CIT vs. Tei Technologies (P) Ltd.; 259 CTR 186 (Del):
In the relevant years, the assessee claimed exemption u/s. 10A, 1961 by computing the exempt amount without setting off the loss of non eligible units. The Assessing Officer computed the amount after setting off the loss from the non -eligible units against the profit of the eligible units. The Tribunal allowed the assessee’s claim.
On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:
“i) Even after the amendment by the Finance Act, 2000, section 10A has been retained in Chapter III of the Act, notwithstanding the change in the language of s/s. (1) thereof. Secondly, though s/s. (1) provides for a deduction of the eligible profits, it further states that the deduction “shall be allowed from the total income of the assesee”.
ii) Determination of total income is the last point before the tax is charged, and once the total income is determined or quantified, there is absolutely no scope for making any further deduction. If this is the true legal position, it is not possible to understand s/s. (1) of section 10A as providing for a “deduction” of the profits of the eligible unit “from the total income of the assessee”. The definition of the expression “total income” given in section 2(45) cannot be imported into the interpretation of s/s. (1) having regard to the context in which it is used and the scheme of the Act relating to the charge of tax.
iii) The form of the return of income prescribed by the Rules gives a further indication that section 10A provides for an exemption and not merely a deduction. Steps given in the return form ITR-6 are also an indication that the relief u/s. 10A has to be given before the adjustment of the losses of the current year and the brought forward losses from the past years.
iv) Incomes which are enumerated in Chapter III have traditionally been considered as incomes which are exempt from tax rather than as deduction in the computation of total income. The fact that a particular class of income is only partially exempt from taxation does not necessarily mean that it is only a deduction. Admittedly, there is ambiguity and lack of clarity or precision in the language employed in section 10A(1) which says that deduction shall be made from the total income, when the Act contains no provision to allow any deduction from the total income.
v) Thus, it is not impermissible to rely on the heading or title of Chapter III and interpret the section as providing for an exemption rather than a deduction even after the amendment by Finance Act, 2000 w.e.f. 01-04-2001.
vi) S/s. (4) of section 80A cannot defeat such construction. Sole object of s/s. (4), is to ensure that double benefit does not enure to an assessee in respect of the same income, once u/s. 10A or 10B or under any of the provisions of Chapter VI-A and again under any other provisions of the Act. This s/s. does not militate against the view that section 10A or section 10B is an exemption provision.
vii) Contents of Circular No. 5 of 2010 dated 03-06- 2010, accord with the aforesaid view. Therefore, the current losses as well as brought forward losses of the non-EPZ unit cannot be deducted or reduced from the profits of EPZ unit for computing the deduction u/s. 10A.”
