Page 154 - DCOM508_CORPORATE_TAX_PLANNING

Unit 6: Tax Planning: FTZ, SEZ and 100 % EOUs

Notes
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 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 affi rmative. 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 profi ts 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 profi t earned for the same year by the non 10A units. In the case of
Honeywell International India (Pvt.) 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 profi ts 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 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.
As against this view adumbrated in the orders of the Tribunal, in accordance with which
the assessment order in the present case has been framed, the CIT has taken a different
view. We are not here concerned with the correctness of either of the views. It is only
to be noted that where the assessment order has been passed on the basis of one of the
several plausible views or interpretations to be placed on the statutory provisions, it does
not become erroneous and prejudicial to the interests of the revenue merely because the
CIT prefers to adopt another view which is favourable from the Revenue’s point of view.
This is a well settled position for which no authority needs to be cited. In this view of the
matter, we hold that the Assessing Officer did not err and the assessment order passed

by him cannot be said to be erroneous because the 10% profits of the units eligible for the

benefit under section 10A have been used to adjust the losses from the local non 10A units.
The appeal of the assessee is accordingly accepted and the order of the CIT passed under
section 263 is set aside.
Contd...

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