VENTURA (INDIA) PRIVATE LIMITED,,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 13,, PUNE

Though the assessee has preferred multiple grounds of appeal however, the crux of the grievance of the assessee is whether the Ld. CIT(Appeals) erred in holding the action of the Assessing Officer of setting off of unabsorbed business losses before allowing deduction u/s.10A of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟). The assessee prays in this appeal that the Assessing Officer be directed to allow the deduction u/s.10A of the Act before allowing set off of unabsorbed business losses.

The brief facts in this case are that the assessee has claimed deduction of Rs.17,74,65,815/- u/s.10A of the Act and thereafter set off its brought forward losses and brought forward depreciation against the residual income from business and profession. The Assessing Officer brought to the notice of the assessee the decision of the Hon‟ble Supreme Court of India in the case of Himatsingka Seide Ltd. in Civil Appeal No.1501 of 2008 wherein the Hon‟ble Apex Court upheld the decision of the Hon‟ble Karnataka High Court in CIT Vs. Himatsingka Seide Ltd. 286 ITR 255 (Kar.) that brought forward losses ought to be set off before claiming deduction u/s.10A. The assessee was asked why the ratio of the above decision should not be applied in its case. The assessee in its submissions before the Assessing Officer stated that the decision of the Hon‟ble Apex Court in the case of Himatsingka Seide Ltd. (supra.) was with reference to the pre-amended section 10B when 10A/10B were exemption provisions and the assessment year was 1994-95. The assessee submitted that the scenario changed with the introduction of the amendment in section 10A/10B w.e.f.01.04.2000. The amended provisions provided for a deduction from the total income of the assessee as against exemption from total income that was allowed earlier. The assessee further submitted that various authorities have since held that the decision of the

The matter travelled before the Ld. CIT(Appeals) and detail written submission was filed before him by the assessee wherein the assessee submitted the detailed analysis regarding term of total income in order to bring out the relevant stage of deduction u/s.10A of the Act and set off of unabsorbed depreciation. That further, the assessee relied on the decision of the Hon‟ble Bombay High Court in the case of CIT Vs. Black & Veatch Consulting (P). Ltd., (2012) 20 Taxmann. Com 727 ( Bom.). The Ld. CIT(Appeals) after considering the submissions of the assessee, assessment order and the facts of the case as per the detailed reasoning in his order which is on record admitted that the Hon‟ble Supreme Court in the case of Himatsingka Seide Ltd. (supra.) has decided the issue in favour of the Revenue and thereafter, the Hon‟ble Bombay High Court in the case of CIT Vs. Black & Veatch Consulting (P). Ltd. (supra.), has decided the issue in favour of the assessee, but however, the Hon‟ble Bombay High Court has not considered the CBDT Circular (supra.) in its order and because of which, the Ld. CIT(Appeals) upheld the order of the Assessing Officer which prima facie based on CBDT Circular dated 16.07.2013.

At the time of hearing, the Ld. AR of the assessee vehemently reiterated the submissions placed before the Sub-ordinate Authorities. The Ld. AR further referred to the decisions in the case of CIT Vs. Black & Veatch

Per contra, the Ld. DR placed heavy reliance on the orders of the Sub- ordinate Authorities.

We have perused the case records and heard the rival contentions. We have also considered the judicial pronouncements placed before us. The basic issue in this appeal before us is the relevant stage when deduction u/s.10A has to be given effect to at stage of computing profits and gains of business at first instance. The Hon‟ble Bombay High Court in the case of CIT Vs. Black & Veatch Consulting (P). Ltd. (supra.) has categorically held that “deduction u/s.10A has to be given effect to at stage of computing profits and gains of business i.e. anterior to application of provisions of section 72 which deals with carry forward and set off of business losses. A distinction has been made by the Legislature while incorporating the provisions of Chapter VI- A. Section 80A(1) stipulates that in computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of the Chapter, the deductions specified in ss. 80C to 80U. S. 80B(5) defines for the purposes of Chapter VI-A "gross total income" to mean the total income computed in accordance with the provisions of the Act, before making any deduction under the Chapter. What the Revenue in essence seeks to attain is to telescope the provisions of Chapter VI-A in the context of the deduction which is allowable under s. 10A. which would not be permissible unless a specific statutory provision to that effect were to be made. In the absence thereof, such an approach cannot be accepted.

The Hon‟ble Supreme Court of India in the case of CIT & Anrs. Vs. Yokogawa India Ltd. (supra.) held that “from a reading of the relevant provisions of Section 10A it is more than clear to us that the deductions contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee.” The Hon‟ble Apex Court further observed as follows:

We further observe that it is undisputed fact that otherwise, the assessee is eligible for claiming deduction u/s.10A of the Act. The dispute was at what stage this could be provided to the assessee. That now we have taken guidance from the binding judicial pronouncements as mentioned herein above and accordingly following the view as aforesaid, we allow the appeal of the assessee and direct the Assessing Officer to allow deduction u/s.10A of the Act to the assessee before allowing set off of unabsorbed business loss.