M/S.AKAY FLAVOURS & AROMATICS P. LTD,ERNAKULAM vs. THE ACIT, ERNAKULAM

Per GEORGE GEORGE K.,JUDICIAL MEMBER:

This appeal at the instance of the assessee is directed against the order of the

CIT(A)-I, Kochi dated 22/09/2016. The relevant assessment year is 2004-05.

“The learned Commissioner of Income-tax(Appeals) ought to have held that the eligible Deduction U/S. 10B should have been computed and allowed as claimed in the Return of Income amounting to Rs.1,04,78,854/- since the Deduction U/S. 10B is to be allowed from the total income of the undertaking before setting off carried forward business loss U/S. 72 and unabsorbed depreciation U/S. 32(2).”

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The assessee is a company. The assessee is having a 100% export oriented

undertaking, engaged in the manufacture and export of oleoresines from spices.

For the assessment year 2004-05, the return of income was filed u/s. 139(1) of

the I.T. Act on 29/10/2004. In the return of income, the assessee had claimed

deduction under section 10B of the I.T. Act amounting to Rs. 1,04,78,854/-. The

assessment u/s. 143 r.w.s. 147 was completed vide order dated 27/12/2007. In

the reassessment completed, deduction claimed by the assessee u/s. 10B of the

Act was reduced to ‘Nil’ . The Assessing Officer recomputed the deduction u/s.

10B of the Act after setting off carry forward business loss u/s. 72 of the I.T. Act

and unabsorbed depreciation u/s. 32(2) of the I.T. Act.

preferred an appeal to the first appellate authority. It was contended before the

CIT(A) that profits in respect of eligible units should be calculated on a stand

alone basis. The CIT(A) however rejected the contentions raised by the assessee

and held that Hon’ble Jurisdictional High Court in the case of CIT vs. Patspin

India Ltd. reported in 203 Taxman 47 (Kerala) on identical facts had held that

deduction u/s. 10B of the Act is to be calculated after set off losses of the earlier

assessment years including unabsorbed depreciation. The CIT(A) also noticed

that there were divergent views taken by the Hon’ble Bombay High Court,

Hon’ble Karnataka High Court and the Hon’ble Delhi High Court.

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Tribunal. The Ld. Counsel for the assessee submitted that the judgment of the

Hon’ble Kerala High Court relied on by the first appellate authority in the case of

Patspin India Ltd. (supra) has been reversed by the judgment dated 11-10-2017

of the Hon’ble Apex Court in Civil Appeal Nos. 8633/2013, 8548/2013, 8546/2013

and 1097/2016. A copy of the judgment of the Hon’ble Apex Court in the case of

Patspin India Ltd. vs. CIT is placed on record. The Hon’ble Apex Court following

its earlier judgment in the case of CIT vs. Yokogawa India Ltd. reported in 391

ITR 274 allowed the appeal filed by the assessee. It was submitted that in view

of the Hon’ble Apex Court judgment cited supra, deduction u/s. 10B of the Act is

to be computed on a stand alone basis, before setting off the carry forward

business losses and unabsorbed depreciation.

authorities.

The Hon’ble Apex Court in the case of CIT vs. Yokogawa India Ltd. (supra) had

categorically held that deduction u/s. 10A of the Act for eligible unit is to be

calculated on a stand alone basis, before setting off carry forward business

losses and unabsorbed depreciation. The Hon’ble Apex Court in para two of its

judgment had held that the judgment would have equal application also to units

4 ITA No.491/Coch/2016

covered u/s. 10B of the I.T. Act. In view of the judgments of the Hon’ble Apex

Court in the case of CIT vs. Yokogawa India Ltd. (supra) and Patspin India Ltd.

vs. CIT (supra), we hold that deduction under section 10B of the Act is to be

calculated before setting off unabsorbed depreciation and carry forward business

losses. It is ordered accordingly.

above. Pronounced in the open court on 5th February, 2018

sd/- sd/- (CHANDRA POOJARI) ( GEORGE GEORGE K.) ACCOUNTANT MEMBER JUDICIAL MEMBER

Place: Kochi Dated: 5th February, 2018 GJ Copy to: 1. M/s. Akay Flavours & Aromatics (P) Ltd., Ambunad, Malaidamthuruthu P.O., Aluva, Ernakulam-683 561. 2. The Assistant Commissioner of Income-tax, Circle-2(1),Kochi. 3. The Commissioner of Income-tax(Appeals)-I, Kochi 4. The Pr.Commissioner of Income-tax, Kochi 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin