IMPORTANT POINT
Though Section 10A is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV, and not at the stage of computation of the total income under Chapter VI.

Headnote:(a) Interpretation of statute – Taxing statute – Literal interpretation – No room for any intendment – No equity or presumption about tax – Nothing is to be read in or implied – One can only look fairly at the language used – Chapter notes and marginal headings have no relevance. (Para 8, 9)
       (1921) 1 KB 64; (2009) 16 SCC 659 – Relied upon
       (b) Income Tax Act, 1961 – Section 10A – Amendment 2000 – No more an exemption provision – Instead, providing for deduction – Retention of section 10A in Chapter III merely suggestive and not determinative – Distinction between `exemption' and `deduction' – Reference to deduction under Section 10A in Chapter VI not required – Section 10A not applicable at the stage of operation of Chapter VI – Deductions under Section 10A would be prior to the commencement of exercise under Chapter VI. (Para 13, 14, 15, 17)
       (c) Income Tax Act, 1961 – Section 10A – Expression "total income of the assessee" – Should be understood as ‘total income of the undertaking’. (Para 17)
       (d) Income Tax Act, 1961 – Section 10A – Held, though Section 10A is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV, and not at the stage of computation of the total income under Chapter VI. (Para 18)
       Facts of the case:
       The questions arising in the cases under consideration are:
       (i) Whether Section 10A of the Act is beyond the purview of the computation mechanism of total income as defined under the Act. Consequently, is the income of a Section 10A unit required to be excluded before arriving at the gross total income of the assessee?
       (ii) Whether the phrase "total income" in Section 10A of the Act is akin and pari materia with the said expression as appearing in Section 2(45) of the Act?
       (iii) Whether even after the amendment made with effect from 1.04.2001, Section 10A of the Act continues to remain an exemption section and not a deduction section?
       (iv) Whether losses of other 10A Units or non 10A Units can be set off against the profits of 10A Units before deductions under Section 10A are effected?
       (v) Whether brought forward business losses and unabsorbed depreciation of 10A Units or non 10A Units can be set off against the profits of another 10A Units of the assessee.
       Finding of the Court:
       Though Section 10A is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV, and not at the stage of computation of the total income under Chapter VI.
       Result: Appeals disposed of.

JUDGMENT

RANJAN GOGOI, J.

Leave granted in all the special leave petitions.

2. The true and correct meaning and effect of the provisions of Section 10A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") is the principal issue arising for determination of the Court. At the outset, it must be made clear that the decision of this Court with regard to the provisions of Section 10A of the Act would equally be applicable to cases governed by the provisions of Section 10B in view of the said later provision being pari materia with Section 10A of the Act though governing a different situation.

3. The broad question indicated above may be conveniently dissected into the following specific questions arising in the cases under consideration.

(i) Whether Section 10A of the Act is beyond the purview of the computation mechanism of total income as defined under the Act. Consequently, is the income of a Section 10A unit required to be excluded before arriving at the gross total income of the assessee?

(ii) Whether the phrase "total income" in Section 10A of the Act is akin and pari materia with the said expression as appearing in Section 2(45) of the Act?

(iii) Whether even after the amendment made with effect from 1.04.2001, Section 10A of the Act continues to remain an exemption section and not a deduction section?

(iv) Whether losses of other 10A Units or non 10A Units can be set off against the profits of 10A Units before deductions under Section 10A are effected?

(v) Whether brought forward business losses and unabsorbed depreciation of 10A Units or non 10A Units can be set off against the profits of another 10A Units of the assessee.

4. At the very outset, Section 10A of the Act as it existed prior to its amendment by the Finance Act of 2000 with effect from 1.04.2001; subsequent to the aforesaid amendment and the provisions of Section 10A of the Act, as further amended by the Finance Act, 2003 with retrospective effect from 1.04.2001 may be conveniently set out below.

5. Section 10A of the Act, as it stood prior to the amendment made by the Finance Act, 2000, (amendment effective from 1.4.2001) was as follows:

"10A. (1) Subject to the provisions of this section, any profits and gains derived by an assessee from an industrial undertaking to which this section applies shall not be included in the total income of the assessee.

(2) This section applies to any industrial undertaking which fulfils all the following conditions, namely:-

(i) ...

(ia) in relation to an undertaking which begins to manufacture or produce any article or thing on or after the 1st day of April, 1995, its exports of such articles or things are not less than seventy-five per cent of the total sales thereof during the previous year;

(ii) ...

Provided ...

(iii) ...

(3) The profits and gains referred to in sub-section (1) shall not be included in the total income of the assessee in respect of any ten consecutive assessment years, beginning with the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things.

(4) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year, relevant to any subsequent assessment year, -

(i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-section (1) of section 36 shall apply as if every allowance or deduction referred to therein and relating to or allowable for any of the relevant assessment years, in relation to any building, machinery, plant or furniture used for the purposes of the business of the industrial undertaking in the previous year relevant to such assessment year or any expenditure incurred for the purposes of such business in such previous year had been given full effect to for that assessment year itself and accordingly sub-section (2)

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2016 Supreme(SC) 1010

IMPORTANT POINTThough Section 10A is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV, and not at the stage of computation of the total income under Chapter VI.

Cases Referred (1)

IMPORTANT POINT
Though Section 10A is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV, and not at the stage of computation of the total income under Chapter VI.