M/s. Amec Foster Wheeler India Pvt. Ltd., CHENNAI V. DCIT, CHENNAI

CO 106/CHNY/2016

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2689 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 26-07-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Keywords: Depreciation; Capital expenditure
• Section: 37(1); 10B; 32; 147; 37; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . , . , BEFORE SHRI ABRAHAM P. GEORGE , ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 1531/MDS/2016. / ASSESSMENT YEAR : 2009-2010. M/S. AMEC FOSTER WHEELER INDIA PRIVATE LIMITED, 6 TH FLOOR, ZENITH BUILDING, ASCENDAS IT PARK, CSIR ROAD, TARAMANI, CHENNAI 600 113. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(4) CHENNAI. ./ I.T.A. NO. 1762/MDS/2016 & C.O. NO. 106/MDS/2016 (IN ITA NO.1762/MDS/2016) / ASSESSMENT YEAR : 2009-2010. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(4) CHENNAI. VS. M/S. AMEC FOSTER WHEELER INDIA PRIVATE LIMITED, 6 TH FLOOR, ZENITH BUILDING, ASCENDAS IT PARK, CSIR ROAD, TARAMANI, CHENNAI 600 113. [PAN AAACF3204C] ( / APPELLANT) (RESPONDENT/ CROSS OBJECTOR) ASSESSEE BY : SHRI. SRIRAM SESHADRI, C.A DEPARTMENT BY : SHRI. A.V. SREEKANTH, IRS, JCIT. ! '# /DATE OF HEARING : 22-12-2016 $% ! '# /DATE OF PRONOUNCEMENT : 06-01-2017 ITA NOS.1531 & 1762/16 & C.O.NO.106/2016. :- 2 -: / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER: APPEAL IN ITA NO.1531/MDS/2016 HAS BEEN FILED BY THE ASSESSEE AGAINST AN ORDER DATED 09.03.2016 OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI. THIS WAS PURSUANT TO AN ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) ON ASSESSEE FOR ASSESSMEN T YEAR 2009-2010. 2. APPEAL IN ITA NO.1762/MDS/2016 FILED BY THE REVENUE IS AGAINST ANOTHER ORDER DATED 09.03.2016 OF LD. COMMI SSIONER OF INCOME TAX (APPEALS)-1, CHENNAI. THIS WAS PURSUANT TO AN A SSESSMENT ORDER U/S.143(3) READ WITH SECTION 147 OF THE ACT PASSED BY THE LD. ASSESSING OFFICER FOR THE VERY SAME YEAR. CROSS OBJECTION OF THE ASSESSEE IS AGAINST THE LATTER APPEAL. 3. APPEAL IN ITA NO.1531/MDS/2016 IS TAKEN UP FIRST FO R DISPOSAL. SOLE ISSUE RAISED BY THE ASSESSEE IS ON D ISALLOWANCE OF EXPENDITURE INCURRED TOWARDS IMPROVEMENT IN LEASEHO LD FACILITY. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR ISS UE HAD COME UP BEFORE THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AS SESSMENT YEAR 2008- 09. AS PER LD. AUTHORISED REPRESENTATIVE THIS TRIB UNAL IN ITA NO.1530/MDS/2016 HAD REMITTED THE MATTER BACK TO TH E FILE OF THE LD. ITA NOS.1531 & 1762/16 & C.O.NO.106/2016. :- 3 -: ASSESSING OFFICER FOR VERIFYING WHETHER EXPENDITURE INCURRED WAS CAPITAL IN NATURE OR NOT. AS PER LD. AUTHORISED R EPRESENTATIVE DISALLOWANCE FOR THE IMPUGNED ASSESSMENT YEAR WAS A LSO SIMILAR TO WHAT WAS CLAIMED BY THE ASSESSEE FOR ASSESSMENT YEA R 2008-09. 4. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THE QUESTION RAIS ED IS WHETHER CLAIM OF THE ASSESSEE ON IMPROVEMENT ON LEASEHOLD PREMISE S WAS A REVENUE OUT GO OR NOT. LD. ASSESSING OFFICER DISALLOWED TH E CLAIM CONSIDERING IT TO BE A CAPITAL EXPENDITURE AND LD. COMMISSIONER O F INCOME TAX (APPEALS) HAD CONFIRMED SUCH DISALLOWANCE. WE FIND THAT THERE WAS A SIMILAR DISALLOWANCE DONE FOR ASSESSMENT YEAR 2008- 09 ALSO. WHEN THE MATTER REACHED THE TRIBUNAL, IT HAD HELD AS UN DER AT PARA 4 TO 7 OF ITS ORDER IN ITA NO.1530/MDS/2016, DATED 25.11.2 016 AS UNDER:- 4. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS). ASSESSEE FURN ISHED A BREAK UP OF THE EXPENDITURE OF D2,57,98,071/- BEFO RE LD. COMMISSIONER OF INCOME TAX (APPEALS) WHICH READ AS UNDER:- PARTICULARS AMOUNT (IN INR) COST INCURRED TOWARDS PARTITIONING, FALSE CEILING AND FLOORING 96,70,938 ELECTRICAL WORK REPAIRS AND REPLACEMENT 79,56,512 ITA NOS.1531 & 1762/16 & C.O.NO.106/2016. :- 4 -: CABLING & NETWORKING CHARGES 57,92,628 DUCTING AND OTHER AIR CONDITIONER RELATED COSTS 16,76,540 FIRE SPRINKLER WORKS AND FIRE EXTINGUISHERS 2,79,971 STORAGE UNITS 2,43,000 ARCHITECT FEES 1,78,487 TOTAL 2,57,98,07 6 AS PER THE ASSESSEE, ABOVE EXPENDITURE DID NOT RES ULT IN CREATION OF ANY NEW ASSET NOR GAVE IT ANY ENDURING BENEFIT. RELIANCE WAS PLACED ON THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS AYESHA HOSPITALS P. LTD 292 ITR 266 AND THIR U AROORAN SUGARS LTD VS. DCIT, 350 ITR 324. HOWEVER, LD. COMM ISSIONER OF INCOME TAX (APPEALS) WAS NOT IMPRESSED BY THE ABOVE CONTENTION. HE HELD AS UNDER:- 10. RENOVATION PER SE WOULD BE A COMPOSITE ITEM O F ACTIVITY WHICH WOULD BE VIOLATED IN ITS CONCEPT IF THE SAME IS SPLIT UP INTO SMALLER FRAGMENTS. THIS IS SO AS THESE SMALLER IND IVIDUAL ACTIVITIES WOULD NOT MAKE AVAILABLE ANY FACILITY WH ICH COULD BE USED BY THE APPELLANT VOID OF THE OTHER CO-RELATED ACTIVITIES. RENOVATION THEREFORE WOULD ENCOMPASS AND INCLUDE T HE SUM TOTAL OF ALL SUCH ACTIVITIES TO MAKE AVAILABLE A CO MMON FACILITY FOR THE USE OF THE APPELLANT. THE ARCHITECT FEES FOR EX AMPLE CLAIMED SEPARATELY BY THE APPELLANT WOULD BE A INTEGRAL PAR T OF THE RENOVATION ACTIVITY AS ALSO THE FEE PAID TO THE CON TRACTOR EXECUTING THE RENOVATION. SIMPLY PUT, ALL ACTIVITY PUT TOGETHER RESULT IN RESTORING TO GOOD AND USABLE CON DITION AND SUCH AN EXERCISE WOULD INCLUDE REPAIRS AS A INTEGRA L PART THEREOF. 11.THE CASE OF THE APPELLANT RESTS ON THE PLEA THAT IT IS A LEASEHOLD PREMISE LAND HENCE EXPENDITURE SHOULD BE TREATED AS BEING TOWARDS CURRENT REPAIRS NOTWITHSTANDING THE P ROVISION IN EXPLANATION 1 TO S.32(1). IN MY CONSIDERED VIEW THI S CANNOT BE ACCEPTED FOR THE REASON THAT THERE IS A SPECIFIC PR OVISION TO DEAL WITH SUCH EXPENDITURE. FURTHER MORE THE RIGHTS AND ENTITLEMENTS OF THE APPELLANT IS NOT ADVERSELY IMPAIRED AS THE E XPENDITURE QUALIFIES FOR DEPRECIATION AND IN THE EVENT THAT TH E PREMISES ARE VACATED THE APPELLANT IS ENTITLED TO TERMINAL BENEF ITS WITH REGARD TO THE EXPENDITURE / INVESTMENT MADE. 12.FINALLY WITH REGARD TO THE CLAIM PREFERRED BY TH E APPELLANT U/S 37 AND NOT U/S 32, THE SAME IS NOT TENABLE ON FACT S AND IN LAW. IT IS SETTLED LAW THAT THE PROVISIONS OF S.37 ARE APP LICABLE IN RESPECT OF GENERAL EXPENSES, WHERE EXPENDITURE NOT SPECIFIE D IN ITA NOS.1531 & 1762/16 & C.O.NO.106/2016. :- 5 -: S.30 TO 5.36 ARE TO BE CONSIDERED. AS ALSO, EXPENDI TURE WHICH IS NOT CAPITAL OR PERSONAL IN NATURE AND WHICH IS WHO LLY AND EXCLUSIVELY LAID OUT OR EXPENDED FOR THE PURPOSE O F BUSINESS. THESE EXCLUDE EXPENSES FOR ANY PURPOSE WHICH IS AN OFFENCE OR PROHIBITED BY LAW ETC. SEC.37(1) THEREFORE BEING A RESIDUAL PROVISION, CANNOT BE TAKEN AID! OF, UNLESS AND UNTI L IT IS ESTABLISHED THAT NONE OF THE PROVISIONS OF S.30 TO 36 ARE APPLICABLE TO A GIVEN CASE. THIS VIEW FIND SUPP ORT FROM THE RATIO IN. MALWA VANASPATI AND CHEMICAL COMPANY LTD V. CIT 154 ITR 655 (MP) AND KHIMJI VISRAM AND SONS P LTD V CIT 209 ITR 993 (GUJ.). 13.THE DECISIONS RELIED UPON BY THE APPELLANT HAVE DRAWN STRENGTH FROM THE RULING IN CIT V. AYESHA HOSPITALS P LTD 292 ITR 266 (MAD). IT MAY BE TAKEN INTO ACCOUNT THAT THE ASSESSMENT YEAR WHICH WAS BEFORE THE HON'BLE CO URT WAS 1991-92 IN RESPECT OF AN EXPENDITURE OF 1,85,557 WHICH WAS INCURRED BY THE ASSESSEE TOWARDS EXPENDITURES RELAT ING. TO PAINTING, RE-LAYING OF DAMAGED FLOORS, AND PARTITIO NS ETC IN A LEASED PREMISE FOR RUNNING OF A HOSPITAL. THE LEASE DEED DID NOT PROVIDE FOR SUCH EXPENDITURE TO BE UNDERTAKEN BY TH E LESSOR. DRAWING SUPPORT FROM THE APEX COURT DECISION IN CIT .V. MADRAS AUTO SERVICE P LTD 233 ITR 468 THE EXPENDITURE WAS HELD TO BE REVENUE IN NATURE AND DEDUCTIBLE AS IT WAS FO R THE PURPOSE OF CARRYING ON BUSINESS. THE MINOR REPAIRS WERE BUT ESSENTIAL TO USE THE LEASED PREMISES AS A HOSPITAL WHICH REQUIRE THE DAMAGED FLOOR TILES TO BE REPLACED, PAINTING OF WAL LS AND MINOR PARTITIONS TO BE PUT IN PLACE. IN THE CONTEXT OF THE ASSESSEE THERE, THESE WOULD CONSTITUTE MINOR REPAIRS NOT RES ULTING IN ADDED OR ENDURING BENEFIT. LIKEWISE TILE AMOUNT EXPENDED AND THE EXTENT OF RENOVATION AND RE PAIRS CARRIED OUT THOUGH NOT DETERMINATIVE WOULD BE FAIRL Y INDICATIVE TOWARDS DECIDING WHETHER THE SAME WOULD CONST I TUTE MINOR REPAIRS. THE FACTS IN THE CASE OF THE APPELLANT WHICH WAS RE GULARLY IN OCCUPATION OF LEASE PREMISES FOR THE CONDUCT OF ITS BUSINESS ARE SIGNIFICANTLY DIFFERENT AND DIFFERENTLY PLACED. A S ITUATION WHERE THE APPELLANT HAD TAKEN ON LEASE A PARE BUILDING OR A BARREN PLATE OF FLOOR SPACE WHEREIN C IVIL, ELECTRICAL, MASONARY, PLUMBING AND OTHER RELATED WORKS WERE EXT ENSIVELY CARRIED OUT TO MAKE WORKS STATIONS, CABINS, AND CON GENIAL WOR1K SPACE CANNOT BE EQUATED TO THAT OF A CASE WHERE MIN OR REPAIRS AS IN THE CASE OF AYESHA HOSPITAL (SUPRA) WERE CARR IED OUT. 14.LN THIS CONTEXT IT WILL SERVE USEFUL PURPOSE TO REFER TO THE DECISION OF THE HON'BLE KERALA HIGH COURT DATED 18. 8.2015 IN INDUS MOTOR COMPANY P LTD V. DC IT 378 ITR 707. WHI LE EXAMINING A SIMILAR CLAIM THE HON'BLE COURT OBSERVE D ' .... AFTER THE INTRODUCTION OF EXPLANATION 1 TO SECTION 32(1) OF THE ACT, THERE IS NO SCOPE LEFT OUT AT ALL FOR ANY INTERPRETATION SINCE BY A LEGAL ITA NOS.1531 & 1762/16 & C.O.NO.106/2016. :- 6 -: FICTION, THE ASSESSEE IS TREATED AS THE OWNER OF TH E BUILDING FOR THE PERIOD OF HIS OCCUPATION. THIS MEANS THAT BY RE FURBISHING, DECORATING OR BY DOING INTERIOR WORK IN THE BUILDIN G AND ENDURING BENEFIT WAS DERIVED BY THE ASSESSEE FOR THE PERIOD OF OCCUPATION AND, THEREFORE, IS A CAPITAL EXPENDITURE AND NOT RE VENUE EXPENDITURE ..... ' ' ..... ACCORDING TO US, BY ADD ING EXPLANATION 11 TO SECTION 32(1) PARLIAMENT HAS MANIFESTED ITS LEGI SLATIVE INTENTION TO TREAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON LEASEHOLD BUILDING AS CAPITAL EXPENDITURE AND, THER EFORE, EXPLANATION 1 TO SECTION 32(1) CANNOT BE SUBJECTED TO ANY FURTHER INTERPRETATION. FURTHER THE LANGUAGE OF EXPLANATION 1 IS VERY PLAIN AND CLEAR AND THERE IS NO SCOPE FOR PROVIDING A DIF FERENT MEANING FOR THE WORDS USED AND, HENCE, WE ARE BOUND TO CONS IDER THE QUESTION BY GIVING THE LITERAL MEANING TO THE EXPRE SSIONS I AND PHRASEOLOGIES BY THE LEGISLATURE APPLIED.' FURTHER APPLYING THE RATIO, AMONGST OT1ERS, OBTAINING IN THE CASE OF MAD RAS AUTO SERVICE P LTD 233 ITR 468 THE HON'BLE HIGH COURT, T HE JURISDICTIONAL ITAT IN ITS ORDER DATED 11.9.2015 IN ITA NO. 700/MDS/2014FOR THE A.Y.2008-09 IN THE CASE OF THE CONTINENTAL ENTERPRISES V. ITO HAS DISMISSE9 THE CLAIM OF 100% DEPRECIATION BY THE ASSESSEE THUS HE UPHELD THE ORDER OF THE ASSESSING OFFICER. 5. BEFORE US, LD. AUTHORISED REPRESENTATIVE STRONGLY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES SUBMITTED THAT BREA KUP OF EXPENDITURE FURNISHED BY THE ASSESSEE WAS NEVER DOU BTED BY THE LOWER AUTHORITIES. ACCORDING TO HIM, A SUM OF D94, 71,490/- WAS SUO MOTU CAPITALIZED BY THE ASSESSEE. RELYING ON THE JU DGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C IT VS. ARMOUR CONSULTANTS P. LTD. 355 ITR 418. LD. AUTHORISED RE PRESENTATIVE SUBMITTED THAT CLAIM OF THE ASSESSEE WAS UNDER SEC. 37(1) OF THE ACT. AS PER LD. AUTHORISED REPRESENTATIVE THE EXP ENDITURE CLAIMED WAS NOT CAPITAL IN NATURE. ACCORDING TO HIM, EXPLAN ATION 1 TO SEC. 32(1) OF THE ACT APPLIED ONLY TO CAPITAL ITEMS. LD . AUTHORISED REPRESENTATIVE SUBMITTED THAT EXPENDITURE INCURRED FOR FALSE CEILING, PARTITIONS ETC WERE HELD BY THE HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF AYESHA HOSPITAL (P) LTD (SUPRA) TO BE IN THE NATURE OF REPAIR AND MAINTENANCE. FURTHER, ACCORDING TO HIM I N THE CASE OF AYESHA HOSPITAL (P) LTD (SUPRA), THE JURISDICTIONA L HIGH COURT HAD ALSO CONSIDERED THE EFFECT OF EXPLANATION (1) TO SE C. 32(1) OF THE ACT. 6. CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT COST OF REPAIRS CLAIMED BY THE ASSESSEE COULD NOT INCLUDE ITA NOS.1531 & 1762/16 & C.O.NO.106/2016. :- 7 -: EXPENDITURE WHICH WAS CAPITAL IN NATURE BY VIRTUE O F EXPLANATION TO SEC. 30 OF THE ACT INSERTED BY FINANCE ACT, 2003 W.E.F. 01.04.2004. FURTHER, ACCORDING TO HIM, CLAIM OF TH E ASSESSEE WAS HIT BY EXPLANATION (1) TO SEC. 32 OF THE ACT. RELI ANCE WAS PLACED ON THE JUDGMENT OF KERALA HIGH COURT IN THE CASE IN DUS MOTOR COMPANY P. LTD VS. DCIT 382 ITR 503, THAT OF BOMBAY HIGH COURT IN THE CASE OF RPG ENTERPRISES VS. DCIT, 386 ITR 401 AND THAT OF DELHI HIGH COURT IN THE CASE OF BIGJOS IND IA LTD VS. CIT. 293 ITR 170 . FURTHER, ACCORDING TO HIM, HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF AYESHA HOSPITAL (P) LTD (SUPRA) HAD NOT CONSIDERED THE EXPLANATION 1 TO SEC. 32 OF THE ACT. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. LD. DEPARTMENTAL R EPRESENTATIVE HAS PLACED STRONG RELIANCE ON EXPLANATION TO SEC.30 OF THE ACT WHICH IS REPRODUCED HEREUNDER:- FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT THE AMOUNT PAID ON ACCOUNT OF THE COST OF REPAIRS REFERRED TO IN SUB-CLAUSE (I), AND THE AMOUNT PAID ON ACCOUNT OF CURRENT REPAIRS REFERRED TO IN SUB-CLAUS E (II), OF CLAUSE (A), SHALL NOT INCLUDE ANY EXPENDIT URE IN THE NATURE OF CAPITAL EXPENDITURE. HE HAS ALSO PLACED RELIANCE ON EXPLANATION 1 TO SEC . 32(1) OF THE ACT, WHICH IS ALSO REPRODUCED HEREUNDER:- WHERE THE BUSINESS OR PROFESSION OF THE ASSESSEE I S CARRIED ON IN A BUILDING NOT OWNED BY HIM BUT IN RESPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHE R RIGHT OF OCCUPANCY AND ANY CAPITAL EXPENDITURE IS INCURRED BY THE ASSESSEE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION ON THE CONSTRUCTION OF ANY STRUCTURE OR DOING OF ANY WORK, IN OR IN RELATION T O, AND BY WAY OF RENOVATION OR EXTENSION OF, OR IMPROVEMEN T TO, THE BUILDING, THEN, THE PROVISIONS OF THIS CLAU SE SHALL APPLY AS IF THE SAID STRUCTURE OR WORK IS A B UILDING OWNED BY THE ASSESSEE. FOR APPLYING BOTH THESE EXPLANATIONS, THE THRESHOL D REQUIREMENT IS THAT THE EXPENDITURE CLAIMED IS CAP ITAL IN NATURE. IF THE EXPENDITURE CLAIMED IS NOT CAPITAL I N NATURE THEN IRRESPECTIVE OF THE QUESTION WHETHER IT WAS INCURRE D IN A LEASEHOLD PREMISE OR ON OWN PREMISES, IT WILL BE AL LOWABLE. ITA NOS.1531 & 1762/16 & C.O.NO.106/2016. :- 8 -: JURISDICTIONAL HIGH COURT HAS CLEARLY HELD THAT IN THE CASE OF THIRU AROORAN SUGARS LTD (SUPRA) THAT EXPENDITURE I NCURRED ON FALSE CEILING AND OFFICE RENOVATION WERE REVENUE IN NATURE. THE QUESTION THUS IS NOT WHETHER EXPENDITURE IS INC URRED IN LEASE HOLD PREMISES OR NOT, THE QUESTION IS WHETHER EXPENDITURE INCURRED CAPITAL IN NATURE OR NOT. NO DOUBT, ASSESSEE HAD FURNISHED A BREAK-UP OF THE EXPENDITUR E BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS). IN OUR OP INION, NONE OF THE AUTHORITIES VERIFIED WHETHER THE EXPEN DITURE INCLUDED ANY CAPITAL OUTGO OR NOT. WE ARE THEREFOR E OF THE OPINION THAT MATTER REQUIRES A FRESH LOOK BY THE LD . ASSESSING OFFICER. WE SET ASIDE THE ORDERS OF THE LOWER AUTH ORITIES AND REMIT THE ISSUE REGARDING CLAIM OF EXPENDITURE ON IMPROVEMENT OF LEASEHOLD ASSET BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCOR DANCE WITH LAW. GROUND NO. 2 OF THE ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSE. 6 . FOR THE IMPUGNED ASSESSMENT YEAR BREAK-UP OF THE IMPROVEMENT EXPENDITURE CLAIMED BY THE ASSESSEE WE RE AS UNDER:- PARTICULARS AMOUNT (IN INR) COST INCURRED TOWARDS PARTITIONING, FALSE CEILING AND FLOORING 1,01,01,654 ELECTRICAL WORK CARRIED OUT 78,85,632 DUCTING AND OTHER AIR CONDITIONER RELATED COSTS 33,23,335 CABLING & NETWORKING CHARGES 29,62,709 ARCHITECT FEES 17,10,345 FIRE SPRINKLER WORKS AND FIRE EXTINGUISHERS 10,52,835 STORAGE UNITS 2,49,806 WALL COVERS/GRAPHICS 1,96,281 PROJECTOR SCREEN 26,437 VENETIAN BLINDS 20,633 TOTAL 2,75,29,667 ITA NOS.1531 & 1762/16 & C.O.NO.106/2016. :- 9 -: CLAIM OF EXPENDITURE IS SIMILAR TO WHAT WAS CLAIMED BY THE ASSESSEE IN A.Y. 2008-2009. HENCE WE ARE OF THE OPINION THAT IN VIEW OF THE OR DER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2008-09, ISSUE REGARDING CLAIM OF EXPENDITURE ON IMPROVEMENT OF LEASEHOLD ASSET REQUI RES A FRESH LOOK BY THE LD. ASSESSING OFFICER. WE GIVE SIMILAR DIRE CTIONS AS GIVEN FOR ASSESSMENT YEAR 2008-09. APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 7 . NOW, WE TAKE UP APPEAL OF THE REVENUE IN ITA NO.1762/MDS/2016. 8. FACTS APROPOS ARE THAT ASSESSEE HAD FILED RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DISCLOSING INCOME OF D27,46,17,112/-. ASSESSMENT WAS COMPLETED AFTER CON SIDERING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 10A OF THE ACT. SUBSEQUENTLY, ON 21.03.2014, A NOTICE U/S.148 OF THE ACT WAS ISSU ED TO THE ASSESSEE. PURSUANT TO SUCH NOTICE, ASSESSEE REQUESTED THE LD. ASSESSING OFFICER TO TREAT THE RETURN ORIGINALLY FILED AS ONE FILED I N RESPONSE TO THE NOTICE. LD. ASSESSING OFFICER WHILE COMPLETING THE ASSESSME NT EXCLUDED EXCHANGE LOSS, TELECOMMUNICATION EXPENDITURE, SOFTW ARE MAINTENANCE CHARGE AND MANAGEMENT FEES INCURRED IN FOREIGN CURR ENCY FROM EXPORT TURNOVER WHILE WORKING OUT DEDUCTION AVAILABLE TO T HE ASSESSEE U/S.10A ITA NOS.1531 & 1762/16 & C.O.NO.106/2016. :- 10 -: OF THE ACT. HOWEVER, HE DID NOT EXCLUDE THESE AMOU NTS FROM TOTAL TURNOVER. FURTHER, WHILE COMPUTING SUCH DEDUCTIONS, LD. ASSESSING OFFICER ALSO INCLUDED TURNOVER AND PROFITS OF A DOM ESTIC TARIFF UNIT OF THE ASSESSEE, TO THE TURNOVER AND PROFITS OF ITS S TPI UNITS. 9. AGGRIEVED ON BOTH ABOVE, ASSESSEE MOVED IN APPEAL B EFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). IN SO FAR AS EXCLUSION OF THE FOREIGN EXCHANGE LOSS, TELECOMMUNICATION EXP ENDITURE, SOFTWARE MAINTENANCE FEES AND MANAGEMENT FEES INCURRED IN FOREIGN CURRENCY, FROM EXPORT TURNOVER IS CONSIDERED, THE LD. COMMISS IONER OF INCOME TAX (APPEALS) WAS ONE WITH THE LD. ASSESSING OFFICE R. HOWEVER, HE WAS OF THE OPINION THAT THESE ITEMS WHICH WERE EXCL UDED FROM EXPORT TURNOVER HAD TO BE DEDUCTED FROM TOTAL TURNOVER ALS O WHILE WORKING OUT SUCH DEDUCTION RELYING ON THE SPECIAL BENCH DE CISION IN THE CASE OF ITO VS. SAKSOFT LIMITED, (2009) 20 DTR 514. 10. IN SO FAR AS AGGREGATION OF TURNOVER AND PROFITS OF DTA UNIT WITH STPI UNIT WAS CONCERNED, LD. COMMISSIONER OF I NCOME TAX (APPEALS) HELD THAT DEDUCTION AVAILABLE U/S.10A OF THE ACT WAS SPECIFIC TO THE UNDERTAKING AND THERE COULD NOT BE ANY SUCH AGGREGATION. HE DIRECTED THE LD. ASSESSING OFFICER TO GRANT DEDUCTI ON UNDER SECTION 10A OF THE ACT TO THE STPI UNIT ON A STAND-ALONE BASIS. ITA NOS.1531 & 1762/16 & C.O.NO.106/2016. :- 11 -: 11. NOW BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE STR ONGLY ASSAILING THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) SUBMITTED THAT DECISION OF THE SPECIAL BENCH IN THE CASE OF SAKSOFT LIMITED (SUPRA) HAS BEEN TAKEN IN APPEAL BY THE DE PARTMENT BEFORE THE HONBLE HIGH COURT. AS FOR CLUBBING OF TURNOVE R AND PROFITS OF DTA UNIT WITH TO THE TURNOVER AND PROFITS OF STPI UNIT , LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT SUCH AGGREGATION WAS RIGHTLY DONE BY THE LD. ASSESSING OFFICER. 12. PER CONTRA, LD. AUTHORISED REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW ON THE ABOVE IS SUES. 13. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IN SO FAR AS EXCL USION OF ITEMS FROM TOTAL TURNOVER WHERE THESE WERE DEDUCTED FROM EXPO RT TURNOVER, WE FIND THAT JUDGMENT OF KARNATAKA HIGH COURT IN THE C ASE OF CIT VS. TATA ELXSI 349 ITR 98 IS IN FAVOUR OF THE ASSESSEE. SPECIAL BENCH DECI SION IN THE CASE OF SAKSOFT LIMITED (SUPRA) STANDS IMPLI ED APPROVED. 14. COMING TO THE ASPECT OF AGGREGATION OF TURNOVER AND PROFITS OF DTA UNIT, WHILE COMPUTING DEDUCTION AVAILABLE U/ S.10A OF THE ACT IS CONCERNED, WE FIND THAT VIEW TAKEN BY LD. COMMISSIO NER OF INCOME TAX ITA NOS.1531 & 1762/16 & C.O.NO.106/2016. :- 12 -: (APPEALS) IS FORTIFIED BY THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF CIT VS. YOKAGAWA INDIA LTD IN CIVIL APPEAL NO.8498/ 2013, DATED 16.12.2016. WHILE APPROVING THE JUDGMENT OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD 341 ITR 38 5 WHERE IT AS HELD THAT DEDUCTION AVAILABLE U/S.10A OF THE ACT WAS TO BE COMPUTED ON A STANDALONE BASIS, SEPARATELY FOR EACH UNDERTAKING, THEIR LORDSHIP HAD OBSERVED AS UNDER:- V) FROM A READING OF THE RELEVANT PROVISIONS OF SECTION 10A IT IS MORE THAN CLEAR TO US THAT THE DEDUCTIONS CON TEMPLATED THEREIN IS QUA THE ELIGIBLE UNDERTAKING OF AN ASSES SEE STANDING ON ITS OWN AND WITHOUT REFERENCE TO THE OT HER ELIGIBLE OR NON-ELIGIBLE UNITS OR UNDERTAKINGS OF T HE ASSESSEE. THE BENEFIT OF DEDUCTION IS GIVEN BY THE ACT TO THE INDIVIDUAL UNDERTAKING AND RESULTANTLY FLOWS TO THE ASSESSEE. THIS IS ALSO MORE THAN CLEAR FROM THE CONTEMPORANEOUS CIRCU LAR NO. 794 DATED 9.8.2000 WHICH STATES IN PARAGRAPH 15.6 T HAT, THE EXPORT TURNOVER AND THE TOTAL TURNOVER FOR THE PURPOSES OF SECTIONS 10A AND 10B SHALL BE OF THE UNDERTAKING LOCATED IN SPECIFIED ZONES OR 100% EXPORT ORIENTED UNDERTAKINGS, AS THE CASE MAY BE, AND THIS SHALL NOT HAVE ANY MATERIAL RELATIONSHIP WITH THE OTHER BUSINESS OF THE ASSESSEE OUTSIDE THESE ZONES OR UNITS FOR THE PURPOSES OF THIS PROVISION. (VI) IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [FIRST PROVISO TO SECTIONS 10A(1); 10A (1A) AND 10A (4)] THAT THE UNI T THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS T HE ELIGIBLE UNDERTAKING AND THAT IS ALSO HOW THE CONTEMPORANEOU S ITA NOS.1531 & 1762/16 & C.O.NO.106/2016. :- 13 -: CIRCULAR OF THE DEPARTMENT (NO.794 DATED 09.08.2000 ) UNDERSTOOD THE SITUATION, IT IS ONLY LOGICAL AND NA TURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTL Y AND, THEREFORE, IMMEDIATELY AFTER THE STAGE OF DETERMINA TION OF ITS PROFITS AND GAINS. AT THAT STAGE THE AGGREGATE OF T HE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SET OFF AN D CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION 10A THEREFORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE A CT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM T HE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION TOTAL INCOME OF THE ASSESSEE IN SECTIO N 10A HAS ALREADY BEEN DEALT WITH EARLIER AND IN THE OVERALL SCENARIO UNFOLDED BY THE PROVISIONS OF SECTION 10A THE AFORE SAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPR ESSION TOTAL INCOME OF THE ASSESSEE IN SECTION 10A AS T OTAL INCOME OF THE UNDERTAKING. HENCE, IN OUR OPINION, LD. COMMISSIONER OF INCOME T AX (APPEALS) WAS JUSTIFIED IN DIRECTING THE LD. ASSESSING OFFICER TO WORK OUT THE DEDUCTION AVAILABLE TO THE ASSESSEE U/S.10A OF THE ACT, WITHO UT AGGREGATING THE TURNOVER AND PROFIT OF ITS DTA UNIT. WE DO NOT FIN D ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON BOTH THESE ASPECTS. APPEAL OF THE REVE NUE STANDS DISMISSED. ITA NOS.1531 & 1762/16 & C.O.NO.106/2016. :- 14 -: 15. CROSS OBJECTION OF THE ASSESSEE WHICH QUESTIONS THE REOPENING DONE FOR THE IMPUGNED ASSESSMENT YEAR HAS BECOME INFRUCTUOUS, SINCE REVENUES APPEAL HAS BEEN DISMIS SED ON MERITS. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.1531/MDS/2016 IS ALLOWED FOR STATISTICAL PURPOSE . APPEAL OF THE DEPARTMENT IN ITA NO. 1762/MDS/2016 IS DISMISSED AN D CROSS OBJECTION OF THE ASSESSEE IS DISMISSED AS INFRUCTUO US. ORDER PRONOUNCED ON FRIDAY, THE 6 TH DAY OF JANUARY, 2017, AT CHENNAI. SD/- ( . ) (G. PAVAN KUMAR) ' # / JUDICIAL MEMBER SD/- ( . ) (ABRAHAM P. GEORGE) $ # / ACCOUNTANT MEMBER & / CHENNAI ' / DATED:6TH JANUARY, 2017. KV ( ! )'*+ ,+' / COPY TO: 1 . -. / APPELLANT 3. /' () / CIT(A) 5. +23 )'4 / DR 2. )5 -. / RESPONDENT 4. /' / CIT 6. 36 7 / GF