CIT Vs. Galaxy Surfactants Ltd, Bombay High Court
The assessee, Galaxy Surfactants Ltd had a 100% Export Oriented Unit (EOU) which was entitled to a deduction u/s 10B. For AY 2005-06, the assessee set-off loss incurred in eligible EOU unit against profit from non-eligible unit. The Assessing Officer (AO) denied set off of loss, contending that the deduction was undertaking specific. On appeal, ITAT relying on decision of co-ordinate bench of Delhi in Honeywell International (India) Pvt Ltd [108 TTJ (Del) 924], allowed the set off of loss of eligible unit against the profit of non eligible unit.
A Division bench of Bombay HC, ruling in favor of the assessee held that it was eligible to set off a loss incurred in tax holiday unit against the income arising from other units, under the same head of ‘profits and gains of business or profession’. HC observed that there was no specific prohibition in Sec 10B for such setting off of a loss. Under Sec 70, the assessee was eligible to set off loss from one source against income from any other source under the same head of income. HC observed, “The Legislature not having introduced a statutory prohibition, there is no reason to deprive the assessee of the normal entitlement which would flow out of the provisions of Section 70.”
HC on perusal of Sec 10B further observed that such a prohibition on set off was not even within the contemplation of the Legislature. HC observed that Sec 1 0B(7) provides that provisions of Sec 80IA(8) and 80IA(10) shall be applicable to the undertaking eligible for deduction u/s 10B. However, provisions of Sec 80 IA(5) were not made applicable to Sec 10B. Sec 80IA(5) provides that profits and gains of an eligible business, for the purposes of determining the quantum of deduction to be computed as if such eligible business is the only source of income of the assessee.
HC observed that with the amendment brought in by Finance Act 2000, Section 10B was no longer an exemption section, but a deduction. Therefore, the contention of Revenue that since the income was exempt, no loss could be allowed to be set off was unacceptable. Reliance was placed on co-ordinate bench decision in Hindustan Lever Ltd (2010) 325 ITR 102 (Bom).
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HIGH COURT OF JUDICATURE AT BOMBAY
INCOME TAX APPEAL NO. 3465 OF 2010
The Commissioner of Income Tax
Vs.
M/s. Galaxy Surfactants Ltd.
February 7, 2012.
ORAL JUDGMENT
