ACIT 8(3), MUMBAI vs. SYNTEL INTERNATIONAL P.LTD, PUNE

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ITA 6861/MUM/2012Status: DisposedITAT Mumbai01 January 2016AY 2008-093 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that Section 10A deduction is to be given effect to at the stage of computing business profits, prior to the set-off of business losses. Unabsorbed depreciation of a non-10A unit should be set off against other taxable income.

What were the facts?

The assessee, engaged in software services, reported a loss in its Pune STP unit. The AO insisted on setting off brought forward unabsorbed depreciation against the income before allowing Section 10A deduction. The assessee argued that unabsorbed depreciation should be set off against non-10A income.

What were the issues?

Whether brought forward unabsorbed depreciation of a non-10A unit must be set off against other taxable income before allowing deduction under Section 10A.

Which sections of the Income-tax Act were involved?

Section 10A,Section 72

AI-generated summary — verify with the full judgment below

1

आयकर अपीलीय अिधकरण, ‘ई’ खंडपीठ मुंबई INCOME TAX APPELLATE TRIBUNAL,MUMBAI “E” BENCH सव"ी राजे", लेखा सद" एवं संदीप गोसांई, "ाियक सद" Before S/Sh. Rajendra,Accountant Member & Sandeep Gosain,Judicial Member आयकर अपील सं/.ITA No.6861/Mum/2012,िनधा"रण वष"/Assessment Year-2008-09 ACIT-Range-8(3) M/s. Syntel International P.Ltd. Room No.217, Aayakar Bhavan Plot No.B-1, Software Technology Mumbai-400 020. Pune- 412 114. PAN: AAICS 0960 L (अपीलाथ" /Appellant) (""थ" / Respondent) िनधा"रती ओर से/Assessee by : Shri Dinesh Vyas (AR) राज" की ओर से/ Revenue by : Shri M.M. Utture -DR सुनवाई की तारीख / Date of Hearing : 05-11-2015 घोषणा की तारीख / Date of Pronouncement : 01.01.2016 आयकर अिधिनयम,1961 1961 की धारा 254 254(1)के अ"ग"त आदेश 1961 1961 254 254 Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद" राजे" के अनुसार PER RAJENDRA, AM- Challenging the order dt.14.8.12 of CIT(A)-18, Mumbai the Assessing Officer (AO) has filed the present appeal 2.Assessee-Company, engaged in the business of development and export of computer software services etc. filed its return of income on 30.9.2008 declaring total income at Rs.4.72 crores.During the AY 2008-09 it started operation at Software Technology Park (STP).The Pune STP units suffered a loss of Rs.3.79 crores (unabsorbed depreciation allowance). The AO assessed the loss as business loss as unabsorbed depreciation while completing the assessment. During the assessment proceedings the co. contended before the AO that deduction u/s. 10A of the Act should be allowed without setting off the brought forward unabsorbed depreciation, that the unabsorbed depreciation should be set off against the non-10A income. However, the AO held that deduction u/s. 10A could not be allowed without setting off the brought forward unabsorbed depreciation claimed for the AY 2007-08. 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). After considering the submission of the assessee and the FAA, the FAA referred to the judgment of the Hon'ble Bombay High Court delivered in the case of Black & Veatch Consulting Pvt.Ltd.(PS 206-HC-2012)(Bom.).He further mentioned that in the case of M/s. Syntel Ltd. sister concern of the assessee identical issue was decided in favour of the assessee by the Hon’ble High Court. Accordingly he directed the AO to compute the income after setting off the brought forward unabsorbed depreciation/loss against other taxable income as claimed by the assessee.

ITA6861/M/12-M/s. Syntel Intl. P.Ltd.

4.

During the course of hearing before us, the Departmental Representative (DR) supported the order of the AO. The Authorised Representative (AR) state that similar question had arisen in the case of Shanti Vijay Jewels Ltd. (ITA 7006/Mum/2010- AY-04-05-dt.16.11.2012), that the order of the Tribunal was confirmed by the Hon'ble Bombay High Court in April 2015. 5.We have heard the rival submissions and perused the material before us. We find that the aa had during the course of assessment proceedings requested the AO to adjust the unabsorbed depreciation against the non-10A income,that the AO rejected the claim made by the assessee, that the FAA following the judgments of the Jurisdictional High Court allowed the appeal filed by the assessee.We find that the Hon’ble High Court in the case of Black & Veatch Consulting Pvt.Ltd.(supra), had decided the issue as under :- “Section 10A of the Income-tax Act, 1961, is a provision which is in the nature of a deduction and not an exemption. The deduction under section 10A has to be given effect to at the stage of computing the profits and gains of business. This is anterior to the application of the provisions of section 72 which deals with the carry forward and set off of business losses. A distinction has been made by the Legislature while incorporating the provisions of Chapter VI-A. Section 80A(1) stipulates that in computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of the Chapter, the deductions specified in sections 80C to 80U . Section 80B(5) defines for the purposes of Chapter VI-A “gross total income” to mean the total income computed in accordance with the provisions of the Act, before making any deduction under the Chapter. Therefore, the deduction under section 10A has to be given at the stage when the profits and gains of business are computed in the first instance. The Tribunal was right in holding that the deduction under section 10A in respect of the allowable unit under section 10A has to be allowed before setting off brought forwarded losses of a non-section 10A unit. ….”

Respectfully following the above judgment,we confirm the order of the FAA and decide the effective ground of appeal against the AO. As a result,appeal filed by the AO stands dismissed. फलतः िनधा"रती अिधकारी "ारा दािखल क" गई अपील नामंजूर क" जाती है. Order pronounced in the open court on 1st January, 2016. आदेश क" घोषणा खुले "यायालय म" "दनांक 01 जनवरी, 2016 को क" गई । (संदीप गोसांई / Sandeep Gosain) (राजे" / RAJENDRA) "ाियक सद" / JUDICIAL MEMBER लेखा सद" / ACCOUNTANT MEMBER मुंबई/Mumbai,िदनांक/Date: 01.01.2016 व.िन.स.Jv.Sr.PS.

ITA6861/M/12-M/s. Syntel Intl. P.Ltd.

आदेश की "ितिलिप अ"ेिषत/Copy of the Order forwarded to : 1.Appellant /अपीलाथ"

2.

Respondent /""थ" 3.The concerned CIT(A)/संब" अपीलीय आयकर आयु", 4.The concerned CIT /संब" आयकर आयु" 5.DR A Bench, ITAT, Mumbai /िवभागीय "ितिनिध, ए खंडपीठ,आ.अ."ाया.मुंबई 6.Guard File/गाड" फाईल स"ािपत "ित //// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst.

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