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Income Tax Appellate Tribunal, “A ” BENCH, CHENNAI
Before: SHRI GEORGE MATHAN & SHRI S. JAYARAMAN
आदेश/ O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER :
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.
In its return filed for the assessment year 2005-06, the assessee after adjusting the brought forward losses from its gross total income arrived the total income at NIL. While doing the assessment, the AO held that in view of provisions of section 10A(6), the assessee is not eligible to set off losses where such loss relate to any of the assessment years ending before the first day of April 2001 and accordingly completed the assessment rejecting the assessee’s claim. Aggrieved, the assessee filed an appeal before the CIT(A). The Ld. CIT(A) dismissed the appeal.
Aggrieved against the order of the Ld. CIT(A), the assessee filed this appeal.
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).
But , because of the restriction as provided u/s. 10A(6), with effect from assessment year 2001-02, as amended by Finance Act 2003, the business loss and unabsorbed depreciation relating to relevant assessment years ending before 01.04.2001 is not entitled to be carried forward after the completion of block of 10 consecutive assessment years. In view of the above, the carry forward business loss and the unabsorbed depreciation related to the assessment years 1994-95 to 1997-98 is not eligible to be set off against the income of the assessee for the assessment year 2005-06.
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 :
“ (8) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee, before the due date for furnishing the return of income under sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in writing that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him for any of the relevant assessment years.”
Therefore, it is required, to examine as to whether the assessee claimed the benefit of the provisions of section 10A for the assessment years 1994-95 to 1996-97 or not. In view of that we deem it fit to remit this issue back to the AO to verify the claim and if he finds that the assessee has not claimed the deduction as canvassed by it, then the AO shall not apply the provisions of section 10A from those assessment years and accordingly allow the set off the brought forward losses of assessment years 1994-95 to 1997-98 against the gross total income of the assessee for the assessment year 2005-06. The assesse shall also place relevant material in support of its contentions before the AO and comply with his requirements in accordance with law. The AO on examination of them, shall pass a speaking order. Thus, the assessee’s appeal is treated as partly allowed for statistical purposes.
In the result, the assessee’s appeal is treated as partly allowed for statistical purposes.
Order pronounced on Tuesday, 10th March, 2020 at Chennai.