The tax payer is carrying on business in two units. The unit engaged in software development was registered with the Software Technology Park of India and was claiming tax holiday under section 1 0A of the Income Tax Act, 1961 (Act) (“eligible unit”) and the other unit was engaged in trading activity (“non eligible unit”). The eligible unit had profits while the non eligible unit had incurred a loss during the relevant year. The tax payer had claimed tax holiday under section 10A of the Act for the eligible unit treating it as an independent unit without reducing the loss of non eligible unit.
The Assessing Officer (“AO”) recomputed the profits of the tax payer by first adjusting the loss of non eligible unit against the profits of eligible unit and thereafter allowing deduction to the extent of balance profit. The tax payer preferred an appeal before the Commissioner of Income tax (Appeals) [“CIT(A)”]. The CIT(A) again allowed the deduction after reducing loss of non eligible unit, however, making some changes in the computation methodology.
The tax payer filed an appeal before the Income Tax Appellate Tribunal (“ITAT”). Simultaneously AO has also preferred an appeal against the order of CIT(A) before the ITAT.
Issues
