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Income Tax Appellate Tribunal, BANGALORE BENCH ‘A’
PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER :
This appeal by the Revenue is directed against the order of Commissioner of Income-tax (Appeals) -3, Bangalore dated 24/11/2015 for asst. year 2006-07.
Briefly stated, the facts of the case relevant for these appeals are as under:- 3.1 The assessee, a company engaged in manufacture and trading of coffee, tea and spices filed its return of income for asst. year 2006-07 on 31/11/2006 declaring income of Rs.15,99,252/-. after claiming deduction u/s 10B of the Income-tax Act, 1961 (in short ‘the Act’). The returns was processed u/s 143(1) of the Act and the case was subsequently taken up for scrutiny. The assessment was completed u/s 143(3) of the Act vide order dated 31/12/2008, denying the assessee’s claims for deduction of Rs.3,54,74,166/- u/s 10B of the Act. On appeals before the CIT(A) and subsequently ITAT, a co- ordinate bench vide order in dated 18/6/2010 set aside the matter to the file of the AO for verification of From No.56G filed by the assessee company and then compute the income accordingly. In pursuance thereof, the Assessing Officer (‘AO’) verified the Form 56G and completed the assessment u/s 143(3) r.w.s 254 of the Act vide order dated 30/8/2011 wherein the assessee’s income was determined at NIL after allowing deduction of Rs.2,87,08,216/- u/s 10B of the Act, to the extent of profits available; but only after setting off brought forward business losses of Rs.97,86,535/- against business profits. 3.1 Aggrieved by the order of the CIT-3, Bangalore dated 24/11/2015 for asst. year 2006-07, Revenue has filed this appeal raising the following grounds:-
“1. The order of the learned CIT(A) is opposed to law and facts of the case.
2. On the facts and in the circumstances of the case, the CIT(A) erred in following the ratio laid down by the Hon'ble Karnataka High Court in the case of CIT Vs M/s Yokogawa India Ltd., (341 ITR 385) 3. On the facts and in the circumstances of the case, the CIT(A) erred in holding that the deduction u/s l0B was to be deducted from the income of the eligible unit i.e. before computing the Gross Total Income.
For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored.
The appellant craves leave to add, alter, amend and / or delete any of the grounds mentioned above.”
3.2 The ld DR for Revenue was heard in support of the grounds raised (Supra) and placed strong reliance on the finding in the orders of the AO on this issue.
3.3 Per contra, the ld AR for the assessee submitted that the assessee’s claim for being allowed the deduction claimed u/s 10B of the Act is squarely covered in its favour by the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. Yokogowa India Ltd. (341 ITR 385). It is submitted that the ld CIT(A), following the aforesaid decision, has rightly directed the AO to compute the deduction u/s 10B of the Act before setting off the brought forward business losses against business profits of the year under consideration. 3.4.1 We have heard the rival contentions and perused and carefully considered the material on record. From a perusal of the details on record it is seen that the AO was of the view that deduction u/s 10B of the Act was to be allowed only on the income computed after setting off the brought forward losses. Accordingly, the assessee’s income was determined by the AO by first setting off the brought forward losses from the business income for calculating the deduction u/s 10B of the Act.
3.4.2 We find that the issue in dispute before us is squarely covered in favour of the assessee by the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. Yokogawa India Ltd. (2012) 341 Products Ltd-ITR 385 (Kar). In its decision the Hon’ble High Court had held that the income of sec. 10A unit has to be excluded at source itself before arriving at the gross total income/loss. As the deduction u/s 10A of the Act has to be computed from the total income of the assessee, the brought forward business loss and depreciation being set off against such profit and gains of the undertaking as a whole would not arise. Section 10A of the Act being analogous with sec. 10B of the Act, the aforesaid decision of the Hon’ble High Court would equally apply to the case on hand. In this view of the matter and respectfully following the decision of the Hon’ble Karnataka High Court in Yokogawa India Ltd. (341 ITR 385), which has since been approved by the Hon’ble Apex Court in CIT Vs. Yokogawa India Ltd., (2017) 77 taxmann.com 41(SC), we uphold the impugned order of the ld CIT(A) in directing the AO to compute the deduction u/s 10B of the Act in the case on hand without setting off the brought forward business losses from the assessee’s income. We hold and direct accordingly. Consequently, the grounds raised by Revenue are dismissed.
4. In the result, the Revenue’s appeal for the asst. year 2006-07 is dismissed.