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By Vijay Kumar

Income Tax

Profit from the eligible business for deduction u/s 80IA of the Act has to be computed after deduction of the notional brought forward losses and depreciation – ITAT Special Bench

Deduction under Section 80IA :

Section 80-IA(5) of the Act seeks to regard the eligible unit as a separate source of income so as to separately determine the carry forward and set off of losses in the hands of that unit. the only harmonious construction of section 80-IA(5), consistent with the object in allowing deduction only to profits and gains of the eligible business would be that-

a. the deduction under that section would be computed with reference to profits of the eligible unit, unaffected by losses suffered in other units;

b. in case of loss suffered by the eligible unit, such loss would not be set off against profits of other units / other business / other incomes in the initial year of assessment or subsequent years of eligible years of assessments ;

c. where losses of the eligible unit remained to be adjusted against that very source they are to be carried forward to subsequent year(s), and set of in the succeeding year(s), and on the balance profit alone the deduction admissible would be computed;

d. where there are no losses of the eligible unit carried forward (in view of set off against profits of that very source), it is the mandate of law that the losses of earlier years, though already absorbed against other sources they are once again be notionally brought forward and set off against profits of the eligible unit to compute eligible deduction.

e. the deduction would be limited to gross total income;

Central Excise

Conversion of copper rods into Copper wire - there cannot be two definitions for manufacture, one for EOU and another for DTA unit – Liability to be restricted to duty and interest under notification 22/2003-CE: Tribunal

DUTY has been demanded with interest and penalty on Copper Wire “manufactured” by the appellant and cleared to domestic tariff area on refusal by their customers to whom they were sent for export.

The Adjudicating Authority has held –

• Conversion of Copper rods into wires has to be treated as manufacture in view of the fact that unit themselves have obtained LOP for manufacture from the Development Commissioner and the licence is granted to them for manufacture;

• The Development Commissioner while giving post-facto approval for sale in DTA had specifically mentioned that sale will be on payment of full duty in terms of para 6.8(f) of the Exim Policy, 2002-2007.

Central Excise

Clearances made to DTA purchasers, after obtaining requisite permission from DC, against payment in forex, duty need not be discharged by 100% EOU and duty is to be discharged on such clearances by DTA purchasers: Tribunal by Majority

The clearances made to DTA purchasers after obtaining requisite permission from Development Commissioner against payment in foreign exchange, duty need not be discharged by the 100% EOU and duty is to be discharged on such clearances by the DTA purchasers.

As the duty payable is held to be not payable by 100% EOU, and as the said duty has been paid ‘Under Protest', the EOU is eligible for the refund of the duty, along with interest, subject to filing of refund claim, if any, subject to the satisfaction of Doctrine of unjust enrichment.

The clearances of EOU in this case are not provisional since the assessees have not been able to establish the same.

Since the assessments are held not to be provisional, the aspect of unjust enrichment is required to be looked into and suo moto refund cannot be sanctioned.

See our columns tomorrow for the judgements