ACIT Vs K.E.I. Industries Limited (ITAT Delhi)
Section 10B: Losses of Eligible Units cannot Be Set off against Income of other Units
The assessee is aggrieved before the Ld. CIT(A) for denial of carry forward loss in its 100% Export Oriented Unit [EOU] at Chopanki, Bhiwandi (Rajasthan). The A.O. relying upon the Order for the preceding assessment year i.e., 2008-2009 did not allow carry forward of business losses. The assessee in the written submissions has submitted that the assessee is a 100% EOU at Chopanki, Bhiwandi (Rajasthan) which is registered as EOU [Noida Special Economic Zone] and is eligible for deduction under section 10B of the I.T. Act, 1961. The unit become operational in A.Y. 2008-2009. For the previous year relevant to A.Y. 2009-2010, the unit suffered loss of Rs.2,45,32,014/- which was carried forward as “business loss”. It was also submitted that in A.Y. 2008-2009 the Tribunal vide Order Dated 18.05.2012 has allowed similar claim of assessee following the decision of Hon’ble Bombay High Court. The Ld. CIT(A) following the same allowed the claim of assessee and the operative portion of the Order of the Ld. CIT(A) in paras 20 and 21 of the Order are reproduced as under :
“20. It was submitted that for the preceding assessment year i.e. 2008-09 A.Y., ITAT by the order dated 18.5.2012, in ITA No. 3901 /Del/2011 has held that the Appellant was right in carrying forward the loss of Chopanki unit. In allowing the appeal for assessment year 2008-09, the ITAT followed the decision of Bombay High Court in CIT v. Galaxy Surfactants Ltd. [2012] 343 ITR 108.
21. Respectfully following the decision of ITAT in appellant’s own case for the assessment year 2008-09, the AO is directed to allow carry forward of loss of Rs.2,45,32,014/- of Chopanki unit as business loss. It is not a case, where losses of non eligible unit or units are being set off against the profit of eligible unit. The issue whether section 10A is exemption provision deduction provision is of no relevance. Insofar as, carry forward of loss of unit eligible to deduction under section 10B is concerned the amendment made by the Finance Act, 2003 to subsection (6) with retrospective effect from 01.04.2001 specifically provide for carry forward of losses of 100% EOU. There is no merit in the reason that since section 10B is in the nature of exemption, therefore, benefit of carry forward is not available. The specific mandate of the law, as amended by Finance Act, 2003 which specifically provide for carry forward of losses of unit eligible for deduction u/s 10B cannot be overlooked. The reason of the AO would nullify the amendment of sub-section (6) of section 10B of the Act, which is not permissible. Assessing Officer had only reduced returned loss by Rs.56,28,605/-being the loss of Chopanki Unit eligible for deduction u/s 10B after excluding depreciation on capitalization of exchange fluctuation. Hence, addition of Rs. 56,28.605/- in returned loss is deleted and loss of Chopanki Unit is not to be separately carried forward but as part of loss from other units only. This ground of appeal is hence allowed.”
The Ld. D.R. fairly stated that the issue is covered by the Order of the Tribunal for the A.Y. 2008-2009.
On the other hand, Learned Counsel for the Assessee submitted that ultimately the matter in issue have been decided by the Hon’ble Supreme Court in the case of CIT vs., Yokogawa India Ltd., [2017] 391 ITR 274 [SC] in Reference to Assessee’s SLP(C) No.18157/2015 as referred in para-14 of the Order which is reproduced as under :
“14. The difference between the two expressions ‘exemption’ and ‘deduction’, though broadly may appear to be the same i.e., immunity from taxation, the practical effect of it in the light of the specific provisions contained in different parts of the Act would be wholly different. The above implications cannot be more obvious than from the case of Civil Appeal Nos.8563/2013, 8564/2013 and civil appeal arising out of SLP(C) No. 18157/2015, which have been filed by loss making eligible units and/or by non-eligible assessees seeking the benefit of adjustment of losses against profits made by eligible units.”
Learned Counsel for the Assessee submitted that in the aforesaid decision of the Hon’ble Supreme Court it is made clear that findings under section 10A would be applicable to the cases governed by provisions of Section 10B of the I.T. Act and it was a group appeals which have been decided by the Hon’ble Supreme Court by holding that deduction under section 10A/10B is to be allowed while computing the gross total income and not at the stage of computation of total income in Chapter-VI of the I.T. Act dealing in the aggregation of the income set-off or carried forward of the loss. Learned Counsel for the Assessee, therefore, submitted that issue is covered by Order of ITAT for the A.Y. 2008-2009 in the case of same assessee and ultimately decided by the Hon’ble Supreme Court in the case of CIT vs., Yokogawa India Ltd., (supra), in which in para-18 held as under :
“18. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly.”
In view of the above facts and that when the Tribunal has allowed similar claim of assessee in preceding A.Y. 2008-2009 and ultimately in group appeals, the Hon’ble Supreme Court has allowed the claim of assessee, the issue is covered by the aforesaid decisions in favour of the assessee which fact is also accepted by the Ld. D.R. Therefore, there is no infirmity in the Order of the Ld. CIT(A) in allowing the claim of assessee. Ground No.3 of the appeal of the Revenue stand dismissed.
