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Tax Publishers
Dy. CIT v. Ocwen Financial Solutions (P) Ltd.
[IT(TP)A No. 511/Bang/2016, dt. 25-9-2020] : 2020 TaxPub(DT) 3873 (Bang-Trib)
1. Deduction under section 10A/10AA is it prior to set off
of carry forward losses or vice versa?
2. Buy back expenses whether allowable as a business
expenditure?
Facts:
1. Assessee had returned the following incomes during the
assessment year --
Amount (in Rs.)
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S.
No.
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Particulars
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Bangalore
unit (taxable unit)
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Bangalore
unit (Section 10AA unit)
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Mumbai
unit (Section 10A unit)
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Total
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1
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Taxable profits
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9,18,62,166
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5,77,47,822
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2,93,35,804
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17,89,45,792
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2
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Less : Section 10A/10AA deduction
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(5,77,47,822)
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(2,93,35,804)
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(8,70,83,626)
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3
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Taxable profits
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9,18,62,166
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|
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9,18,62,166
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4
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Less : Set off brought forward losses of
assessment year 2005-06/2006-07/2010-11
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(1,01,40,720)
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|
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(1,01,40,720)
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5
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Taxable business income
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8,17,21,446
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8,17,21,446
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The assessing officer and DRP reduced
the brought forward losses in (4) above first and then computed the deduction
of section 10A/10AA in short they adjusted the b/f
losses against the exempt income under section 10A/10AA. On higher appeal--
2. Assessee incurred expenses for buyback of shares which
was disallowed by AO/DRP on higher appeal --
Held in favour of the assessee basing Yokogawa India
Ltd. (2017) 77 taxmann.com 41 (SC) that first deduction under section
10A/10AA be allowed then set off provisions be done. What is not income first
cannot be added to gross taxable income thus deductions under section 10A/10AA
precede set off provisions.
Held in favour of the assessee basing CIT v. Motor
Industries Co. Ltd. [ITA No. 1064/2008 judgment, dated 31-10-2014 (Karnataka
High Court)] that buy back of shares do not bring in any enduring benefit
thus are allowable expenditure.
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