STERIA INDIA LTD. (ESTWHILE XANSA INDIA LTD.),NOIDA vs. ACIT, NEW DELHI

The Ld. AR submits that both the issues are covered against the Revenue. In assessee’s own case for the earlier years vide consolidated order dated 26/9/2016 passed by ITAT Delhi Bench being ITA No. 2283/DEL/2011.

The Ld. DR submits that the Assessing Officer has recorded facts that the assessee do not have any documentary evidence as to how 25% of substances allowance paid by the assessee company. Thus, the Ld. DR submitted that the judgment in the earlier assessment year was on the basis of entire amount which was settled in the later years, therefore, the ITAT order will not be applicable in the present assessment year. The Ld. DR also relied on the Section 10(14) of the Act is for special allowance and is applicable in assessee’s case. As regards Section 10A of the Act, the Ld. DR submitted the case law of the Hon’ble Delhi High Court

The Ld. AR submitted that the ITAT order dated 26/9/2016 clearly covers the present issues in the present assessment year.

We have heard both the sides it is pertinent to note that in assessee’s own case for Assessment Year 2004-05, 2005-06, 2006- 07, 2007-08 , 2008-09 & 2009-10 which is a subsequent years, the ITAT Delhi Bench held both the issues in favour of the assessee and against the revenue. The ITAT held as under: “29. On perusal of the above decision it is apparent that the 1st appellate authority has considered the provisions of Section 195 of the income tax act and held that this payment of subsistence allowance is only a reimbursement of expenditure which is not chargeable to tax in India and hence no withholding tax was required to be deducted from such payment and hence provisions of section 40a(i) does not apply. Even otherwise he held that such payment of subsistence allowance if not fully spent for the official purposes of the employees then it would be chargeable to tax in the hands of the employees only, and as it is an expenditure of the employer incurred wholly and exclusively for the purposes of the business, which cannot be disallowed in parts. We also concur with the reasons given that such subsistence allowance is supported by the evidence of the actual expenditure incurred for official purposes to the extent of 75% and for the balance 25%, employees have submitted a declaration of having spent in the said amount in the course of travel abroad. Therefore, we do not subscribe to the argument of the Ld. Departmental representative that 25% of expenditure has been claimed by the assessee without any evidence as

In result, ITA No. 3672/Del/2013 of the Revenue is dismissed.

As relates to assessee’s appeal, the Ld. AR submitted that unobserved depreciation whether can be reduced from the income from other sources by the Assessing Officer. The Ld. AR submitted that unobserved depreciation can be set out with any income. The Ld. AR relied upon the Hon’ble Karnataka High Court judgment in case of CIT Vs. Yokogawa 341 ITR 385. The Ld. AR submitted that Section 10A deduction is in the form of disallowance only. The Ld. AR also relied upon the ITAT Delhi Bench order in case of Canam International (P) Ltd. Vs. ACIT 37 ITR (T) 38.

The Ld. DR quoted Section 32(2) and further stated that depreciation merged with next year for which Section 10A is claimed is not proper as depreciation automatically is deducted from the profit. In the present case profits were sufficiently large to absorb depreciation. It partakes current year depreciation. Section 10A & 10B are exemption Sections and are not at par with Chapter VI of the Act. The computation should be in precise manner. The Ld. DR relied on the Delhi High Court judgment in the case of CIT Vs. KEI Industries.

The Ld. AR in his rejoinder relied on the Hon'ble Supreme Court’s order in case of CIT Vs. Mother India Refrigerators 155 ITR 711 (SC). The Ld. AR further submits that Section 32(2) falls in allowance and Section 72(2) clearly set out that the allowance should be given first effect. Set off depreciation in any manner can be utilized and thus it loses characterizing business. The Ld. AR

We have heard both the sides, the reliance of Hon’ble Karnataka High Court judgment in case of Yokogawa India Ltd. clearly makes point that how the set off of unabsorbed depreciation has to be taken into account. As the income of the Section 10A unit has to be excluded at source itself before arriving at the gross total income, the loss of the non-section 10A unit cannot be set off against the income of the Section 10A unit under Section 72. The loss incurred by the assessee under the head “Profits and gains of business or profession” has to be set off against the profits and gains, if any, of any business or profession carried on by such assessee. Therefore, as the profits and gains under Section 10A is not be included in the income of the assessee at all, the question of setting off the loss of the assessee of any profits and gains of business against such profits and gains of the undertaking would not arise. Similarly, as per section 72(2), unabsorbed business loss is to be first set off and thereafter unabsorbed depreciation treated as current year’s depreciation under Section 32(2) is to be set off. As deduction under Section 10A has to be excluded from the total income of the assessee the question of unabsorbed business loss being set off against such profit and gains of the undertaking would

In the result, appeal of the assessee is allowed.