DCIT, New Delhi V. M/s. NIIT Ltd., New Delhi

ITA 1112/DEL/2012

• Counselvise Citation: 111220114 RSA 2012
• Duration Of Justice: 3 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 17-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 02-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAMKANUJHA
• Assessee Lawyers: SHIKHA SHARMA; AJAY VOHRA SR ADV ROHIT JAIN
• Keywords: Business income; Depreciation; Additional evidence; Unabsorbed depreciation
• Section: 142(1); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. I. C. SUDHIR , JM ITA NO. 1112 /DEL /2012 : ASSTT. YEAR : 2006 - 07 DCIT, CENTRAL CIRCLE - 08, NEW DELHI VS M/S NI IT LTD., B0234, OKHLA INDUSTRIAL AREA, PHASE - I, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AA A CN0085D ASSESSEE BY : SH. AJAY VOHRA, SR. ADV., ROHIT JAIN, ADV. & MS. SHIKHA SHARMA, ADV. REVENUE BY : SH. P. DAM KANUJHA , SR. DR DATE OF HEARING : 17.02 .201 5 DATE OF PRONOUNCEMENT : 08 .05 .2015 ORDER PER N. K. SAINI, AM: THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 27.12.2011 OF CIT(A) - XXXII, DELHI. 2. FOLLOWING GROUNDS HA VE BEEN RAISED IN THIS APPEAL: 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON FACTS OF THE CASE IN HOLDING THAT THE THREE UNITS OF THE ASSESSEE COMPANY NAMELY NIIT - ITES, NIIT - KTWO AND NIIT - MUMBAI ARE SEPARATE 100% EOUS OF THE ASSESS EE COMPANY FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 10B OF THE INCOME TAX ACT, 1961 AND PROFITS ARISING THERE FROM HAVE TO BE ALLOWED AS DEDUCTION UNDER THAT SECTION SEPARATELY. ITA NO. 1112 /DEL / 2012 NIIT LTD . 2 2. THAT THE COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN LAW AND ON FACTS OF THE CASE IN HOLDING THAT THE DEDUCTION U/S 10B OF THE ACT IS ALLOWABLE AT THE SOURCE ITSELF AND NOT AFTER THE COMPUTATION OF GROSS TOTAL INCOME. 3. THAT THE COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN LAW AND ON FACTS OF THE CASE IN ALLOWING THAT DEDUCT ION U/S 10B OF THE ACT AFTER DEDUCTING UNABSORBED DEPRECIATION FROM THE PROFIT OF BUSINESS WITHOUT APPRECIATING THAT THE ASSESSING OFFICER HAS RIGHTLY RECOMPUTED THE UNABSORBED DEPRECIATION FOR EARLIER YEAR AS A RESULT OF WHICH NO UNABSORBED DEPRECIATION W AS AVAILABLE FOR SET OFF IN THE ASSESSMENT YEAR UNDER CONSIDERATION. 4. THAT THE COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN LAW AND ON FACTS OF THE CASE IN ADMITTING THE ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS. 5. THAT THE COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN LAW AND ON FACTS OF THE CASE IN ALLOWING THE DEDUCTION U/S 10B OF THE ACT TO THE ASSESSEE AT RS. 7,83,34,105/ - AS CLAIMED BY IT INSTEAD OF DEDUCTION OF RS. 2,96,15,440/ - AS ALLOWED BY THE ASSESSING OFF ICER. 6. (A) THE ORDER OF THE CIT(A) IS ERRONEOUS AND NOT TENABLE IN LAW AND ON FACTS. (B) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. ITA NO. 1112 /DEL / 2012 NIIT LTD . 3 3. FIRST ISSUE VIDE GROUND NO. 1 RELATES TO THE DEDUCTION U/S 10B OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WITH REFERENCE TO BUSINESS PROFIT S RELATING TO 3 UNITS OF THE ASSESSEE NAMELY NIIT - ITES, NIIT - KTWO AND NIIT - MUMBAI. FACTS RELATED TO THIS ISSUE I N BRIEF ARE THAT THE ASSESSEE FILED A RETURN OF INCOME ON 29.11.2006 DECLARING LOSS OF RS. 18,68,63,644/ - . LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD 3 INDEPENDENT AND SEPA RATE 100% EXPORT ORIENTED UNDERTAKING (EOU) WHICH WERE ENGAGED IN THE SAME LINE OF BUSINESS AND NO SEPARATE BOOKS OF ACCOUNTS HAD BEEN MAINTAINED FOR THESE UNITS SO THESE WERE IN FACT EXPANSION OF THE SAME BUSINESS. THE AO ALSO RAISED THE DOUBT ABOUT THE A LLOCATION OF EXPENSES TO THESE UNITS TO ARRIVE AT THE CONCLUSION THAT DEDUCTION COULD NOT BE CALCULATED IN RES PECT OF THE UNITS SEPARATELY. HE , THEREFORE, CALCULATED THE DEDUCTION U/S 10B OF THE ACT BY AGG REGATING ALL THE PROFITS OF THE ELIGIBLE OR NON - ELI GIBLE UNITS BY APPLYING THE FORMULA AS GIVEN IN SECTION 10B(4) OF THE ACT TO THE ENTIRE PROFIT S OF THE BUSINESS OF THE ASSESSEE COMPANY. 4 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE 3 UNITS WERE INDEPENDENT ITA NO. 1112 /DEL / 2012 NIIT LTD . 4 O F EACH OTHER IN RESPECT OF THEIR LICENCES, LOCATION AND RESOURCES. THEREFORE, SEPARATE APPROVALS WERE TAKEN FROM THE STPI AUTHORITY FOR CLAIMING EXEMPTION U/S 10B OF THE ACT AS NEWLY SET UP 100% EOU AND THEY HAD ALSO BEEN ISSUED SEPARATE EXPORT LICENCES BY CUSTOMS AUTHORITIES. THE ASSESSEE ALSO FURNISHED THE EVIDENCES TO ESTABLISH THAT THOSE UNITS HAD SEPARATE FIXED ASSETS, PLANTS & MACHINERY AND FURNITURE & FIXTURES ETC. IT WAS SUBMITTED THAT EACH OF THE THREE EOU HAD INDEPENDENT, SEPARATE AND DISTINCT OPE RATIONS AS INDICATED IN THE EVIDENCES FURNISHED IN THE FORM OF COPIES OF SOFTEX FORMS, INVOICES, FOREIGN INWARD REMITTANCE CERTIFICATES, CUSTOM BONDED REGISTER MAINTAINED BY EACH UNIT AND COPIES OF MONTHLY PERFORMANCE REPORTS. IT WAS FURTHER STATED THAT TH OUGH SEPARATE BOOKS OF ACCOUNTS IN RESPECT OF THESE UNITS HAD NOT BEEN MAINTAINED IN THE TRADITIONAL SENSE BUT SOFTWARE ACCOUNTING SYSTEM WAS IMPLEMENTED BY THOSE UNITS AND EVERY TRANSACTION OF EACH UNIT WAS SEPARATELY CODED, THEREFORE, ALL THE TRANSACTION WERE IDENTIFIABLE AS IN THE CASE OF SEPAR ATE BOOKS. IT WAS FURTHER STATED THAT THE DEDUCTION HAD BEEN CLAIMED IN RESPECT OF THREE EOUS ON THE BASIS OF PRESCRIBED AUDIT REPORT IN FORM NO. 56G WH ICH ALSO REQUIRES THE CERTIFICATE FROM A CHARTERED ACCOUNTANT WHO CERTIFY THE AMOUNT CLAIMABLE AS DEDUCTION U/S 10B OF THE ACT ITA NO. 1112 /DEL / 2012 NIIT LTD . 5 ON THE BASIS OF EXAMINATION OF ACCOUNTS AND RECORDS OF THE ASSESSEE RELATING TO THE BUSINESS OF THE ELIGIBLE UNDERTAKING. IT WAS POINTED OUT THAT THE SAID REPORT ALSO DID NOT REFER TO ANY SEP ARATE BOOKS TO BE MAINTAINED OR REQUIRED TO BE MAINTAINED BY THE ELIGIBLE EOU. THE RELIANCE WAS PLACED ON THE DECISION OF THE ITAT MUMBAI BENCHES IN THE CASE OF DCIT VS ARABIAN EXPORTS LIMITED REPORTED AT 109 TTJ 440. IT WAS CONTENDED THAT THE THREE UNITS OF THE ASSESSEE ARE SEPARATE 100% EOUS FOR THE PURPOSES OF CLAIMING DEDUCTION U/S 10B OF THE ACT AND THOSE COULD NOT BE TREATED AS ONE JUST BECAUSE THEY CARRY OUT THE SAME NATURE OF BUSINESS. THE RELIANCE WAS ALSO PLACED ON THE FOLLOWING CASE LAWS: CIT VS MAHAN FOODS LTD. 216 CTR 148 CIT VS GEDORE TOOLS (INDIA) P. LTD. 126 ITR 613 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT IT WAS NOT THE CASE OF THE AO TH AT THE THREE ELIGIBLE UNITS HAD BEEN FORMED BY SPLITTING UP OR RECONSTRUCTING THE OLD OR NON - ELIGIBLE UNITS AND SINCE THERE WERE ENOUGH EVIDENCE IN THE ASSESSEE S CASE THAT THE THREE EXPORT ORIENTED UNITS WERE FORMED INDEPENDENTLY OF THE EXISTING UNITS FOR THE PURPOSE OF EXPORT OF SOFTWARE AND THOSE WERE APPROVED AS S UCH BY THE RE LEVANT AUTHORITIES AND THEY ITA NO. 1112 /DEL / 2012 NIIT LTD . 6 HAD BEEN FUNCTIONING INDEPENDENTLY OF EACH OTHER FOR THE PURPOSES OF BUSINESS OF EXPORT OF SOFTWARE, THEREFORE, THOSE UNITS HAVE TO BE TREATED AS ELIGIBLE UNDERTAKINGS FOR THE PURPOSES OF DEDUCTION U/S 10B OF THE AC T AND THE PROFITS ARISING THERE FROM HAVE TO BE ALLOWED AS DEDUCTION UNDER THAT SECTION SEPARATELY AS CERTIFIED BY THE AUDIT REPORT IN FORM 56G. THE LD. CIT(A) DIRECTED THE AO TO RECOMPUTED THE DEDUCTION U/S 10B OF THE ACT BY CONSIDERING EACH UNIT AS SEPAR ATE FOR CLAIMING DEDUCTION U/S 10B OF THE ACT. 6 . NOW THE DEPARTMENT IS IN APPEAL. THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE AO AND FURTHER SUBMITTED THAT THE ASSESSEE WAS NOT MAINTAI NING SEPARATE BOOKS OF ACCOUNTS BECAUSE ALL THE THREE UNITS WERE IN FACT EXPANSION OF THE SAME BUSINESS AS THOSE WERE ENGAGED IN THE SAME LINE OF BUSINESS. THEREFORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE AO TO CONSIDER EACH UNIT AS SEPARATE FOR CLAIMING DEDUCTION U/S 10B OF THE ACT. 7 . IN HIS RIVAL SUBMISSIO NS THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) ITA NO. 1112 /DEL / 2012 NIIT LTD . 7 EXAMINED THE ISSUE OF INDEPENDENT AND SEPARATE EXISTENCE OF THE ELIGIBLE UNITS OF THE ASSESSEE AND HELD THAT IN VIEW OF THE VARIOUS DOCUMENTS, SO EVIDENT BY THE ASSESSEE INCLUDING THE DOCUMENTS RELATING TO THE LICENCE , LOCATION AND RESOURCES OF THE ELIGIBLE UNDERTAKING, I T WAS CLEAR THAT THE THREE UNI TS OF THE ASSESSEE COMPANY WERE TO BE TREATED AS SEPARATE 100% EOUS FOR THE PURPOSES OF CLAIMING DEDUCTION U/S 10B OF THE ACT AND THEY CANNOT BE TREATED A S SINGLE UNIT. 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH T HE MATERIAL AVAILABLE ON THE RECORD. IN THE PR ESENT CASE , IT IS NOTICED THAT THE AO TREATED THE THREE EXPORT ORIENTED UNDERTAKING OF THE ASSESSEE AS A SINGLE UNIT , ONLY ON THIS BASIS THAT SEPARATE BOOKS OF AC COUNTS WERE NOT MAINTAINED, O N THE CONTRARY, EAC H OF THE THREE UNDERTAKINGS HAD BEEN SEPARATELY AND INDEPENDENT LY GRANTED REGISTRATION BY SOFTWARE TECHNOLOGY PARK OF INDIA, PUNE (STPI) FOR CLAIMING EXEMPTION U/S 10B OF THE ACT AS NEWLY SET UP 100% EOU , WHICH IS EVIDENT FROM THE COPIES OF STPI APPROVAL A ND EXTENSION LETTERS THERETO WHICH ARE PLACED AT PAGE NOS. 52 TO 69 OF THE ASSESSEE S PAPER BOOK. THOSE THREE UNITS WERE ALSO GRANTED SEPARATE LICENCE BY THE CUSTOMS AUTHORITIES, COPIES OF WHICH ARE PLACED AT PAGE NOS. 162 TO ITA NO. 1112 /DEL / 2012 NIIT LTD . 8 172 OF THE ASSESSEE S PAPER BO OK. THOSE EOU S WERE SITUATED AT SEPARATE LOCATION HAVING INDEPENDENT BUILDING S ON SEPARATE ADDRESS ES , THEIR PLANT & MACHINERY AND FIXED ASSETS WERE ALSO SEPARATE , EACH OF THE EOU FURNISHED SEPARATE AUDIT REPORT IN FORM NO. 56G. THEREFORE, IT CANNOT BE SAI D THAT THE THREE EOU S OF THE ASSESSEE COMPANY WERE FORMED AFTER SPLITTING OFF OF THE EXISTING UNIT OR RECONSTRUCTING THE OLD OR NON - ELIGIBLE UNIT. IN THE PRESENT CASE, ALTHOUGH IT IS AN ADMITTED FACT THAT THESE UNITS WERE NOT HAVING SEPARATE BOOKS OF ACCO UNTS BUT ERP SOFTWARE ACCOUNTING SYSTEM WAS IMPLEMENTED BY EACH OF THEM AND TRANSACTION S OF EACH UNIT WERE SEPARATELY CODED ALL THE TRANSACTION WERE IDENTIFIABLE AS IN THE CASE OF SEPARATE BOOKS. THEREFORE, THE LD. CIT(A) WAS FULLY JUSTIFIED IN DIRECTING T HE AO TO COMPUTE THE DEDUCTION U/S 10B OF THE ACT IN RESPECT OF EACH UNIT SEPARATELY. WE, DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 9 . GROUND NOS. 2 & 3 ARE CO - RELATED AND RELATE TO THE DEDUCTION U/S 10B OF THE ACT. THE FACTS RELATE D TO THIS ISSUE IN BRIEF ARE THAT THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ALL THE THREE DIFFERENT UNITS OF THE ASSESSEE WERE NOT OPERATING IN ISOLATION AS CLAIMED AND IT WAS ONLY FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10B OF T HE ITA NO. 1112 /DEL / 2012 NIIT LTD . 9 ACT THAT THE ASSESSEE TRIED TO ALLOCATE THE EXPENSES BETWEEN VARIOUS UNITS FOR COMPUTING DEDUCTION UNDER THE SAID SECTION AND THAT THE PROFITS OF THE UNITS ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT WERE DISPROPORTIONATELY HIGH AS COMPARED TO THE TOTAL B USINESS OF THE ASSESSEE. HE, FURTHER OBSERVED THAT THE ASSESSEE DID NOT MAINTAIN SEPARATE BOOKS OF ACCOUNTS FOR ALL THE UNITS AND ALSO DID NOT GIVE THE BASIS OF APPORTIONMENT OF COMMON EXPENSES, THEREFORE, THE DEDUCTION U/S 10B OF THE ACT WAS TO BE COMPUTE D BY APPORTIONING THE AGGREGATE PROFITS OF THE ASSESSEE FROM ALL THE BUSINESS INCLUDING THE DOMESTIC BUSINESS IN THE RATIO OF EXPORT TURNOVER TO THE TOTAL TURNOVER. THE AO ALSO HELD THAT THE ASSESSEE WRONGLY COMPUTED UNABSORBED DEPRECIATION BROUGHT FORWARD FROM THE EARLIER ASSESSMENT YEAR. ACCORDING TO THE AO, THE ASSESSEE HAD BEEN WRONGLY COMPUTED UNABSORBED DEPRECIATION IN THE EARLIER YEARS BY FIRST CLAIMING DEDUCTION U/S 10B OF THE ACT, WHILE COMPUTING INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND NOT OUT OF THE GROSS TOTAL INCOME, AFTER ADJUSTING UNABSORBED DEPRECIATION, IF ANY, CARRY FORWARD FROM EARLIER YEARS. THE AO ALSO OBSERVED THAT IN CASE THERE WAS ANY UNABSORBED DEPRECIATION RELATING TO THE EARLIER ASSESSMENT YEARS WHICH W AS FOUND TO BE ALLOWABLE TO THE ASSESSEE, SUCH UNABSORBED DEPRECIATION HAD TO BE FIRST ITA NO. 1112 /DEL / 2012 NIIT LTD . 10 REDUCED FROM THE ELIGIBLE PROFITS BEFORE ALLOWING DEDUCTION U/S 10B OF THE ACT AND THE DEDUCTION UNDER THE SAID SECTION WAS TO BE RESTRICTED TO THE EXTENT OF RESIDUAL PR OFITS OF THE BUSINESS. THE RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS HIMATASINGIKE SEIDE LTD. REPORTED AT 286 ITR 255. 10 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE DEDUCTION U/S 10B OF THE ACT WAS ALLOWABLE FROM PROFITS OF THE ELIGIBLE BUSINESS AS COMPUTED UNDER THE HEAD BUSINESS INCOME AND SUCH PROFITS WERE THE INDIVIDUAL PROFITS OF THE ELIGIBLE UNITS COMPUTED BEFORE SETTING OFF OF BROUGHT FORWARD UNABSORBE D LOSS ES /DEPRECIATION, IF ANY, OF NON - ELIGIBLE UNDERTAKING S REQUIRED TO BE SET OFF, SUBSEQUENTLY AT THE STAGE OF COMPUTING GROSS TOTAL INCOME UNDER CHAPTER VI OF THE ACT. IT WAS FURTHER STATED THAT THE FACTS OF THE CASE RELIED BY THE AO WERE DISTINGUISHABL E FROM THE FACTS OF THE ASSESSEE S CASE , ON THE OTHER HAND, THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SCIENTIFIC ATLANTA INDIA TECHNOLOGY (P) LTD. REPORTED AT 38 SOT 252 WAS APPLICABLE WHEREIN THE TRIBUNAL HELD THAT DEDUCTION U/S 10A OF THE ACT HAS TO BE INDEPENDENTLY COMPUTED IN RELATION TO THE PROFITS OF THE ITA NO. 1112 /DEL / 2012 NIIT LTD . 11 ELIGIBLE UNITS WITHOUT ADJUSTING THE SAME AGAINST UNABSORBED DEPRECIATION RELATING TO THE NON - ELIGIBLE UNITS. THE RELIANCE WAS ALSO PLACED ON THE FOLLOWING CASE LAWS: ACIT VS Y OKOGAWA INDIA LTD. 111 TTJ 548 (TRIB) CHANGEPOND TECHNOLOGIES (P.) LTD. VS ACIT 119 TTJ 18 (CHENN.) KPIT CUMMINS INFOSYSTEMS (BANGALORE) (P) LTD. VS ACIT (2008) 26 SOT 529 (BANG.) RELIQ SOFTWARE (P) LIMITED VS ITO 125 ITD 101 (BANG.) CIT VS MA HAN FOODS LTD . 216 CTR 148 (DEL.) CIT VS GEDORE TOO LS (INDIA) PVT. LTD. 126 ITR 673 (DEL.) DCIT VS ARABIAN EXPORTS LTD. 109 TTJ 440 (MUM.) 11 . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE FACTS OF THE CASE RELIED BY THE AO I.E. CI T VS HIMMATSINGIKE SEIDE LTD. WERE DISTINGUISHABLE FROM THE FACTS OF THE ASSESSEE S CASE BECAUSE IN THE SAID C A SE. THE ASSESSEE HAS UNABSORBED DEPRECIATION RELATING TO 100% EXPORT ORIENTED UNDERTAKING , CARRIED FORWARD FROM ASSESSMENT YEAR 1988 - 89. THE SAID UNABSORBED DEPRECIATION WAS ADJUSTED AGAINST CERTAIN INCOME FROM OTHER SOURCES AND NOT ADJUSTED AGAINST THE ELIGIBLE PROFIT OF THE 100% EOU AND THE ENTIRE PROFIT FROM THE EOU WAS CLAIMED AS EXEMPT FROM TAX. THE HON BLE HIGH COURT AFTER ANALYZING THE ENTIR E ITA NO. 1112 /DEL / 2012 NIIT LTD . 12 SCHEME HELD THAT THE UNABSORBED DEPRECIATION OF THE EOU HAD TO BE ADJUSTED AGAINST THE ELIGIBLE PROFIT BEFORE ALLOWING EXEMPTION/DEDUCTION U/S 10B OF THE ACT AND THAT BY CLAIMING SET OFF OF UNABSORBED DEPRECIATION OF THE ELIGIBLE UNDERTAKING AGAINST INCO ME FROM OTHER SOURCES, THE ASSESSEE HAD VIRTUALLY TAKEN EXEMPTION FROM PAYMENT OF TAX EVEN IN RESPECT OF OTHER BUSINESS INCOME WHICH WAS CLEARLY NOT PERMISSIBLE . W HEREAS IN ASSESSEE S CASE , T HERE WAS NO BROUGHT FORWARD UNABSORBED DEPRECIATION IN RESPECT OF 100% EOUS AND THE UNABSORBED DEPRECIATION WAS IN RESPECT OF NON - ELIGIBLE BUSINESS WHICH THE AO HAD DEDUCTED FROM THE PROFITS OF THE ENTIRE BUSINESS WHILE ALLOWING DEDUCTION U/S 10B OF THE ACT. THE LD. CIT(A) HELD THAT DEDUCTION U/S 10B OF THE ACT WAS ALLO WABLE AT THE SOURCE ITSELF AND NOT AFTER COMPUTATION OF GROSS TOTAL INCOME. THE LD. CIT(A) DIRECTED THE AO TO ALLOW THE DEDUCTION U/S 10B OF THE ACT FROM THE PROFIT OF THE ELIGIBLE UNDERTAKING WITHOUT SETTING OFF THE LOSSES OR UNABSORBED BROUGHT FORWARD DE PRECIATION. THE RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS YOKOGAWA INDIA LTD. REPORTED AT 246 CTR 226. 12 . NOW THE DEPARTMENT IS IN APPEAL. THE LD. DR REITERATED THE OBSERVATIONS OF THE AO AND STRONGLY S UPPORTED THE ITA NO. 1112 /DEL / 2012 NIIT LTD . 13 ASSESSMENT ORDER DATED 31.12.2009. IT WAS FURTHER SUBMITTED THAT IT IS AN ACCEPTED POSITION OF LAW THAT FIRST BUSINESS PROFIT HAS TO BE DETERMINED BASED ON SECTION 30 TO 40D AS PROVIDED U/S 29 OF THE ACT AND THAT IT WAS WITH REFERENCE TO THE P ROFIT SO DETERMINED , DEDUCTION U/S 10B(4) OF THE ACT HAS TO BE WORKED OUT . THE RELIANCE WAS PLACED ON THE DECISION OF THE HON BLE KERALA HIGH COURT IN THE CASE OF CIT VS PATSPIN INDIA LTD. REPORTED AT 245 CTR 97. IT WAS SUBMITTED THAT THE LD. CIT(A) WAS NO T JUSTIFIED IN REVERSING THE STAND OF THE AO. 1 3 . IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE DEDUCTION U/S 10B OF THE ACT IS ALLOWABLE IN RESPECT OF PROFIT DERIVE D BY THE ELIGIBLE UNDERTAKING, QUANTIFIED IN TERMS OF SUB - SECTION (4) OF SECTION 10B OF THE ACT I.E. QUA THE PROFITS OF EACH UNDERTAKING AS IF SUCH UNDERTAKING WAS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE D EDUCTION U/S 10B OF THE ACT WAS TO BE PROVIDED FROM INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION IMMEDIATELY AFTER DEDUCTION U/S 30 TO 43D OF THE ACT AND BEFORE ANY ADJUSTMENT OF BROUGHT FORWARD LOSSES OF EARLIER YEARS U/S 72 OF THE AC T OR SET OFF OF INTER - HEAD LOSSES U/S 71 OF THE ACT OF CHAPTER VI ITA NO. 1112 /DEL / 2012 NIIT LTD . 14 WAS MADE. IT WAS FURTHER STATED THAT THE UNABSORBED DEPRECIATION CARRIED FORWARD FROM THE EARLIER YEARS BY THE ASSESSEE DID NOT RELATE TO THE ELIGIBLE UNDERTAKING S RATHER IT WAS RELA TED TO T HE NON - ELIGIBLE UNITS, T HEREFORE, IT WAS NOT TO BE REDUCED FROM THE PROFITS OF THE EOU. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS YOKOGAWA INDIA LTD. 246 CTR 226 (KAR.) BLACK & VEATCH CONSULTING PVT. LTD. 348 ITR 72 (BOM.) CIT VS TYCO ELE CTRONICS TOOLS INDIA (P) LTD. 205 TAXMAN 403 (KAR.) CIT VS GALAXY SURFACTANTS LTD. (2012) 249 CTR 38 (BOM.) SCIENTIFIC ATLANTA INDIA TECHNOLOGY (P) LIMITED CIT VS TEI TECHNOLOGIES PVT. LTD. (2012) 210 TAXMAN 237 (DEL.) 14 . IT WAS FURTHER SUBMITTED THAT TH E ASSESSEE HAD RIGHTLY CLAIMED DEDUCTION U/S 10B OF THE ACT ON THE BASIS OF INDEPENDENT/SEPARATE PROFITS OF EACH OF THE ELIGIBLE UNDERTAKING WITHOUT ADJUSTING THE SAME AGAINST UNABSORBED DEPRECIATION CARRIED FORWARD FROM EARLIER YEAR WHICH WAS PERTAINING T O THE NON - ELIGIBLE UNITS. THEREFORE, THE DISALLOWANCE MADE BY THE AO WAS RIGHTLY DELETED BY THE LD. CIT(A). ITA NO. 1112 /DEL / 2012 NIIT LTD . 15 15 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT APPEARS THAT THE ASSESSEE WAS NOT HAVING ANY UNABSORBED DEPRECIATION RELATING TO THE ELIGIBLE EXPORT ORIENTED UNITS (EOU S) . THEREFORE, ADJUSTMENT IN THE ELIGIBLE PROFITS OF THE EOU WAS NOT TO BE MADE ON ACCOUNT OF BROUGHT FORWARD UNABSORBED DEPRECIATION. THE SAID UNABSORBED DEPRECIATION WAS ADJUSTED BY THE ASSESSEE AGAINST CERTAIN INCOME FROM OTHER SOURCES AND NOT AGAINST THE ELIGIBLE PROFITS OF THE 100% EOU. 16. ON A SIMILAR ISSUE THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS YOKOGAWA INDIA LT D. 341 ITR 385 HELD AS UNDER: THAT AS THE PROFITS AND GAINS UNDER SECTION 10A WERE NOT TO BE INCLUDED IN THE INCOME OF THE ASSESSEE AT ALL, THE QUESTION OF SETTING OFF THE LOSS OF THE ASSESSEE FROM ANY BUSINESS AGAINST SUCH PROFITS AND GAINS OF THE UNDER TAKING WOULD NOT ARISE. SIMILARLY, AS PER SECTION 72(2), UNABSORBED BUSINESS LOSS IS TO BE FIRST SET OFF AND THEREAFTER UNABSORBED DEPRECIATION TREATED AS CURRENT YEAR S DEPRECIATION UNDER SECTION 32(2) IS TO BE SET OFF. AS THE DEDUCTION UNDER SECTION 10A HAS TO BE EXCLUDED FROM THE TOTAL INCOME OF THE ASSESSEE, THE QUESTION OF UNABSORBED ITA NO. 1112 /DEL / 2012 NIIT LTD . 16 BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFIT AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. 17 . SIMILARY, THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS T EI TECHNOLOGIES PVT. LTD. 361 ITR 36 (DEL.) HELD AS UNDER: THAT FOR COMPUTING DEDUCTION UNDER SECTION 10A IN RESPECT OF AN EXPORT PROCESSING ZONE UNIT, THE LOSSES SUFFERED IN THE NON - EXPORT PROCESSING ZONE UNIT NEED NOT BE SET OFF AGAINST THE PROFITS/IN COME OF THE EXPORT PROCESSING ZONE UNIT. THE BROUGHT FORWARD LOSSES OF THE NON - EXPORT PROCESSING ZONE UNIT NEED NOT BE DEDUCTED OR REDUCED. 1 8 . THEREFORE, BY KEEPING IN VIEW THE RATIO LAID DOWN BY THE HON BLE JURISDICTIONAL HIGH COURT & THE KARNATAKA HI GH COURT, WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). ACCORDINGLY, WE DO NOT SEE ANY MERIT IN THESE TWO GROUNDS OF THE DEPARTMENTAL APPEAL. 19 . NEXT ISSUE VIDE GROUND NO. 4 RELATES TO THE ADMIS SION OF THE ADDITIONAL EV IDENCE BY THE LD CIT(A) . AS REGARDS TO THIS ISSUE THE LD. DR SUBMITTED THAT THE ASSESSEE DID NOT FU RNISH THE EVIDENCES BEFORE THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS, THEREFORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN ADMITTING THE ADDITIONAL EVIDENCES. THE LD. COUNSEL FOR THE ASSESSEE IN HIS RIVAL SUBMISSIONS SUBMITTED THAT THE LD. ITA NO. 1112 /DEL / 2012 NIIT LTD . 17 CIT(A) FORWARDED THE ADDITIONAL EVIDENCES TO THE AO UNDER THE PROVISIONS OF RULES 46A OF THE INCOME TAX RULES AND THE AO SUBMITTED HIS REPORT DATED 08.08.2011. THEREFORE, IT CANNOT BE SAID THAT THE LD. CIT(A) DID NOT PROVIDE THE OPPORTUNITY TO THE AO WHO COMPLETED THE ASSESSMENT IN DUE HASTE. 20 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRES ENT CASE, IT APPEARS THAT THE AO VIDE NOTICE U/S 142(1) OF THE ACT CALLED THE DETAILS RELATING TO CLAIM U/S 10B OF THE ACT WHICH THE ASSESSEE FURNISHED. THE LD. CIT(A) FOUND FROM THE RECORD THAT THE ASSESSEE REPLIED TO THE SHOW - CAUSE REGARDING THE ALLOWABI LITY OF DEDUCTION U/S 10B OF THE ACT VIDE SUBMISSIONS DATED 30.12.2009. THE LD. CIT(A) CATEGORICALLY STATED THAT THERE WAS NO SPECIFIC SHOW - CAUSE GIVEN TO THE ASSESSEE AS TO WHY ALL THE UNITS OF THE ASSESSEE COMPANY BE NOT TREATED AS A SINGLE UNIT FOR THE PURPOSE OF ALLOWANCE OF DEDUCTION U/S 10B OF THE A CT, T HEREFORE, SPECIFIC OPPORTUNITY WAS NOT GRANTED TO THE ASSESSEE FOR CLARIFYING THE ISSUE AS TO WHY ALL THE UNITS OF THE ASSESSEE MAY NOT BE CONSIDERED AS ONE UNIT FOR THE PURPOSE OF SECTION 10B OF THE A CT AND THAT THE DOCUMENTS FURNISHED BY THE ITA NO. 1112 /DEL / 2012 NIIT LTD . 18 ASSESSEE BEFORE HIM GOES TO THE ROUTE OF THE AFORESAID ISSUE RELATING TO DEDUCTION U/S 10B OF THE ACT . IN THE PRESENT CASE, THE LD. CIT(A) ADMITTED THOSE EVIDENCES AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY TO THE AO WHO FURNISHED HIS REMAND REPORT. THEREFORE, WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 21 . GROUND NOS. 5 & 6 ARE GENERAL IN NATURE SO DO NOT REQUIRE ANY COMMENTS ON OUR PART. 22 . IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. ( ORDER PRON OUNCED IN THE COURT ON 08 /0 5 /2015 ) SD/ - SD/ - (I. C. SUDHIR ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08 /05 /2015 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RES PONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR