By C. N. Vaze, Shailesh Kamdar, Chartered Accountants
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31 (2008) 114 TTJ 881 (Chennai)
Ford Business Services Center (P) Ltd. v. ACIT
ITA No. 308 (Mad.) of 2005 &
C.O. No. 170 (Mad.) of 2005
A.Y. 2001-02. Dated : 22-6-2007
S. 10B, S. 32(2) and S. 72 of the Income-tax Act, 1961 —
Set-off of business loss and unabsorbed depreciation of earlier assessment years
is allowable against the profits and gains of a unit eligible for deduction
u/s.10B.
For the relevant assessment year, the assessee, engaged in
the business of IT-enabled accounting services and software development, claimed
set-off of carried forward business loss and unabsorbed depreciation against the
income of the unit on which deduction u/s.10B was claimed. The Assessing Officer
and the CIT(A) disallowed the claim. The CIT(A) noted that once the profits and
gains of the unit are eligible for S. 10B deduction, it cannot be taken into
consideration for set-off u/s.70 or u/s.71 or for application of S. 72 and,
therefore, loss from other undertaking cannot be set off against this profit.
The Tribunal allowed the assessee’s claim. The Tribunal
observed as under :
(a) The heading of Chapter III of the Income-tax Act,
i.e. ‘Incomes which do not form part of total income’ cannot be conclusive
about the exact purport of any provision contained in the said chapter.
(b) When S. 10B was introduced w.e.f. 1st April 1989, there
was total exclusion of such income from the total income. Subsequently,
however, the total exclusion was removed and deduction was provided for.
Similar is the case for S. 10A, S. 10AA and S. 10BA.
(c) Once deduction u/s.10B has to be allowed, the total
income of the undertaking will enter the computation and then only deduction
will be given to the assessee. If that is the case, then the stand of the
CIT(A) that S. 10B is a secluded provision cannot be accepted. Had it been a
case where total exclusion from income was provided for, then perhaps, the
observation of the CIT(A) that such income cannot be taken into consideration
for set-off u/s.70, u/s.71, or u/s.72 would have been proper.
Therefore, the Assessing Officer is directed to consider the
set-off of unabsorbed business losses and depreciation after availing deduction
u/s.10B.
