CIT v M/s Chelslind Textiles Ltd (ITA No: 361/2009 dtd 04/03/2009) – Karnataka HC Background: Assessee claimed deduction u/s 10B amounting to Rs.4,75,30,724/- on the business income of Rs.5,36,70,676. During the course of assessment proceedings, the AO allowed the deduction claimed by the assessee. The Commissioner of Income-tax observed that the AO allowed the deduction without setting-off unabsorbed depreciation amount of Rs.4,26,23,711. Therefore, the CIT in his jurisdiction under Section 263 of the Income Tax Act was of the view that the same resulted in excess deduction allowed under Section 10B of the Act and incorrect determination of loss was carried forward. Therefore, he set-aside the said order and directed the Assessing Officer to re-compute the total income after setting-off the unabsorbed depreciation. Further,the question arose as to whether an assessee incurring losses in the 10A unit has an option to opt out of the benefit under section 10A(8) and make inter-source and inter-head set-off u/s 72.