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Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद�य लेखा सद�य राजे�� राजे�� केकेकेके अनुसार अनुसार PER RAJENDRA, AM- लेखा लेखा सद�य सद�य राजे�� राजे�� अनुसार अनुसार Challenging the orders dated 18/03/2014 of the CIT (A)-16 Mumbai,the Assessing Officer (AO)and the assessee have filed cross appeals for the above-mentioned Assessment Years (AY.s.).Assessee-company is engaged in the business of information technology enabled services.As the issues involved in both the years are common,so,a single order is being passed. ITA/4469/Mum/2014,AY :05-06: 2.Effective ground of appeal
,filed by the AO, is about direction under section 10A of the Act.During the assessment proceedings, the AO found that the assessee was having to STPI units at Mumbai and Bangalore,that it had declared business income from Mumbai unit at Rs.55.26 lakhs and loss of Rs. 29.25 lakhs for the Bangalore unit,that it had netted of the Bangalore unit loss with the profit of Mumbai unit and had claimed exemption of Rs. 53.96 lakhs under section 10. A of the Act,that it was having business loss of earlier years to the tune of Rs. 10.12 lakhs,that it had not netted of the business loss with that of income from Mumbai unit.The AO directed it to file explanation in that regard.After considering the submission of the assessee,dated 16/11/2007, he held that the deduction on income was allowable only on the total income,that total income was to be calculated only after deducting the brought forward losses of earlier years and adjusting the same with that of the income for 4602+3(05-06 &(06-07)- Aditya Birla Minacs the year under consideration.Accordingly,he assessed the income of the assessee at Rs.Nil and held that it was not eligible for claiming deduction u/s.10 A of the Act. 2.1.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority (FAA).It was argued that the action of the AO was not justifiable,that the provisions of section 80B(5)of the Act will be applicable to Chapter VIA only,that section 10 A fell under Chapter III of the Act.Referring to the provisions of section 72 and 10A of the Act,the assessee argued that there was no express provision in the section to contend that the benefit of deduction was available only on the net amount after setting off the Inter/intra head gains/losses,that by setting off the brought forward losses against profits of Mumbai unit and thus denying the deduction under section 10A the AO had tried to extend the provisions of section 80A (2) of the Act to section 10A,that the income of section 10 A unit had to be excluded before arriving at the gross total income. It relied upon certain case laws, before the FAA. After considering the submissions of the assessee and the assessment order, the FAA referred to the order of the Tribunal in the case of Larsen and Toubro Infotech Ltd. (ITA/3152- 53/Mum/2010,dtd.29/12/2012)and directed the AO to ascertain whether the assessee had maintained separate accounts in respect of each unit and the profit had been computed separately.He further observed that if separate accounts were maintained deduction u/s.10 A was required to be computed for each unit separately,that the loss from one unit could not be adjusted against the profit of other unit.He directed the AO to ascertain whether the assessee had maintained separate accounts in respect of each unit and whether the profit has been computed separetely.He further mentioned that deduction u/s.10A was required to be computed for each unit separtely,that losses from one unit cannot be adjusted against the profit of the other unit.Finally,he held that if the assessee has not maintained separate accounts for both the units action taken by the AO would stand confirmed.
2.2.During the course of hearing before us,the Departmental Representative (DR)stated that matter could be decided on merits.The Authorised Representative(AR)argued that issue has been decided against the Revenue by the judgment of the Hon’ble Bombay High Court in the case of Black and Veatch Consulting P.Ltd.(348ITR72).We find that the Hon’ble Apex Court has in the case of Yokogawa India Ltd.(Civil Appeal no.8498 of 2013,dtd. 16.12. 2016)has held as under: “If the specific provisions of the Act provide [first proviso to Sections 10A(1); 10A (1A) and 10A (4)J that the-unit that is contemplated for grant of benefit of deduction is the eligible
4602+3(05-06 &(06-07)- Aditya Birla Minacs undertaking-- and that is also how the contemporaneous Circular of the department (No 794 dated 09 08 2000) understood the situation, it is only logical and natural that the stage of deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be premature for application. The deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression "total income of the assessee" in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be ..reconciled by understanding .-the expression "total income of the assessee" in Section 10A as 'total income of the undertaking'.....that though section 10A,as amended,is a provision for deduction,the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI.” Respectfully,following the above,we decide the effective ground of appeal against the AO.
ITA/4602/Mum/2014,AY.2005-06: 4.Solitary ground of appeal,raised by the assessee,is about direction given by the FAA about maintenance of books of accounts.Before us,the AR argued that that the FAA was not justified in giving the direction that in case separate accounts were not kept the assessee would not be entitled for deduction, that the assessee had filed form no.56 F before the AO. He relied upon the case of Arabian Exports Ltd.(16SOT61)and Enable Exports (P.)Ltd. of the Hon’ble Delhi High Court.The DR supported the order of the FAA.
4.1.We find that in the matter of Arabian Exports Ltd.(supra)the Tribunal has held that the AO was not justified in denying the claim of the assessee on the ground that no separate books of accounts were maintained with regard to deduction u/s.10B of the Act.In our opinion maintaining separate books of accounts and determining profit separately is not the same.If from the from no.56F the AO can determine the profit separately,there would not be justification for any addition/disallowance.The AO is directed to verify the form and decide the issue accordingly.Effective ground is allowed in favour of the assessee,in part.
5.During the course of hearing ,GOA2was not pressed by the AR.Hence,same stands dismissed as not pressed. ITA.s./4603&4470/Mum/2014,AY-2006-07 6.Following our orders for the earlier year,we decide the effective ground of appeal against the AO and partly allow the appeal in favour of the assessee.
As a results appeals filed by the AO for both the AY.s.stand dismissed and the appeals of the assessee are partly allowed.