Section 10A — While computing deduction u/s.10A of an eligible unit, loss of non-eligible and other eligible unit cannot be set off against profit of such eligible unit.
The assessee was rendering services from its three units located at Chennai, Bangalore and Kochi. It claimed exemption of Rs.58.68 lakh u/s.10A in respect of income from the Bangalore unit. The Assessing Officer held that the loss from the other two units had to be set off first against the income of the Bangalore unit and since this set-off left the assessee with no positive income, the assessee was not entitled to any exemption u/s.10A. The CIT(A) upheld the order of the Assessing Officer.
The Tribunal, following the Special Bench decision of ITAT Chennai in the case of Scientific Atlanta India Technology (P.) Ltd. v. ACIT, (2010) 129 TTJ 223 (Chennai) (SB)/(2010) 37 DTR 46 (Chennai) (SB)/(2010) 2 ITR 66 (Trib.) (Chennai) (SB), held as under:
(1) The business loss of non-eligible unit(s) cannot be set off against the profits of undertaking(s) eligible for deduction u/s.10A.
(2) Any other income, including the losses arising to the assessee from other concerns, shall be computed as per the regular provisions of the Act, and, consequently, carried forward under and in terms of the regular provisions of the Act.
(3) That the unabsorbed claim u/s.10A, i.e., the income after deduction, having arisen from an eligible unit, cannot be carried forward in the like manner as a business loss or unabsorbed depreciation and would, therefore, be subject to tax.
(4) Deductions u/s.10A and u/s.10B, and also those u/s.80HH, u/s.80HHA, u/s.80-I, u/s.80-IA, etc. are unit-specific in contradiction to being assessee-specific.
(5) There is nothing in the section that suggests aggregation of profits from two or more undertakings so that the profit derived from each is to be considered separately i.e., as if it were the only income of the assessee, for the purpose of computation of deduction thereunder.
(6) In other words, the qualifying amount and, consequently, the deduction in its respect are to be worked out on a stand-alone basis, independently for each eligible unit.
(7) Loss of any other unit is not to be set off while computing deduction u/s.10A.
(8) Income that remains after the deduction u/s. 10A or the unabsorbed claim u/s.10A would stand to be taxed as such i.e., shall not be set off against any other loss or be carried forward.
