CIT & Anr. Vs Yokogawa India Ltd. (Supreme Court of India)
The Supreme Court considered the interpretation and effect of Section 10A of the Income-tax Act, 1961, while clarifying that its conclusions would equally apply to Section 10B, as both provisions are pari materia. The principal questions before the Court included whether Section 10A operates outside the computation mechanism of total income, whether the expression “total income” in Section 10A is the same as under Section 2(45), whether Section 10A continued to be an exemption provision after the amendments effective from 1 April 2001, and whether losses and unabsorbed depreciation of eligible or non-eligible units could be adjusted against the profits of Section 10A units before allowing the benefit under the provision.
The Court examined the evolution of Section 10A, beginning with its pre-amendment form, where profits of eligible undertakings were expressly excluded from total income, followed by the substitution made by the Finance Act, 2000, effective from 1 April 2001, which introduced the concept of a “deduction” of eligible profits from the total income of the assessee. It also considered the subsequent retrospective amendments made by the Finance Act, 2003.
The Revenue argued that the amended language clearly transformed Section 10A into a deduction provision and that deductions should be allowed while computing total income under Chapter VI of the Act. It also contended that no consequential amendment in Chapter VI was necessary because the language of Section 10A itself was sufficient. The assessees, on the other hand, submitted that the retention of Section 10A in Chapter III, dealing with incomes not forming part of total income, reflected its continuing exemption character. Alternatively, they argued that even if Section 10A was regarded as a deduction provision, the deduction had to be granted immediately after computing the profits of the eligible undertaking and before aggregation of incomes or adjustment of losses under other provisions of the Act.
