IGARASHI MOTORS INDIA LIMITED,CHENNAI vs. ACIT, CHENNAI

The assessee filed this appeal against the order of Commissioner of Income Tax (Appeals)-9, Chennai, in & 06(2008- 09)/CIT(A)-9 dated 27.02.2017 for assessment year 2005-06.

M/s. Igarashi Motors India Ltd., the assessee, is engaged in the business of manufacture of Electric Micro Motors and Sub-assemblies.

The Ld. AR inviting our attention to the copy of the paper book submitted that the assessee company though commenced its production during the period relating to assessment year 1994-95, it did not claim the benefit of deduction u/s. 10A upto assessment year 1997-98. It started availing the benefit of deduction u/s. 10A only from the assessment year 1997-98. In this regard, the Ld. AR invited our attention to the copy of assessee’s letters dated 24.11.1997 & 27.11.1998 to the AO and corresponding copies of 143(1)(a) orders dated 25.04.1998 & 02.11.1998, wherein the AO has mentioned under the column explanation for adjustments (if any) made as “opted out/in of section 10A vide letter dated 27.11.1998 copy given” and submitted that therefore the block of 10 consecutive assessment years availing the deduction u/s. 10A has to commence from assessment year 1997-98 only as provided u/s. 10A(8) for the reason that the assessee has exercised the option to avail the benefit of deduction under section 10A from that assessment year only. Therefore, the assessee is entitled to set off the brought forward losses of assessment years 1994-95 to 1997- 98 against the gross total income of assessment year 2005-06 and hence pleaded to allow the assessee’s appeal. Per contra, the Ld. DR submitted that the assessee commenced its manufacturing activity in assessment year 1994-95. Therefore, this assessment year is the first year of eligibility, the 10th year of claim would be assessment year 2003-04 and hence the assessee would not be entitled to claim the exemption u/s. 10A from assessment year 2004-05 onwards. The assessment year under consideration is assessment year 2005-06. Therefore, as held by the Ld. CIT(A), the assessee is not entitled for the exemption u/s. 10A in the assessment year 2005-06 and accordingly he supported the order of the Ld. CIT(A) submitting that nowhere section 10A(8) provides that the loss relating to the period where no claim is made is entitled to be carried forward in spite of section 10A(6) of the Act. In the normal course the assessee could have been eligible to carry forward the unabsorbed depreciation allowance and the business loss from the assessment year 1998-99 onwards without any restriction with or without section 10A(8).

We heard the rival submissions and gone through relevant material. It is clear from the above that the assessee company commenced its production during the period relating to assessment year 1994-95, however, it is pleaded that it did not claim the benefit of deduction u/s. 10A up to the assessment year 1997-98. It started availing the benefit of deduction u/s. 10A only from the assessment year 1997-98 as evidenced by the intimations issued for the assessment years 1997-98 & 1998-99. Therefore, the block of 10 consecutive assessment years for availing the deduction u/s. 10A has to commence from assessment year 1997-98 as provided u/s. 10A(8). However, the Revenue pleads that the assessee commenced its manufacturing activity in the assessment year 1994-95. Therefore, this assessment year is the first year of eligibility, the 10th year of claim would be assessment year 2003-04. The assessee would not be entitled to claim the exemption u/s. 10A from assessment year 2004-05 onwards and therefore definitely it is not entitled for this assessment year ie ay 2005-06. However the provisions of sections 10(8) reads as under :

In the result, the assessee’s appeal is treated as partly allowed for statistical purposes.