M/s. Max Healthscribe Ltd. (Presently Known as Spheris India Pvt. Ltd.) v. The Income-tax Officer, Ward-12(1), Bangalore
[Citation -2015-LL-0123-10]

Citation 2015-LL-0123-10
Appellant Name M/s. Max Healthscribe Ltd. (Presently Known as Spheris India Pvt. Ltd.)
Respondent Name The Income-tax Officer, Ward-12(1), Bangalore
Court HIGH COURT OF KARNATAKA
Relevant Act Income-tax
Date of Order 23/01/2015
Assessment Year 2003-04
Judgment View Judgment
Keyword Tags due date for furnishing the return • unabsorbed depreciation • industrial undertaking • managing director • free trade zone • unabsorbed loss • business loss • general tax
Bot Summary: The assessing authority passed an order under Section 143(3) of the Act, treating the relief under Section 10(A) as a deduction instead of exemption, by computing book profits under Section 115JB, by not taking various deductions contemplated under explanation to the said Section, computing the relief under Section 10A by restricting the benefit of carry forward business loss and depreciation. In respect of these two years, the assessee had opted out of Section 10A of the Act by invoking the provisions of the erstwhile Section 10A(7). The said provision reads as under: Notwithstanding anything contained in the foregoing provisions of this section, where the assessee, before the due date for furnishing the return of income under sub-section of Section 139 furnishes to the Assessing Officer a declaration in writing that 7 the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him for any of the relevant assessment years. The newly recast Section 10A substituted by the Finance Act, 2000 came into effect from 01.04.2001 in the amended provisions it is numbered as sub Section found in the identical language, which reads as under: Notwithstanding anything contained in the foregoing provisions of this section, where the assessee, before the due date for furnishing the return of income under sub-section of section 139 furnishes to the Assessing Officer a declaration in writing that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him for any of the relevant assessment years. The said provisions clearly provided for an assessee opting out of the provisions under Section 10A for any of the relevant assessment years, the provisions of Section 10A would not apply to him for these years. If in any year of loss, the assessee opts out of Section 10A, the prohibition contained in Sub Section in respect of carry forward of such loss would not apply. Such an assessee will be required to furnish a declaration in writing before the expiry of the time allowed under section 139(1) or under section 139(2), whether fixed originally or on extension, to furnish the return of income for the first assessment year for which the tax holiday under the new scheme is available to him, that the provisions of this section may not be made applicable to him and if he does so, the provisions of this section 10A will not apply to him for any of the five assessment years for which the tax holiday provisions would have normally applied to him.


IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 23RD DAY OF JANUARY, 2015 PRESENT HON' BLE MR. JUSTICE N. KUMAR AND HON' BLE MR. JUSTICE B. VEERAPPA ITA No. 447/2009 C/W. ITA No.446/2009 ITA No. 447/2009: BETWEEN: M/S. MAX HEALTHSCRIBE LTD. (PRESENTLY KNOWN AS SPHERIS INDIA PVT. LTD.) ONE, SPHERIS PLAZA, 8TH BLOCK KORAMANGALA, BANGALORE-560 095. (REPRESENTED BY ITS MANAGING DIRECTOR, SRI. SURESH NAIR, AGED ABOUT 48 YEARS S/O. LATE N. SHIVASHANKARAN) .. APPELLANT (BY SRI. CHYTHANYA K.K., ADVOCATE) AND: INCOME TAX OFFICER WARD 12(1) BANGALORE. ... RESPONDENT (BY SRI. K.V. ARVIND, ADVOCATE) 2 THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961 ARISING OUT OF ORDER DATED 12.06.2009 PASSED IN ITA NO. 1094/BNG/2008, FOR ASSESSMENT YEAR 2003- 04 PRAYING TO FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND TO ALLOW APPEAL AND SET ASIDE ORDER PASSED BY ITAT BANGALORE IN ITA No.1094/BNG/2008, DATED 12-06-2009 IN INTEREST OF JUSTICE AND EQUITY. ITA No. 446/2009: BETWEEN: M/S. MAX HEALTHSCRIBE LTD. (PRESENTLY KNOWN AS SPHERIS INDIA PVT. LTD.) ONE, SPHERIS PLAZA, 8TH BLOCK KORAMANGALA, BANGALORE-560 095. (REPRESENTED BY ITS MANAGING DIRECTOR, SRI. SURESH NAIR, AGED ABOUT 48 YEARS S/O. LATE N. SHIVASHANKARAN) .. APPELLANT (BY SRI. CHYTHANYA K.K., ADVOCATE) AND: INCOME TAX OFFICER WARD 12 (1) BANGALORE. ... RESPONDENT (BY SRI. K.V. ARVIND, ADVOCATE) THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961 ARISING OUT OF ORDER 3 DATED 12.06.2009 PASSED IN ITA NO. 1093/BNG/2008, FOR ASSESSMENT YEAR 2002- 03 PRAYING TO FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND TO ALLOW APPEAL AND SET ASIDE ORDER PASSED BY ITAT BANGALORE IN ITA No.1093/BNG/2008, DATED 12-06-2009 IN INTEREST OF JUSTICE AND EQUITY. THESE INCOME TAX APPEALS COMING ON FOR HEARING THIS DAY, N. KUMAR J., DELIVERED FOLLOWING: JUDGMENT These two appeals arise out of common order passed by Tribunal in respect of same assessee for two assessment years, where Tribunal upheld orders passed by lower authorities holding that assessee is not eligible to carry forward unabsorbed loss and depreciation relating to assessment years when appellant had opted out of Section 10A in said years. 4 2. substantial questions of law that arise for our consideration are as under: 1) Whether on facts and in circumstances of case, Honourable Tribunal was right in law in holding that carried forward business losses and unabsorbed depreciation of assessment years 1998-1999 and 2000-2001 (during which years, appellant had opted out of section 10A by exercising option under Section 10A(7) could not be set off while computing total income of appellant for impugned assessment year? 2) Whether on facts and in circumstances of case, Honourable Tribunal was right in law in not holding that prohibition contained in section 10A(6) shall apply only in respect of previous years relevant to assessment years succeeding tax holiday period? 5 3. assessee is company engaged in medical transcription. assessee s case is selected for scrutiny. assessing authority passed order under Section 143(3) of Act, treating relief under Section 10(A) as deduction instead of exemption, by computing book profits under Section 115JB, by not taking various deductions contemplated under explanation to said Section, computing relief under Section 10A by restricting benefit of carry forward business loss and depreciation. 4. Aggrieved by said order, assessee preferred appeal to Commissioner of Income- tax (Appeals) and he, in turn, has partly allowed appeal. 6 5. Aggrieved by said order, assessee preferred second appeal to Tribunal, which came to be dismissed. 6. For assessment year 1998-1999 assessee claimed business loss of Rs.1,59,31,197/- and depreciation of Rs.7,59,667/- and in respect to assessment year 2000-2001 business loss claimed was Rs.51,79,426/- and depreciation was Rs.1,11,71,979. In respect of these two years, assessee had opted out of Section 10A of Act by invoking provisions of erstwhile Section 10A(7). said provision reads as under: (7) Notwithstanding anything contained in foregoing provisions of this section, where assessee, before due date for furnishing return of income under sub-section (1) of Section 139 furnishes to Assessing Officer declaration in writing that 7 provisions of this section may not be made applicable to him, provisions of this section shall not apply to him for any of relevant assessment years. 7. newly recast Section 10A substituted by Finance Act, 2000 came into effect from 01.04.2001 in amended provisions it is numbered as sub Section (8) found in identical language, which reads as under: (8) Notwithstanding anything contained in foregoing provisions of this section, where assessee, before due date for furnishing return of income under sub-section (1) of section 139 furnishes to Assessing Officer declaration in writing that provisions of this section may not be made applicable to him, provisions of this section shall not apply to him for any of relevant assessment years. 8 8. said provisions clearly provided for assessee opting out of provisions under Section 10A for any of relevant assessment years, provisions of Section 10A would not apply to him for these years. It may be noted that in year of opting out, entire Section 10A which inter alia includes provisions of sub Section (6) would not apply to assessee. If in any year of loss, assessee opts out of Section 10A, prohibition contained in Sub Section (6) in respect of carry forward of such loss would not apply. In other words, loss suffered by such assessee in such year of opting out would be available to him for future set off as per normal provisions of Act like Section 32(2) of Act in respect of depreciation and Section 72(1) in respect of business loss. In fact, in circular issued by CBDT 9 No.308, dated 29.06.1981 at Para No.6 it reads as under: 6.7 special provision has been made in sub-section (7) of new section 10A to give option to assessee who derives profits and gains from industrial undertaking situated in free trade zone not to avail of this tax concession. Such assessee will be required to furnish declaration in writing before expiry of time allowed under section 139(1) or under section 139(2), whether fixed originally or on extension, to furnish return of income for first assessment year for which tax holiday under new scheme is available to him, that provisions of this section may not be made applicable to him and if he does so, provisions of this section 10A will not apply to him for any of five assessment years for which tax holiday provisions would have normally applied to him. dispensation has been made on 10 consideration that some assessees may find general tax concessions available in relation to industries in rest of India more attractive than new scheme. 9. In fact, said question arose for consideration before this Court in case of Commissioner of Income-tax v. Yokogawa India Limited reported in (2012) 341 ITR 385 (KAR) wherein in Paragraph 32 it was held as under: provisions of this sub-section will apply even in case where assessee has opted out of section 10A by exercising his option under sub-section (8). As discussed, it is permissible for assessee to opt in and opt out of section 10A. In year when assessee has opted out, normal provisions of Act would apply. profits derived by him from STP undertaking would suffer tax in normal course subject to various provisions of Act including 11 those of Chapter VI-A. If in such year, assessee has suffered losses, such losses would be subject to inter source and inter head set off. balance, if any, thereafter can be carried forward for being set off against profits of subsequent assessment years in normal course. Unabsorbed depreciation also merits similar treatment. 10. In that view of aforesaid legal position, impugned orders passed by authorities cannot be sustained. assessee is entitled to benefit of carry forward of unabsorbed depreciation or loss relating to assessment years when appellant had opted out of Section 10A. 11. Therefore, substantial questions of law are answered in favour of assessee and against revenue. Hence, we pass following: 12 ORDER (a) Appeals are allowed. (b) Impugned orders are hereby set aside. (c) appellants are entitled to benefit of depreciation and business loss, in accordance with law. SD/- JUDGE SD/- JUDGE Sbs M/s. Max Healthscribe Ltd. (Presently Known as Spheris India Pvt. Ltd.) v. Income-tax Officer, Ward-12(1), Bangalore
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