Deduction u/s 10B allowed before setting off of brought forward business loss and unabsorbed depreciation

The brief facts of the case are that the assessee is engaged in the business of export of processed agricultural produce like gherkins, onions and other vegetables. The assessee company is a 100% Export Oriented Unit and has claimed deduction u/s.10B of the Income Tax Act, 1961 (The Act) from the AY 2000-01. A survey u/s.133A of the Act, was conducted in the business premises of the assessee on 17.11.2009. Consequent to the survey, the assessment has been re-opened u/s.147 of the Act. The assessments have been completed u/s.143(3) r.w.s.147 of the Act, and determined profits & gains eligible for deduction u/s.10B of the Act, at Rs. Nil after setting off of brought forward business loss and unabsorbed depreciation against profit derived from eligible unit and denied deduction u/s.10B of the Act. The assessee carried the matter in appeal before the Ld. CIT(A), but could not succeed. The ld CIT(A) rejected the arguments of the assessee and sustained the additions made by the AO towards denial of deduction u/s.10B of the Act.

ITAT in its order stated that the Hon’ble Supreme Court in the case of CIT & Anr. v. Yokogawa India Ltd .,reported in [2017] 391 ITR 274 (SC), had considered very similar issue and in light of provisions of Sec.10A & 10B of the Act, and after considering relevant facts very categorically held that the stage of deduction would be while computing gross total income of eligible undertaking under Chapter-IV of the Act, and not at the stage of the computation of total income under Chapter-VI of the Act.

The Hon’ble Supreme Court while upholding the decision of the Hon’ble Karnataka High Court in the case of CIT & Anr. v. Yokogawa India Ltd. & Ors. reported in [2012] 341 ITR 385 (Karnataka), had considered the observations of the Hon’ble Karnataka High Court, wherein, it has been clearly held that the exemption u/s.10A of the Act, has to be allowed without setting off of brought forward business loss and unabsorbed depreciation from the earlier assessment years or current assessment year either in the case of STP Units or in the case of very same undertaking.

Therefore, following the decision the decision of the Hon’ble Supreme Court in the case of CIT & Anr. v. Yokogawa India LTd. ITAT is of the view that u/s.10B of the Act, should be allowed before setting off of brought forward business loss and unabsorbed depreciation against profits from the eligible unit. Hence, directed the AO to allow deduction u/s.10B of the Act, as claimed by the assessee.

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