|COURT:||Delhi High Court|
|CORAM:||R. K. Gauba J, Ravindra Bhat J|
|CATCH WORDS:||exempt income|
|DATE:||March 13, 2015 (Date of pronouncement)|
|DATE:||March 23, 2015 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 10A/10B: loss suffered in s. 10A/10B units cannot be set-off against the profits of taxable units|
The High Court had to consider whether the loss suffered by the assessee in a unit entitled for exemption under sections 10A and 10B of the Income Tax Act, 1961, can be set off against income from any other unit not eligible for such exemption after the amendment by the Finance Act 2000 w.e.f. 1.4.2001 which converted the said sections from an “exemption” provision into a “deduction” provision. HELD by the High Court:
(i) Parliament was aware of the various restricting and limiting provisions like section 80A and section 80AB which was in Chapter VI-A which do not appear in Chapter III. The fact that even after its recast, the relief has been retained in Chapter III indicates that the intention of Parliament it is to be regarded as an exemption and not a deduction. The Act of Parliament in consciously retaining this section in Chapter III indicates its intention that the nature of relief continues to be an exemption. Chapter VII deals with the incomes forming part of the total income on which no income-tax is payable. These are the incomes which are exempted from charge, but are included in the total income of the assessee. Parliament, despite being conversant with the implications of this Chapter, has consciously chosen to retain section 10A in Chapter III;
(ii) There is a difference of opinion between the Karnataka and Bombay High Courts as to whether Section 10A or Section 10B are in the nature of exempt income or deductions. However, there is agreement in both the opinions as to the manner of computation and that such profits have to be eliminated at the first stage itself, that is, as soon as they are computed, suggesting that it is an exemption provision. It was held that the eligible profits are not to be subjected to the adjustment under Section 72 of the Act, and the brought forward loss from the unit eligible for the relief under Section 10B cannot be adjusted against the profits from the other three eligible units, which in effect reiterates the position that the loss does not enter the field of taxation just as the profits also do not enter the field. This, with respect, lends support more to the view that Section 10A and Section 10B are in the nature of exemption provisions, rather than provisions for deduction;
(iii) Even if Section 10A/ Section 10B are treated as exemption provisions, Section 80A (4) cannot defeat that interpretation. The object of Section 80-A (4) is to ensure that double benefit does not result to an assessee in respect of the same income, once under Section 10A or Section 10B or under any of the provisions of Chapter VIA and again under any other provision of the Act. Even if Section 10A or Section 10B is construed as exemption provisions, it is still possible to invoke the sub-section and ensure that the assessee does not obtain a deduction in respect of the exempted income under any other provision of the Act. The only object of the sub-section is to ensure that there is no double benefit arising to the assessee in respect of the same income.
(iv) Consequently, the tax-exempt income of the assessee, eligible under Section 10-B cannot be set off against the losses from tax-liable income.
(CIT v. TEI Technologies (P) Ltd  361 ITR 36), CIT vs. Galaxy Surfactants Ltd. (343 ITR 102), Hindustan Lever Ltd. vs. Deputy Commissioner of Income Tax (2010) 325 ITR 102 (Bom), CIT v. Himatasingike Side Ltd. 286 ITR 255 Black and Veatch Consulting Pvt. Ltd  348 ITR 72 (Bom), Commissioner of Income-tax v. Williamson Financial Services and Ors., (2008) 297 ITR 17 (SC) & CIT v. Yokogawa India Ltd., (2012) 341 ITR 385 (Kar) referred)
VERY BAD OF REVENUE VERY SORRY TO NOTE.. REVENUE CASES NEED NOT BE COUNTENANCED AT ALL AS EVERY REVENUE APPEAL IS SOME MEANINGLESS ACTION.. DO YOU ADVOCATES THINK THERE IS SOME SENSE OF PROPORTION PREVAILING IN REVENUE CASES…IF GOVERNMENT TOLERATES LET IT NOT COLLECT TAXES AT ALL, IF THAT WAY THEY ILLOGICALLY COLLECT THEY NEED TO REPAY WITH EXEMPLARY DAMAGES TO TAX PAYERS… THAT WAY ONLY WE CAN SETTLE SOME MEANINGFUL GOVERNANCE IN THE GOVERNMENT ADMINISTRATIVE SYSTEMS, I THINK!