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Unit 5: Exemptions and Deductions – II

be utilized for being adjusted against the brought forward losses and the losses for the Notes
same year either under the same head of income but from a different source or under
another head of income for the same year. 6 ITA No: 4324/Mum/2008. It was thus submitted
that the order under section 263 was bad in law.

The learned CIT Departmental Representative strongly relied on the order passed by the
CIT and the reasoning given therein. She further submitted that the assessment order was
contrary to the provisions of the statute and, therefore, was rightly held to be erroneous
by the CIT. It was her contention that the 10% profits which are taxed under section 10A for
the assessment year 2003–04 cannot be utilized for being adjusted against losses for the
same year under different sources or heads of income or against brought forward losses.
She submitted that such profits stand on a separate footing and cannot be considered to be
part of the profits and gains of the business as computed under sections 29 to 43 of the Act.
On a careful consideration of the rival contentions, we are of the view that the assessment
order cannot be said to be erroneous since it is in accordance with the views expressed in
several orders of different Benches of the Tribunal. In the case of Mindtree Consulting Pvt.
Ltd. (supra), it was held that the profits which became taxable after availing of the exemption
under section 10B of the Act were available to be adjusted against the loss assessed for the
same year under the head “Income from other sources” as permitted under section 71.
It may be clarified that section 10B is substantially similar to section 10A of the Act. In the
case of Navin Bharat Industries Ltd. (supra), the Mumbai Bench of the Tribunal held that
the units under section 10A are entitled to set off their 7 ITA No: 4324/Mum/2008 losses
against the profits from non 10A units or against other business income for the same year.
This order deals with the reverse situation. However, the question is whether the provisions
of sections 70 and 71 are applicable even with regard to the losses or profits assessed in
respect of units enjoying the benefits of section 10A.
That question was decided by the Tribunal by holding in the affirmative. In Wipro BPO
Solutions Ltd. vs. DCIT [2010- TIOL-95-ITAT-BANG], the Bangalore Bench of the Tribunal
was dealing with section 10B. After noting that 90% of the profits were deductible under
the section and 10% of the profits were assessable for the assessment year 2003–04, it was
held that the business loss brought forward from the assessment year 2001–02 can be set
off against the 10% profits assessed under section 10B for the assessment year 2003–04. In
DCIT vs. A V Thomas Leather & Allied Products Ltd. [2009-TIOL-434-ITAT-MAD], the
Chennai Bench of the Tribunal held that the loss in respect of a unit under section 10A can
be set off against the profit earned for the same year by the non 10A units. In the case of
Honeywell International India () Ltd. vs. DCIT (2007) 108 TTJ (Del) 924, the Delhi Bench of
the Tribunal was dealing with the loss of an unit eligible under section 10A for the
assessment year 2003–04. It was held that the loss can be set off against the profits of any
other unit or business under sections 70 and 71 of the Act. Again the Mumbai Bench of the
Tribunal in the case of Sovika Infotek Ltd. vs. ITO [2008-TIOL- 343-ITAT-MUM], dealing
with section 10B, held that the provisions of sections 70 and 71 were applicable and the loss
from the 10A 8 ITA No: 4324/Mum/2008 unit can be adjusted against the income from
other sources for the same year.

Thus there is ample authority in the form of orders of different Benches of the Tribunal for
the proposition that the 10% profits of an unit under section 10A which is assessed for the
assessment year 2003–04 are not different in any way from the profits of any other business
carried on by the assessee and, therefore, any losses for the same year or brought forward
from an earlier year can be adjusted against those profits. The loss arising in the section
10A unit is also eligible for being adjusted against the profits of any other business for the
same year or against income under other heads of income.
Contd...

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