IT - Sections 10A, 10AA, 10B & 10BA - CBDT clarifications
IT has been brought to the notice of the Board that the provisions of 10A/10AA/10B/10BA of the Income-tax Act, with regard to applicability of Chapter IV of the Act and set off and carry forward of losses, are being interpreted differently by the Officers of the Department as well as by different High Courts.
All the above sections fall under Chapter III of the Income Tax Act, which deals with INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME.
Section 10A: Special provision in respect of newly established undertakings in free trade zone, etc.
Section10AA: Special provisions in respect of newly established Units in Special Economic Zones.
Section 10B: Special provisions in respect of newly established hundred per cent export-oriented undertakings.
Section 10BA: Special provisions in respect of export of certain articles or things.
Chapter IV deals with Computation of income.
Now Board clarifies that section 10A and 10B provide for deduction of the profits and gains derived from the export of articles or things or computer software for a period of 10 consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such article or thing or computer software. The deduction is to be allowed from the total income of the assessee. The term 'total income' has been defined in section 2 (45) of the IT Act.
All income for the purposes of computation of total income is to be classified under the following heads of income and computed in accordance with the provisions of Chapter IV of the Act-
• Salaries
• Income from house property
• Profits and gains of business and profession
• Capital gains
• Income from other sources
The income computed under various heads of income in accordance with the provisions of Chapter IV of the IT Act shall be aggregated in accordance with the provisions of Chapter VI of the IT Act, 1961. This means that first the income/loss from various sources i.e. eligible and ineligible units, under the same head are aggregated in accordance with the provisions of section 70 of the Act. Thereafter, the income from one head is aggregated with the income or loss of the other head in accordance with the provisions of section 71 of the Act. If after giving effect to the provisions of section 70 and 71 of the Act there is any income (where there is no brought forward loss to be set off in accordance with the provisions of section 72 of the Act) and the same is eligible for deduction in accordance with the provisions of Chapter VI-A or section 10A, 10B etc. of the Act, the same shall be allowed in computing the total income of the assessee.
If after aggregation of income in accordance with the provisions of section 70 and 71 of the Act, the resultant amount is a loss (pertaining to AY 2001-02 and any subsequent year) from eligible unit it shall be eligible for carry forward and set off in accordance with the provisions of section 72 of the Act. Similarly, if there is a loss from an ineligible unit, it shall be carried forward and may be set off against the profits of eligible unit or ineligible unit as the case may be, in accordance with the provisions of section 72 of the Act.
CBDT letter in F. No. 279/Misc./M-116/2012-ITJ, Dated: July 16, 2013