Case Law Details
Case Name : CIT Vs M/s Shantivijay Jewels Ltd. (Bombay High Court)
Appeal Number : ITA No. 1336 & 1376 of 2013
Date of Judgement/Order : 07/04/2015
Related Assessment Year :
Brief of the case:
In this case Hon’ble Court considered question of law that whether claim for set off of unabsorbed business loss which was brought forward in subsequent AY against the profit of section 10A is allowable or not. ITAT allowed the appeal filed by the assessee and Hon’ble Court after considering the facts of the case decided that ITAT didn’t commit any error while passing the judgment.
Facts of the case:
- The Assessee is engaged in the manufacturing and export of gems jewellery and filed return of Income for AY 2005-05 after claiming the deduction under 10A.
- Later on assessee revised the return in which he withdrew its claim of deduction under section 10A and claimed set off for the unabsorbed business loss brought forward from AY 2002-03 against the profits of section 10 for the current year.
- The claim of set off was disallowed by AO.
- Aggrived from the order assessee filed appeal before CIT (A) which was dismissed.
Contention of the revenue:
- Claim of the set off cannot be allowed for the current year being the first AY after tax holiday period.
- Since the unabsorbed loss of AY 2002-03 had been set off against the business profit of section 10 A in AYs 2003-04 & 2005-06, there remain no loss for the set off in the impugned AY.
- ITAT remained fail in looking the above view.
Contention of the assessee:
- The ITAT had applied the law laid down by this court in the case of Hindustan Unilever Ltd. 325 ITR 102 and Black & Veatch Consulting Pvt. Ltd. (ITA No. 1237 of 2011). Both the cases are applied to the facts of the present case.
- Assessee was entitled for carried forward loss and that loss pertained to AY 2002-03. As per provision of the Act losses upto AY 2001-02 were not allowable.
- The understanding of the revenue was also on above provision and also ITAT took note of Circular No. 7 of 2005 issued by CBDT dated 05.09.2003 which mentioned that losses were to be allowed while computing the income u/s 10A. There is a explanatory note of the Finance Bill 0f 2003 as well.
Held by ITAT:
- The sub-section (6) of the section 10 A contains non-obstante clause and therefore notwithstanding contained in any other provision of the act, in computing the total income of the assessee of the PY relevant to AY immediately succeeding the last of relevant AYs, or of any PY relevant to any subsequent AY, as per clause (ii) thereof, no loss referred to in sub-section (1) of section 72 or sub-section (1) & (3) of section 74 insofar as such loss relates to the business of the undertaking, shall be carried forward or set off where such loss relates to any of the relevant AYs.
- In clause (ii) w.e.f. 01.04.2004, the words “ending before the 1st day of April, 2001 were inserted.
- If the losses pertain to any subsequent AY, then, the understanding of the revenue as reflected in the circulars would bind it.
- By virtue of non-obstante clause and by virtue of wording of sub-clause (ii), the revenue could not have disallowed the claim of set off.
Held by the court:
There is no mistake committed by ITAT in allowing the appeal.