PR. COMMISSIONER OF INCOME TAX(CENTRAL)-2 vs. M/S NIIT LTD

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ITA/1189/2017HC DelhiDLHC01445856201722 December 2017Bench: CASES PERTAINING TO SPL.DIVISION BENCHES2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no question of law arose from the ITAT's order. The Tribunal had confirmed the CIT(A)'s finding, which allowed the assessee to set off losses from eligible units under Section 10B against profits from ineligible units. This decision was based on the prevailing interpretation of Section 10B as providing a deduction, allowing for such set-offs. The High Court noted that this view was subsequently affirmed by the Supreme Court in CIT vs. Yokogawa India Limited. Therefore, the appeal filed by the Revenue was dismissed as it did not raise a substantial question of law, given the established legal position.

What were the facts?

The Revenue, represented by the Pr. Commissioner of Income Tax(Central)-2, appealed against an order of the Income Tax Appellate Tribunal (ITAT). The ITAT had confirmed the decision of the Commissioner of Income Tax (Appeal), which allowed the assessee, M/s NIIT Ltd, to set off losses from eligible units under Section 10B of the Income Tax Act, 1961, against profits of ineligible units. The Assessing Officer (A.O.) had disallowed this set-off based on his interpretation of Section 10B. The CIT(A) and ITAT followed the prevailing view in CIT vs. Yokogawa India Limited, which treated Section 10B provisions as deductions rather than exemptions, permitting such set-offs. The Supreme Court later affirmed this view.

What were the issues?

1. Whether the Tribunal erred in law by allowing the set-off of losses from eligible units under Section 10B of the Income Tax Act, 1961, against profits of ineligible units, thereby disallowing the excess deduction sought to be brought to tax by the Assessing Officer? The Revenue contended that the Assessing Officer's disallowance of the set-off between losses of eligible units and profits of ineligible units was correct based on the interpretation of Section 10B. The Revenue's argument appears to be that such set-off should not be permitted. The judgment does not explicitly record the Revenue's specific legal arguments or precedents relied upon, other than the general reference to the AO's interpretation. The Assessee, M/s NIIT Ltd, through its representatives, relied on the decision in CIT vs. Yokogawa India Limited (341 ITR 385). This case held that the provisions of Section 10B were in the nature of deductions, not exemptions, and therefore allowed for the set-off or adjustment of losses from eligible units with profits from ineligible units. The ITAT also took note of the subsequent Supreme Court affirmation of the Karnataka High Court's view in the same case.

Which sections of the Income-tax Act were involved?

Section 10B

AI-generated summary — verify with the full judgment below

ITA 1189/2017 Page 1 $~7 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 1189/2017 PR. COMMISSIONER OF INCOME TAX(CENTRAL)-2 ..... Appellant Through : Mr Zoheb Hossain, Advocate for Revenue. versus M/S NIIT LTD ..... Respondent Through : Mr Rohit Jain and Mr Aniket D.Agrawal, Advocates. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A.K.CHAWLA O R D E R % 22.12.2017 ITA 1189/2017 & CM No.47032/2017(condonation of delay) 1. The sole question of law urged in support of the Revenue’s Appeal in this case is the issue of disallowance of excess deduction sought to be brought to tax on interpretation of Section 10B of the Income Tax Act, 1961(hereafter referred to as ‘the Act’), by the Assessing Officer(A.O.). 2. The A.O. had disallowed the set off between the losses of the eligible units with the profits of the ineligible units on an interpretation of Section 10B of the Act. 3. The Commissioner of Income Tax (Appeal) followed the then prevailing Rule in CIT versus Yokogawa India Limited, 341 ITR 385,

ITA 1189/2017 Page 2 which had ruled that the provisions were in the nature of deduction than exemptions and allowed the set off/adjustment. 4. The Income Tax Appellate Tribunal (ITAT) confirmed the findings of the Commissioner of Income Tax, taking note of the subsequent event, whereby the Supreme Court affirmed the Karnataka view (CIT versus Yokogawa India Limited(supra). 5. Having regard to the fact, the only question is the issue of absorption of losses and the treatment as between two categories of Units, i.e. eligible units (under Section 10B) and an ineligible one, which is now covered by the Supreme Court Ruling in CIT versus Yokogawa India Limited(supra). 6. No question of law arises. The appeal is, therefore, dismissed. S. RAVINDRA BHAT, J A.K.CHAWLA, J DECEMBER 22, 2017 ‘Sn’

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