DCIT - 15(1)(2), MUMBAI vs. GANESH POLYCHEM LTD., MUMBAI

ORDER

PER N.K. PRADHAN, AM

filed by the Revenue read as under: I. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that setting off of the loss of non-eligible undertaking M/s Ganesh Polychem Ltd. 10B of the Act. II. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding 100% of the profits of the eligible undertaking as deduction u/s 10B instead of 90% of the deduction of the eligible profits.

3. We begin with the 1st ground of appeal. Briefly stated, the assessee is a company engaged in the manufacture and marketing of chemicals. It filed its return of income for the assessment year (AY) 2011-12 on 29.09.2011 showing income of Rs.89,28,450/- under normal provisions and profit of Rs.14,68,92,120/- u/s 115JB. The assessee had two undertakings i.e. one at Vapi which is 100% Export Oriented Undertaking (EOU) and other at Dombivali which is a domestic tariff area. The assessee had claimed deduction u/s 10B for 100% EOU, as evidenced from the Audit Report in Form No. 56G. The eligible undertaking i.e. 100% EOU had profit and non-eligible undertaking had loss. The assessee had claimed exemption for eligible undertaking before set off of the brought forward losses and unabsorbed depreciation of non-eligible undertaking. The Assessing Officer (AO) held that the unabsorbed depreciation and brought forward losses of non-eligible undertaking ought to be first adjusted against the business profits of the eligible undertaking and thereafter exemption u/s 10B ought to be allowed.

4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) allowed the appeal filed by the assessee by following the judgment of the Hon’ble Bombay High Court in M/s Ganesh Polychem Ltd. AY 2006-07 (ITA No. 2083 of 2012 dated 25.02.2013), wherein the Hon’ble High Court held as under: " The deduction u/s. 10A has to be given effect to at the stage of computing the profits and gains of business. This is anterior to the application of the provisions of S. 72 which deals with the carry forward and set off of business losses. A distinction has been made by the Legislature while incorporating the provisions of Chapter VI-A. S. 80A(1) stipulates that in computing the total income of an Assesses, 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 this 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 u/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. Thus ITAT was correct in holding that the brought unabsorbed depreciation and losses of the unit, the income of which is not eligible for deduction u/s 10A of the Act cannot be set off against the current profit of the eligible unit for computing the deduction u/s 10A of the Act.”

5. Before us, the Ld. DR relies on the order of the AO, whereas the Ld. counsel of the assessee supports the order passed by the Ld. CIT(A).

M/s Ganesh Polychem Ltd.