My client has an SEZ unit in profit and other units in loss. Does the s.10AA deduction come off the unit's own profit before the other units' losses, or only after? And does a late return matter?
The Explanation to s.10AA(1) now settles the arithmetic against the taxpayer at the outer limit: the deduction "shall be allowed from the total income of the assessee computed in accordance with the provisions of this Act, before giving effect to the provisions of this section and the deduction under this section shall not exceed such total income of the assessee". So whatever the unit-wise computation produces, the allowance cannot exceed the assessee's total income computed after every other provision of the Act — including the set-off provisions — has been applied. Separately, the proviso to s.10AA(1) denies the deduction outright to an assessee who does not furnish a return of income on or before the due date under s.139(1).
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2018-04-01, reported as Section 10AA as printed on the Income Tax Department's section page, "Year: 2026"; s.80A(5) as reproduced verbatim by the ITAT Mumbai in ITA No. 5282/MUM/2025 dated 20 February 2026. It bears on section 10AA, section 10AA(1), section 80A(5), section 80AC, section 139(1), section 10A, section 10B of the Income Tax Act 1961, in Capital Gains Exemptions, Deductions & Disallowances and How Tax Law Is Read matters.
This is the amendment under the advice, and it is easy to miss because the section heading and the old case law look unchanged. The line of authority that treats s.10A and s.10AA as an exemption computed at the undertaking stage before the losses of other units come off — CIT v Yokogawa India Ltd on s.10A, and the s.10AA application of it in the library's Genesys International entry — was built on the section as it read before this Explanation was inserted. The Explanation does not itself convert s.10AA into a Chapter VI-A deduction, and it does not in terms direct that the losses of other units be set off against the eligible unit's profits; what it does is impose a ceiling — the deduction cannot exceed total income computed under the Act before s.10AA is applied. Where the other units' losses have swallowed the group's total income, that ceiling bites and the excess is simply lost. The practical consequence is that a Yokogawa-based computation for a year to which the Explanation applies must be re-checked against the ceiling before it is put in the return. The due-date proviso is a second trap: it sits inside s.10AA itself, so a reader who checks only s.80AC (which speaks to Chapter VI-A Part C deductions) will not find it. And s.80A(5), which the Mumbai Tribunal set out in 360 One Distribution Services, expressly names s.10A, s.10AA, s.10B and s.10BA — so the claim must also be made in the return itself.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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This is a statement of the statutory position, not a case. The text relied on is section 10AA as printed on the Income Tax Department's section page carrying the stamp "Year: 2026", fetched twice on 8 September 2026 with identical wording returned on both passes. Immediately after clause (ii) of sub-section (1) the section carries: "Provided that no such deduction shall be allowed to an assessee who does not furnish a return of income on or before the due date specified under sub-section (1) of section 139. Explanation.—For the removal of doubts, it is hereby declared that the amount of deduction under this section shall be allowed from the total income of the assessee computed in accordance with the provisions of this Act, before giving effect to the provisions of this section and the deduction under this section shall not exceed such total income of the assessee." The text of s.80A(5) relied on is the text the Income Tax Appellate Tribunal, Mumbai reproduced verbatim at paragraph 13 of its order in 360 One Distribution Services Limited v. DCIT, Circle-1, Thane, ITA No. 5282/MUM/2025, order dated 20 February 2026: "(5) Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading 'C.--Deductions in respect of certain incomes', no deduction shall be allowed to him thereunder."
Statutory position. Three separate gates now stand in front of a s.10AA claim over and above the eligibility conditions. First, the claim must be made in the return of income, because s.80A(5) names s.10AA. Second, from AY 2024-25, the return must be furnished on or before the s.139(1) due date, because of the proviso to s.10AA(1) inserted by the Finance Act 2023 with effect from 1 April 2024. Third, the amount allowed cannot exceed the assessee's total income computed in accordance with the provisions of the Act before giving effect to s.10AA, because of the Explanation that follows that proviso, which applies from AY 2018-19.
Not a decided case. The Explanation is drafted as a removal-of-doubts provision and it operates on the allowance rather than on the computation of the eligible profit: it fixes the base from which the deduction is taken (total income computed under the Act before s.10AA is applied) and then caps the deduction at that base. It therefore leaves untouched the anterior question of how the eligible profit of the Unit is computed, which is where s.10AA(7) and the export turnover definition operate, but it removes any possibility of the s.10AA allowance exceeding the assessee's total income — which is the practical form in which the losses of other units reach the SEZ claim.
the amount of deduction under this section shall be allowed from the total income of the assessee computed in accordance with the provisions of this Act, before giving effect to the provisions of this section and the deduction under this section shall not exceed such total income of the assessee
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Handle my notice → Ask a CA on WhatsAppThe Explanation to s.10AA(1) now settles the arithmetic against the taxpayer at the outer limit: the deduction "shall be allowed from the total income of the assessee computed in accordance with the provisions of this Act, before giving effect to the provisions of this section and the deduction under this section shall not exceed such total income of the assessee". So whatever the unit-wise computation produces, the allowance cannot exceed the assessee's total income computed after every other provision of the Act — including the set-off provisions — has been applied. Separately, the proviso to s.10AA(1) denies the deduction outright to an assessee who does not furnish a return of income on or before the due date under s.139(1). This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 10AA, section 10AA(1), section 80A(5), section 80AC, section 139(1), section 10A, section 10B of the Income Tax Act 1961. It is reported as Section 10AA as printed on the Income Tax Department's section page, "Year: 2026"; s.80A(5) as reproduced verbatim by the ITAT Mumbai in ITA No. 5282/MUM/2025 dated 20 February 2026. This is the amendment under the advice, and it is easy to miss because the section heading and the old case law look unchanged. The line of authority that treats s.10A and s.10AA as an exemption computed at the undertaking stage before the losses of other units come off — CIT v Yokogawa India Ltd on s.10A, and the s.10AA application of it in the library's Genesys International entry — was built on the section as it read before this Explanation was inserted. The Explanation does not itself convert s.10AA into a Chapter VI-A deduction, and it does not in terms direct that the losses of other units be set off against the eligible unit's profits; what it does is impose a ceiling — the deduction cannot exceed total income computed under the Act before s.10AA is applied. Where the other units' losses have swallowed the group's total income, that ceiling bites and the excess is simply lost. The practical consequence is that a Yokogawa-based computation for a year to which the Explanation applies must be re-checked against the ceiling before it is put in the return. The due-date proviso is a second trap: it sits inside s.10AA itself, so a reader who checks only s.80AC (which speaks to Chapter VI-A Part C deductions) will not find it. And s.80A(5), which the Mumbai Tribunal set out in 360 One Distribution Services, expressly names s.10A, s.10AA, s.10B and s.10BA — so the claim must also be made in the return itself. If it applies to you, the first step is this: Compute the unit-wise s.10AA figure first, then compute the assessee's total income under the Act without giving effect to s.10AA, and allow the lower of the two — the Explanation makes the second figure a hard ceiling.
This is a statement of the statutory position, not a case. The text relied on is section 10AA as printed on the Income Tax Department's section page carrying the stamp "Year: 2026", fetched twice on 8 September 2026 with identical wording returned on both passes. Immediately after clause (ii) of sub-section (1) the section carries: "Provided that no such deduction shall be allowed to an assessee who does not furnish a return of income on or before the due date specified under sub-section (1) of section 139. Explanation.—For the removal of doubts, it is hereby declared that the amount of deduction under this section shall be allowed from the total income of the assessee computed in accordance with the provisions of this Act, before giving effect to the provisions of this section and the deduction under this section shall not exceed such total income of the assessee." The text of s.80A(5) relied on is the text the Income Tax Appellate Tribunal, Mumbai reproduced verbatim at paragraph 13 of its order in 360 One Distribution Services Limited v. DCIT, Circle-1, Thane, ITA No. 5282/MUM/2025, order dated 20 February 2026: "(5) Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading 'C.--Deductions in respect of certain incomes', no deduction shall be allowed to him thereunder." The matter was decided on 2018-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Statutory position. Three separate gates now stand in front of a s.10AA claim over and above the eligibility conditions. First, the claim must be made in the return of income, because s.80A(5) names s.10AA. Second, from AY 2024-25, the return must be furnished on or before the s.139(1) due date, because of the proviso to s.10AA(1) inserted by the Finance Act 2023 with effect from 1 April 2024. Third, the amount allowed cannot exceed the assessee's total income computed in accordance with the provisions of the Act before giving effect to s.10AA, because of the Explanation that follows that proviso, which applies from AY 2018-19.
Not a decided case. The Explanation is drafted as a removal-of-doubts provision and it operates on the allowance rather than on the computation of the eligible profit: it fixes the base from which the deduction is taken (total income computed under the Act before s.10AA is applied) and then caps the deduction at that base. It therefore leaves untouched the anterior question of how the eligible profit of the Unit is computed, which is where s.10AA(7) and the export turnover definition operate, but it removes any possibility of the s.10AA allowance exceeding the assessee's total income — which is the practical form in which the losses of other units reach the SEZ claim. In the words reproduced by the source cited on this page: "the amount of deduction under this section shall be allowed from the total income of the assessee computed in accordance with the provisions of this Act, before giving effect to the provisions of this section and the deduction under this section shall not exceed such total income of the assessee"
It was decided by the CBDT Circulars & Instructions on 2018-04-01 and is reported as Section 10AA as printed on the Income Tax Department's section page, "Year: 2026"; s.80A(5) as reproduced verbatim by the ITAT Mumbai in ITA No. 5282/MUM/2025 dated 20 February 2026. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 10AA, section 10AA(1), section 80A(5), section 80AC, section 139(1), section 10A, section 10B, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Statutory position. Three separate gates now stand in front of a s.10AA claim over and above the eligibility conditions. First, the claim must be made in the return of income, because s.80A(5) names s.10AA. Second, from AY 2024-25, the return must be furnished on or before the s.139(1) due date, because of the proviso to s.10AA(1) inserted by the Finance Act 2023 with effect from 1 April 2024. Third, the amount allowed cannot exceed the assessee's total income computed in accordance with the provisions of the Act before giving effect to s.10AA, because of the Explanation that follows that proviso, which applies from AY 2018-19. It arises in Capital Gains Exemptions, Deductions & Disallowances and How Tax Law Is Read matters, on section 10AA, section 10AA(1), section 80A(5), section 80AC, section 139(1), section 10A, section 10B of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Before relying on Yokogawa or on any pre-amendment s.10A authority to resist a set-off, check the assessment year against the year from which the Explanation and the proviso operate, and say in the submission which text you are applying. For AY 2024-25 onwards, check the actual date of filing of the return against the s.139(1) due date for that year, including any CBDT extension; the proviso to s.10AA(1) is unconditional in its terms and does not carry a 'reasonable cause' escape. Make sure the s.10AA claim appears in the return itself and not for the first time in appeal — s.80A(5) covers s.10AA by name. Do not argue the point off s.80AC: s.80AC reaches deductions under Part C of Chapter VI-A, and s.10AA is not in Chapter VI-A. The bar on s.10AA for a late return is the proviso inside s.10AA(1).
Still good law. The statutory words are the words the Income Tax Department printed on 8 September 2026 under the stamp "Year: 2026", with the section heading returned on the same fetch, and were transcribed identically on two fetches; the s.80A(5) text is the text a Tribunal reproduced at paragraph 13 of an order read in full. The commencement of both the Explanation (Finance Act 2017, w.e.f. 1-4-2018) and the proviso (Act No. 8 of 2023, w.e.f. 1-4-2024) is established from footnotes on year-stamped departmental pages. What remains unverified is whether any court has yet construed the Explanation — none was found, and no citator check was run. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Both amendments are now dated, and they are six years apart — do not treat them as one. The Explanation was inserted by the Finance Act 2017 with effect from 1 April 2018, so it first bites in AY 2018-19: the departmental page stamped Year: 2017 (/w/section-10aa-12) prints, between clause (ii) and sub-section (2), "Following Explanation shall be inserted in sub-section (1) of section 10AA by the Finance Act, 2017, w.e.f. 1-4-2018", followed by the Explanation itself. This brackets cleanly: the Explanation is absent on the Year 2016 page (/w/section-10aa-11) and present on the Year 2019 (No. 2), Year 2020, Year 2021 and Year 2022 pages. The proviso requiring a return by the s.139(1) due date is later: it was inserted by the Finance Act 2023 (Act No. 8 of 2023) with effect from 1 April 2024, so it first bites in AY 2024-25 — the page stamped Year: 2024 (No. 2) (/w/section-10aa-19) carries footnote [75], "Ins. by the Act No. 8 of 2023, w.e.f. 1-4-2024", against it, and the proviso is absent from the Year 2019 (No. 2), 2020, 2021 and 2022 pages and present from the Year 2023 page. decided_on is the commencement date of the earlier of the two, the Explanation (1 April 2018); it is not a decision date. So for AY 2018-19 to AY 2023-24 the Explanation ceiling applies but the due-date proviso does not, and a claim in a belated return for those years cannot be resisted on the proviso. I found no judgment construing the Explanation and none is cited; the reading offered is a reading of words transcribed twice from the Year: 2026 page. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Statutory position. Three separate gates now stand in front of a s.10AA claim over and above the eligibility conditions. First, the claim must be made in the return of income, because s.80A(5) names s.10AA. Second, from AY 2024-25, the return must be furnished on or before the s.139(1) due date, because of the proviso to s.10AA(1) inserted by the Finance Act 2023 with effect from 1 April 2024. Third, the amount allowed cannot exceed the assessee's total income computed in accordance with the provisions of the Act before giving effect to s.10AA, because of the Explanation that follows that proviso, which applies from AY 2018-19.
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