Law:

Section:

Section 10B, read with section 70, of the Income-tax Act, 1961 - Export oriented undertaking - Assessment year 2005-06 - Whether there is no provision in section 10B by which a prohibition has been introduced by Legislature in setting off of a loss which is sustained from one source falling under head of profits and gains of business against income from any other source under same head - Held, yes - Whether therefore, loss sustained by assessee a hundred per cent EOU which is entitled to deduction under section 10B can be set-off against profit of other units under same head - Held, yes [In favour of assessee] FACTS The assessee had a hundred per cent Export Oriented Unit (EOU) which was entitled to a deduction under section 10B. The previous year relevant to assessment year 2005-06 was the first year of production in the unit. During the year under consideration, the assessee disclosed a total profit of Rs. 16.82 crores from business. From this profit, a loss of Rs. 5.56 crores sustained by the hundred per cent EOU was reduced. The loss in the EOU was principally on account of current depreciation which was set-off against the profits of the EOU. After reducing the loss sustained by the EOU against the profits of other units, the assessee disclosed a net taxable income of Rs. 10.76 crores. The Assessing Officer held that a deduction under section 10B had to be given in respect of the profits of the undertaking independently. The Assessing Officer held that a loss sustained by the eligible unit could not be set-off against the income of the other units. The Commissioner (Appeals) confirmed the order of the Assessing Officer. In appeal, the Tribunal, held that there was no justification in the action of the revenue in denying a set-off of a loss of the EOU against the profits of other units as claimed by the assessee. On revenue's appeal: HELD Section 70 provides for a setting off of a loss from one source falling under any head of income (other than capital gains) against income from any other source under the same head. Section 71 provides for the setting off of a loss sustained with reference to one head of income against income from another head (save and…

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