REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 8498 OF 2013 C.I.T. & ANR. APPELLANT(s) VERSUS M/S YOKOGAWA INDIA LTD. RESPONDENT(s) WITH CIVIL APPEAL Nos. 8496/2013, 8497/2013, 8502/2013, 8508/2013, 8511/2013, 8512/2013, 8514/2013, 8516/2013, 8517/2013, 8520/2013, 8925/2013, 8926/2013, 8928/2013, 8788/2012, 8790/2012, 8534/2013, 8563/2013, 8564/2013, 8923/2013, 8924/2013, 8930/2013, 8931/2013, 8232/2015, 9253/2015, CIVIL APPEAL No.12253/2016 (arising out of S.L.P.(C) No. 36441/2013), CIVIL APPEAL No.12252/2016 (arising out of S.L.P.(C) No. 36442/2013), CIVIL APPEAL No.12205/2016 (arising out of S.L.P.(C) No. 977/2014), CIVIL APPEAL No.12207/2016 (arising out of S.L.P.(C) No. 2328/2014), CIVIL APPEAL No.12250/2016 (arising out of S.L.P.(C) No. 10261/2014), CIVIL APPEAL No.12254/2016 2 (arising out of S.L.P.(C) No. 8391/2015), CIVIL APPEAL No.12206/2016 (arising out of S.L.P.(C) No. 13840/2015), CIVIL APPEAL No.12251/2016 (arising out of S.L.P.(C) No. 18157/2015), CIVIL APPEAL No.12208/2016 (arising out of S.L.P.(C) No. 26484/2015), CIVIL APPEAL No.12203/2016 (arising out of S.L.P.(C) No. 1652/2013), CIVIL APPEAL No.12204/2016 (arising out of S.L.P.(C) No. 13861/2016) and CIVIL APPEAL No.12255/2016 (arising out of S.L.P. (C) No. 33728/2016). JUDGMENT RANJAN GOGOI, J. Leave granted in all special leave petitions. 2. true and correct meaning and effect of provisions of Section 10A of Income Tax Act, 1961 (hereinafter referred to as Act ) is principal issue arising for determination of Court. At outset, it must be made clear that decision of this Court with regard to provisions of Section 10A of Act would equally be applicable to cases governed by provisions of Section 3 10B in view of said later provision being pari materia with Section 10A of Act though governing different situation. 3. broad question indicated above may be conveniently dissected into following specific questions arising in cases under consideration. (i) Whether Section 10A of Act is beyond purview of computation mechanism of total income as defined under Act. Consequently, is income of Section 10A unit required to be excluded before arriving at gross total income of assessee? (ii) Whether phrase total income in Section 10A of Act is akin and pari materia with said expression as appearing in Section 2(45) of Act? (iii) Whether even after amendment made with effect from 1.04.2001, Section 10A of Act continues to remain exemption section and not deduction section? 4 (iv) Whether losses of other 10A Units or non 10A Units can be set off against 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 profits of another 10A Units of assessee. 4. At very outset, Section 10A of Act as it existed prior to its amendment by Finance Act of 2000 with effect from 1.04.2001; subsequent to aforesaid amendment and provisions of Section 10A of Act, as further amended by Finance Act, 2003 with retrospective effect from 1.04.2001 may be conveniently set out below. 5. Section 10A of Act, as it stood prior to amendment made by Finance Act, 2000, (amendment effective from 1.4.2001) was as follows: 10A. (1) Subject to provisions of this section, any profits and gains derived by assessee from 5 industrial undertaking to which this section applies shall not be included in total income of assessee. (2) This section applies to any industrial undertaking which fulfils all following conditions, namely: (i) ... (ia) in relation to undertaking which begins to manufacture or produce any article or thing on or after 1st day of April, 1995, its exports of such articles or things are not less than seventy-five per cent of total sales thereof during previous year; (ii) Provided (iii) (3) profits and gains referred to in sub-section (1) shall not be included in total income of assessee in respect of any ten consecutive assessment years, beginning with assessment year relevant to previous year in which industrial undertaking begins to manufacture or produce articles or things. (4) Notwithstanding anything contained in any other provision of this Act, in computing total income of assessee of previous year relevant to assessment year immediately succeeding last of 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 6 shall apply as if every allowance or deduction referred to therein and relating to or allowable for any of relevant assessment years, in relation to any building, machinery, plant or furniture used for purposes of business of industrial undertaking in previous year relevant to such assessment year or any expenditure incurred for purposes of such business in such previous year had been given full effect to for that assessment year itself and accordingly sub-section (2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of sub-section (2) of section 33, sub-section (4) of section 35 or second proviso to clause (ix) of sub-section (1) of section 36, as case may be, shall not apply in relation to any such allowance or deduction; (ii) no loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section 74 and no deficiency referred to in sub-section (3) of section 80J, in so far as such loss or deficiency relates to business of industrial undertaking, shall be carried forward or set off where such loss, or, as case may be, deficiency relates to any of relevant assessment years; (iii) no deduction shall be allowed under section 80HH or section 80HHA or section 80-I or section 80-IA or section 80-IB or section 80J in relation to profits and gains of industrial undertaking; and 7 (iv) in computing depreciation allowance under section 32, written down value of any asset used for purposes of business of industrial undertaking shall be computed as if assessee had claimed and been actually allowed deduction in respect of depreciation for each of relevant assessment years. (5) (6) provisions of sub-section (8) and sub-section (9) of section 80-I shall, so far as may be, apply in relation to industrial undertaking referred to in this section as they apply for purposes of industrial undertaking referred to in section 80-I. (7) (8) 6. Section 10A was substituted by Finance Act, 2000 with effect from 1.4.2001 in following terms: 10A. (1) Subject to provisions of this section, deduction of such profits and gains as are derived by undertaking from export of articles or things or computer software for period of ten consecutive assessment years beginning with assessment year relevant to previous year in which undertaking begins to manufacture or produce such articles or things or computer software, as case may be, shall be allowed from total income of assessee: 8 Provided that where in computing total income of undertaking for any assessment year, its profits and gains had not been included by application of provisions of this section as it stood immediately before its substitution by Finance Act, 2000, undertaking shall be entitled to deduction referred to in this sub-section only for unexpired period of aforesaid ten consecutive assessment years: Provided further that where undertaking initially located in any free trade zone or export processing zone is subsequently located in special economic zone by reason of conversion of such free trade zone or export processing zone into special economic zone, period of ten consecutive assessment years referred to in this sub-section shall be reckoned from assessment year relevant to previous year in which undertaking was first set up in such free trade zone or export processing zone: Provided also that profits and gains derived from such domestic sales of articles or things or computer software as do not exceed twenty-five per cent of total sales shall be deemed to be profits and gains derived from export of articles or things or computer software. Provided also that no deduction under this section shall be allowed to any undertaking for assessment year beginning on 1st day of April, 2010 and subsequent years. (2) This section applies to any undertaking which fulfils all following conditions, namely : 9 (i) (a) (b) (c) (ii) (3) (4) For purposes of sub-section (1), profits derived from export of articles or things or computer software shall be amount which bears to profits of business, same proportion as export turnover in respect of such articles or things or computer software bears to total turnover of business carried on by assessee. (5) (6) Notwithstanding anything contained in any other provision of this Act, in computing total income of assessee of previous year relevant to assessment year immediately succeeding last of 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 relevant assessment years, in relation to any building, machinery, plant or furniture used for 10 purposes of business of undertaking in previous year relevant to such assessment year or any expenditure incurred for purposes of such business in such previous year had been given full effect to for that assessment year itself and accordingly sub-section (2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of sub-section (2) of section 33, sub-section (4) of section 35 or second proviso to clause (ix) of sub-section (1) of section 36, as case may be, shall not apply in relation to any such allowance or deduction; (ii) no loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section 74 in so far as such loss relates to business of undertaking, shall be carried forward or set off where such loss relates to any of relevant assessment years; (iii) no deduction shall be allowed under section 80HH or section 80HHA or section 80-I or section 80-IA or section 80-IB in relation to profits and gains of undertaking; and (iv) in computing depreciation allowance under section 32, written down value of any asset used for purposes of business of undertaking shall be computed as if assessee had claimed and been actually allowed deduction in respect of depreciation for each of relevant assessment year. (7) provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply 11 in relation to undertaking referred to in this section as they apply for purposes of undertaking referred to in section 80-IA. 7. Section 10A was further amended by Finance Act of 2003 with retrospective effect from 1.04.2001. For purposes of present case, amendments introducing Section (1A); making provisions of sub-section (4) subject to provisions of Sections (1) and (1A) and making benefit of provisions of Sections 32, 32A, 33, 35 and clause (ix) of Section 36(1) and also Sections 72(1) and 74(1) and (3) operative from assessment year 2001-2002 alone would be significant. 8. cardinal principles of interpretation of taxing statutes centers around opinion of Rowlatt, J. in Cape Brandy Syndicate vs. Inland Revenue Commissioner1 which has virtually become locus classicus2. above would dispense with necessity of any further elaboration of subject notwithstanding numerous precedents available inasmuch as evolution of all such principles are within four corners of following opinion of Rowlatt, J. 1 (1921) 1 KB 64 2 12 in taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at language used. 9. amendment of Section 10A of Act, by Finance Act, 2000 with effect from 1.4.2001, specifically uses words deduction of profits and gains derived by eligible unit from total income of assessee . There are other provisions of Section 10A, as amended, which could be suggestive of fact that by amendment made by Finance Act, 2000, Section 10A had changed its colour from being exemption section to provision providing for deduction. Yet, Section 10A continued to remain in Chapter III of Act which Chapter deals with incomes which do not form part of total income. There are several Circulars that have been placed before us by contesting parties to explain purpose and object of amendment. Having looked at aforesaid Circulars, issued from time to time, what we find is fair amount of ambiguity therein as to true nature 13 and effect of amendment. Specifically, we may refer to Circular No. 7 dated 16.07.2013 as well as Circular No. 01/2013 dated 17.01.2013 which appear to be conflicting and contradictory to each other; in former Circular provision, i.e., Section 10A is referred to as providing for deductions whereas later Circular uses expression exemption while referring to provisions of Sections 10A and 10B of Act. Even Income Tax Return Forms i.e. Form No. 1 dated 17.08.2001 and Form No. 6 for assessment year 2012-13 are equally contradictory. appellant Revenue would, however contend that, ex facie, from language appearing in Section 10A it is crystal clear that aforesaid provision of Act, as amended by Finance Act, 2000 provides for deductions from gross total income, notwithstanding use of words total income in Section 10A. Exemptions provided for under old Section 10A have been discontinued by Legislature. According to Revenue, where purport and effect of statute is clear from language used there is no scope to turn to Chapter notes or marginal notes so as to 14 understand Section 10A to be exemption section on basis that said provision is still included in Chapter III of Act. Reliance in this regard has been placed on decision of this Court in Tata Power Co. Ltd. vs. Reliance Energy Ltd.3 wherein at page 687, it is held that: 89. Chapter headings and marginal notes are parts of statute. They have also been enacted by Parliament. There cannot, thus, be any doubt that it can be used in aid of construction. It is, however, well settled that if wordings of statutory provision are clear and unambiguous, construction of statute with aid of chapter heading and marginal note may not arise. It may be that heading and marginal note, however, are of very limited use in interpretation because of its necessarily brief and inaccurate nature. They are, however, not irrelevant. They certainly cannot be taken into consideration if they differ from material they describe. 10. Revenue further contends that by virtue of amendment made by Finance Act, 2000, deductions under Section 10A are required to be made and allowed at stage of computation of total income under Chapter VI of Act 3 15 notwithstanding absence of any specific provision in Chapter VI to said effect. In fact, Revenue contends that in view of clear language of Section 10A, as brought about by amendment, parallel or consequential amendment in Chapter VI of Act was wholly unnecessary. 11. On other hand, on behalf of assessees, it is contended that though there may be some features of deduction brought in by amendment to Section 10A, as for example, disallowance of profits in regard to domestic sales, legislative intent in retaining Section 10A in Chapter III of Act would clearly demonstrate true nature of said provision of Act even after amendment thereof by Finance Act of 2000. Deductions from total income which is nowhere envisaged under Act and reference to total income of undertaking, referred to in several sub- sections of Section 10A, would indicate that total income referred to in Section 2(45) has no application to computation under Section 10A and reference therein is only to 16 total income of eligible unit/undertaking. provisions of Section 10A(6), as amended by Finance Act of 2003 retrospectively with effect from 1.4.2001, has also been stressed upon to contend that with effect from assessment year 2001-02 losses and unabsorbed depreciation of eligible units would be allowable for set off immediately on expiry of period of tax holiday i.e. 10 years. provisions of Sections 32, 32A, 33, 35 and part of 36 do not separately apply to eligible unit during period of tax holiday. During said period deduction under aforesaid sections of Act are deemed to have been made. Similarly, under Section 10A(6)(ii) losses referred to in Section 72(1) or 74(1) and 74(3) are also eligible to be carried forward to assessment year following end of holiday period commencing from assessment year 2001-02. All these, according to learned counsels for assessees, suggest that, though heterogeneous elements exist in Section 10A, provision is really exemption provision. Alternatively, according to learned counsels, even if Section 10A is understood to be providing for deductions, stage 17 of such deductions would be immediately after computation of profits and gains of business and before aggregate of incomes under different heads of other loss making eligible units or non-eligible units of assessee are taken into account. In other words, it is immediately after computation of profits and gains of business of undertaking that deduction under Section 10A is required to be made. There is no question of such deductions being computed at stage of application of provisions of Chapter VI of Act. 12. We have considered submissions advanced and provisions of Section 10A as it stood prior to amendment made by Finance Act, 2000 with effect from 1.4.2001; amended Section 10A thereafter and also amendment made by Finance Act, 2003 with retrospective effect from 1.4.2001. 13. retention of Section 10A in Chapter III of Act after amendment made by Finance Act, 2000 would be merely suggestive and not determinative of what is provided by Section 18 as amended, in contrast to what was provided by un-amended Section. true and correct purport and effect of amended Section will have to be construed from language used and not merely from fact that it has been retained in Chapter III. introduction of word deduction in Section 10A by amendment, in absence of any contrary material, and in view of scope of deductions contemplated by Section 10A as already discussed, it has to be understood that Section embodies clear enunciation of legislative decision to alter its nature from one providing for exemption to one providing for deductions. 14. difference between two expressions exemption and deduction , though broadly may appear to be same i.e. immunity from taxation, practical effect of it in light of specific provisions contained in different parts of Act would be wholly different. above implications cannot be more obvious than from case of Civil Appeal Nos. 8563/2013, 8564/2013 19 and civil appeal arising out of SLP(C) No. 18157/2015, which have been filed by loss making eligible units and/or by non-eligible assessees seeking benefit of adjustment of losses against profits made by eligible units. 15. Sub-section 4 of Section 10A which provides for pro rata exemption, necessarily involving deduction of profits arising out of domestic sales, is one instance of deduction provided by amendment. Profits of eligible unit pertaining to domestic sales would have to enter into computation under head profits and gains from business in Chapter IV and denied benefit of deduction. provisions of Sub-section 6 of Section 10A, as amended by Finance Act of 2003, granting benefit of adjustment of losses and unabsorbed depreciation etc. commencing from year 2001-02 on completion of period of tax holiday also virtually works as deduction which has to be worked out at future point of time, namely, after expiry of period of tax holiday. absence of any reference to deduction 20 under Section 10A in Chapter VI of Act can be understand by acknowledging that any such reference or mention would have been repetition of what has already been provided in Section 10A. provisions of Sections 80HHC and 80HHE of Act providing for somewhat similar deductions would be wholly irrelevant and redundant if deductions under Section 10A were to be made at stage of operation of Chapter VI of Act. retention of said provisions of Act i.e. Section 80HHC and 80HHE, despite amendment of Section 10A, in our view, indicates that some additional benefits to eligible Section 10A units, not contemplated by Sections 80HHC and 80HHE, was intended by legislature. Such benefit can only be understood by legislative mandate to understand that stages for working out deductions under Section 10A and 80HHC and 80HHE are substantially different. This is next aspect of case which we would now like to turn to. 21 16. From reading of relevant provisions of Section 10A it is more than clear to us that deductions contemplated therein is qua eligible undertaking of assessee standing on its own and without reference to other eligible or non-eligible units or undertakings of assessee. benefit of deduction is given by Act to individual undertaking and resultantly flows to assessee. This is also more than clear from contemporaneous Circular No. 794 dated 9.8.2000 which states in paragraph 15.6 that, export turnover and total turnover for purposes of sections 10A and 10B shall be of undertaking located in specified zones or 100% Export Oriented Undertakings, as case may be, and this shall not have any material relationship with other business of assessee outside these zones or units for purposes of this provision. 17. If specific provisions of Act provide [first proviso to Sections 10A(1); 10A (1A) and 10A (4)] that unit that is contemplated for grant of benefit of deduction is eligible undertaking and that is also how contemporaneous Circular of 22 department (No.794 dated 09.08.2000) understood situation, it is only logical and natural that stage of deduction of profits and gains of business of eligible undertaking has to be made independently and, therefore, immediately after stage of determination of its profits and gains. At that stage aggregate of incomes under other heads and provisions for set off and carry forward contained in Sections 70, 72 and 74 of Act would be premature for application. deductions under Section 10A therefore would be prior to commencement of exercise to be undertaken under Chapter VI of Act for arriving at total income of assessee from gross total income. somewhat discordant use of expression total income of assessee in Section 10A has already been dealt with earlier and in overall scenario unfolded by provisions of Section 10A aforesaid discord can be reconciled by understanding expression total income of assessee in Section 10A as total income of undertaking . 23 18. For aforesaid reasons we answer appeals and questions arising therein, as formulated at outset of this order, by holding that though Section 10A, as amended, is provision for deduction, stage of deduction would be while computing gross total income of eligible undertaking under Chapter IV of Act and not at stage of computation of total income under Chapter VI. All appeals shall stand disposed of accordingly. .....................,J. (RANJAN GOGOI) .....................,J. (PRAFULLA C. PANT) NEW DELHI DECEMBER 16, 2016. CIT & Anr. v. M/s. Yokogawa India Ltd