The AO and CIT (A) rejected the claim on the ground that after the amendment of s. 10A w.e.f. 1.4.2001, a deduction is allowed from the “total income” and consequently the losses have to be taken into account. On a reference to the Special Bench, HELD deciding in favour of the assessee:
(i) S. 10A allows a deduction of the “profits and gains derived by the undertaking from the export of computer software” “from the total income of the assessee”. The effect is that the deduction has to be made at the stage of computing the income under head “Profits & gains” and not at the stage of computing the gross total income;
(ii) S. 80AB is confined to deductions granted under Chapter VI-A. As s. 10A does not fall in Ch. VI-A, s. 80AB has no application;
(iii) S. 10A grants a deduction to the “profits of the undertaking” and not to the “profits of the assessee”. There is a well known distinction between the “undertaking” and the “assessee” as also noted by the CBDT in Circular F. No. 15/563 dated 13.12.1963. The deduction u/s 10A attaches to the undertaking and not to the assessee;
(iv) Consequently, the losses of a non-eligible unit cannot be set off against the profits of an eligible unit and are eligible to be set-off against other income or to be carried forward. The position of a losses of an eligible unit may be on a different footing.
Note: The judgements in Yokogawa India Ltd 111 TTJ 548 (Bang) & Changepond Technologies 22 SOT 220 (Mad) are impliedly approved. In Global Vantage (ITAT Del) it was held that the brought forward unabsorbed business losses and unabsorbed depreciation of the eligible unit had to be set off before allowing deduction u/s 10A.
