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Income Tax Appellate Tribunal, “A”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD, JM
आदेश / O R D E R PER R.C.SHARMA (A.M):
This is an appeal filed by the assessee against the order of CIT(A) for the assessment year 2008-09 in the matter of order passed u/s.143(3) r.w.s. 254.
The following grounds have been taken by the assessee. 1a) That the Commissioner of Income-tax (Appeals) has erred in not allowing deduction for loss of Rs. 1,10,14,646 of 100% Export Oriented Unit eligible for u/s 10B of the Act against the business income of ineligible unit of the appellant company and income of the appellant company from capital gains. b) That the CIT(A) has erred is not following the following decisions of the Bombay High Court in the following case brought to his notice:- (i) C.I.T v/s Galaxy Surfactants Ltd. 343 ITR 108.
M/s. Lavino Kapur Cottons Pvt. Ltd., (ii) Hindustan Unilever Ltd. v/s D.C.I.T 325 ITR 103. (iii) C.l.T v/s Shantivijay Jewels Ltd. 374 ITR 520. c) That the C.LT.(A) has erred in relying upon the decision of Bombay High Court in the case of C.I.T v/s Black & Veatch Consulting Pvt. Ltd. 348 ITR 72 (Born) to deny the claim of the appellant company. d) That the issue involved in Black & Veatch's case was entirely different and the C.LT (A) has clearly misdirected himself. e) That the only issue involved in Black & Veatch's case was whether deduction u/s 10A of the Act is allowable in respect of income of allowable unit under Section 10A before setting off brought forward losses of a non - section 10A unit. In the said case the Bombay High Court has no where held that the losses of eligible unit are not to be setoff against profits of ineligible units and vise versa. f) That the C.I.T (A) has erred in stating that in the case before the Bombay High Court relied up on the appellant's company the issue was regarding setoff of loss of eligible units u/s 10B of the Act against the income from other units under the same head of income, while in the case of the appellant company the deduction has been claimed against income from other heads. g) That as is apparent from the facts recorded at several places in the appellate order, the appellant company has claimed setoff of loss of eligible unit u/s 10B against the business income of ineligible unit and income from capital gains and as such the decisions of the Bombay High Court relied upon by the appellant are fully applicable. 2.a) That the CIT (A) has erred 111 not following the following Board Circulars placed before him :- (i) Circular No.7 of2003 dated 05.09.2003 which clarified that with a view to rationalize the existing incentives in respect of 10A & 10B units the provisions of the Act have been amended to do away with restriction on the carry forward of business losses and unabsorbed depreciation. In the said Circular it is further clarified the amendment has been brought into effect retrospectively from 01.04.200I and is made applicable to business loss or unabsorbed depreciation arising in assessment year 2001-2002 and subsequent year.
M/s. Lavino Kapur Cottons Pvt. Ltd., (ii) Circular/Instruction No.7 (DY) of 2013 dated 16th July 2013 wherein the complete history of section 10A, 10B etc was given and the relevant portion of Circular no.7 of 2003 was reproduced an it was clarified that irrespective of their continued placement in chapter Ill, Section 10A & 10B as substituted by the Finance Act 2000 provided for deduction of the profit and gains derived from exports. In the said Circular it is expressly stated that firstly the income / Ioss from various sources i.e eligible and ineligible units, under the same head are to be aggregated in accordance with provision of section 70 of the Act. In the said Circular it is further explained that thereafter the income or loss of one head is to aggregated with income of other head in accordance with provisions of section 71. b) That both the Circulars being clarificatory in nature are applicable from 01.04.2001 and in the appellate order passed it has been wrongly stated that Circular relied upon by the appellant is of 2013 which is not applicable to the appellate case. c) That not following the applicable Board Circulars which are 100% applicable to the appellant's case has resulted in grave "error" in the order passed. d) That the appellant company may be allowed the benefit of Board Circular which are 100% applicable to the facts of the present case 3.a) That the Commissioner of Income-tax (Appeals) has erred in not adjudicating on ground No.2 of grounds of appeal filed before him. b) That the said ground of appeal relate to carry forward of balance unabsorbed loss of Rs.54,98,861. The appellant company is entitled to carry forward of balance unabsorbed loss and the necessary relief may be allowed.
3. Rival contentions have been heard and record perused.
4. Facts in brief are that assessee is engaged in manufacturing of absorbent cotton and finished products. During the course of scrutiny assessment, AO declined assessee’s claim of deduction u/s.10B. The tribunal restored the matter back to the file of AO for deciding afresh after verifying the facts.
M/s. Lavino Kapur Cottons Pvt. Ltd., 5. In the second round, AO did not allow set off loss in 10B unit arising out of current year’s depreciation against the income of other ineligible units.
By the impugned order CIT(A) confirmed the action of AO by relying on the decision of the Delhi High Court in the case of KEI Industries Ltd., 57 Taxman 412. Against this order of CIT(A), assessee is in further appeal before us.
We have considered rival contentions and gone through the orders of the authorities below and found from record that assessee’s claim of set off loss in respect of its 10B unit arising in the form of current year depreciation was declined by the AO to be set off against the profit of other units. The issue under consideration is squarely covered by the decision of Jurisdictional High Court in the case of Galaxy Surfactants Ltd., 343 ITR 108 wherein High Court held as under:- “Held that the fact that unabsorbed depreciation could be carried forward to a subsequent year did not militate against the entitlement of the assessee to set off the loss which was sustained by an eligible unit against the income arising from other units under the same head of profits and gains of business or profession. The Legislature not having introduced a statutory prohibition, there was no reason to deprive the assessee of the normal entitlement which would flow out of the provisions of Section 70.”
We found that issue is also covered by the decision of Bombay High Court in the case of Hindustan Unilever Limited., 325 ITR 103 and by the decision in case of Shantivijay Jewels Ltd., 374 ITR 520.
M/s. Lavino Kapur Cottons Pvt. Ltd., 9. Respectfully following these judicial pronouncements, we do not find any justification for declining setting of such loss against income of other units. 10. In the result, appeal of the assessee is allowed.