ACIT, Cir.-10, Pune V. Semco Electric Pvt. Ltd., Pune

ITA 1126/PUN/2011

• Counselvise Citation: 112624514 RSA 2011
• Duration Of Justice: 3 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-01-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 07-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Reopening of assessment; Business income; Depreciation; Reason to believe
• Section: 143(3); 234B; 14A; 10B; 147; 148; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1125/PN/2011 ASSESSMENT YEAR: 2004-05 SEMCO ELECTRIC PVT. LTD., GAT NO.154/1, MAHALUNGE, POST CHAKAN, TALUKA KHED, PUNE 510401 . APPELLANT PAN: AADCS9493H VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 10, NIGDI, PUNE . RESPONDENT ITA NO.1126/PN/2011 ASSESSMENT YEAR: 2004-05 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 10, PUNE . APPELLANT VS. SEMCO ELECTRIC PVT. LTD., GAT NO.154/1, MAHALUNGE, POST CHAKAN, TALUKA KHED, PUNE 510401 . RESPONDENT PAN: AADCS9493H ITA NO.718/PN/2012 ASSESSMENT YEAR: 2006-07 SEMCO ELECTRIC PVT. LTD., GAT NO.154/1, MAHALUNGE, POST CHAKAN, TALUKA KHED, PUNE 510401 . APPELLANT PAN: AADCS9493H VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 10, PUNE . RESPONDENT ITA NO.946/PN/2012 ASSESSMENT YEAR: 2006-07 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 10, PUNE . APPELLANT VS. ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 2 SEMCO ELECTRIC PVT. LTD., GAT NO.154/1, MAHALUNGE, POST CHAKAN, TALUKA KHED, PUNE 510401 . RESPONDENT PAN: AADCS9493H ITA NO.719/PN/2012 ASSESSMENT YEAR: 2007-08 SEMCO ELECTRIC PVT. LTD., GAT NO.154/1, MAHALUNGE, POST CHAKAN, TALUKA KHED, PUNE 510401 . APPELLANT PAN: AADCS9493H VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 10, PUNE . RESPONDENT ITA NO.947/PN/2012 ASSESSMENT YEAR: 2007-08 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 10, PUNE . APPELLANT VS. SEMCO ELECTRIC PVT. LTD., GAT NO.154/1, MAHALUNGE, POST CHAKAN, TALUKA KHED, PUNE 510401 . RESPONDENT PAN: AADCS9493H ASSESSEE BY : SHRI SHARAD SHAH REVENUE BY : SHRI B.C. MALAKAR DATE OF HEARING : 30-01-2015 DATE OF PRONOUNCEMENT : 31-03-2015 ORDER PER SUSHMA CHOWLA, JM: OUT OF THIS BUNCH OF SIX APPEALS, THERE ARE THREE C ROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE SEPARATE ORDER S OF CIT(A)-V, PUNE, DATED 28.06.2011, 20.02.2012 AND 20.02.2012 RELATIN G TO ASSESSMENT YEAR 2004-05, 2006-07 AND 2007-08 RESPECTIVELY AGAINST S EPARATE ORDERS PASSED ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 3 UNDER SECTION 143(3) R.W.S. 147, 143(3) AND 143(3) OF THE INCOME TAX ACT, 1961, RESPECTIVELY. 2. ALL THE APPEALS RELATING TO THE SAME ASSESSEE WE RE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FO R THE SAKE OF CONVENIENCE. 3. FIRST WE SHALL TAKE UP THE CROSS APPEALS IN ASSE SSMENT YEAR 2004-05. 4. THE ASSESSEE IN ITA NO.1125/PN/2011 HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL:- 1) THE LEARNED A.O. ERRED IN ASSUMING JURISDICTION U/ S 147 AND LEARNED CIT (A) ERRED IN UPHOLDING THE AO'S CONTENTION. 2) THE LEARNED A.O. ERRED IN INCREASING THE DEPRECIAT ION @ 60% INSTEAD OF @ 25% IN RESPECT OF COMPUTERS SOFTWARE LICENSE COST AND LEARNED CIT (A) ERRED IN UPHOLDING THE AO'S CONTENT ION. 3.1) WHILE MAKING THE REASSESSMENT, THE LEARNED A.O . HAS ERRED IN NOT GIVING EFFECT TO THE ORDER PASSED BY HON. ITAT IN O UR CASE WHILE PASSING ORDER U/S 147. 3.2) THE LEARNED CIT (A) ERRED IN HOLDING THAT THIS GROUND IS NOT WITHIN THE SCOPE AND AMBIT OF APPEALABLE ORDERS AS PROVIDED U/S 246A OF THE IT ACT. 4) THE LEARNED A.O. HAS ERRED IN COMPUTING INTEREST U /S 234A AND 234B AND LEARNED CIT (A) ERRED IN UPHOLDING THE AO'S CON TENTION. 5) THE APPELLANT CRAVES ITS RIGHT TO ADD TO OR ALTER THE GROUNDS OF APPEAL AT ANY TIME BEFORE OR DURING THE COURSE OF H EARING OF THE CASE. 5. THE REVENUE IN ITA NO.1126/PN/2011 HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW THE LD.CIT(A) ERRED IN ALLOWING ASSESSEE'S CLAIM IN NOT REDUCTION THE AMOUNT OF RS.1.31 CRORES FROM THE EXPORT TURNOVER, BEING THE PROFESSIONAL CONSULTANCY FEES PAID IN FOREIGN EXCHANGE FORM THE EXPORT TURNOVER FOR THE PURPOSE OF COMPUTATION OF EXEMPTION U/S 10B OF THE IT ACT, 1961. 2. THE LD. CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT AS PER EXPLANATION 2(III) TO SEC 10B OF THE I. T ACT, 196 1, 'EXPORT TURNOVER' MEANS THE CONSIDERATION IN RESPECT OF EXPORT (BY TH E UNDERTAKING) OF ARTICLES OR COMPUTER SOFTWARE RECEIVED IN, OR BROUG HT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDA NCE WITH SUB- SEC(3), BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTIC LES OR THINGS OR ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 4 COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY , INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSID E INDIA'. 3. THE LD. CIT(A) ERRED IN NOT HOLDING THAT THE EXP ENDITURE OF RS. 131.10 LAKHS BEING THE OUTFLOW OF FOREIGN CURRENCY ON ACCOUNT OF CONSULTANCY FEES) WAS INCURRED IN FOREIGN EXCHANGE IN INDIA AND SUCH OUTFLOW OF FOREIGN EXCHANGE HAS TO BE ACCOUNTED FOR IN ACCORDANCE WITH THE PROVISIONS OF EXPLANATION 2(III) TO SEC 10B TO THE IT. ACT. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. 6. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS AGAINST THE ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT. 7. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSEE HAD FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,21, 600/- ON 30.10.2004. THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMP LETED VIDE ORDER DATED 29.12.2006 ON ASSESSED INCOME OF RS.1,18,80,840/-. THEREAFTER, THE ASSESSING OFFICER RECORDED REASONS FOR RE-OPENING T HE ASSESSMENT UNDER SECTION 147 OF THE ACT AND NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 31.03.2009. THEREAFTER, NOTICE UNDER SECTION 143(2 ) WAS ISSUED ON 14.11.2009 AND THE ASSESSEE COMPLIED WITH THE STATU TORY NOTICE. 8. THE ASSESSING OFFICER NOTED THAT FOR THE YEAR UN DER CONSIDERATION, THE ASSESSEE HAD CLAIMED EXEMPTION UNDER SECTION 10B OF THE ACT AS IT WAS 100% EXPORT ORIENTED UNIT. ON SCRUTINY OF THE RETURN OF INCOME AND THE COMPUTATION OF INCOME FILED BY THE ASSESSEE, IT WAS NOTED BY TH E ASSESSING OFFICER THAT THE ASSESSEE HAD CLAIMED EXEMPTION UNDER SECTION 10B AT RS.21,12,82,530/- FOR UNIT A-1 AND UNIT A-2. FURTHER, IT WAS NOTED BY TH E ASSESSING OFFICER THAT UNDER SCHEDULE U OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS, THE ASSESSEE HAD SHOWN OUTFLOW OF RS.131.10 LAKHS I N FOREIGN CURRENCY ON ACCOUNT OF CONSULTANCY FEES. HOWEVER, WHILE ARRIVI NG AT THE EXPORT TURNOVER, THIS AMOUNT WAS NOT REDUCED, IN TERMS OF PROVISION OF ITEM (III) OF EXPLANATION 2 BELOW SECTION 10B (9A) OF THE ACT. AFTER THE SAID ADJUSTMENT, THE EXPORT TURNOVER WOULD ARRIVE AT RS.1,35,24,46,241/-. FURT HER, THE ASSESSING OFFICER ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 5 NOTED THAT UNDER DEPRECIATION SCHEDULE, THE ASSESSE E HAD CLAIMED LESS DEPRECIATION ON COMPUTER SOFTWARE IN BOTH THE UNITS AND WHICH HAS RESULTED IN OVER STATEMENT OF PROFIT AND EXCESS CLAIM OF DEDUCT ION UNDER SECTION 10B OF THE ACT. THE ASSESSING OFFICER THUS, RECORDED REAS ONS FOR RE-OPENING THE ASSESSMENT AS THERE WAS AN ESCAPEMENT OF INCOME TOW ARDS EXCESS EXEMPTION CLAIMED BY THE ASSESSEE UNDER SECTION 10B OF THE ACT. DURING THE COURSE OF HEARING, COPY OF REASONS TO BELIEVE RECOR DED WERE HANDED OVER TO THE ASSESSEE, IN RESPONSE TO WHICH, THE ASSESSEE RA ISED FOUR OBJECTIONS, WHICH WERE DISPOSED OF AND WERE RECORDED IN THE ORD ER SHEET. THE RELEVANT PORTION OF ORDER SHEET IS AS UNDER:- 1. NOTICE BEING TIME BARRED - THE AR INFORMED THAT THE NOTICE WAS ISSUED ON 31/03/2009 AND U/S 149, IT IS NOT TIME BA RRED. OBJECTION WITHDRAWN BY THE AR. 2. NOTICE ISSUED WITHOUT APPROVAL OF JCIT- THE AR WAS SHOWN A COPY OF LETTER DATED 31/03/2009 FROM JCIT, R-10 GRA NTING APPROVAL FOR REOPENING. HENCE, OBJECTION WAS WITHDRAWN BY THE A R. 3. ACTION U/S 154 INITIATION- THE AR OBJECTED THAT WITHOUT COMPLETION OF 154 PROCEEDINGS, NOTICE U/S 148 WAS ISSUED. HOW EVER, THE AR WAS INFORMED THAT THE THEN AO VIDE AN ORDER SHEET ENTRY 24/03/2008 HAS DROPPED THE PROCEEDINGS U/S 154 SINCE IT WAS NOT A MISTAKE APPARENT FROM RECORDS. THUS, THIS OBJECTION IS NOT IN ORDER . 4. THE AR SUBMITTED THAT HE HAS FURNISHED ALL THE R ELEVANT DETAILS AND HAS NOTHING MORE TO SAY ON THE SAID ISSUES. THUS, THIS IS NOT AN OBJECTION PER SE & HENCE NEED NO COMMENTS. THUS, ALL THE OBJECTIONS RAISED BY THE ARS TO THE R EOPENING PROCEEDINGS STAND DISPOSED. 9. THE ASSESSING OFFICER THEREAFTER, COMPUTED INCOM E IN THE HANDS OF THE ASSESSEE AFTER CONSIDERING THE EXPLANATION FILED BY THE ASSESSEE. THE PLEA OF THE ASSESSEE IN RESPECT OF OUTFLOW OF RS.131.10 LAK HS IN FOREIGN CURRENCY WAS THAT THE EXPENSES WERE INCURRED IN THE REGULAR COUR SE OF BUSINESS OF EXPORT OF GOODS AND IT HAD NEITHER PROVIDED ANY TECHNICAL SER VICES OUTSIDE INDIA NOR EARNED ANY INCOME BY PROVIDING ANY TECHNICAL SERVIC ES OUTSIDE INDIA. THE ASSESSING OFFICER REJECTING THE SAME AND IN VIEW OF THE PROVISIONS OF THE ACT, OBSERVED THAT RS.131.10 LAKHS REPRESENTING OUTFLOW IN FOREIGN CURRENCY ON ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 6 ACCOUNT OF CONSULTANCY FEES WAS TO BE REDUCED FROM EXPORT TURNOVER, WHICH WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 10B OF THE ACT. THE ALTERNATE PLEA OF THE ASSESSEE TO REDUCE THE AMOUNT OF EXPENSES FROM THE TOTAL TURNOVER ALSO, IN ORDER TO WORK OUT THE DEDUCTION UNDER SECTION 10B O F THE ACT, WAS REJECTED BY THE ASSESSING OFFICER. 10. IN RESPECT OF THE SECOND CLAIM OF ALLOWABILITY OF LESSER DEPRECIATION ON COMPUTER SOFTWARE, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIMED DEPRECIATION @ 25% INSTEAD OF ELIGIBLE RATE OF 60%. THE PLEA OF THE ASSESSEE WAS THAT IT HAD CLAIMED THE DEPRECIATION ON COMPUTE R SOFTWARE @ 25% BY TREATING IT AS AN INTANGIBLE ASSET. THE ALTERNATE PLEA RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT EVEN IF HIGHER RATE OF DEPRECIATION @ 60% WAS APPLIED, THEN THE TAXABLE IN COME AS WELL AS THE QUANTUM OF DEDUCTION UNDER SECTION 10B OF THE ACT W OULD GET REDUCED AND AS SUCH, THERE WOULD BE NO IMPACT ON THE CHARGEABLE IN COME FOR THE CURRENT YEAR. THE ASSESSING OFFICER STILL REJECTED THE PLEA OF TH E ASSESSEE AND HELD THAT THE RATE OF DEPRECIATION FOR COMPUTER SOFTWARE WAS 60% AND THE DEPRECIATION ON COMPUTERS WAS TO BE COMPUTED ACCORDINGLY. IN RESPE CT OF THE ALTERNATE PLEA OF THE ASSESSEE THAT IT WOULD HAVE ANY IMPACT ON THE C HARGEABLE INCOME FOR THE CURRENT YEAR, THE ASSESSING OFFICER OBSERVED THAT T HE ISSUE WOULD CERTAINLY HAVE IMPACT ON THE CHARGEABLE INCOME FOR FUTURE YEA RS ONCE THE ELIGIBLE UNDERTAKING EXHAUSTS ITS PERIOD OF EXEMPTION UNDER SECTION 10B OF THE ACT. 11. BEFORE THE CIT(A), THE PLEA OF THE ASSESSEE WAS THAT THE ISSUES RAISED BY WAY OF RECORDING REASONS FOR REOPENING WERE SAME AS THE ISSUES RAISED IN THE RECTIFICATION PROCEEDINGS INITIATED UNDER SECTI ON 154 OF THE ACT. THE CIT(A) OBSERVED THAT UNDER SECTION 154 OF THE ACT, THE ASS ESSING OFFICER HAD LIMITED POWERS AND IN ALL FAIRNESS, THE ASSESSING OFFICER I NITIATED THE PROCEEDINGS UNDER SECTION 147 OF THE ACT BY RECORDING REASONS F OR RE-OPENING THE ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 7 ASSESSMENT WHICH CANNOT BE FAULTED WITH. RELIANCE IN THIS REGARD WAS PLACED BY THE CIT(A) ON THE RATIOS LAID DOWN IN THE FOLLOW ING CASES. (I) CIT VS INDIA SEA FOODS ITA NO.128/2010, ORDER D ATED 17.01.2011 (KERALA HIGH COURT), (II) HONDA SIEL POWER PRODUCTS LTD. VS. DCIT & ANOT HER WP (CIVIL) NO.9036/2007, ORDER DATED 14.2.2011 OF DELHI HIGH C OURT. 12. IN RESPECT OF THE ISSUE RAISED ON MERITS, THE C IT(A) WHILE ADJUDICATING THE ISSUE OF EXCLUSION OF CONSULTANCY FEES OF RS.13 1.10 LAKHS FROM EXPORT TURNOVER FOR THE PURPOSE OF CALCULATION OF DEDUCTIO N UNDER SECTION 10B OF THE ACT OBSERVED AS UNDER:- 13. I HAVE CONSIDERED THE ABOVE REFERRED EXPLANATI ON OF THE APPELLANT VIS-A-VIS THE AO'S REASONING. IT IS NOTICED THAT OU T OF RS.1.31 CRORES UNDER THE HEAD FOREIGN EXCHANGE OUTFLOW, THERE WAS AN AMOUNT OF RS.8,22,618/- FOR FOREIGN TRAVEL AND RS.2,66,809/- FOR BANK CHARGES, LC CHARGES, ETC.; WHICH IN ANY CASE WOULDN'T COME UNDE R THE PURVIEW OF EXPLANATION 2(III). SO FAR AS THE REMAINING ITEMS A RE CONCERNED, THE MAJOR PAYMENT IS TO TBM CONSULTING GROUP FOR KAIZEN PROGRAMS FOR PROCESS IMPROVEMENT, WHICH HAS BEEN EXPLAINED TO BE FOR IMPROVEMENT IN SYSTEM OF PRODUCTION IN THE APPELLANT'S CASE. IT IS NOT FOR PROVIDING ANY TECHNICAL SERVICES OUTSIDE INDIA, BUT FOR OBTAI NING PROGRAM FOR IMPLEMENTING OF VARIOUS SYSTEM IMPROVEMENTS FOR PRO DUCTIVITY, REDUCTION IN COST OF PRODUCTION, IMPROVEMENT IN QUA LITY AND LEAD TIME, ETC. IN THE MANUFACTURING PROCESS. THE APPELLANT IS A MANUFACTURER AND EXPORTER OF ELECTRICAL GOODS AND THE KAIZEN PROGRAM HAS BEEN UTILIZED FOR THIS PURPOSE. SIMILAR EXPLANATION HAS BEEN GIVE N FOR OTHER MAIN EXPENDITURE OF ERP TRAINING OF APPELLANT'S EMPLOYEE S IN INDIA AND FOR PROCUREMENT OF COMPONENTS FROM TAIWAN/CHINA. ON A C AREFUL PERUSAL OF THE SAME, IT IS NOTICED THAT THE NATURE AND PURPOSE OF THESE ITEMS OF EXPENDITURE ARE NOT FOR PROVIDING ANY TECHNICAL SER VICES OUTSIDE INDIA, THE APPELLANT BEING AN EXPORTER OF ELECTRICAL GOODS . ACCORDINGLY, IT IS HELD THAT THESE EXPENDITURES DO NOT QUALIFY WITHIN THE SCOPE OF EXPLANATION-2(III) TO SEC.10B, AND CANNOT BE REDUCE D FROM THE EXPORT TURNOVER. THIS GROUND OF APPEAL IS ACCORDINGLY ALLO WED. 13. THE SECOND ISSUE CONSIDERED BY THE CIT(A) WAS T HE CLAIM OF DEPRECIATION ON THE COMPUTER SOFTWARE. THE PLEA OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT THE SAID COMPUTER SOFTWARE WAS LICE NSED SOFTWARE RATHER THAN OWNED SOFTWARE AND HENCE, WAS COVERED BY THE ENTRY IN APPENDIX-1 TO THE RULES DEFINING INTANGIBLE ASSETS. THE CIT(A) OBSER VED THAT AFTER THE AMENDMENT IN THE INCOME TAX RULES FROM ASSESSMENT Y EAR 2003-04 WHEREIN RATE OF 60% FOR COMPUTER SOFTWARE WAS INTRODUCED, T HE ASSESSEE WAS ENTITLED ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 8 TO DEPRECIATION @ 60%. CONSEQUENTLY, THIS ISSUE WA S DECIDED AGAINST THE ASSESSEE. 14. THE ASSESSEE IS IN APPEAL AGAINST THE INVOKING OF JURISDICTION UNDER SECTION 147 OF THE ACT AND ALSO AGAINST THE ALLOWAN CE OF DEPRECIATION @ 60% ON COMPUTER SOFTWARE. 15. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF C IT(A) IN HOLDING THAT THE EXPENDITURE OF RS.131.10 LAKHS IS NOT TO BE REDUCED FROM EXPORT TURNOVER WHILE COMPUTING THE DEDUCTION UNDER SECTION 10B OF THE AC T. 16. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE POINTED OUT THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURING OF E LECTRICAL COMPONENTS, WHICH IN TURN WERE EXPORTED TO USA. THE ASSESSING OFFICER HAD REOPENED THE ASSESSMENT BY RECORDING REASONS UNDER SECTION 147 O F THE ACT, WHICH AS PER THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE, WAS INVALID. THE FIRST REASON RECORDED FOR REOPENING THE ASSESSMENT WAS WI TH REGARD TO CONSULTANCY CHARGES PAID BY THE ASSESSEE, WHICH WAS AN OUTFLOW AND THE SECOND REASON RECORDED WAS FOR THE CLAIM OF DEPRECIATION AT A LOW ER RATE AND HENCE, THE REASON FOR HOLDING THAT THERE WAS AN ESCAPEMENT OF INCOME, WAS MISSING. WITH REGARD TO THE MERITS OF THE APPEAL, THE LEARNE D AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAID ASSET WA S AN INTANGIBLE ASSET AND SINCE THE ASSESSEE HAD ONLY A LICENSE TO OPERATE, T HEN AS PER THE RATIO LAID DOWN BY THE DELHI BENCH OF THE TRIBUNAL IN SONY IND IA (P) LTD. VS. ACCL.CIT (2011) 56 DTR 156 (DELHI), DEPRECIATION @ 25% IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. 17. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSE E WAS NOT PRESSED AND THE GROUND OF APPEAL NO.4 REGARDING CHARGING OF INTEREST UNDER SECTION 234A AND 234B OF THE ACT WERE CLAIMED TO BE CONSEQU ENTIAL. ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 9 18. AS AGAINST THE APPEAL OF THE ASSESSEE, THE REVE NUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN ALLOWING THE CLAIM O F THE ASSESSEE IN NOT REDUCING SUM OF RS.1.31 CRORES FROM THE EXPORT TURN OVER WHILE COMPUTING EXEMPTION UNDER SECTION 10B OF THE ACT. 19. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ASSUMPT ION OF JURISDICTION UNDER SECTION 147 OF THE ACT. THE ORIGINAL ASSESSMENT IN THE CASE WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AND THEREAFTER, REA SONS WERE RECORDED FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE A CT. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIMED AN EXPE NDITURE OF FOREIGN CONSULTANCY FEES OF RS.1.31 CRORES AND THE ASSESSIN G OFFICER WAS OF THE VIEW THAT THE SAME SHOULD BE REDUCED FROM THE EXPORT TUR NOVER WHILE COMPUTING THE DEDUCTION UNDER SECTION 10B OF THE ACT. THE SECOND REASON RECORDED FOR REOPENING THE ASSESSMENT WAS THAT THE DEPRECIATION ON COMPUTER SOFTWARE, MERITS TO BE ALLOWED AT 60% INSTEAD OF 25%, BEFORE WORKING OUT THE ADMISSIBLE DEDUCTION UNDER SECTION 10B OF THE ACT. THE FIRST OBJECTION RAISED BY THE ASSESSEE WAS THAT THE SAID ISSUES WERE PART OF THE PROCEEDINGS INITIATED UNDER SECTION 154 OF THE ACT AND CONSEQUENTLY, THE ASSESS MENT COULD NOT BE REOPENED UNDER SECTION 147 OF THE ACT. 20. THE FIRST ASPECT OF THE ISSUE WAS THE PROCEEDIN GS UNDER SECTION 154 OF THE ACT HAD BEEN DROPPED BY THE ASSESSING OFFICER A ND SIMULTANEOUSLY, REASONS WERE RECORDED FOR REOPENING ASSESSMENT UNDE R SECTION 147 OF THE ACT. THE SECOND ASPECT OF THE ISSUE IS WHETHER ONC E NOTICE UNDER SECTION 154 OF THE ACT WAS ISSUED, CAN A LATER NOTICE UNDER SEC TION 148 OF THE ACT COULD BE ISSUED TO THE SAME ASSESSEE. WE FIND THAT THE SAID ISSUE IS SQUARELY COVERED BY THE RATIO LAID DOWN BY THE HONBLE KERALA HIGH C OURT IN CIT VS INDIA SEA FOODS IN ITA NO.128/2010, ORDER DATED 17.01.2011 AN D WHICH HAS BEEN RELIED ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 10 UPON BY THE CIT(A) AND RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT OF KERALA HAVE BEEN REPRODUCED, WHICH READ AS UNDER:- 7. IN THE FIRST CASE DECIDED BY THE KERALA HIGH CO URT, INITIALLY THE AO ISSUED NOTICE U/S 154 FOR RECTIFICATION OF A COMPUT ATION U/S 80HHC. THE ASSESSEE OBJECTED TO THE RECTIFICATION AND THE AO DID NOT PROCEED WITH THE RECTIFICATION AND LET THE TIME LIMIT EXPIR E. AFTERWARDS, NOTICE U/S 148 WAS ISSUED FOR THE SAME POINT FOR EXCESS RELIEF GRANTED U/S 80HHC. AGAIN, THE ASSESSEE IN THAT CASE OBJECTED TO REOPEN ING BY CITING THE SAME JUDGMENT OF MADRAS HIGH COURT IN THE CASE OF E .I.D. PARRY LTD. (SUPRA) WHICH HAS BEEN RELIED UPON BY THE APPELLANT HERE ALSO. THE HON'BLE KERALA HIGH COURT IN THIS CASE OVERTURNED T HE DECISION OF THE ITAT IN FAVOUR OF THE ASSESSEE, AND OBSERVED THAT T HE QUESTION TO BE CONSIDERED WAS WHETHER THE INITIATION OF PROCEEDING S U/S 154 AND DROPPING OF THE SAME WITHOUT ISSUING AN EXPRESS ORD ER IN THAT REGARD WILL AFFECT THE VALIDITY OF REASSESSMENT U/S 147. IT WAS OBSERVED AS UNDER : '3. ON GOING THROUGH THE DECISION OF THE MADRAS HIG H COURT, WHAT ITA 128/2010 WE NOTICE IS APPARENTLY AN INCOME ESCAPING ASSESSMENT WAS FIRST COMPLETED UNDER SECTION 147 AN D DURING PENDENCY OF THE APPEAL BEFORE THE FIRST APPELLATE A UTHORITY, THE OFFICER INITIATED RECTIFICATION PROCEEDINGS UNDER S ECTION 154. THE MADRAS HIGH COURT HELD THAT WHEN RECOURSE OPEN TO T HE ASSESSING OFFICER TO BRING TO TAX ESCAPED INCOME IS EITHER BY RECTIFICATION OR BY WAY OF INCOME ESCAPING ASSESSME NT, IT IS FOR THE OFFICER TO CHOOSE BETWEEN ONE OF THE TWO AND PR OCEED TO PASS ONE ORDER. WE DO NOT THINK THERE CAN BE ANY CO NTROVERSY BECAUSE FOR THE VERY SAME PURPOSE, THE ASSESSING OF FICER CANNOT ISSUE TWO PROCEEDINGS, ONE UNDER SECTION 154 AND THE OTHER UNDER SECTION 147. HOWEVER, WE ARE UNABLE TO UPHOLD THE PRINCIPLE OF CONSTRUCTIVE RES JUDICATA MADE APPLICA BLE BY THE HIGH COURT IN INCOME TAX PROCEEDINGS IN RESPECT OF PROCE EDINGS ONE AFTER ANOTHER INITIATED BY THE ASSESSING OFFICER SU CCESSIVELY. THE FACT THAT THE ASSESSING OFFICER INITIATED RECTIFICA TION PROCEEDINGS UNDER SECTION 154 DOES NOT MEAN THAT HE SHOULD STIC K TO THE SAME ONLY AND PROCEED TO ISSUE ORDERS AS PROPOSED. THE VERY PURPOSE OF ISSUING A NOTICE TO THE ASSESSES IS TO G IVE HIM OPPORTUNITY TO RAISE OBJECTION AGAINST THE PROCEEDI NG WHICH INCLUDES THE ASSESSEE'S RIGHT TO QUESTION THE MAINT AINABILITY OF THE ITA 128/2010 RECTIFICATION PROCEEDINGS. IF THE ASSESSEE CONVINCES THE OFFICER THAT RECTIFICATION IS NOT PER MISSIBLE, THE ASSESSING OFFICER IS ABSOLUTELY FREE TO GIVE UP THE SAME AND SEE WHETHER THERE IS ANY OTHER RECOURSE OPEN TO HIM TO ACHIEVE THE PURPOSE I.E. TO BRING TO TAX ESCAPED INCOME. IN THI S CASE EVEN THOUGH THE ASSESSING OFFICER DID NOT ISSUE ANY SPEC IFIC ORDER DROPPING THE PROCEEDING INITIATED UNDER SECTION 154 BASED ON THE OBJECTION FILED BY THE ASSESSEE, THE ONLY INFER ENCE POSSIBLE AFTER EXPIRY OF THE TIME PROVIDED FOR COMPLETION OF PROCEEDINGS UNDER SECTION 154 IS THAT THE ASSESSING OFFICER HAS GIVEN UP THE PROPOSAL. FURTHER, WHEN A NOTICE IS ISSUED UNDER SE CTION 148 FOR MAKING INCOME ESCAPING ASSESSMENT, THE ASSESSING OF FICER OBVIOUSLY MADE IT CLEAR THAT THE PROCEEDINGS UNDER SECTION 154 IS DROPPED AND HE PROPOSES TO PROCEED WITH REASSESS MENT UNDER SECTION 147. IN FACT, EVEN IF THE ASSESSING OFFICER HAD PROCEEDED WITH THE RECTIFICATION PROCEEDINGS UNDER SECTION 15 4 WHICH WAS ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 11 NOT SUSTAINABLE, IT WAS OPEN TO THE COMMISSIONER OF INCOME TAX TO EXERCISE HIS POWERS UNDER SECTION 263, SET ASIDE THE ORDER ISSUED UNDER SECTION 154 AND DIRECT THE ASSESSING O FFICER TO CONSIDER INCOME ESCAPING ASSESSMENT UNDER SECTION 1 47 WHICH THE ASSESSING OFFICER IS FREE TO INITIATE. IN THIS CASE THE ASSESSING OFFICER IT A 128/2010 8 HIMSELF REALISED THE MISTAKE OF INITIATING RECTIFICATION PROCEEDINGS AND WHEN HE NOTICED THAT THE CORRECT RECOURSE OPEN TO HIM UNDER THE ACT IS T O MAKE AN INCOME ESCAPING ASSESSMENT, HE IS ENTIRELY FREE TO DO IT AND IN OUR VIEW, THERE WAS NOTHING WRONG IN THE ASSESSING OFFICER GIVING UP RECTIFICATION PROCEEDINGS, THOUGH INITIAT ED BY HIM BASED ON REPLY FILED BY THE ASSESSEE AND THEN INITIATING AN INCOME ESCAPING ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 WITHIN THE STATUTORY PERIOD. WE, THEREFORE, ALLOW THE APPE AL BY VACATING THE ORDERS OF THE TRIBUNAL AND THAT OF THE FIRST AP PELLATE AUTHORITY.' 21. FURTHER, THE CIT(A) HAD ALSO RELIED UPON THE DE CISION OF HONBLE DELHI HIGH COURT IN HONDA SIEL POWER PRODUCTS LTD. VS. DC IT & ANOTHER WP (CIVIL) NO.9036/2007, JUDGMENT DATED 14.02.2011 AND THE REL EVANT OBSERVATIONS OF THE HONBLE DELHI HIGH COURT HAVE BEEN REPRODUCED U NDER PARA 8, WHICH READ AS UNDER:- 8. IN THE SECOND JUDGMENT OF THE DELHI HIGH COURT MENTIONED ABOVE, THE PETITIONER HAD RELIED UPON DAMADHAR H. SHAH (20 00) 245 ITR 774 (GUJ.) AND ALSO BERGER PAINTS INDIA LTD. OF CALCUTT A HIGH COURT (SUPRA) WHICH HAS ALSO BEEN CITED BY THE APPELLANT HERE. T HE HON'BLE DELHI HIGH COURT OBSERVED AS UNDER: '20. THE AFORESAID JUDGMENTS DO NOT STATE THAT ONCE NOTICE UNDER SECTION 154 OF THE ACT IS ISSUED, RESORT TO SECTION 147 IS BARRED OR PROHIBITED UNDER THE ACT. WHAT IS HIGHLIGHTED BY THE GUJARAT HIGH COURT IS THE DISTINCTION BETWEEN SECTIONS 154 AND 14 OF THE ACT. IT IS FURTHER POINTED OUT THAT IF SECTION 154 OF THE ACT IS APPLICABLE THEN THE ASSESSING OFFICER SHOULD NOT AR BITRARILY AND IN A WANTON MANNER RESORT TO PROCESS OF REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT. THIS REASONING IS CON TRARY AND GOES AGAINST THE PLEA AND ARGUMENT OF THE PETITIONE R AS IT ACCEPTS THE DIFFERENCE IN SCOPE AND AMBIT OF THE SA ID PROVISIONS. IT HAS BEEN HELD THAT WHEN MISTAKES ARE APPARENT, T HE ASSESSING OFFICER SHOULD INVOKE SECTION 154 OF THE ACT BUT IN CASES WHERE MISTAKES ARE NOT APPARENT FROM THE RECORD, THE ASSE SSING OFFICER CAN REOPEN ASSESSMENTS UNDER SECTION 147 OF THE ACT WHEN THE PRE-CONDITIONS ARE SATISFIED. 21. RECTIFICATION OF A MISTAKE APPARENT FROM THE RE CORD CANNOT BE EQUATED WITH THE POWER OF REOPENING UNDER SECTIONS 147 AND 148 OF THE ACT, WHICH IS CONFERRED ON THE ASSESSING OFFICER TO REOPEN CASES UNDER ASSESSMENT WHEN CONDITIONS MENTI ONED IN THE SAID SECTION ARE SATISFIED. THE OBJECT AND PURP OSE OF THE TWO PROVISIONS IS SEPARATE AND THE PRECONDITIONS AND RE QUIREMENTS ARE DIFFERENT. THE WORDS REASONS TO BELIEVE ' WHEN INCOME ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 12 CHARGEABLE TO TAX AS ESCAPED ASSESSMENT HAS A DIFFE RENT CONNOTATION AND REQUIREMENTS AND CANNOT BE EQUATED WITH THE POWER UNDER SECTION 154 TO RECTIFY MISTAKES APPAREN T FROM THE RECORD. IN SOME CASES ALBEIT NOT IN ALL CASES, SECT IONS 154 AND 147 BOTH MAY BE APPLICABLE AND, THEREFORE, THE AFOR ESAID DECISIONS SUGGEST THAT RECOURSE TO SECTION 154 MAY BE JUSTIFIED RATHER THAN RECOURSE TO THE PROVISIONS OF SECTION 1 47/148 OF THE ACT FOR REOPENING OF ASSESSMENTS. BUT THIS IS DIFFE RENT FROM STATING THAT IF NOTICE UNDER SECTION 154 IS ISSUED, THEN NOTICE UNDER SECTION 147/148 IS BARRED OR PROHIBITED. PER SE AND EX FACIE THE LANGUAGE OF SECTION 147 SHOWS THAT THE PR E-REQUISITES OF THE SAID PROVISION ARE NOT CONTROLLED, CURBED AN D REGULATED WITH THE REQUIREMENT OF MISTAKE WHICH IS APPARENT F ROM THE RECORD. 22. IN THE PRESENT CASE, THE ASSESSEE IN RESPONSE T O THE NOTICE UNDER SECTION 154 OF THE ACT HAD OBJECTED TO THE RE CTIFICATION PROCEEDINGS. IT WAS SUBMITTED THAT RECTIFICATION PR OCEEDINGS UNDER SECTION 154 OF THE ACT WERE NOT JUSTIFIED AND WITHOUT JURISDICTION AS THERE WAS NO MISTAKE OR ERROR APPAR ENT FROM THE RECORD. WE HAVE EXAMINED THE SECOND GROUND. THE ASS ESSING OFFICER COULD NOT HAVE RESORTED TO SECTION 154 PROC EEDINGS TO DISALLOW EXPENDITURE UNDER SECTION 14A OF THE ACT. THIS WAS NOT POSSIBLE IN 154 PROCEEDINGS AS IT WAS NOT AN ERROR OR MISTAKE APPARENT FROM THE RECORD.' 22. THE PROVISIONS OF SECTION 147 / 148 OF THE ACT CAN BE INVOKED BY THE ASSESSING OFFICER, WHERE HE HAS A REASON TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT. IN THE CASE OF THE ASSESSEE BE FORE US, THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 10B OF THE ACT AND IN VIEW OF ALLOWING THE SAID EXPENDITURE I.E. AN AMOUNT OF RS.1.31 CRORES O N CONSULTANCY FEES, AS PER THE ASSESSING OFFICER, THERE WAS AN EXCESS CLAIM OF DEDUCTION ALLOWED UNDER SECTION 10B OF THE ACT AND FURTHER, BY NOT ALLOWING THE DEPRECIATION @ 60% ON THE COMPUTER SOFTWARE, FURTHER, THERE WAS UNDER-ASS ESSMENT OF THE CLAIM OF DEDUCTION UNDER SECTION 10B OF THE ACT, IN THE INST ANT ASSESSMENT, BUT IN THE LATER YEARS, WHEN NO DEDUCTION UNDER SECTION 10B OF THE ACT WAS AVAILABLE TO THE ASSESSEE, THERE WAS ESCAPEMENT OF INCOME. HENC E, IT WAS A CONSEQUENT EFFECT AND IN VIEW OF THE ABOVE SAID REASONS, WE FI ND NO MERIT IN THE PLEA OF THE ASSESSEE THAT THERE WAS NO BASIS FOR INVOKING THE J URISDICTION UNDER SECTION 147 OF THE ACT. WE UPHOLD THE ISSUE OF NOTICE FOR REASSESSMENT UNDER SECTION 148 OF THE ACT. ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 13 23. THE SECOND ASPECT OF THE ISSUE AS REFERRED BY T HE CIT(A) WAS WHETHER IN CASES, WHERE THE NOTICE UNDER SECTION 154 OF THE ACT FOR RECTIFICATION WAS ISSUED, CAN ON SAME REASONS, THE NOTICE UNDER SECTI ON 148 OF THE ACT FOR RE- ASSESSMENT COULD BE ISSUED. THE HONBLE DELHI HIGH COURT IN HONDA SIEL POWER PRODUCTS LTD. VS. DCIT (SUPRA) HAD CONSIDERED THE SAID ISSUE AND IN VIEW OF THE SAID RATIO LAID DOWN, WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE IN THIS REGARD. FURTHER, REFERENCE WAS MADE TO RATIO LAID DOWN BY JURISDICTIONAL HIGH COURT IN HINDUSTAN UNILEVER LTD. VS. DCIT & AN OTHER (2010) 325 ITR 102 (BOM), WHEREIN IT WAS HELD THAT AN ISSUE WHICH WAS ACCOUNTED FOR IN THE COMPUTATION OF INCOME BY THE ASSESSEE AND THE SAME BEING CAPABLE OF RECTIFICATION UNDER SECTION 154(1) OF THE ACT, THEN RECOURSE TO PROVISIONS OF SECTION 147 OF THE ACT WAS NOT WARRANTED. THE HON BLE BOMBAY HIGH COURT HAD HELD THAT WHERE THE REVENUE HAD AN EFFICACIOUS REMEDY OPEN TO IT IN THE FORM OF RECTIFICATION UNDER SECTION 154 OF THE ACT FOR CORRECTING THE COMPUTATIONAL ERROR AND CONSEQUENTLY, RECOURSE TO T HE PROVISIONS OF SECTION 147 OF THE ACT WAS NOT WARRANTED. IT WAS FURTHER H ELD BY THE HONBLE HIGH COURT THAT THE PROVISIONS OF STATUTE LAID DOWN OVER LAPPING REMEDIES WHICH ARE AVAILABLE TO THE REVENUE, BUT THE EXERCISE OF THESE REMEDIES MUST COMMENSURATE WITH THE PURPOSE THAT IS SOUGHT TO BE ACHIEVED BY THE LEGISLATION. IT WAS FURTHER HELD BY THE HONBLE HI GH COURT THAT THE EXERCISE OF POWERS VESTED BY A STATUTE MUST EQUALLY BE CONSISTE NT WITH CONSTITUTIONAL NORMS. THE REMEDIES WHICH THE LAW PROVIDES ARE TAI LORED TO BE PROPORTIONAL TO THE SITUATION WHICH THE REMEDY RESOLVES. WHERE THE STATUTE PROVIDES FOR SEVERAL REMEDIES, THE CHOICE OF THE REMEDY MUST BE APPROPRIATE TO THE UNDERLYING BASIS AND OBJECT OF THE CONFERMENT OF TH E REMEDY. A SIMPLE COMPUTATIONAL ERROR CAN BE RESOLVED BY RECTIFYING A N ORDER OF ASSESSMENT UNDER SECTION 154(1). IT WOULD BE ENTIRELY ARBITRA RY FOR THE ASSESSING OFFICER TO REOPEN THE ENTIRE ASSESSMENT UNDER SECTION 147 OF T HE ACT TO RECTIFY AN ERROR OR MISTAKE WHICH CAN BE RECTIFIED UNDER SECTION 154 . AN ARBITRARY EXERCISE OF ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 14 POWER IS CERTAINLY NOT A CONSEQUENCE WHICH PARLIAME NT CONTEMPLATES. HOWEVER, IN THE FACTS OF THE PRESENT CASE, THE RECO RDING OF REASONS FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE A CT WAS WARRANTED AND THEREAFTER, ISSUE OF NOTICE UNDER SECTION 148 OF TH E ACT WAS CORRECT, AS THE REASONS RECORDED DO NOT ESTABLISH THAT THERE WERE A NY COMPUTATIONAL ERRORS OR MISTAKES, WHICH COULD BE RECTIFIED BY INVOKING THE PROVISIONS OF SECTION 154 OF THE ACT. IN THE ENTIRETY OF THE ABOVE SAID FACTS A ND CIRCUMSTANCES, WE UPHOLD THE ORDER OF CIT(A) AND CONFIRM THE REOPENING OF TH E ASSESSMENT UNDER SECTION 147 / 148 OF THE ACT. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THUS, DISMISSED. 24. THE SECOND ISSUE RAISED BY THE ASSESSEE IS WITH REGARD TO THE RATE OF DEPRECIATION TO BE ALLOWED ON COMPUTER SOFTWARE. T HE PLEA OF THE ASSESSEE BEFORE US WAS THAT AS PER THE ENTRY IN APPENDIX-1 T O THE INCOME TAX RULES, 1962 (IN SHORT RULES) I.E. REFERENCE TO PART B INTANGIBLE ASSETS, IT IS PROVIDED THAT KNOW-HOW, PATENTS, COPY RIGHTS, TRADE MARKS, L ICENSES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATU RE ARE TO BE TAKEN AS INTANGIBLE ASSETS. AS AGAINST THE ENTRY NO.5 IN PA RT A, TANGIBLE ASSETS READS AS COMPUTERS INCLUDING THE COMPUTER SOFTWARE. FURT HER, THE CLAIM OF THE ASSESSEE WAS THAT THE SOFTWARE WAS LICENSED SOFTWAR E RATHER THAN OWNED SOFTWARE AND ONCE WHEN THERE WAS SPECIFIC ENTRY FOR COPY RIGHTS, LICENSES OR OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATU RE, THE GENERAL ENTRY FOR COMPUTER SOFTWARE SHOULD BE UNDERSTOOD FOR OWNED SO FTWARE, WHICH ONCE PURCHASED AND THERE WAS NO QUESTION OF RENEWAL OF L ICENSE. RELIANCE IN THIS REGARD WAS PLACED ON SERIES OF DECISIONS BY THE LEA RNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, BUT SPECIAL RELIAN CE WAS PLACED ON THE RATIO LAID DOWN BY THE DELHI BENCH OF THE TRIBUNAL IN SON Y INDIA PVT. LTD. VS. ADDL.CIT (2011) 56 DTR 156 (DELHI). IT WAS POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT IN CASE OF LICENSE FOR USE OF ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 15 COMPUTER SOFTWARE, IT WAS HELD THAT THE LICENSE WAS AN INTANGIBLE ASSET AS PER PART B OF APPENDIX-1 TO RULES, WHICH PRESCRIBES UNI FORM RATE OF 25% FOR DEPRECIATION ON ALL INTANGIBLE ASSETS. IN THE SCHE DULE TO INCOME TAX RULES, UNDER PART A IN BLOCK OF ASSETS AND PLANT & MACHINE RY AT SERIAL NO.5, IT IS PROVIDED THAT DEPRECIATION AT 60% WOULD BE ALLOWED ON COMPUTERS INCLUDING COMPUTER SOFTWARE. THE SAID DEFINITION TO INCLUDE COMPUTER SOFTWARE WAS INTRODUCED W.E.F. ASSESSMENT YEAR 2006-07. UNDER P ART B I.E. INTANGIBLE ASSETS, IT IS PROVIDED THAT KNOW-HOW, PATENTS, COPY RIGHTS, TRADE MARKS, LICENSES, FRANCHISES OR ANY OTHER BUSINESS OR COMME RCIAL RIGHTS OF SIMILAR NATURE ARE TO BE ALLOWED DEPRECIATION @ 25%. WHILE INTERPRETING THE TERM LICENSE FOR USE OF COMPUTER SOFTWARE, THE DELHI BEN CH OF THE TRIBUNAL IN SONY INDIA PVT. LTD. VS. ADDL.CIT (SUPRA), HAD HELD THAT THE SAME WAS AN INTANGIBLE ASSET. THE RATIO LAID DOWN BY THE DELHI BENCH OF T RIBUNAL WAS WITH REGARD TO LICENSE FOR USE OF COMPUTER SOFTWARE. THE ACT ITSE LF RECOGNIZED THE DISTINCTION BETWEEN THE COMPUTER SOFTWARE PERSE AND THE LICENSE , WHEREIN THE COMPUTER ALONG WITH COMPUTER SOFTWARE IS TERMED AS A TANGIBL E ASSET AND THE LICENSE IS COVERED AS INTANGIBLE ASSET. THE DELHI BENCH OF TR IBUNAL HAS HELD THAT THE LICENSE FOR USE OF COMPUTER SOFTWARE IS AN INTANGIB LE ASSET ENTITLED TO DEPRECIATION @ 25%. HOWEVER, IN THE FACTS OF THE P RESENT CASE BEFORE US, THE NATURE OF ACQUISITION OF COMPUTER SOFTWARE IS NOT C LEAR WHETHER THE ASSESSEE HAS PURCHASED COMPUTER SOFTWARE PERSE OR HAS OBTAIN ED LICENSE FOR USE OF ANY COMPUTER SOFTWARE. IN CASE THE ASSET ACQUIRED BY T HE ASSESSEE IS IN THE FORM OF COMPUTER SOFTWARE, THEN THE SAME IS ENTITLED TO THE DEPRECIATION @ 60% AND IN CASE, IT IS THE LICENSE FOR USE OF COMPUTER SOFT WARE, THEN THE ASSESSEE IS ONLY ENTITLED TO DEPRECIATION @ 25% AS CLAIMED IN T HE RETURN OF INCOME. IN ORDER TO ESTABLISH THE NATURE OF ACQUISITION BY THE ASSESSEE IN THE FIELD OF COMPUTER SOFTWARE, WE DEEM IT FIT TO RESTORE THE IS SUE BACK TO THE FILE OF ASSESSING OFFICER, WHO SHALL DETERMINE THE SAME AND CONSEQUENTLY, ALLOW THE DEPRECIATION ON THE SAME. THE ASSESSEE SHALL FURNI SH THE NECESSARY EVIDENCE ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 16 IN THIS REGARD BEFORE THE ASSESSING OFFICER AND WHO IN TURN, SHALL DECIDE THE ISSUE. THE GROUND OF APPEAL NO.2 RAISED BY THE ASS ESSEE IS THUS, ALLOWED FOR STATISTICAL PURPOSES. 25. THE GROUND OF APPEAL NO.3 IS NOT PRESSED, HENCE , THE SAME IS DISMISSED AS NOT PRESSED. 26. THE ISSUE IN GROUND OF APPEAL NO.4 I.E. CHARGIN G OF INTEREST UNDER SECTIONS 234A AND 234B OF THE ACT IS CONSEQUENTIAL IN NATURE AND HENCE, GROUND OF APPEAL NO.4 IS DISMISSED. 27. NOW, COMING TO THE ISSUE RAISED BY THE REVENUE IN GROUNDS OF APPEAL AGAINST REDUCTION OF SUM OF RS.1.31 CRORES FROM THE EXPORT TURNOVER WHILE COMPUTING EXEMPTION UNDER SECTION 10B OF THE ACT. SECTION 10B OF THE ACT LAYS DOWN THE SPECIAL PROVISIONS IN RESPECT OF NEWL Y ESTABLISHED 100% EXPORT ORIENTED UNDERTAKINGS. THE EXPLANATION UNDER SECTI ON 10B OF THE ACT OF CLAUSE (III) DEFINES EXPORT TURNOVER AND IT LAYS DOWN THAT THE CONSIDERATION IN RESPECT OF EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWAR E RECEIVED IN OR BROUGHT INTO INDIA BY THE ASSESSEE, IN CONVERTIBLE FOREIGN EXCHA NGE, IN ACCORDANCE WITH THE SUB-SECTION (3) IS TO BE TAKEN AS EXPORT TURNOVER, BUT IT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXP ENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICE S OUTSIDE INDIA. THUS, FOR CLAIMING THE DEDUCTION UNDER SECTION 10B OF THE ACT , THE MEANING OF THE TERM EXPORT TURNOVER HAS BEEN PRESCRIBED IN CLAUSE (II I) UNDER EXPLANATION 2 TO SECTION 10B OF THE ACT, WHICH INCLUDES THE CONSIDER ATION TO BE RECEIVED IN RESPECT OF EXPORT OF ARTICLES OR THINGS AND THE COM PUTER SOFTWARE, BUT IT DOES NOT INCLUDE CERTAIN EXPENDITURE INCURRED OUTSIDE IN DIA IN FOREIGN EXCHANGE IN PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. THE AS SESSING OFFICER HAD INVOKED THE SAID PROVISION FOR HOLDING THAT THE CONSULTANCY FEES OF RS.1.31 CRORES IS TO ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 17 BE EXCLUDED FROM THE EXPORT TURNOVER FOR THE PURPOS E OF CALCULATION OF DEDUCTION UNDER SECTION 10B OF THE ACT. THE CLAIM OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT IT WAS NOT ENGAGED IN PR OVISION OF ANY TECHNICAL SERVICES OUTSIDE INDIA AND NO EXPENDITURE WAS INCUR RED IN FOREIGN EXCHANGE FOR PROVIDING SUCH TECHNICAL SERVICES OUTSIDE INDIA . THE EXPENDITURE OF RS.1.31 CRORES INCLUDED UNDER-MENTIONED ITEMS:- PAYMENTS TO/FOR :- A) TBM CONSULTING GROUP - RS.95,35,237/- B) JD EDWARDS (ASIA PACIFIC) PTE LTD. - RS.17,09,6 08/- C) WARREN CHU - RS.6,63,602/- D) MCCLINTIC & ASSOCIATES - RS.1,11,926/- E) FOREIGN TRAVEL - RS.8,22,618/- F) OTHERS (BANK CHARGES) - RS.2,66,809/- 28. THE SAID EXPLANATION OF ASSESSEE IS REPRODUCED BY THE CIT(A) UNDER PARA 12 AT PAGES 12 AND 13 OF THE APPELLATE ORDER. THE FIRST ITEM UNDER CONSIDERATION IS TBM CONSULTING GROUP, WHICH WAS FO R IMPLEMENTING VARIOUS KAIZEN PROGRAMMES IN THE ASSESSEE COMPANY. THE PUR POSE OF THE SAID KAIZEN PROGRAMME WAS TO PROVIDE INPUTS FOR IMPROVED PRODUCTIVITY, REDUCTION IN LEAD LINE, IMPROVEMENT IN COST OF PRODUCTION, RE DUCING INVENTORY AND IMPROVED QUALITY. THE ASSESSEE HAD PAID A SUM OF R S.95.35 LAKHS TO THE SAID CONCERN FOR OBTAINING PROGRAMME FOR IMPLEMENTING SY STEMS IMPROVEMENTS, WHICH IN TURN WOULD RESULT IN IMPROVEMENT IN PRODUC TION, REDUCTION IN INVENTORIES AND IMPROVED QUALITY OF THE PRODUCTS, E TC. THE EXPENDITURE INCURRED BY THE ASSESSEE THOUGH IN FOREIGN EXCHANGE , WAS NOT IN THE NATURE OF PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. THE AP PELLANT WAS MANUFACTURER AND EXPORTER OF ELECTRICAL GOODS AND THE SAID PROGR AMME WAS UTILIZED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND WAS NOT AN EXPENDITURE IN THE NATURE OF A PROVISION FOR TECHNICAL SERVICES OUTSIDE INDIA AND HENCE, THE SAID EXPENDITURE COULD NOT BE EXCLUDED FROM THE EXPORT T URNOVER WHILE COMPUTING EXEMPTION UNDER SECTION 10B OF THE ACT. ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 18 29. SIMILARLY, THE EXPENDITURE OF RS.17,09,608/- IN CURRED FOR GIVING TRAINING TO ITS EMPLOYEES ON J E EDWARDS ERP SOLUTIONS WAS I N THE SIMILAR LINE OF ACTIVITY AND FOR PROVIDING MORE CONTROL AND EFFICIE NCY IN THE MANAGEMENT OF ACTIVITIES THROUGH IMPLEMENTATION OF ERP PACKAGE AN D COULD NOT BE SAID TO HAVE BEEN INCURRED FOR PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. THESE IN TURN WERE RELATED TO THE OPERATIONAL ACTIVITIES OF THE ASSESSEE COMPANY AND COULD NOT BE HELD TO BE AN EXPENDITURE INCURRED ON PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. ANOTHER EXPENDITURE OF RS.6,63,602/ - WAS INCURRED BY THE ASSESSEE BY WAY OF PAYMENT TO MR. WARREN CHU FOR RE GISTERING THE COMPANY FOR PROCUREMENTS IN TAIWAN / CHINA, WHICH UNDER NO CIRCUMSTANCES COULD BE HELD TO HAVE BEEN INCURRED FOR PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. THE ASSESSEE ALSO INCURRED AN EXPENDITURE OF RS.1,11,92 6/- FOR THE DEVELOPMENT OF TOOLS (DIE) FOR PRODUCTION AND FOR THE PURPOSE, HAD APPOINTED MCCLINTIC & ASSOCIATES FOR RENDERING THE REQUISITE ADVISE, WHIC H WAS RELATABLE TO ITS PRODUCTION ACTIVITIES AND COULD NOT BE SAID TO BE R ELATABLE TO THE EXPORT OF THE ASSESSEE COMPANY. FURTHER, THE ASSESSEE HAD INCURR ED AN EXPENDITURE OF RS.8,22,618/- FOR OVERSEAS TRAVEL, WHICH COULD NOT BE TERMED AS PROFESSIONAL TECHNICAL SERVICES AND ALSO EXPENDITURE INCURRED ON BANK CHARGES OF RS.2,66,809/- COULD NOT BE TERMED AS PAYMENT FOR TE CHNICAL SERVICES. IN THE ENTIRETY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE FIND MERIT IN THE OBSERVATIONS OF THE CIT(A) THAT THE NATURE AND PURP OSE OF ITEMS OF EXPENDITURE WERE NOT FOR PROVIDING ANY TECHNICAL SERVICES OUTSI DE INDIA AS THE ASSESSEE WAS AN EXPORTER OF ELECTRICAL GOODS. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) IN HOLDING THE SAID EXPENDITURE DID NOT QUAL IFY WITHIN THE SCOPE OF EXPLANATION 2(III) TO SECTION 10B OF THE ACT AND CO ULD NOT BE REDUCED FROM THE EXPORT TURNOVER. ACCORDINGLY, THE GROUNDS OF APPEA L RAISED BY THE REVENUE ARE DISMISSED. ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 19 30. THE ASSESSEE IN ITA NO.718/PN/2012 HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL:- 1) THE LEARNED A.O. HAS ERRED (AND THE LEARNED CIT (A) ERRED IN UPHOLDING) BY RECOMPUTING WDV OF 'COMPUTER SOFTWARE ' (COMPRISING OF LICENSE FEES PAID FOR USE OF SOFTWARE) BY ALLOWING DEPRECIATION @ 60% INSTEAD OF @ 25%. 1.1) THE LEARNED A.O. HAS ERRED (AND THE LEARNED CI T (A) ERRED IN UPHOLDING) THAT THE RATE OF DEPRECIATION APPLICABLE TO LICENSED SOFTWARE IS THAT OF TANGIBLE ASSETS INSTEAD THAT OF INTANGIB LE ASSETS. 1.2) THE LEARNED A.O. HAS ERRED (AND THE LEARNED CI T (A) ERRED IN UPHOLDING) BY REDUCING THE WDV OF LICENSED SOFTWARE BY INCREASING THE RATE OF DEPRECIATION TO 60% INSTEAD OF 25%, 2) THE LEARNED A.O. HAS ERRED (AND LEARNED CIT (A) ERRED IN UPHOLDING) BY DENYING THE BENEFIT OF TAX HOLIDAY UN DER SECTION 10B OF THE INCOME TAX ACT, 1961 ON THE INTEREST FROM BANK DEPOSITS RS.1,13,93,655/- 3) THE LEARNED A.O. HAS ERRED (AND LEARNED CIT (A) ERRED IN UPHOLDING) BY NOT ACCEPTING THE TAXABLE INCOME (THA T IS RS. NIL) AS DECLARED BY THE ASSESSEE. 4) THE APPELLANT CRAVES ITS RIGHT TO ADD TO OR ALT ER THE GROUNDS OF APPEAL AT ANY TIME BEFORE OR DURING THE COURSE OF H EARING OF THE CASE. 31. THE ISSUE IN GROUND OF APPEAL NO.1 RAISED BY TH E ASSESSEE IS ARISING OUT OF GROUND OF APPEAL NO.2 RAISED IN ASSESSMENT Y EAR 2004-05 AND THE SAME HAS BEEN SET-ASIDE BY US TO THE FILE OF ASSESS ING OFFICER TO DETERMINE THE NATURE OF EXPENDITURE INCURRED ON ACQUISITION O F COMPUTER SOFTWARE. THE ASSESSEE VIDE GROUND OF APPEAL NO.1 IS AGGRIEVED BY THE ORDER OF AUTHORITIES BELOW IN RE-COMPUTING THE WDV OF THE COMPUTER SOFTW ARE BY ALLOWING DEPRECIATION @ 60% INSTEAD OF 25%. THE ISSUE IN TH IS GROUND OF APPEAL IS CONSEQUENTIAL TO THE ISSUE TO BE DECIDED VIDE GROUN D OF APPEAL NO.2 IN ITA NO.1125/PN/2011. ACCORDINGLY, WE DIRECT THE ASSESS ING OFFICER TO DECIDE THE ISSUE OF ALLOWABILITY OF DEPRECIATION WHETHER AT 60 % OR 25% AFTER ADJUDICATING THE ISSUE IN ASSESSMENT YEAR 2004-05. THE GROUND O F APPEAL NO.1 RAISED BY THE ASSESSEE IS THUS, ALLOWED FOR STATISTICAL PURPO SES. ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 20 32. THE ISSUE IN GROUND OF APPEAL NO.2 RAISED BY TH E ASSESSEE IS AGAINST THE TREATMENT OF BANK INTEREST OF RS.1,13,93,655/- WHILE DETERMINING THE EXEMPTION UNDER SECTION 10B OF THE ACT. 33. IT WAS POINTED OUT BY THE LEARNED AUTHORIZED RE PRESENTATIVE FOR THE ASSESSEE THAT THE ISSUE IS COVERED BY THE RATIO LAI D DOWN BY THE HONBLE KARNATAKA HIGH COURT IN CIT & ANOTHER VS. MOTOROLA INDIA ELECTRONICS (P) LTD. IN ITA NO.428/2007, JUDGMENT DATED 11.12.2013. IN THE FACTS OF THE CASE BEFORE THE HONBLE KARNATAKA HIGH COURT, THE ASSESS EE HAD EARNED INTEREST FROM DEPOSITS LYING IN EEFC ACCOUNT AND ADVANCING O F INTER-CORPORATE LOANS OUT OF FUNDS OF UNDERTAKING OF WHICH, THE ASSESSEE HAD CLAIMED THAT SINCE THE SAID INCOME RELATED TO ITS BUSINESS, THE ASSESSEE W AS ENTITLED TO THE EXEMPTION UNDER SECTION 10A AND 10B OF THE ACT. TH E HONBLE HIGH COURT HELD THAT THE SAID INCOME SINCE TOOK PART TAKE OF T HE NATURE OF PROFITS AND GAINS OF BUSINESS, HENCE, THE SAME WAS CONSTRUED AS INCOM E OF THE BUSINESS UNDERTAKING AND THE ASSESSEE WAS ENTITLED TO THE CL AIM OF DEDUCTION UNDER SECTION 10A AND 10B OF THE ACT. THE LEARNED AUTHOR IZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2008-09 HAD CONSIDERED THE ALTERNATE PLEA OF THE ASSESSEE FOR NETTING OFF OF INTEREST INCOME AND SET -ASIDE THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER. 34. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 35. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.114/PN/20 13 RELATING TO ASSESSMENT YEAR 2008-09 VIDE ORDER DATED 12.09.2014 HAD CONSIDERED THE ISSUE OF COMPUTATION OF QUANTUM OF ELIGIBLE EXEMPTI ON UNDER SECTION 10B OF THE ACT ON ACCOUNT OF THE RECEIPTS OF INTEREST OF R S.1.05 CRORES AND SALE OF ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 21 SCRAP OF RS.23,58,831/-. AFTER DELIBERATING UPON T HE ISSUE AND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THAT TH E INTEREST IN QUESTION WAS ON ACCOUNT OF DEPOSITS, WHICH HAS ARISEN ONLY FROM THE SURPLUS OF ELIGIBLE BUSINESS AND THERE WAS DIRECT NEXUS OF PROFITS OF E LIGIBLE BUSINESS AND ALSO THE ALTERNATE PLEA OF THE ASSESSEE THAT THE ONLY NET IN TEREST INCOME SHOULD BE DISALLOWED FOR CLAIM OF DEDUCTION UNDER SECTION 10B OF THE ACT, THE MATTER WAS RESTORED BACK TO THE FILE OF ASSESSING OFFICER VIDE PARA 8, WHICH READS AS UNDER:- 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDER OF THE AO/TPO AND THE DRP ON THIS ISSUE AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. SINCE THE ASSESSEE HAS NOT JUSTIFIED BEFORE THE AO THE REASONS FOR NOT EXCLUDING THE OTHER INCOME WHILE WORKING OUT THE EX EMPTION U/S.10B AND SINCE NOTHING IS COMING OUT OF THE RECORDS AS T O WHAT HAS HAPPENED FINALLY IN THE PRECEDING ASSESSMENT YEARS, THEREFORE, WE DEEM IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE AO FOR PASSING A SPEAKING ORDER ON THIS ISSUE. IT IS NOT KNOWN WHETH ER THE STAND OF THE DEPARTMENT IN THE PAST HAS BEEN ACCEPTED BY THE ASS ESSEE OR NOT. IF NOT, THEN WHAT IS THE OUTCOME IN APPEAL. THE AO IS THEREFORE DIRECTED TO ADJUDICATE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW. HE IS ALSO DIRECTED TO CONSIDER THE ALTERNATE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE FOR NETTING OFF OF INTEREST INCOME. THE AO SHALL DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. GR OUND OF APPEAL NO.2 BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STA TISTICAL PURPOSES. 36. THE ISSUE RAISED BEFORE US IS IDENTICAL TO THE ISSUE IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2008-09 AND FOLLOW ING THE SAME PARITY OF REASONING, WE REMIT THIS ISSUE ALSO BACK TO THE FIL E OF ASSESSING OFFICER TO DECIDE THE SAME IN ACCORDANCE WITH THE DIRECTIONS O F TRIBUNAL (SUPRA) RELATING TO ASSESSMENT YEAR 2008-09. THE APPEAL OF THE ASSE SSEE IS THUS, PARTLY ALLOWED. 37. THE REVENUE IN ITA NO.946/PN/2012 HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD.CIT (A) IS RIGHT IN HOLDING THAT SALES TAX SET OFF IS IN THE NATURE OF BUSINESS INCOME REPRESENTING PROFIT DERIV ED FROM ELIGIBLE ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 22 BUSINESS OF 100% EOU AND ARE ELIGIBLE FOR DEDUCTION U/S. 10B OF THE IT ACT, 1961. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT (A) IS RIGHT IN HOLDING THAT RECEIPTS FR OM SALE OF SCRAP IS TO BE NETTED OUT FROM PURCHASE, WHILE DETERMINING THE QUA NTUM OF DEDUCTION U/S. 10B OF THE IT ACT, 1961 WHEN INFACT THE INCOME ON SALE OF SCRAP IS NOT ELIGIBLE FOR THE DEDUCTION BECAUSE IT IS NOT IN PROXIMITY WITH EXPORT ACTIVITY OF THE ASSESSEE. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALT ER ANY OF THE ABOVE GROUNDS OF APPEAL. 38. THE REVENUE VIDE GROUND OF APPEAL NO.1 IS AGGRI EVED BY THE ORDER OF CIT(A) IN HOLDING THAT THE SALES TAX SET OFF WAS IN THE NATURE OF BUSINESS INCOME AND WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 10B OF THE ACT. 39. THE SECOND ISSUE RAISED BY THE REVENUE IS THAT THE RECEIPTS FROM SALE OF SCRAP WERE TO BE NETTED OFF WHILE DETERMINING TH E QUANTUM OF DEDUCTION UNDER SECTION 10B OF THE ACT. 40. IT WAS THE CASE OF ASSESSEE BEFORE US THAT BOTH THE ISSUES WERE COVERED BY THE ORDER OF TRIBUNAL RELATING TO ASSESS MENT YEAR 2004-05, WHEREIN IT HAS BEEN HELD THAT BOTH THE RECEIPTS ON ACCOUNT OF SALE OF SCRAP AND SALES TAX SET OFF WERE IN THE NATURE OF PROFIT DERIVED FR OM BUSINESS OF ELIGIBLE EOU AND WAS ELIGIBLE FOR GRANT OF DEDUCTION UNDER SECTI ON 10B OF THE ACT. WE FIND THAT THE SAID ISSUE HAS BEEN DECIDED IN FAVOUR OF T HE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2001-02 I N ITA NOS.1075/PN/2005 AND 1374/PN/2005, ORDER DATED 25.0 3.2008 AND FOR ASSESSMENT YEAR 2003-04 IN ITA NO.944/PN/2006, ORDE R DATED 28.03.2008 AND ALSO IN ITA NO.1328/PN/2007 RELATING TO ASSESSM ENT YEAR 2004-05, VIDE ORDER DATED 26.02.2009. FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT THE AMOUNT ON ACCOUNT OF SALES TAX SET OFF AND SALE OF SCRAP IS TO BE CONSIDERED AS PROFIT DERIVED FROM THE BUSINESS OF T HE ELIGIBLE EOU UNIT ON WHICH THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDU CTION UNDER SECTION 10B OF THE ACT. BOTH THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 23 41. THE ASSESSEE IN ITA NO.719/PN/2012 HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL:- 1) THE LEARNED A.O. HAS ERRED (AND THE LEARNED CIT (A) ERRED IN UPHOLDING) BY RECOMPUTING WDV OF 'COMPUTER SOFTWARE ' (COMPRISING OF LICENSE FEES PAID FOR USE OF SOFTWARE) BY ALLOWING DEPRECIATION @ 60% INSTEAD OF @ 25%. 1.1) THE LEARNED A.O. HAS ERRED (AND THE LEARNED C IT (A) ERRED IN UPHOLDING) THAT THE RATE OF DEPRECIATION APPLICABLE TO LICENSED SOFTWARE IS THAT OF TANGIBLE ASSETS INSTEAD THAT OF INTANGIB LE ASSETS. 1.2) THE LEARNED A.O. HAS ERRED (AND THE LEARNED CI T (A) ERRED IN UPHOLDING) BY REDUCING THE WDV OF LICENSED SOFTWARE BY INCREASING THE RATE OF DEPRECIATION TO 60% INSTEAD OF 25%, 2) THE LEARNED A.O. HAS ERRED (AND LEARNED CIT (A) ERRED IN UPHOLDING) BY DENYING THE BENEFIT OF TAX HOLIDAY UN DER SECTION 10B OF THE INCOME TAX ACT, 1961 ON THE INTEREST FROM BANK DEPOSITS RS.1,28,17,094/- 3) THE LEARNED A.O. HAS ERRED (AND LEARNED CIT (A) ERRED IN UPHOLDING) BY NOT ACCEPTING THE TAXABLE INCOME (THA T IS RS. NIL) AS DECLARED BY THE ASSESSEE. 4) THE APPELLANT CRAVES ITS RIGHT TO ADD TO OR ALT ER THE GROUNDS OF APPEAL AT ANY TIME BEFORE OR DURING THE COURSE OF H EARING OF THE CASE. 42. THE GROUNDS OF APPEAL NOS.1 AND 2 RAISED BY THE ASSESSEE ARE IDENTICAL TO THE GROUNDS OF APPEAL NOS.1 AND 2 RAIS ED IN ITA NO.718/PN/2012 AND OUR DECISION IN ITA NO.718/PN/2012 SHALL APPLY MUTATIS MUTANDIS TO ITA NO.719/PN/2012. THUS, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 43. THE REVENUE IN ITA NO.947/PN/2012 HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) IS RIGHT IN HOLDING THAT RECEIPTS FRO M SALE OF SCRAP IS TO BE NETTED OUT FROM PURCHASE, WHILE DETERRING THE QUANT UM OF DEDUCTION U/S.10B OF THE I.T. ACT 1961 WHEN IN FACT THE INCOM E ON SALE OF SCRAP IS NOT ELIGIBLE FOR THE DEDUCTION BECAUSE IT IS NOT IN PROXIMITY WITH EXPORT ACTIVITY OF THE ASSESSEE. 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. ITA NOS.1125, 1126/PN/2011 ITA NOS.718, 719/PN/2012 ITA NOS.946, 947/PN/2012 SEMCO ELECTRIC PVT LTD. 24 44. THE GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IS IDENTICAL TO THE GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IN ITA NO.946/PN/2012 AND OUR DECISION IN ITA NO.946/PN/2012 SHALL APPLY MUTATIS MUTANDIS TO ITA NO.947/PN/2012. THUS, THE GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 45. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AND THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THIS THE 31 ST DAY OF MARCH, 2015. SD/- SD/- (G.S. PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST MARCH, 2015. GCVSR COPY OF THE ORDER IS FORWARDED TO: - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE