Law: Income Tax Act, 1961

Section: 10B

ORDER S. Ravindra Bhat, J. - The question of law framed in this case is as follows: "Whether the learned Income Tax Appellate Tribunal was correct in holding that the loss suffered by the Assessee in a unit entitled for exemption under Section 10B of the Income Tax Act, 1961, can be set off against income from any other unit not eligible for such exemption?" 2. The brief facts of this appeal under Section 260A of the Income Tax Act, 1961 (hereinafter "the Act") are as follows. M/s. Kei Industries Ltd., (hereinafter the "Assessee") is a Public Limited company, engaged in the business of manufacturing cables, wires and stainless steel wires selling them to public sector companies and Electricity Board. It filed its return of income on 29.09.2008 declaring Rs. 1,49,18,516/- as income for the year under consideration. It was assessed under the provisions of Section 143(3) of the Act. The Assessing Officer (AO) during the assessment proceedings, noticed that: (i) The Assessee had a hundred per-cent export oriented undertaking (100% EOU) at Plot No.A-280 to 283, RIICO Industrial Area, Chopanki, Distt. Alwar (Rajasthan); was registered as EOU in Noida Special Economic Zone and eligible for deduction under Section 10B of the Act. This was the first year of operation of this Unit. (ii) However, there was a loss of Rs. 2,00,29,769/- from this unit which the assessee had set off against the income of the other units. 3. The assessee was asked to explain as to why the set-off of this loss should not be disallowed, as the income of this unit was exempt from tax. In response, the Assessee furnished its detailed submissions, which, however, were rejected by the AO who was of the opinion that as Section 10B was in Chapter-III of the Act, under the heading - "incomes which do not form part of total income", legislative intent was clear that such income was exempt. The AO also held that such being the case, losses of the unit, too could not be set off against income of any other unit(s). Consequently, the loss of Rs. 2,00,29,769/- from the Chopanki Unit was not allowed to be set off from the income of other units. 4. Aggrieved, the assessee preferred an appeal to the…

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