Saturday, 17 December 2016

Lays down law on loss set-off for Sec 10A/10B units in Yokogawa case

SC rules upon issue of set-off of losses of Sec. 10A/10B units, non- eligible units while computing benefit allowable u/s 10A/10B in Yokogawa India and other cases; Holds that Sec. 10A/10B, post amendment by Finance Act, 2000 w.e.f. April 1, 2001, is a 'deduction provision' and not an 'exemption provision' even though it appears in Chapter III dealing
with income not forming part of total income; Observes that introduction of the word ‘deduction’ in Section 10A has to be understood as "a clear enunciation of the legislative decision to alter its nature from one providing for exemption to one providing for deductions"; Further states that provisions of Sec 80HHC and 80HHE  which provide for somewhat similar deductions as Sec.10A/10B would be wholly irrelevant and redundant if deductions u/s 10A/10B were to be made at the stage of operation of Chapter VI of the Income-tax Act; Therefore, holds that "The retention of the said provisions of the Act i.e. Section 80HHC and 80HHE, despite the amendment of Section 10A, in our view, indicates that some additional benefits to eligible Section 10A units, not contemplated by Sections 80HHC and 80HHE, was intended by the legislature."; Further observes that deduction u/s 10A/10B are qua the undertaking without reference to other eligible /non-eligible units and thus the benefit is granted to the undertaking which resultantly flow to the assessee, draws support from contemporaneous CBDT Circular No. 794 dated August 9, 2000;  Thus holds that " it is only logical and natural that the stage of deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of determination of its profits and gains" and therefore provisions of set off and carry forward of losses (Sec 70, 72 and 74) would be premature for application; Reconciles the "discordant" use of the expression "total income of the assessee" in Sec. 10A by understanding it as "total income of the undertaking"; Thus, concludes that Sec. 10A/10B are provisions of deduction and the stage of deduction is while computing gross total income of eligible undertaking under Chapter IV of the Income-tax Act and not at the stage of computation of total income under Chapter VI:SC 

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