Case Law Details
A recent decision of the Special Bench (SB) of the Chennai Income Tax Appellate Tribunal (ITAT) in the case of Scientific Atlanta India Technology Pvt. Ltd. (Taxpayer). The issue before the SB was that, while computing the amounts eligible for tax holiday under the Indian Tax Law (ITL), whether the losses of an undertaking of the Taxpayer which is not eligible for tax holiday (Non- eligible Undertaking), are required to be set off against the profits of another undertaking of the Taxpayer which is eligible for tax holiday (Eligible Undertaking).
The SB held that the amount eligible for tax holiday was specific to each undertaking of the Taxpayer. Further, for the purpose of determining the amount eligible for tax holiday under the ITL, the losses of a Non-eligible Undertaking are not required to be set off against the profits of an Eligible Undertaking.
Background and facts of the case
- The ITL provides tax holiday with respect to profits and gains derived from undertakings engaged in the export of articles or things or computer software for a period of 10 consecutive years, subject to conditions specified therein (Tax Holiday). Up to tax year 1999-00, the ITL provided for exemption of income derived from such undertakings i.e. income of Eligible Undertakings did not form part of the total income of a taxpayer. From tax year 2000-01, the ITL provides for a deduction of profit derived from Eligible Undertaking from its total income. Such profit forms part of the income of a taxpayer but is reduced later before arriving at the total income.
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