M/S. STANADYNE INDIA PVT. LTD.,TIRUVALLUR vs. ACIT, CC-IV(4), CHENNA
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Income Tax Appellate Tribunal, A BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2007-08 arises out of the order of Learned Commissioner of Income Tax (Appeals), Chennai-16 [hereinafter “CIT(A)”] dated 11.03.2024 in the matter of assessment framed by the Assessing
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Officer [AO] u/s. 143(3) r.w.s 92CA(4) & 144C(3) of the Income-tax
Act,1961 (hereinafter “the Act”) on 28.01.2011.
The grounds of appeal raised by the assessee are as under:
The order of the Commissioner of Income Tax (Appeals) [“CIT(A)"] is contrary to law, facts and circumstances of the case. 2. Set off of unabsorbed depreciation before allowing deduction under Section 10B of the Act. 2.1 The CIT(A) erred in setting off the unabsorbed depreciation and brought forward business loss of earlier years from profits of the undertaking before allowing deduction under Section 10B of the Act. 2.2 The CIT(A) erred in confirming the adjustment made by the Assessing Officer (AO) without adjudicating the case on merits. 2.3 The CIT(A) ought not to have passed the impugned order ex- parte without providing sufficient opportunity of being heard to the Appellant. 2.4 The CIT(A) ought to have appreciated that Section 10B of the Act provides for deduction of profits of the undertaking in its entirety and does not provide for any adjustment by way of set off of any brought forward losses. 2.5 The CIT(A) ought to have appreciated that the terms 'profit' and turnover" in sub-section (4) of Section 10B refers only to the current year's profits and turnover. 2.6 The CIT(A) failed to appreciate that profits of unit eligible for deduction under Section 10B of the Act is to be granted while computing the profits and gains of business or profession of the business itself and not from gross total income. 2.7 The CIT(A) failed to appreciate that the term 'total income' used in Section 10B of the Act refers only to the total income of the undertaking and not total income of the Assessee.
2.8 The CIT(A) ought to have followed the binding decision of the Hon'ble Supreme Court in the case of CIT vs Yokogawa India Limited wherein the same issue is settled in favour of the Appellant.
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Reduction of refurbishment charges from export turnover while computing deduction u/s 10B 3.1 The CIT(A) erred in reducing the refurbishment charges amounting to Rs.1,15,53,800 from the export turnover while computing the deduction under Section 10B of the Act. 3.2 The CIT(A) erred in confirming the adjustment made by the AO without adjudicating the case on merits. 3.3 The CIT(A) ought not to have passed the impugned order ex- parte without providing sufficient opportunity of being heard to the Appellant. 3.4 The CIT(A) ought to have appreciated that the refurbishment charges is directly connected with the export activity and as such it cannot be excluded from export turnover. 4. The Appellant prays that directions be given to grant all such relief arising from the grounds of appeal mentioned supra as also all consequential relief thereto. 5.The Appellant craves leave to add, alter, amend, substitute, rescind, modify and/or withdraw in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal.”
Grounds No.1, 4 & 5 are general in nature, therefore no
adjudication is required.
Ground No.2 is regarding set off of unabsorbed depreciation and
brought forward business loss of earlier years from profits of the
undertaking before allowing deduction u/s. 10B of the Act.
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The assessee-company is engaged in manufacture of fuel
injection system consisting of pumps, injectors, hydraulic, valve lifters
etc. The assessee-company has shown business income of
Rs.1,41,22,834/- and has claimed deduction u/s. 10B of the Act at
Rs.1,38,38,944/-. The assessee has set off of carry forward
depreciation loss of earlier years to the extent of Rs.2,83,890/-. The
A.O has recomputed the income by first setting off of the unabsorbed
depreciation of Rs.2,87,48,637 from total income determined at
Rs.2,87,448,637/- and since after setting off of unabsorbed
depreciation there is no income left, assessee has not allowed any
deduction u/s. 10B of the Act. The A.O has held that deduction u/s.
10B of the Act is to be granted after setting off of unabsorbed
depreciation and brought forward losses prior to computation of
deduction u/s. 10B of the Act.
The Ld. Authorized Representative (A.R) of the assessee has
argued that the issue whether the brought forward losses has to be set
off first before allowing exemption under chapter-III has been settled
by the Hon’ble Supreme Court in the case of CIT v. Yokogawa India
Ltd. [2017] 77 taxmann.com 41 (SC), therefore the issue is settled in
favour of the assessee.
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The Ld. Departmental Representative (DR), on the other hand,
has relied on the orders of lower authorities.
We have heard the rival submissions, and perused the materials
available on record. The issue whether set off of unabsorbed
depreciation and business losses are to be allowed before allowing
deduction/exemption u/s. 10B of the Act has been settled by Hon’ble
Supreme Court in the case of CIT v. Yokogawa India Ltd., supra, by
holding that though section 10A of the Act 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 not at
the stage of computation of total income under Chapter-VI. In view of
the above, the A.O is directed to allow the claim of deduction u/s. 10B
of the Act before allowing unabsorbed depreciation as held by Hon’ble
Supreme Court.
Ground No.3 is against confirming the reduction of refurbishment
charges from export turnover while computing deduction u/s. 10B of
the Act.
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The assessee in the computation of eligible profit u/s. 10B of the
Act has computed the deduction u/s. 10B of the Act at Rs.
1,38,38,944/- by taking profit for net income at Rs. 1,41,22,834/-,
export turnover at Rs.24,58,25,868/- and total turnover at
Rs.25,08,68,702/- as per Section 10B(4) of the Act. However, the A.O
while making computation as per 10B(4) has excluded the
refurbishment charges on export sales of Rs. 1,15,53,800/- from
export turnover while computing ratio of export turnover by total
turnover on the profit for undertaking to determine the eligible profit
u/s. 10B of the Act. The A.O has not considered refurbishment
charges on export as part of export turnover as the assessee has
classified the said income separately from the export sale in the profit
and loss account and further, the refurbishment charges are
transaction over and above the export sale. The A.O has computed
deduction u/s. 10B of the Act at Rs. 1,31,88,514/- against the claim of
Rs. 1,38,38,944/-.
The Ld. AR has submitted that refurbishment charges are
incidental to the export activity are part of the export turnover and
therefore, has been correctly included in the export turnover. The Ld.
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AR has relied on the decision of Hon’ble Karnataka High Court in the
case of CIT v. Hewlett Packard Global Soft Ltd. [2017] 87
taxmann.com 182 (Karnataka), and the decision of Hon’ble Madras
High Court in the case of Camiceria Apparels India (P.) Ltd. v. ACIT
[2019] 103 taxmann.com 234 (Mad.) in support of its contention.
The Ld. Departmental Representative (DR), on the other hand,
has relied on the orders of lower authorities.
We have heard the rival submissions, and perused the materials
available on record. The A.O while computing the eligible profit u/s.
10B of the Act as per section 10B(4) has not considered refurbishment
charges on export sales of Rs.1,15,53,800/- as the assessee in the
profit and loss account has classified separately. The Ld. AR has
submitted that refurbishment charges are incidental to and integral to
export and therefore cannot be excluded from the export turnover .We
are in agreement with the submission of Ld AR that refurbishment
export sale is integral and incidental to the export business and
therefore to be considered part of export turnover for the purpose of
computation u/s 10B(4). The Hon’ble Madras High Court in the case
of CIT vs. M/s. Oliver Valves India Pvt. Ltd., in Tax case Appeal
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No.278 & 279 of 2018 vide order dated 23.07.2020. on similar facts has held the fee received as a part of export turnover. We, therefore allow the assessee’s ground of appeal.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on 27th November, 2024.
Sd/- Sd/- (एबी टी. वक�) (जगदीश) (Jagadish) (ABY. T. Varkey) लेखा सद! /Accountant Member �ाियक सद! / Judicial Member चे�नई/Chennai, �दनांक/Dated: 27th November, 2024. EDN/-
आदेश क� �ितिल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकर आयु�/CIT, Chennai 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF
