M/S. VISUAL GRAPHICS COMPUTI vs. THE DEPUTY COMMISSIONER

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TCA/115/2016HC Madras04 June 2020Bench: Hon`ble Dr Justice VINEET KOTHARI5 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Tribunal's decision was not legally sound. It relied on the decision of the Hon'ble Apex Court in Commissioner of Income-tax v. Yokogawa India Ltd. The Court reiterated that deductions under Section 10A or 10B are to be made while computing the gross total income of the eligible undertaking under Chapter IV of the Act, not at the stage of computing total income under Chapter VI. The revenue's method of computing income by first setting off unabsorbed depreciation and thereby leaving no income to claim Section 10A deduction was found to be contrary to the law declared by the Supreme Court. Consequently, the appeal was allowed, and the substantial question of law was answered in favor of the assessee and against the revenue. No costs were awarded.

What were the facts?

The assessee, M/s. Visual Graphics Computing Services India Private Limited, filed an appeal under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal (ITAT) dated May 29, 2015. The appeal was filed before the High Court of Judicature at Madras. The core of the dispute concerns the assessment year(s) not explicitly stated but implied to be covered by the ITAT's order. The procedural history involves the ITAT's decision which is now under challenge before the High Court. The amount in dispute is not specified. The High Court noted that the controversy was covered by a previous decision of the same bench.

What were the issues?

1. Whether the Tribunal was right in law in holding that the carry forward loss/depreciation of one eligible unit should be set off against the profits of another eligible unit before deduction under Section 10A of the Income Tax Act, 1961? (Question of law) Assessee's Contention: The judgment does not record specific arguments made by the assessee, but it is implied that the assessee would argue in favor of the principle established in the cited Supreme Court case. Revenue's Contention: The judgment does not record specific arguments made by the revenue. However, the issue arises from the revenue's computation of income where carry forward depreciation was set off against profits before the Section 10A deduction, leading to no income for the deduction. The revenue's action was found to be against the law declared by the Apex Court.

Which sections of the Income-tax Act were involved?

Section 10A,Section 260A

AI-generated summary — verify with the full judgment below

Order in TCA No.115 of 2016 (M/s.Visual Graphics Computing Services -Vs- DCIT) dated 04.06.2020 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 04.06.2020 CORAM THE HON'BLE DR.JUSTICE VINEET KOTHARI AND THE HON'BLE MR.JUSTICE R.SURESH KUMAR Tax Case (Appeal) No.115 of 2016 M/s.Visual Graphics Computing Services India Private Limited Ascendas International Tech Park Unit 4& 5, 5th Floor, CSIR Road Chennai 600 113.

... Appellant Vs. The Deputy Commissioner of Income Tax Company Circle-III(4), Chennai 600 034. .. Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the common order of the Income Tax Appellate Tribunal 'A' Bench, Chennai dated 29.05.2015 in ITA No.6177/Mds/2011. For Appellant : Mr.M.Vijayaraghavan for M/s.Subbaraya Aiyar Padmanabhan

For Respondent : Mr.M.Swaminathan, Senior Standing Counsel assisted by Ms.V.Pushpa Junior Standing Counsel

Page 1 of 5 http://www.judis.nic.in Order in TCA No.115 of 2016 (M/s.Visual Graphics Computing Services -Vs- DCIT) dated 04.06.2020 J U D G M E N T (Judgment of the Court was delivered by DR.VINEET KOTHARI,J) Both the learned counsel agree that the controversy in the present case is covered by the decision rendered by this Bench in Tax Case Appeal No.228 of 2011 (M/s.Comstar Automotive Technologies Private Limited -Vs- The Deputy Commissioner of Income Tax, Chennai) decided on 18.03.2020. The question of law arising in the present appeal is as under. “ Whether the Tribunal was right in law in holding that the carry forward loss / depreciation of one eligible unit should be set off against the profits of another eligible unit before deduction under Section 10A of the Act?"

2.

It was held by the Division Bench in the aforesaid judgment in the case of M/s.Comstar Automotive Technologies Private Limited -Vs- The Deputy Commissioner of Income Tax, Chennai as under. " 27. Therefore the law has been settled by the said decision of the Hon'ble Apex Court, where in clear terms, it has been held that, the deductions either under Section 10A or 10B would be made while computing the gross total income of the eligible undertaking (like the Assessee) under Chapter IV of the Act and not at the stage of computation of the total income under Chapter Page 2 of 5 http://www.judis.nic.in Order in TCA No.115 of 2016 (M/s.Visual Graphics Computing Services -Vs- DCIT) dated 04.06.2020 VI of the Act. 28. Here in the case in hand, the total income was first arrived at by the Revenue through the Assessing Officer in the Assessment Order by computing the total income by way of brought forward or carry forward the depreciation allowance of the earlier Assessment Years and set off the unabsorbed depreciation first and making the return Nil, thereby leaving the Assessee in a position where it could not claim any deduction under Section 10B as there was no income after set off of carry forward depreciation and unabsorbed depreciation from earlier years. 29. This method of computing the income in the present case made by the Revenue is totally against the said law as has been declared by the Hon'ble Apex Court in the aforesaid decision in Commissioner of Income-tax v. Yokogawa India Ltd., (cited supra). 30. Therefore we have no hesitation to hold that, the decision of the ITAT, which is impugned herein, would not stand in the legal scrutiny, in view of the law having been declared by the Hon'ble Apex Court. Therefore, we are of the view that, the Substantial Question of Law raised in this Appeal is covered by the said decision, therefore it can be answered accordingly. Page 3 of 5 http://www.judis.nic.in Order in TCA No.115 of 2016 (M/s.Visual Graphics Computing Services -Vs- DCIT) dated 04.06.2020 31. In the result, the Appeal is allowed and the Substantial Question of Law raised in this Appeal is answered in favour of the Assessee and against the Revenue. There shall be however no order as to costs." 3. Accordingly, in terms of the aforesaid judgment rendered by this Court itself, the present appeal is disposed of in the same terms and the question of law framed above is answered in the same terms. The appeal is accordingly disposed of. No costs. (V.K.,J.) (R.S.K.,J.) 04.06.2020 KST To Income Tax Appellate Tribunal 'A' Bench,Chennai. Page 4 of 5 http://www.judis.nic.in Order in TCA No.115 of 2016 (M/s.Visual Graphics Computing Services -Vs- DCIT) dated 04.06.2020 DR.VINEET KOTHARI, J. AND R.SURESH KUMAR, J. KST T.C.(A) No.115 of 2016 04.06.2020 Page 5 of 5 http://www.judis.nic.in

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