Section 10B

Section 10B — the law in short

What the courts have decided on section 10B, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Yokogawa India Ltd Supreme CourtHelps taxpayer
  Must my 10A unit's profits be reduced by other units' losses before the deduction?
  No. After the Finance Act 2000 the relief is a deduction rather than an exemption, but it is worked out while computing the profits of the eligible undertaking, before the setting off and aggregation that produces total income. Losses of other units and brought-forward losses therefore do not eat into it.
• PCIT v Macquarie Global Services Pvt Ltd — s.10AA(4) is unit specific, and the splitting-up objection belongs to the first year High CourtHelps taxpayerValidity unconfirmed
  The Assessing Officer says my client's SEZ unit is a reconstruction of its existing EOU business, and he is raising it in year three after allowing the claim twice. Can he?
  The Delhi High Court held that the conditions in s.10AA(4) are unit specific and not assessee specific, so an assessee who already runs an export business — even one that enjoyed s.10A relief — is not disqualified from claiming s.10AA on a genuinely new SEZ unit. It also held, following its own earlier decisions, that the objection under clause (ii) that the undertaking was formed by splitting up or reconstruction relates to the date of formation and must be taken in the first year in which the exemption is claimed, not in a later year. The Revenue's appeal was dismissed with no substantial question of law arising.
• Saguna Rural Foundation v Exemption Ward 2(3), Mumbai ITATHelps taxpayerValidity unconfirmed
  CPC denied my s.11(2) accumulation because Form 10 was filed after the s.139(1) due date, and the CIT(A) said s.13(9) settles it. Can the Tribunal still help me?
  Yes. Following the jurisdictional High Court in CIT v Sakal Relief Fund, the Mumbai Tribunal held that filing Form No. 10 before completion of assessment satisfies s.11(2), so a s.143(1) denial founded only on the s.139(1) due date cannot stand. The matter was restored to the Assessing Officer for the limited purpose of checking that the stated purpose of accumulation matches the objects and is backed by a trustees' resolution, with an express direction not to deny exemption on merely technical grounds.
• 360 One Distribution Services Ltd v DCIT — s.80A(5) kills a s.80JJAA claim first made before the Commissioner (Appeals) ITATHelps departmentValidity unconfirmed
  We missed the s.80JJAA claim in the return and raised it for the first time in appeal, with the Form 10DA report in hand. Can the Commissioner (Appeals) or the Tribunal still allow it?
  No. The Mumbai Tribunal held that s.80A(5) disentitles an assessee from claiming a deduction under s.80JJAA where the claim was not made in the return of income, and that this disposes of the matter without going into any other aspect. It was no answer that the chartered accountant's Form 10DA had been issued, because the Tribunal found nothing on record that prevented the assessee from raising the claim and filing Form 10DA before the Assessing Officer during the scrutiny proceedings, which ran on until the assessment order was passed. The appeal was dismissed.
• Statutory position — the Explanation to s.10AA(1): the SEZ deduction is capped at total income, and a late return kills it CBDT Circulars & InstructionsCuts both ways
  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).

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.