ADSORBENT CARBONS PRIVATE LIMITED,TUTICORIN vs. ITO, TUTICORIN

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ITA 42/CHNY/2016Status: DisposedITAT Chennai10 June 2016AY 2009-103 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that Section 10B deduction is to be reckoned on a standalone basis for the income of the undertaking alone, without reference to other units. The deduction is to be calculated prior to setting off unabsorbed business losses and depreciation.

What were the facts?

The assessee, a 100% EOU manufacturing activated carbons, claimed deduction under Section 10B for AYs 2008-09 and 2009-10. The Revenue disallowed this claim, arguing that brought forward unabsorbed depreciation and business losses should be adjusted first, leaving no income to be deducted under Section 10B.

What were the issues?

Whether brought forward unabsorbed depreciation and business losses should be set off before calculating the deduction under Section 10B. Whether Section 10B deduction is to be calculated on a standalone basis.

Which sections of the Income-tax Act were involved?

Section 10B,Section 143(3),Section 139(1)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, BENCH ‘A’, CHENNAI

Before: SHRI SANJAY ARORA & SHRI G. PAVAN KUMAR

For Respondent: Shri M.Shiva Srinivas, Jt. CIT
Hearing: 08.12.2016Pronounced: 06.03.2017

आदेश /O R D E R

Per Sanjay Arora, AM:

1.

This is a set of two Appeals by the Assessee arising out of a common Order by the Commissioner of Income Tax (Appeals)-1, Madurai dated 08.10.2015, dismissing the assessees’ appeal contesting it’s assessment u/s. 143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) for assessment years (AYs) 2008- 09 & 2009-10 dated 28.12.2012 and 29.12.2011 respectively.

2.

The assessee company, in the business of manufacturing and export activated carbons, through a 100% export oriented unit (EOU), filed its return of 2 & 42/Mds/2016 (AY 2008-09 & 2009-10) Adsorbent Carbons Pvt. Ltd. v. ITO income for the relevant years with the time specified u/s. 139(1) of the Act, claiming deduction u/s. 10B of the Act at �. 10,24,407/- and �. 67,57,158/-, for the two consecutive years respectively. In doing so, the brought forward unabsorbed depreciation and unabsorbed business loss for the earlier years, i.e., AYs 2003-04 to 2006-07, was not adjusted (set off). This constitutes the bone of contention between the parties, with the Revenue claiming the same as not in consonance with the provision of s. 10B as substituted by Finance Act, 2000 w.e.f 01.04.2001, and as further amended by Finance Act, 2001 and Finance Act, 2002. The effect of these amendments, in its view, has been to, notwithstanding its continued placement in Chapter-III of the Act, convert it into a deduction provision. The income of such an Undertaking shall enter the computation process, i.e., for the total income as defined u/s. 2(45) of the Act, and if, upon aggregation under Chapter-VI, adjusting the brought forward losses, any income survives, the same shall, where including any income derived from an eligible undertaking, be deductible u/s. 10B, in accordance with the provisions of the said section. This sums up the Revenue’s case, disallowing the claim for deduction u/s. 10-B as no income survived the adjustment (set off) of brought forward unabsorbed depreciation and business loss u/c. VI of the Act, placing reliance on CIT v. Himatasingike Seide Ltd. [2006] 286 ITR 255 (Kar), SLP against which stands dismissed by the Apex Court. Aggrieved, the assessee is in appeal.

3.

We have heard the parties, and perused the material on record. Subsequent to the hearing, the ld. counsel for the assessee, Shri R.Vijayaraghavan, brought the decision by the Apex Court in the case of CIT v. Yokogawa India Ltd. & Others (in Civil Appeal No. 8498/13 dated 16.12.2016) to our notice. Being by the Hon'ble Apex Court, binding on all the Courts and Tribunals in India, the same was admitted and the Revenue allowed time to respond, if so desired. No response has been received to date. We accordingly

3 & 42/Mds/2016 (AY 2008-09 & 2009-10) Adsorbent Carbons Pvt. Ltd. v. ITO proceed to decide these appeals taking into account the said decision. The same is squarely on the point. The Hon'ble Apex Court, while agreeing that ss. 10A and 10B of the Act are no longer exemption provisions, makes it abundantly clear that the same (deduction) is to be reckoned on a stand alone basis, i.e., qua the income of the Undertaking alone, without any reference to the income of any other eligible or non eligible unit of the assessee. And, further, that the stage of deduction there-under shall be while computing the gross total income under Chapter-IV of the Act and not at the stage of computing the total income under Chapter-VI of the Act. The words ‘from the total income of the assessee’ occurring in s.10B(1) were considered by it as made discordantly, and were accordingly read by it to imply ‘the total income of the undertaking’, i.e., as used in first proviso to s.10B(1). The deduction u/s. 10B(1) shall be worked out accordingly, i.e., prior to setting off the unabsorbed business loss and depreciation of the assessee’s eligible undertaking for the assessement year 2001-02 and subsequent assessment years. The AO shall profile these losses separately. We decide accordingly.

4.

In the result, the assessees’ appeals are allowed. Order pronounced on March 06, 2017 at Chennai.

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