2 & 3 are relating to allowing depreciation on electrical fittings @ 10%, as against deprecation @ 15% claimed by the assessee. We have already adjudicated this issue on Grounds No.2 & 3 of the assessee’s appeal for A.Y 2009-10, and the same reasoning applies in the present case as well. Accordingly grounds of appeal are dismissed. 9.1 Grounds No.4 to 6 are relating to allocation R & D expenses for quantifying deduction u/s. 10B of the Act. We have already adjudicated this issue on Grounds No.4-6 of the assessee’s appeal for A.Y 2009- 10, and the same reasoning applies in the present case as well. Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 17 -: 9.2 Grounds No.7 to 10 are relating to set off of carried forward business loss for the purpose of quantifying deduction u/s. 10B of the Act. 9.3 The assessee has claimed standalone computation of the eligible profit of the EOU in terms of section 10B of the Act. However, the A O has set off the brought forward loss before giving deduction u/s 10B on the ground that Section 10B of the Act is only a deduction section and not exemption section. On appeal, the Ld. CIT(A) dismissed the ground. 9.4 The Ld. AR before us has submitted that the profit from eligible unit has to be considered on standalone basis for the purpose of determining deduction u/s .10B of the Act. Further the Ld. AR has submitted that deduction 10B of the Act is granted before determining the set off of loss u/s. 72 of the Act. The Ld. AR has submitted the issue has not been settled by Hon’ble Apex Court in the case of CIT vs. Yokogava India Ltd. [2017] 77 taxmann.com 51 (SC). The Ld.AR has also relied on the decision of Co-ordinate Bench of this Tribunal in the case of M/s. Stanadyne India Pvt. Ltd. vs. ACIT in ITA No.1387/Chny/2024 dated 27.11.2024 (ITAT-Mad.). Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 18 -: 9.5 The Ld. DR has relied on the orders of Lower authorities. 9.6 We have heard the rival submissions and perused the materials available on record. The A.O in the assessment order has noted that the assessee has a carried forward loss from AY 2010-11 and the same should be set off from the current year income before allowing deduction u/s. 10B of the Act. The issue of setting off loss before allowing benefit u/s 10A/10B has been settled by Hon’ble Supreme Court in the case of CIT vs. Yokogava India Ltd., supra, as under: “15. Sub-section 4 of Section 10A which provides for pro rata exemption, necessarily involving deduction of the profits arising out of domestic sales, is one instance of deduction provided by the amendment. Profits of an eligible unit pertaining to domestic sales would have to enter into the computation under the head “profits and gains from business” in Chapter IV and denied the benefit of deduction. The provisions of Sub-section 6 of Section 10A, as amended by the Finance Act of 2003, granting the benefit of adjustment of losses and unabsorbed depreciation etc. commencing from the year 2001-02 on completion of the period of tax holiday also virtually works as a deduction which has to be worked out at a future point of time, namely, after the expiry of period of tax holiday. The absence of any reference to deduction under Section 10A in Chapter VI of the Act can be understand by acknowledging that any such reference or mention would have been a repetition of what has already been provided in Section 10A. The provisions of Sections 80HHC and 80HHE of the Act providing for somewhat similar deductions would be wholly irrelevant and 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 said provisions of the Act i.e. Section 80HHC and 80HHE, despite the amendment of Section 10A, in our view, indicates that some additional benefits to eligible Section 10A units, not contemplated by Sections 80HHC and 80HHE, was intended by the legislature. Such a benefit can only be understood by a legislative mandate to understand that the stages for working out the deductions under Section 10A and 80HHC and 80HHE are substantially different. Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 19 -: This is the next aspect of the case which we would now like to turn to.” 9.7 The issue whether set off of business loss is to be allowed before allowing deduction/exemption u/s. 10B of the Act has been settled by Hon’ble Supreme Court in the case of CIT vs. Yokagava India Ltd., supra, by holding that through section 10A is a provision for deduction, the stage of deduction could be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of total income under chapter VI of the Act. Therefore, we uphold the order of Ld. CIT(A) accordingly. In light of the above, the appeal filed by the assessee for A.Y 2011-12 is partly allowed. 10. In the result, the appeals of assessee for A.Ys 2009-10, 2010-11 & 2011-12 are partly allowed and the appeals of Revenue for A.Ys 2009-10 and 2010-11 are dismissed. Order pronounced on 25th day of July, 2025 at Chennai. Sd/- Sd/- (यस यस िव ने रिव) (SS Viswanethra Ravi) \u0001याियक \u0001याियक \u0001याियक \u0001याियक सद\bय सद\bय सद\bय सद\bय / Judicial Member (जगदीश) (Jagadish) लेखा लेखा लेखा लेखा सद\u0011य सद\u0011य सद\u0011य सद\u0011य /Accountant Member चे\u0013नई/Chennai, \u0016दनांक/Dated: 25th July, 2025. EDN/- Printed from counselvise.com ITA Nos.2380 & 4645/Chny/2018 & ITA Nos.5404, 769 & 2335/Chny/2019 :- 20 -: आदेश क\u0019 \bितिल प अ े षत/Copy to: 1. अपीलाथ\u0007/Appellant 2. \b थ\u0007/Respondent 3. आयकर आयु\u000f/CIT, Chennai 4. िवभागीय \bितिनिध/DR 5. गाड\u0018 फाईल/GF Printed from counselvise.com "