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Unit in SEZ will be covered by sub-section(6) to section 115JB of the Act irrespective of the fact that those units were claiming deduction u/s.10A of the Act. We also observe that benefit given to SEZ unit from the applicability of provisions of section 115JB has been withdrawn by the Finance Act, 2011 by inserting a proviso to section 115JB(6) of the Act,
Sub-section (3) of section 10A either before or after its substitution does not contemplate a break in the five succeeding assessment years in relation to which an assessee is entitled to avail of benefit under section 10A of the Act. Thus, in case of an assessee who had already started availing the benefit of section 10A of the Act in any assessment year prior to the coming into force of the substituted sub-section (3),
Since the provisions of section 10A and 10B are similar in nature and as the jurisdictional High Court decided the issue while considering the provisions of section 10B also respectfully following the above, we uphold the contention of assessee that carry forward business losses and depreciation cannot be set off to the profits of the undertaking while working the claim u/s 10B. Therefore, AO is directed to do the needful in light of the above principles laid down.
ection 10A, as it presently stands, though worded as deduction provision, is essentially and in substance an exemption provision. We have also held that the implication of an exemption provision is that the particular income which is exempt from tax does not enter the field of taxation and is not subject to any computation.
Reason behind disallowance of claim made by the assessee was that since the assessee had not claimed deduction under section 10A in the return filed under section 139(1), the proviso to section 10A debarred him from making any such claim in revised return. At this stage, it would be relevant to take note of the proviso under section 10A.
So far the question of benefit under s. 10B of the Act is concerned, the learned counsel for the appellant-assessee has submitted that the view as taken by the Tribunal cannot be sustained for the authoritative pronouncement of the Hon’ble Supreme Court in the case of ITO v. Arihant Tiles & Marbles (P.) Ltd. [2010] 186 Taxman 439 (SC) holding, inter alia, that step-wise activity of cutting marble blocks and converting into the polished slabs and tiles constituted manufacture or production in terms of s. 80-IA of the Act while distinguishing the decision in Aman Marble’s case (supra), and while observing, inter alia, held as under:
Various objections raised by AO as mentioned above have been verified by ld. CIT(A) and found that land and building and machineries are new. Capitals introduced by the Directors are from their own sources and not by transferring from M/s. Shagun. Out of 70 employees employed by assessee company, only 8 employees were related to M/s Shagun and this is not a reason that for employing the ex-employees of any other company curtails the benefit allowable to the assessee.
Ostensibly, while denying the assessee’s claim of carried forward unabsorbed loss/depreciation assessed under the normal provisions of the Act, the Assessing Officer has proceeded on the basis that section 10A of the Act provides an exemption and, therefore, loss suffered in such unit is not allowed to be set off or carried forward for further set off against other normal business income.
Section 10A is a provision which is in the nature of a deduction and not an exemption. This was emphasised in a judgment of a Division Bench of this Court while construing the provisions of Section 10B in Hindustan Unilever Ltd Vs. Deputy Commissioner of Income Tax 2. (2010) 325 ITR 102 at para 24.
Plain reading of above provisions makes it abundantly clear that for the purposes of section 10A, the eligible business (appellant’s branch office in this case) is to be considered as a separate entity and transfer of goods or services by eligible business to/from other business of the assessee are to be treated as if such transfer has been made to/from an unrelated third party. Therefore, supply of software by appellant’s branch office to appellant’s head office is to be considered as export to an unrelated third party and profits derived by appellant from such export are eligible for exemption u/s 10A of the Act.
