CIT vs. Black & Veatch Consulting Pvt.Ltd (Bombay High Court)

S. 10A/ 10B deduction allowable without set off of losses of non-eligible units

The question arose whether the brought forward unabsorbed depreciation and losses of a unit which was not eligible for s. 10A deduction could be set-off against the current profit of a unit eligible for s. 10A deduction. The Tribunal, relying on Scientific Atlanta Vs. ACIT 129 TTJ 273 (Che)(SB) held that the a. 10A deduction had to be allowed before set-off of the losses of the non-eligible unit. On appeal by the department to the High Court, HELD dismissing the appeal:

S. 10A is a deduction provision and not an exemption provision. S. 10A has to be given effect to at the stage of computing the profits and gains of business. This is anterior to the application of the provisions of s. 72 which deals with the carry forward and set off of business losses. A distinction has been made by the Legislature while incorporating the provisions of Chapter VI-A. S. 80A(1) stipulates that in computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of the Chapter, the deductions specified in s. 80C to 80U. S. 80B(5) defines for the purposes of Chapter VI-A “gross total income” to mean the total income computed in accordance with the provisions of the Act, before making any deduction under the Chapter. What the Revenue in essence seeks to attain is to telescope the provisions of Chapter VI-A in the context of the deduction which is allowable u/s 10A, which would not be permissible unless a specific statutory provision to that effect were to be made. In the absence thereof, such an approach cannot be accepted. Accordingly, the decision of the Tribunal is affirmed since it is plain and evident that the deduction u/s 10A has to be given at the stage when the profits and gains of business are computed in the first instance (Hindustan Unilever Ltd vs. DCIT 325 ITR 102 (Bom) followed)